SMMF Summit Financial Group Inc

Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ:SMMF) today reported second quarter 2016 net income of $4.24 million, or $0.40 per diluted share, compared to $4.01 million, or $0.38 per diluted share, for the second quarter of 2015, representing an increase of 5.8 percent, or 5.3 percent per diluted share. Q2 2016 earnings compared to Q2 2015 and Q1 2016 were negatively impacted by increased personnel costs and other noninterest expenses, which were offset by increased net interest earnings and increased gains realized on sales of both securities and foreclosed properties. 

Excluding from second quarter 2016 one-time items of income, gain, expense and loss, Q2 2016 core earnings approximated $3.90 million, or $0.37 per diluted share compared to Q2 2015 core earnings of $4.07 million, or $0.39 per diluted share, and to Q1 2016 core earnings of $3.95 million, or $0.37 per diluted share.

For the six months ended June 30, 2016, Summit recorded net income of $8.31 million, or $0.78 per diluted share, compared with $8.29 million, or $0.78 per diluted share, for the comparable 2015 six-month period, representing an increase of 0.1%, with no change per diluted share.

Excluding from the six-month period ended June 30, 2016 one-time items of income, gain, expense and loss, core earnings approximated $7.71 million, or $0.75 per diluted share compared to the comparable period of 2015 core earnings of $8.39 million, or $0.78 per diluted share.

Highlights for Q2 2016 include:

• Loans grew $70.0 million during the quarter, or 25.3 percent (on an annualized basis), and have grown $87.3 million, or 16.0 percent (annualized), year-to-date.
• Nonperforming assets declined for the fifteenth consecutive quarter. Compared to the linked quarter, nonperforming assets as a percentage of total assets declined from 2.66 percent to 2.47 percent, reaching its lowest level since Q2 2008; foreclosed properties are at the lowest level since Q3 2009.
• Core revenues increased 1.44 percent compared to the linked quarter, and 1.75 percent compared to the year ago quarter.
• Net interest margin declined 9 basis points compared to Q2 2015, and 10 basis points compared to the linked quarter.
• Recorded charges of $259,000 to write-down foreclosed properties compared to $109,000 in Q1 2016 and $160,000 in Q2 2015.
• Announced our entering into a definitive merger agreement to acquire First Century Bankshares, Inc. headquartered in Bluefield, West Virginia.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “Summit achieved another quarter of solid operating results in Q2 2016, despite the challenges of higher overhead costs from the important investments we are making both in our people and in our infrastructure to assist us in maintaining our growth momentum. Our strong core earnings, growing loan portfolio and continued reductions in our portfolio of problem assets are all very gratifying to note; but I am particularly pleased by the opportunities represented by our two pending acquisitions of First Century Bankshares, announced during the quarter just ended and expected to close at beginning of the year 2017; and of Highland County Bankshares, which has received all requisite shareholder and regulatory approvals and is expected to close on October 1, 2016. These deals serve to combine Summit with two financially strong banks that have similar cultures, core values and guiding principles as ours, and share the same commitment to build long-term client relationships by providing service beyond expectations.”

Results from Operations

Total revenue for second quarter 2016, consisting of net interest income and noninterest income, grew 3.2 percent to $14.8 million compared to $14.3 million for the second quarter 2015. For the year-to-date period ended June 30, 2016, total revenue was $29.4 million compared to $29.0 million for the same period of 2015, representing a 1.3 percent increase.

Total core revenue, excluding nonrecurring items, described above, was $14.4 million for second quarter 2016 compared to $14.1 million for the same prior-year quarter, an increase of 1.8 percent. For the first half of 2016, total core revenue (excluding nonrecurring items) was $28.6 million compared to $28.2 million for the first half of 2015, a 1.6 percent improvement.

For the second quarter of 2016, net interest income was $11.7 million, an increase of 2.4 percent from the $11.5 million reported in the prior-year second quarter and decreased $45,000 compared to the linked quarter. The net interest margin for second quarter 2016 was 3.40 percent compared to 3.49 percent for the year-ago quarter, and 3.50 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 second quarter 2016 was $3.05 million compared to $2.86 million for the comparable period of 2015. Excluding realized securities gains, noninterest income was $2.66 million for second quarter 2016, compared to $2.69 million reported for second quarter 2015.

The second quarter 2016 provision for loan losses totaled $250,000, compared to $250,000 for the linked quarter, and $500,000 for the year-ago quarter.

Core noninterest expense continues to be well-controlled. Total noninterest expense increased 4.7% to $8.44 million compared to $8.06 million for the prior-year second quarter. Excluding from noninterest expense (on a pre-tax basis) merger expenses, gains/losses on sales of foreclosed properties, and write-downs of foreclosed properties, noninterest expense would have approximated $8.30 million for Q2 2016 compared to $7.80 million for the comparable period of 2015. Noninterest expense for the first half of 2016 increased 4.5% compared to the first half of 2015.

Balance Sheet

At June 30, 2016, total assets were $1.57 billion, an increase of $72.8 million, or 4.9 percent since December 31, 2015. Total loans, net of unearned fees and allowance for loan losses, were $1.17 billion at June 30, 2016, up $87.4 million, or 8.1 percent, from the $1.08 billion reported at year-end 2015.

At June 30, 2016, deposits were $1.10 billion, an increase of $29.8 million, or 2.8 percent, since year end 2015. During first half 2016, checking and time deposits declined by $8.8 million and $1.3 million, respectively, or 2.6 percent and 0.3 percent respectively, while savings increased $40.0 million or 15.0 percent.

Asset Quality

As of June 30, 2016, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $38.7 million, or 2.47 percent of assets. This compares to $40.1 million, or 2.66 percent of assets at the linked quarter, and $45.1 million, or 3.05 percent of assets, at second quarter 2015.

Second quarter 2016 net loan charge-offs were $188,000, or 0.07 percent of average loans annualized; while adding $250,000 to the allowance for loan losses. The allowance for loan losses stood at $11.4 million, or 0.97 percent of total loans at June 30, 2016, compared to 1.05 percent at year-end 2015.

Capital Adequacy

Shareholders’ equity was $150.7 million as of June 30, 2016 compared to $143.7 million December 31, 2015 and $140.1 million at June 30, 2015. Tangible book value per common share increased to $13.40 at June 30, 2016 compared to $12.78 at December 31, 2015 and $12.22 at June 30, 2015. Summit had 10,692,320 outstanding common shares at Q2 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 June 30, 2016. The Bank’s total risk-based capital ratio was 13.9 percent at June 30, 2016 compared to 14.5 percent at December 31, 2015, while its Tier 1 leverage capital ratio was 10.6 percent at June 30, 2016 compared to the 10.8 percent reported at December 31, 2015.

About the Company

Summit Financial Group, Inc. is a $1.57 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle and South Central regions of West Virginia and the Northern and Shenandoah Valley regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates fifteen banking locations. Summit also operates Summit Insurance Services, LLC in Moorefield, West Virginia and Leesburg, Virginia.

FORWARD-LOOKING STATEMENTS

This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as “expects”, “anticipates”, “believes”, “estimates” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could” are intended to identify such forward-looking statements.

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies. We undertake no obligation to revise these statements following the date of this press release.

NON-GAAP FINANCIAL MEASURES

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America ("GAAP"). Specifically, Summit adjusted GAAP performance measures to exclude the effects of realized and unrealized securities gains and losses, gains/losses on sales of assets, and write-downs of foreclosed properties to estimated fair value included in its Statements of Income. Management deems believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is important for a proper understanding of the operating results of Summit's core business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.  

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Quarterly Performance Summary -- Q2 2016 vs Q2 2015
		For the Quarter Ended						Percent
Dollars in thousands		6/30/2016			6/30/2015			Change
Condensed Statements of Income
	Interest income
	Loans, including fees	$	13,622		$	12,972			5.0	%
	Securities		1,656			1,685			-1.7	%
	Other		5			1			400.0	%
	Total interest income		15,283			14,658			4.3	%
	Interest expense
	Deposits		2,154			2,074			3.9	%
	Borrowings		1,395			1,126			23.9	%
	Total interest expense		3,549			3,200			10.9	%
	Net interest income		11,734			11,458			2.4	%
	Provision for loan losses		250			500			-50.0	%
	Net interest income after provision
	for loan losses		11,484			10,958			4.8	%
	Noninterest income
	Insurance commissions		1,090			1,080			0.9	%
	Service fees related to deposit accounts		1,059			1,072			-1.2	%
	Realized securities gains		383			170			125.3	%
	Other income		513			538			-4.6	%
	Total noninterest income		3,045			2,860			6.5	%
	Noninterest expense
	Salaries and employee benefits		4,764			4,442			7.2	%
	Net occupancy expense		512			489			4.7	%
	Equipment expense		686			560			22.5	%
	Professional fees		429			372			15.3	%
	FDIC premiums		300			320			-6.3	%
	Merger expense		153			-		n/a
	Foreclosed properties expense		93			158			-41.1	%
	Loss (gain) on sales of foreclosed properties		(276	)		103			-368.0	%
	Write-downs of foreclosed properties		259			160			61.9	%
	Other expenses		1,517			1,457			4.1	%
	Total noninterest expense		8,437			8,061			4.7	%
	Income before income taxes		6,092			5,757			5.8	%
	Income taxes		1,849			1,747			5.8	%
	Net income	$	4,243		$	4,010			5.8	%

 

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Quarterly Performance Summary -- Q2 2016 vs Q2 2015
		For the Quarter Ended						Percent
		6/30/2016			6/30/2015			Change
Per Share Data
	Earnings per common share
	Basic	$	0.40		$	0.38			5.3	%
	Diluted	$	0.40		$	0.38			5.3	%
	Cash dividends	$	0.10		$	0.08			25.0	%
	Average common shares outstanding
	Basic		10,681,995			10,667,892			0.1	%
	Diluted		10,701,017			10,676,474			0.2	%
	Common shares outstanding at period end		10,692,320			10,843,676			-1.4	%
Performance Ratios
	Return on average equity		11.49	%		11.67	%		-1.5	%
	Return on average tangible equity		12.10	%		12.36	%		-2.1	%
	Return on average assets		1.10	%		1.09	%		0.9	%
	Net interest margin		3.40	%		3.49	%		-2.6	%
	Efficiency ratio (A)		55.35	%		52.05	%		6.3	%

NOTE (A) – Computed on a tax equivalent basis excluding nonrecurring income and expense items and amortization of intangibles.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Six Month Performance Summary -- 2016 vs 2015
		For the Six Months Ended						Percent
Dollars in thousands		6/30/2016			6/30/2015			Change
Condensed Statements of Income
	Interest income
	Loans, including fees	$	27,059		$	25,821			4.8	%
	Securities		3,382			3,579			-5.5	%
	Other		7			2			250.0	%
	Total interest income		30,448			29,402			3.6	%
	Interest expense
	Deposits		4,324			4,145			4.3	%
	Borrowings		2,611			2,279			14.6	%
	Total interest expense		6,935			6,424			8.0	%
	Net interest income		23,513			22,978			2.3	%
	Provision for loan losses		500			750			-33.3	%
	Net interest income after provision
	for loan losses		23,013			22,228			3.5	%
	Noninterest income
	Insurance commissions		2,013			2,208			-8.8	%
	Service fees related to deposit accounts		2,038			2,048			-0.5	%
	Realized securities gains (losses)		775			650			19.2	%
	Other income		1,026			1,093			-6.1	%
	Total noninterest income		5,852			5,999			-2.5	%
	Noninterest expense
	Salaries and employee benefits		9,446			8,629			9.5	%
	Net occupancy expense		1,051			988			6.4	%
	Equipment expense		1,343			1,095			22.6	%
	Professional fees		901			707			27.4	%
	FDIC premiums		600			650			-7.7	%
	Merger expense		264			-			n/a
	Foreclosed properties expense		217			366			-40.7	%
	Loss (gain) on sales of foreclosed properties		(282	)		253			-211.5	%
	Write-downs of foreclosed properties		369			732			-49.6	%
	Other expenses		3,082			2,846			8.3	%
	Total noninterest expense		16,991			16,266			4.5	%
	Income before income taxes		11,874			11,961			-0.7	%
	Income taxes		3,569			3,667			-2.7	%
	Net income	$	8,305		$	8,294			0.1	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Six Month Performance Summary -- 2016 vs 2015
		For the Six Months Ended						Percent
		6/30/2016			6/30/2015			Change
Per Share Data
	Earnings per common share
	Basic	$	0.78		$	0.85			-8.2	%
	Diluted	$	0.78		$	0.78			0.0	%
	Cash dividends	$	0.20		$	0.16			25.0	%
	Average common shares outstanding
	Basic		10,676,925			9,747,042			9.5	%
	Diluted		10,685,290			10,585,411			0.9	%
	Common shares outstanding at period end		10,692,320			10,843,676			-1.4	%
Performance Ratios
	Return on average equity		11.29	%		12.22	%		-7.6	%
	Return on average tangible equity		11.90	%		12.95	%		-8.1	%
	Return on average assets		1.09	%		1.14	%		-4.4	%
	Net interest margin		3.45	%		3.54	%		-2.5	%
	Efficiency ratio (A)		55.63	%		50.65	%		9.8	%

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		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
Condensed Statements of Income
	Interest income
	Loans, including fees	$	13,622		$	13,436		$	13,265		$	12,983		$	12,972
	Securities		1,656			1,726			1,685			1,543			1,685
	Other		5			3			1			5			1
	Total interest income		15,283			15,165			14,951			14,531			14,658
	Interest expense
	Deposits		2,154			2,170			2,085			2,106			2,074
	Borrowings		1,395			1,216			1,133			1,120			1,126
	Total interest expense		3,549			3,386			3,218			3,226			3,200
	Net interest income		11,734			11,779			11,733			11,305			11,458
	Provision for loan losses		250			250			250			250			500
	Net interest income after provision
	for loan losses		11,484			11,529			11,483			11,055			10,958
	Noninterest income
	Insurance commissions		1,090			924			851			983			1,080
	Service fees related to deposit accounts		1,059			978			1,126			1,111			1,072
	Realized securities gains (losses)		383			393			421			372			170
	Other income		513			511			471			527			538
	Total noninterest income		3,045			2,806			2,869			2,993			2,860
	Noninterest expense
	Salaries and employee benefits		4,764			4,682			4,530			4,479			4,442
	Net occupancy expense		512			540			481			496			489
	Equipment expense		686			656			617			582			560
	Professional fees		429			472			507			402			372
	FDIC premiums		300			300			270			300			320
	Merger expense		153			112			-			-			-
	Foreclosed properties expense		93			124			150			168			158
	Loss (gain) on sale of foreclosed properties		(276	)		(6	)		(314	)		35			103
	Write-downs of foreclosed properties		259			109			636			1,046			160
	Other expenses		1,517			1,565			1,617			1,364			1,457
	Total noninterest expense		8,437			8,554			8,494			8,872			8,061
	Income before income taxes		6,092			5,781			5,858			5,176			5,757
	Income taxes		1,849			1,719			1,712			1,515			1,747
	Net income	$	4,243		$	4,062		$	4,146		$	3,661		$	4,010

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Five Quarter Performance Summary
		For the Quarter Ended
		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
Per Share Data
	Earnings per common share
	Basic	$	0.40		$	0.38		$	0.39		$	0.34		$	0.38
	Diluted	$	0.40		$	0.38		$	0.39		$	0.34		$	0.38
	Cash dividends	$	0.10		$	0.10		$	0.08		$	0.08		$	0.08
	Average common shares outstanding
	Basic		10,681,995			10,671,856			10,661,700			10,703,526			10,667,892
	Diluted		10,701,017			10,679,301			10,669,192			10,712,203			10,676,474
	Common shares outstanding at period end		10,692,320			10,681,880			10,671,744			10,658,199			10,843,676
Performance Ratios
	Return on average equity		11.49	%		11.10	%		11.66	%		10.42	%		11.67	%
	Return on average tangible equity		12.10	%		11.70	%		12.31	%		11.01	%		12.36	%
	Return on average assets		1.10	%		1.08	%		1.12	%		1.00	%		1.09	%
	Net interest margin		3.40	%		3.50	%		3.51	%		3.41	%		3.49	%
	Efficiency ratio (A)		55.35	%		55.93	%		54.46	%		52.93	%		52.05	%

NOTE (A) – Computed on a tax equivalent basis excluding nonrecurring income and expense items and amortization of intangibles.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Selected Balance Sheet Data
		For the Quarter Ended
Dollars in thousands, except per share amounts		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
Assets
	Cash and due from banks	$	4,161		$	4,005		$	3,625		$	4,232		$	3,988
	Interest bearing deposits other banks		8,897			12,655			5,862			8,057			9,274
	Securities		261,633			271,515			280,792			272,127			276,661
	Loans, net		1,166,723			1,096,790			1,079,331			1,062,348			1,064,472
	Property held for sale		23,425			24,684			25,567			29,713			31,500
	Premises and equipment, net		21,405			21,589			21,572			20,457			20,490
	Intangible assets		7,398			7,448			7,498			7,548			7,598
	Cash surrender value of life insurance policies		38,246			37,989			37,732			37,482			37,222
	Other assets		33,293			31,893			30,450			27,340			28,764
	Total assets	$	1,565,181		$	1,508,568		$	1,492,429		$	1,469,304		$	1,479,969
Liabilities and Shareholders' Equity
	Deposits	$	1,096,545		$	1,094,544		$	1,066,709		$	1,072,091		$	1,053,310
	Short-term borrowings		205,552			153,448			171,394			145,291			174,599
	Long-term borrowings and
	subordinated debentures		94,214			94,692			95,170			95,648			98,625
	Other liabilities		18,201			19,755			15,412			15,985			13,363
	Shareholders' equity		150,669			146,129			143,744			140,289			140,072
	Total liabilities and shareholders' equity	$	1,565,181		$	1,508,568		$	1,492,429		$	1,469,304		$	1,479,969
	Book value per common share	$	14.09		$	13.68		$	13.48		$	13.16		$	12.92
	Tangible book value per common share	$	13.40		$	12.98		$	12.78		$	12.45		$	12.22
	Tangible equity to tangible assets		9.2	%		9.2	%		9.2	%		9.1	%		9.0	%
	Tangible common equity to tangible assets		9.2	%		9.2	%		9.2	%		9.1	%		9.0	%

 

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)
Regulatory Capital Ratios (A)
		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
Summit Financial Group, Inc.
	CET1 Risk-based Capital		11.5	%		11.9	%		11.8	%		11.7	%		11.6	%
	Tier 1 Risk-based Capital		12.9	%		13.5	%		13.4	%		13.4	%		13.2	%
	Total Risk-based Capital		13.8	%		14.5	%		14.4	%		14.4	%		14.2	%
	Tier 1 Leverage Ratio		10.5	%		10.7	%		10.7	%		10.5	%		10.4	%
Summit Community Bank, Inc.
	CET1 Risk-based Capital		13.0	%		13.6	%		13.6	%		13.6	%		13.4	%
	Tier 1 Risk-based Capital		13.0	%		13.6	%		13.6	%		13.6	%		13.4	%
	Total Risk-based Capital		13.9	%		14.5	%		14.5	%		14.6	%		14.4	%
	Tier 1 Leverage Ratio		10.6	%		10.7	%		10.8	%		10.7	%		10.6	%

NOTE (A) – Computed in accordance with Basel III regulatory capital guidelines beginning January 1, 2015 

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)
Loan Composition
Dollars in thousands		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
Commercial		$	101,521		$	101,743		$	97,201		$	89,250		$	97,284
Mortgage warehouse lines			80,282			-			-			-			-
Commercial real estate
Owner occupied			190,534			202,680			203,555			199,068			191,743
Non-owner occupied			348,099			353,350			337,295			336,550			331,056
Construction and development
Land and development			65,702			66,483			65,500			66,164			64,435
Construction			8,506			7,997			9,970			8,419			18,214
Residential real estate
Non-jumbo			225,919			221,368			221,749			222,739			220,199
Jumbo			52,105			50,057			50,313			46,092			49,203
Home equity			75,904			74,097			74,300			73,652			72,504
Consumer			19,520			19,095			19,251			19,124			18,683
Other			10,008			11,235			11,669			12,518			12,423
Total loans, net of unearned fees			1,178,100			1,108,105			1,090,803			1,073,576			1,075,744
Less allowance for loan losses			11,377			11,315			11,472			11,228			11,272
Loans, net		$	1,166,723		$	1,096,790		$	1,079,331		$	1,062,348		$	1,064,472

 

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)
Deposit Composition
Dollars in thousands		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
Non interest bearing checking		$	120,845		$	122,378		$	119,010		$	118,887		$	113,256
Interest bearing checking			205,095			210,878			215,721			217,242			202,957
Savings			306,785			286,695			266,825			259,185			246,949
Time deposits			463,820			474,593			465,153			476,777			490,148
Total deposits		$	1,096,545		$	1,094,544		$	1,066,709		$	1,072,091		$	1,053,310

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Asset Quality Information
		For the Quarter Ended
Dollars in thousands		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
	Gross loan charge-offs	$	263		$	561		$	132		$	774		$	463
	Gross loan recoveries		(75	)		(154	)		(126	)		(481	)		(407	)
	Net loan charge-offs	$	188		$	407		$	6		$	293		$	56
	Net loan charge-offs to average loans (annualized)		0.07	%		0.15	%		0.00	%		0.11	%		0.02	%
	Allowance for loan losses	$	11,377		$	11,315		$	11,472		$	11,228		$	11,272
	Allowance for loan losses as a percentage
	of period end loans		0.97	%		1.02	%		1.05	%		1.05	%		1.05	%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	399		$	430		$	853		$	884		$	1,065
	Commercial real estate		5,773			6,140			5,955			5,294			2,421
	Commercial construction and development		-			-			-			-			-
	Residential construction and development		5,400			5,467			5,623			5,345			5,627
	Residential real estate		3,531			3,248			3,245			3,881			4,433
	Consumer		91			121			92			53			45
	Total nonperforming loans		15,194			15,406			15,768			15,457			13,591
	Foreclosed properties
	Commercial		-			-			-			-			-
	Commercial real estate		976			976			1,300			3,209			3,279
	Commercial construction and development		8,708			8,717			8,717			9,328			10,178
	Residential construction and development		12,989			13,808			14,068			14,965			15,839
	Residential real estate		752			1,183			1,482			2,211			2,204
	Total foreclosed properties		23,425			24,684			25,567			29,713			31,500
	Other repossessed assets		38			-			5			-			55
	Total nonperforming assets	$	38,657		$	40,090		$	41,340		$	45,170		$	45,146
	Nonperforming loans to period end loans		1.29	%		1.39	%		1.45	%		1.44	%		1.26	%
	Nonperforming assets to period end assets		2.47	%		2.66	%		2.77	%		3.07	%		3.05	%

 

Loans Past Due 30-89 Days
		For the Quarter Ended
In thousands		6/30/2016			3/31/2016			12/31/2015			9/30/2015			6/30/2015
	Commercial	$	422		$	465		$	339		$	42		$	344
	Commercial real estate		214			920			543			1,926			4,945
	Construction and development		520			218			1,182			39			21
	Residential real estate		4,763			3,055			4,442			3,888			3,932
	Consumer		177			73			186			216			211
	Other		12			14			9			9			7
	Total	$	6,108		$	4,745		$	6,701		$	6,120		$	9,460

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2016 vs Q2 2015
	Q2 2016										Q2 2015
	Average			Earnings /			Yield /				Average			Earnings /			Yield /
Dollars in thousands	Balances			Expense			Rate				Balances			Expense			Rate
ASSETS
Interest earning assets
Loans, net of unearned  interest
Taxable	$	1,126,519		$	13,488			4.82	%		$	1,046,203		$	12,854			4.93	%
Tax-exempt		14,554			203			5.61	%			12,466			179			5.76	%
Securities
Taxable		211,624			1,062			2.02	%			216,063			1,093			2.03	%
Tax-exempt		71,649			900			5.05	%			74,430			898			4.84	%
Interest bearing deposits other banks
and Federal funds sold		9,152			4			0.18	%			7,923			1			0.05	%
Total interest earning assets		1,433,498			15,657			4.39	%			1,357,085			15,025			4.44	%
Noninterest earning assets
Cash & due from banks		3,752										3,973
Premises & equipment		21,517										20,409
Other assets		89,773										96,231
Allowance for loan losses		(11,420	)									(11,095	)
Total assets	$	1,537,120									$	1,466,603
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	205,242		$	79			0.15	%		$	206,597		$	59			0.11	%
Savings deposits		295,402			550			0.75	%			251,802			429			0.68	%
Time deposits		471,343			1,526			1.30	%			486,396			1,586			1.31	%
Short-term borrowings		183,673			419			0.92	%			154,704			125			0.32	%
Long-term borrowings and
subordinated debentures		94,568			975			4.15	%			100,583			1,001			3.99	%
Total interest bearing liabilities		1,250,228			3,549			1.14	%			1,200,082			3,200			1.07	%
Noninterest bearing liabilities
Demand deposits		120,118										114,327
Other liabilities		19,044										14,771
Total liabilities		1,389,390										1,329,180
Shareholders\' equity - preferred		-										-
Shareholders' equity - common		147,730										137,423
Total liabilities and
shareholders' equity	$	1,537,120									$	1,466,603
NET INTEREST EARNINGS				$	12,108									$	11,825
NET INTEREST MARGIN								3.40	%									3.49	%

 

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2016 vs YTD 2015
	YTD 2016										YTD 2015
	Average			Earnings /			Yield /				Average			Earnings /			Yield /
Dollars in thousands	Balances			Expense			Rate				Balances			Expense			Rate
ASSETS
Interest earning assets
Loans, net of unearned  interest
Taxable	$	1,107,801		$	26,778			4.86	%		$	1,040,935		$	25,588			4.96	%
Tax-exempt		15,189			424			5.61	%			12,516			353			5.69	%
Securities
Taxable		210,494			2,146			2.05	%			213,252			2,368			2.24	%
Tax-exempt		75,482			1,873			4.99	%			75,744			1,835			4.89	%
Interest bearing deposits other banks
and Federal funds sold		8,621			7			0.16	%			7,504			2			0.05	%
Total interest earning assets		1,417,587			31,228			4.43	%			1,349,951			30,146			4.50	%
Noninterest earning assets
Cash & due from banks		3,757										3,827
Premises & equipment		21,556										20,307
Other assets		89,708										97,454
Allowance for loan losses		(11,491	)									(11,166	)
Total assets	$	1,521,117									$	1,460,373
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	207,487		$	162			0.16	%		$	203,237		$	118			0.12	%
Savings deposits		286,399			1,055			0.74	%			253,093			857			0.68	%
Time deposits		471,470			3,106			1.32	%			486,187			3,169			1.31	%
Short-term borrowings		176,111			659			0.75	%			149,769			238			0.32	%
Long-term borrowings and
subordinated debentures		94,811			1,952			4.14	%			103,148			2,041			3.99	%
		1,236,278			6,934			1.13	%			1,195,434			6,423			1.08	%
Noninterest bearing liabilities
Demand deposits		120,291										114,761
Other liabilities		17,485										14,435
Total liabilities		1,374,054										1,324,630
Shareholders' equity - preferred		-										3,602
Shareholders' equity - common		147,063										132,141
Total liabilities and
shareholders' equity	$	1,521,117									$	1,460,373
NET INTEREST EARNINGS				$	24,294									$	23,723
NET INTEREST MARGIN								3.45	%									3.54	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
	For the Quarter Ended										For the Six Months Ended
Dollars in thousands	6/30/2016			3/31/2016			6/30/2015				6/30/2016			6/30/2015
Core earnings applicable to common shares	$	3,895		$	3,950		$	4,069			$	7,705		$	8,394
FHLB special dividend		-			-			-				-			176
Applicable income tax effect		-			-			-				-			(65	)
Realized securities gains (losses)		383			393			170				775			650
Applicable income tax effect		(142	)		(145	)		(63	)			(287	)		(241	)
Merger expense		153			(112	)		-				264			-
Applicable income tax effect		(57	)		41			-				(98	)		-
Gain (loss) on sale of foreclosed properties		276			6			(103	)			282			(253	)
Applicable income tax effect		(102	)		(2	)		38				(104	)		94
Write-downs foreclosed properties		(259	)		(109	)		(160	)			(369	)		(732	)
Applicable income tax effect		96			40			59				137			271
		348			112			(59	)			600			(100	)
GAAP net income applicable to common shares	$	4,243		$	4,062		$	4,010			$	8,305		$	8,294
Core diluted earnings per common share	$	0.37		$	0.37		$	0.39			$	0.75		$	0.78
FHLB special dividend		-			-			-				-			0.02
Applicable income tax effect		-			-			-				-			(0.01	)
Realized securities gains (losses)		0.04			0.04			0.02				0.07			0.06
Applicable income tax effect		(0.01	)		(0.01	)		(0.01	)			(0.03	)		(0.02	)
Merger expense		(0.01	)		(0.01	)		-				(0.02	)		-
Applicable income tax effect		-			-			-				0.01			-
Gain (loss) on sale of foreclosed properties		0.03			-			(0.01	)			0.03			(0.02	)
Applicable income tax effect		(0.01	)		-			-				(0.01	)		0.01
Write-downs of foreclosed properties		(0.02	)		(0.01	)		(0.01	)			(0.03	)		(0.07	)
Applicable income tax effect		0.01			-			-				0.01			0.03
		0.03			0.01			(0.01	)			0.03			-
GAAP diluted earnings per common share	$	0.40		$	0.38		$	0.38			$	0.78		$	0.78

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures
	For the Quarter Ended										For the Six Months Ended
Dollars in thousands	6/30/2016			3/31/2016			6/30/2015				6/30/2016			6/30/2015
Total core revenue	$	14,396		$	14,192		$	14,148			$	28,590		$	28,151
FHLB special dividend		-			-			-				-			176
Realized securities gains/(losses)		383			393			170				775			650
Other-than-temporary impairment of securities		-			-			-				-			-
		383			393			170				775			826
GAAP total revenue	$	14,779		$	14,585		$	14,318			$	29,365		$	28,977
Total core noninterest income	$	2,662		$	2,413		$	2,690			$	5,077		$	5,349
Realized securities gains/(losses)		383			393			170				775			650
Other-than-temporary impairment of securities		-			-			-				-			-
		383			393			170				775			650
GAAP total noninterest income	$	3,045		$	2,806		$	2,860			$	5,852		$	5,999
Total core noninterest expense	$	8,301		$	8,339		$	7,798			$	16,640		$	15,281
Merger expense		153			112			-				264			-
(Gains)/losses on sales of foreclosed properties		(276	)		(6	)		103				(282	)		253
Write-downs of foreclosed properties		259			109			160				369			732
		136			215			263				351			985
GAAP total noninterest expense	$	8,437		$	8,554		$	8,061			$	16,991		$	16,266

Contact: Robert S. Tissue, Sr. Vice President & CFO
Telephone: (304) 530-0552
Email: rtissue@summitfgi.com