SUMMIT FINANCIAL GROUP, INC. - FORM 8-K - EX-99 - EXHIBIT 99

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8-K - 8-K - SUMMIT FINANCIAL GROUP, INC.	form8kearnings2ndquarter20.htm

EXHIBIT 99

FOR RELEASE 6:00 AM ET, July 25, 2016

Contact: Robert S. Tissue, Sr. Vice President & CFO

Telephone: (304) 530-0552

Email: rtissue@summitfgi.com

SUMMIT FINANCIAL GROUP REPORTS SECOND QUARTER AND FIRST HALF 2016 RESULTS

Q2 2016 Diluted EPS $0.40 compared to $0.38 for Q2 2015 and $0.38 for Q1 2016

MOOREFIELD, WV - July 25, 2016 (GLOBE NEWSWIRE) - 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	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		—	%

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	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		%	—		%	0.11		%	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	%
Total interest bearing liabilities	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	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	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	383			393			170		775			650
	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	383			393			170		775			650
	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

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SUMMIT FINANCIAL GROUP, INC. Reports