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Summit Financial Group Reports Second Quarter and First Half 2015 Results

MOOREFIELD, W. Va., July 27, 2015 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ:SMMF) today reported second quarter 2015 net income applicable to common shares of $4.01 million, or $0.38 per diluted share, compared to $2.24 million, or $0.25 per diluted share, for the second quarter of 2014, representing an increase of 79.1 percent, or 52.0 percent per diluted share. Q2 2015 earnings compared to Q2 2014 were positively impacted by an $802,000 decline in write-downs of foreclosed properties, a $500,000 decrease in provision for loan losses, and a $1.14 million increase in net interest income.

Excluding from second quarter 2015 (on a pre-tax basis) realized securities gains of $170,000, losses on sales of foreclosed properties of $103,000, and write-downs of foreclosed properties of $160,000, Q2 2015 core earnings approximated $4.07 million, or $0.39 per diluted share. Excluding from second quarter 2014 (on a pre-tax basis) realized securities losses of $43,000, losses on sales of foreclosed properties of $54,000, $1,000 in other-than-temporary impairment of securities (“OTTI”) and write-downs of foreclosed properties of $962,000, Q2 2014 core earnings approximated $2.91 million, or $0.32 per diluted share.

For the six months ended June 30, 2015, Summit recorded net income applicable to common shares of $8.29 million, or $0.78 per diluted share, compared with $4.44 million, or $0.50 per diluted share, for the comparable 2014 six-month period, representing an increase of 87.0%, or 56.0% per diluted share.

Excluding from the six month period ended June 30, 2015 nonrecurring items (on a pre-tax basis) comprised of realized securities gains of $650,000, a $176,000 Federal Home Loan Bank of Pittsburgh (“FHLB”) special dividend, losses on sales of assets of $253,000, and write-downs of foreclosed properties of $732,000, and from the 2014 first six-month period realized securities losses of $64,000, losses on sales of assets of $129,000, OTTI charges of $1,000 and write-downs of foreclosed properties of $1.89 million, core earnings for first six months of 2015 were approximately $8.39 million, or $0.78 per diluted share, compared to $5.75 million, or $0.65 per diluted share, for the 2014 six month period.

Highlights for Q2 2015 include:

  • Net interest margin has increased 17 basis points since Q2 2014, although it declined 10 basis points compared to Q1 2015 principally due to a one-time FHLB special dividend paid in first quarter 2015 to its member banks.
  • Achieved loan growth of $25.2 million during the quarter, or 9.6 percent (on an annualized basis), and $44.7 million, or 8.6 percent (annualized) year-to-date.
  • Nonperforming assets declined for the fourteenth consecutive quarter. Compared to the linked quarter, nonperforming assets as a percentage of total assets declined from 3.18 percent to 3.05 percent, reaching its lowest level since Q2 2008; foreclosed properties are at the lowest level since Q3 2009.
  • Core revenues were relatively flat compared to the linked quarter, but have increased 8.3 percent compared to the year ago quarter.
  • Recorded charges of $160,000 to write-down foreclosed properties compared to $572,000 in Q1 2015 and $962,000 in Q2 2014.

H. Charles Maddy III, President and Chief Executive Officer of Summit, commented, “I am very pleased to report our Q2 2015 and year-to-date 2015 operating results. Our strong core earnings, growing loan portfolio, increasing revenues, stable net interest margin, strengthening capital and continued reductions in our portfolio of problem assets during the quarter are all very gratifying; perhaps more importantly, these results represent a continuation of recent similar trends giving us optimism as we look forward to the remainder of 2015 and beyond.”

Results from Operations

Total revenue for second quarter 2015, consisting of net interest income and noninterest income, grew 9.9 percent to $14.3 million compared to $13.0 million for the second quarter 2014. For the year-to-date period ended June 30, 2015, total revenue was $29.0 million compared to $25.8 million for the same period of 2014, representing a 12.1 percent increase.

Total core revenue (excluding nonrecurring items, enumerated above) was $14.1 million for second quarter 2015 compared to $13.1 million for the same prior-year quarter, an increase of 8.3 percent. For the first half of 2015, total core revenue (excluding nonrecurring items) was $28.2 million compared to $25.9 million for the first half of 2014, an 8.6 percent improvement.

For the second quarter of 2015, net interest income was $11.5 million, an increase of 11.0 percent from the $10.3 million reported in the prior-year second quarter and decreased $62,000 compared to the linked quarter. The net interest margin for second quarter 2015 was 3.49 percent compared to 3.32 percent for the year-ago quarter, and 3.59 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 2015 was $2.86 million compared to $2.71 million for the comparable period of 2014. Excluding realized securities gains/losses and OTTI of securities, noninterest income was $2.69 million for second quarter 2015, compared to $2.75 million reported for second quarter 2014.

The second quarter 2015 provision for loan losses totaled $500,000, compared to $250,000 for the linked quarter, and $1.0 million for the year-ago quarter.

Core noninterest expense continues to be well-controlled. Total noninterest expense decreased 5.5% to $8.06 million compared to $8.53 million for the prior-year second quarter. Excluding from noninterest expense (on a pre-tax basis) losses on sales of foreclosed properties of $103,000 in Q2 2015 and $54,000 in Q2 2014 and write-downs of foreclosed properties of $160,000 in Q2 2015 and $962,000 in Q2 2014, noninterest expense would have approximated $7.80 million for Q2 2015 compared to $7.51 million for the comparable period of 2014. Noninterest expense for the first half of 2015 decreased 4.5% compared to the first half of 2014.

Balance Sheet

At June 30, 2015, total assets were $1.48 billion, an increase of $36.4 million, or 2.5 percent since December 31, 2014. Total loans, net of unearned fees and allowance for loan losses, were $1.06 billion at June 30, 2015, up $44.6 million, or 4.4 percent, from the $1.02 billion reported at year-end 2014.

At June 30, 2015, deposits were $1.05 billion, a decrease of $8.0 million, or 0.8 percent, since year end 2014. During first half 2015, checking and savings declined by $3.2 million and $6.6 million, respectively, or 1.0 percent and 2.6 percent, respectively, while time deposits increased $1.9 million or 0.4 percent. Long-term borrowings and subordinated debentures declined by 13.4 percent since year end 2014, as the Company prepaid $14.3 million in subordinated debentures, which was funded by short-term borrowings.

Asset Quality

As of June 30, 2015, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $45.1 million, or 3.05 percent of assets. This compares to $46.4 million, or 3.18 percent of assets at the linked quarter, and $63.0 million, or 4.39 percent of assets, at second quarter 2014.

Second quarter 2015 net loan charge-offs were $56,000, or 0.02 percent of average loans annualized; while adding $500,000 to the allowance for loan losses. The allowance for loan losses stood at $11.3 million, or 1.05 percent of total loans at June 30, 2015, compared to 1.08 percent at year-end 2014.

Capital Adequacy

Shareholders’ equity was $140.1 million as of June 30, 2015 compared to $131.6 million December 31, 2014 and $117.5 million at June 30, 2014. Tangible book value per common share increased to $12.22 at June 30, 2015 compared to $11.86 at December 31, 2014 and $11.40 at June 30, 2014.

At June 30, 2015, Summit’s and its depository institution’s, Summit Community Bank, Inc.’s (the “Bank’s”), regulatory risk-based capital ratios computed in accordance with the new Basel III regulatory capital guidelines effective January 1, 2015, were each well in excess of the regulatory minimum required ratio relative to each plus the respective applicable capital conservation buffer on a fully phased-in basis. Respectively, the Company’s and Bank’s Tier 1 leverage capital ratios were 10.4 percent and 10.6 percent at June 30, 2015 compared to 9.9 percent and 10.6 percent reported at December 31, 2014.

About the Company

Summit Financial Group, Inc. is a $1.48 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 2015 vs Q2 2014
For the Quarter Ended Percent
Dollars in thousands 6/30/20156/30/2014 Change
Condensed Statements of Income
Interest income
Loans, including fees $ 12,972 $ 12,515 3.7%
Securities 1,685 1,827 -7.8%
Other 1 2 -50.0%
Total interest income 14,658 14,344 2.2%
Interest expense
Deposits 2,074 2,335 -11.2%
Borrowings 1,126 1,689 -33.3%
Total interest expense 3,200 4,024 -20.5%
Net interest income 11,458 10,320 11.0%
Provision for loan losses 500 1,000 -50.0%
Net interest income after provision
for loan losses 10,958 9,320 17.6%
Noninterest income
Insurance commissions 1,080 1,091 -1.0%
Service fees related to deposit accounts 1,072 1,101 -2.6%
Realized securities gains (losses) 170 (43) n/m
Other-than-temporary impairment of securities - (1) n/m
Other income 538 557 -3.4%
Total noninterest income 2,860 2,705 5.7%
Noninterest expense
Salaries and employee benefits 4,442 4,045 9.8%
Net occupancy expense 489 505 -3.2%
Equipment expense 560 513 9.2%
Professional fees 372 282 31.9%
FDIC premiums 320 495 -35.4%
Foreclosed properties expense 158 229 -31.0%
Loss on sales of foreclosed properties 103 54 90.7%
Write-downs of foreclosed properties 160 962 -83.4%
Other expenses 1,457 1,445 0.8%
Total noninterest expense 8,061 8,530 -5.5%
Income before income taxes 5,757 3,495 64.7%
Income taxes 1,747 1,063 64.3%
Net income 4,010 2,432 64.9%
Preferred stock dividends - 193 n/m
Net income applicable to common shares$ 4,010 $ 2,239 79.1%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q2 2015 vs Q2 2014
For the Quarter Ended Percent
6/30/20156/30/2014 Change
Per Share Data
Earnings per common share
Basic $ 0.38 $ 0.30 26.7%
Diluted $ 0.38 $ 0.25 52.0%
Cash dividends $ 0.08 $ - n/a
Average common shares outstanding
Basic 10,667,892 7,457,222 43.1%
Diluted 10,676,474 9,630,699 10.9%
Common shares outstanding at period end 10,843,676 7,457,222 45.4%
Performance Ratios
Return on average equity 11.67% 8.37% 39.4%
Return on average tangible equity 12.36% 8.98% 37.6%
Return on average assets 1.09% 0.69% 58.0%
Net interest margin 3.49% 3.32% 5.1%
Efficiency ratio (A) 52.05% 52.86% -1.5%

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 -- 2015 vs 2014
For the Six Months Ended Percent
Dollars in thousands 6/30/20156/30/2014 Change
Condensed Statements of Income
Interest income
Loans, including fees $ 25,821 $ 24,731 4.4%
Securities 3,579 3,679 -2.7%
Other 2 4 -50.0%
Total interest income 29,402 28,414 3.5%
Interest expense
Deposits 4,145 4,576 -9.4%
Borrowings 2,279 3,480 -34.5%
Total interest expense 6,424 8,056 -20.3%
Net interest income 22,978 20,358 12.9%
Provision for loan losses 750 2,000 -62.5%
Net interest income after provision
for loan losses 22,228 18,358 21.1%
Noninterest income
Insurance commissions 2,208 2,273 -2.9%
Service fees related to deposit accounts 2,048 2,144 -4.5%
Realized securities gains (losses) 650 (64) n/m
Other-than-temporary impairment of securities - (1) -100.0%
Other income 1,093 1,137 -3.9%
Total noninterest income 5,999 5,489 9.3%
Noninterest expense
Salaries and employee benefits 8,629 8,026 7.5%
Net occupancy expense 988 1,046 -5.5%
Equipment expense 1,095 1,079 1.5%
Professional fees 707 598 18.2%
FDIC premiums 650 997 -34.8%
Foreclosed properties expense 366 482 -24.1%
Loss on sales of foreclosed properties 253 129 96.1%
Write-downs of foreclosed properties 732 1,891 -61.3%
Other expenses 2,846 2,780 2.4%
Total noninterest expense 16,266 17,028 -4.5%
Income before income taxes 11,961 6,819 75.4%
Income taxes 3,667 1,997 83.6%
Net income 8,294 4,822 72.0%
Preferred stock dividends - 387 n/m
Net income applicable to common shares$ 8,294 $ 4,435 87.0%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary -- 2015 vs 2014
For the Six Months Ended Percent
6/30/20156/30/2014 Change
Per Share Data
Earnings per common share
Basic $ 0.85 $ 0.59 44.1%
Diluted $ 0.78 $ 0.50 56.0%
Cash dividends $ 0.16 $ - n/a
Average common shares outstanding
Basic 9,747,042 7,455,307 30.7%
Diluted 10,585,411 9,629,830 9.9%
Common shares outstanding at period end 10,843,676 7,457,222 45.4%
Performance Ratios
Return on average equity 12.22% 8.42% 45.1%
Return on average tangible equity 12.95% 9.04% 43.3%
Return on average assets 1.14% 0.69% 65.2%
Net interest margin 3.54% 3.32% 6.6%
Efficiency ratio (A) 50.65% 53.49% -5.3%

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
For the Quarter Ended
Dollars in thousands 6/30/20153/31/201512/31/20149/30/20146/30/2014
Condensed Statements of Income
Interest income
Loans, including fees $ 12,972 $ 12,848 $ 12,666 $ 13,033 $ 12,515
Securities 1,685 1,894 1,784 1,724 1,827
Other 1 1 2 3 2
Total interest income 14,658 14,743 14,452 14,760 14,344
Interest expense
Deposits 2,074 2,071 2,130 2,288 2,335
Borrowings 1,126 1,152 1,371 1,395 1,689
Total interest expense 3,200 3,223 3,501 3,683 4,024
Net interest income 11,458 11,520 10,951 11,077 10,320
Provision for loan losses 500 250 - 250 1,000
Net interest income after provision
for loan losses 10,958 11,270 10,951 10,827 9,320
Noninterest income
Insurance commissions 1,080 1,128 1,023 1,105 1,091
Service fees related to deposit accounts 1,072 976 1,113 1,177 1,101
Realized securities gains (losses) 170 480 149 128 (43)
Other-than-temporary impairment of securities - - - - (1)
Other income 538 555 537 503 557
Total noninterest income 2,860 3,139 2,822 2,913 2,705
Noninterest expense
Salaries and employee benefits 4,442 4,187 4,133 4,026 4,045
Net occupancy expense 489 498 495 482 505
Equipment expense 560 535 487 520 513
Professional fees 372 335 452 380 282
FDIC premiums 320 330 315 480 495
Foreclosed properties expense 158 208 239 298 229
Loss on sales of foreclosed properties 103 150 628 70 54
Write-downs of foreclosed properties 160 572 300 1,580 962
Other expenses 1,457 1,389 2,061 1,350 1,445
Total noninterest expense 8,061 8,204 9,110 9,186 8,530
Income before income taxes 5,757 6,205 4,663 4,554 3,495
Income taxes 1,747 1,920 1,464 1,218 1,063
Net income 4,010 4,285 3,199 3,336 2,432
Preferred stock dividends - - 191 193 193
Net income applicable to common shares$ 4,010 $ 4,285 $ 3,008 $ 3,143 $ 2,239

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
For the Quarter Ended
6/30/20153/31/201512/31/20149/30/20146/30/2014
Per Share Data
Earnings per common share
Basic $ 0.38 $ 0.49 $ 0.39 $ 0.42 $ 0.30
Diluted $ 0.38 $ 0.41 $ 0.32 $ 0.35 $ 0.25
Cash dividends $ 0.08 $ 0.08 $ - $ - $ -
Average common shares outstanding
Basic 10,667,892 8,815,961 7,796,508 7,457,222 7,457,222
Diluted 10,676,474 10,493,323 9,963,214 9,630,293 9,630,699
Common shares outstanding at period end 10,843,676 10,586,242 8,301,746 7,457,222 7,457,222
Performance Ratios
Return on average equity 11.67% 12.79% 10.10% 11.13% 8.37%
Return on average tangible equity 12.36% 13.56% 10.76% 11.90% 8.98%
Return on average assets 1.09% 1.18% 0.89% 0.93% 0.69%
Net interest margin 3.49% 3.59% 3.42% 3.47% 3.32%
Efficiency ratio (A) 52.05% 49.27% 53.07% 51.19% 52.86%

NOTE (A) – Net income divided by average total shareholders’ equity.

NOTE (B) – 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 6/30/20153/31/201512/31/20149/30/20146/30/2014
Assets
Cash and due from banks$ 3,988 $ 3,850 $ 3,728 $ 3,933 $ 3,749
Interest bearing deposits other banks 9,274 8,437 8,783 9,300 9,970
Securities 276,661 282,135 282,834 282,401 287,883
Loans, net 1,064,472 1,039,669 1,019,842 993,347 992,816
Property held for sale 31,500 34,368 37,529 47,252 48,783
Premises and equipment, net 20,490 20,208 20,060 20,132 20,301
Intangible assets 7,598 7,648 7,698 7,748 7,798
Cash surrender value of life insurance policies 37,222 36,961 36,700 36,417 36,151
Other assets 28,764 27,216 26,394 28,139 28,507
Total assets$ 1,479,969 $ 1,460,492 $ 1,443,568 $ 1,428,669 $ 1,435,958
Liabilities and Shareholders' Equity
Deposits$ 1,053,310 $ 1,058,308 $ 1,061,314 $ 1,054,454 $ 1,057,795
Short-term borrowings 174,599 148,985 123,633 127,432 91,729
Long-term borrowings and
subordinated debentures 98,625 101,602 113,879 114,855 158,331
Other liabilities 13,363 15,708 13,098 10,566 10,638
Shareholders' equity 140,072 135,889 131,644 121,362 117,465
Total liabilities and shareholders' equity$ 1,479,969 $ 1,460,492 $ 1,443,568 $ 1,428,669 $ 1,435,958
Book value per common share (A)$ 12.92 $ 12.84 $ 12.60 $ 12.62 $ 12.21
Tangible book value per common share (A)$ 12.22 $ 12.11 $ 11.86 $ 11.81 $ 11.40
Tangible equity to tangible assets 9.0% 8.8% 8.6% 8.0% 7.7%
Tangible common equity to tangible assets 9.0% 8.8% 8.0% 7.3% 7.0%

NOTE (A) – Assumes conversion of convertible preferred stock

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (A)
6/30/20153/31/201512/31/20149/30/20146/30/2014
Summit Financial Group, Inc.
CET1 Risk-based Capital 11.6% 11.3% n/a n/a n/a
Tier 1 Risk-based Capital 13.2% 13.0% 13.3% 12.5% 12.4%
Total Risk-based Capital 14.2% 14.0% 14.9% 14.3% 14.2%
Tier 1 Leverage Ratio 10.4% 10.1% 9.9% 9.2% 9.0%
Summit Community Bank, Inc.
CET1 Risk-based Capital 13.4% 13.5% n/a n/a n/a
Tier 1 Risk-based Capital 13.4% 13.5% 14.2% 14.4% 14.5%
Total Risk-based Capital 14.4% 14.5% 15.3% 15.5% 15.6%
Tier 1 Leverage Ratio 10.6% 10.5% 10.6% 10.5% 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 thousands6/30/20153/31/201512/31/20149/30/20146/30/2014
Commercial $ 97,284 $ 89,928 $ 88,590 $ 83,762 $ 90,096
Commercial real estate
Owner occupied 191,743 180,269 157,783 156,765 154,260
Non-owner occupied 331,056 325,764 317,136 314,577 314,439
Construction and development
Land and development 64,435 66,558 67,881 61,088 64,246
Construction 18,214 19,094 28,591 27,239 20,902
Residential real estate
Non-jumbo 220,199 219,938 220,071 218,125 219,569
Jumbo 49,203 50,492 52,879 51,917 52,487
Home equity 72,504 68,894 67,115 64,256 61,248
Consumer 18,683 18,485 19,456 19,906 19,777
Other 12,423 11,074 11,507 6,753 6,798
Total loans, net of unearned fees 1,075,744 1,050,496 1,031,009 1,004,388 1,003,822
Less allowance for loan losses 11,272 10,827 11,167 11,041 11,006
Loans, net$ 1,064,472 $ 1,039,669 $ 1,019,842 $ 993,347 $ 992,816

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition
Dollars in thousands 6/30/20153/31/201512/31/20149/30/20146/30/2014
Non interest bearing checking$ 113,256 $ 117,049 $ 115,427 $ 104,442 $ 106,134
Interest bearing checking 202,957 196,606 204,030 195,183 187,855
Savings 246,949 257,687 253,578 255,880 243,323
Time deposits 490,148 486,966 488,279 498,949 520,483
Total deposits$ 1,053,310 $ 1,058,308 $ 1,061,314 $ 1,054,454 $ 1,057,795

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information
For the Quarter Ended
Dollars in thousands 6/30/20153/31/201512/31/20149/30/20146/30/2014
Gross loan charge-offs$ 463 $ 782 $ 362 $ 297 $ 1,312
Gross loan recoveries (407) (192) (488) (82) (249)
Net loan charge-offs$ 56 $ 590 $ (126)$ 215 $ 1,063
Net loan charge-offs to average loans (annualized) 0.02% 0.23% -0.05% 0.09% 0.43%
Allowance for loan losses$ 11,272 $ 10,827 $ 11,167 $ 11,041 $ 11,006
Allowance for loan losses as a percentage
of period end loans 1.05% 1.03% 1.08% 1.10% 1.10%
Nonperforming assets:
Nonperforming loans
Commercial$ 1,065 $ 788 $ 392 $ 309 $ 415
Commercial real estate 2,421 1,340 1,844 936 1,537
Commercial construction and development - - - - 3,601
Residential construction and development 5,627 5,333 4,619 4,592 5,248
Residential real estate 4,433 4,491 5,556 5,257 3,289
Consumer 45 65 83 146 129
Total nonperforming loans 13,591 12,017 12,494 11,240 14,219
Foreclosed properties
Commercial - 110 110 110 110
Commercial real estate 3,279 3,657 5,204 5,815 5,762
Commercial construction and development 10,178 10,191 10,179 10,178 10,363
Residential construction and development 15,839 17,590 19,267 20,431 20,557
Residential real estate 2,204 2,819 2,769 10,718 11,991
Total foreclosed properties 31,500 34,367 37,529 47,252 48,783
Other repossessed assets 55 55 221 34 -
Total nonperforming assets$ 45,146 $ 46,439 $ 50,244 $ 58,526 $ 63,002
Nonperforming loans to period end loans 1.26% 1.14% 1.21% 1.12% 1.42%
Nonperforming assets to period end assets 3.05% 3.18% 3.48% 4.10% 4.39%

Loans Past Due 30-89 Days
For the Quarter Ended
In thousands 6/30/20153/31/201512/31/20149/30/20146/30/2014
Commercial$ 344 $ 387 $ 382 $ 253 $ 376
Commercial real estate 4,945 783 266 1,094 1,032
Construction and development 21 2,735 2,278 324 156
Residential real estate 3,932 3,614 7,413 5,087 5,775
Consumer 211 148 269 427 585
Other 7 18 14 18 -
Total$ 9,460 $ 7,685 $ 10,622 $ 7,203 $ 7,924

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2015 vs Q2 2014
Q2 2015 Q2 2014
AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate
ASSETS
Interest earning assets
Loans, net of unearned interest
Taxable$ 1,046,203 $ 12,854 4.93% $ 978,842 $ 12,428 5.09%
Tax-exempt 12,466 179 5.76% 7,597 133 7.02%
Securities
Taxable 216,063 1,093 2.03% 213,560 1,198 2.25%
Tax-exempt 74,430 898 4.84% 82,958 952 4.60%
Interest bearing deposits other banks
and Federal funds sold 7,923 1 0.05% 8,413 2 0.10%
Total interest earning assets 1,357,085 15,025 4.44% 1,291,370 14,713 4.57%
Noninterest earning assets
Cash & due from banks 3,973 3,785
Premises & equipment 20,409 20,433
Other assets 96,231 114,917
Allowance for loan losses (11,095) (11,440)
Total assets$ 1,466,603 $ 1,419,065
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits$ 206,597 $ 59 0.11% $ 190,146 $ 54 0.11%
Savings deposits 251,802 429 0.68% 237,789 388 0.65%
Time deposits 486,396 1,586 1.31% 524,111 1,894 1.45%
Short-term borrowings 154,704 125 0.32% 79,687 59 0.30%
Long-term borrowings and
subordinated debentures 100,583 1,001 3.99% 159,550 1,629 4.10%
Total interest bearing liabilities 1,200,082 3,200 1.07% 1,191,283 4,024 1.35%
Noninterest bearing liabilities
Demand deposits 114,327 101,874
Other liabilities 14,771 9,694
Total liabilities 1,329,180 1,302,851
Shareholders' equity - preferred - 9,283
Shareholders' equity - common 137,423 106,931
Total liabilities and
shareholders' equity$ 1,466,603 $ 1,419,065
NET INTEREST EARNINGS $ 11,825 $ 10,689
NET INTEREST MARGIN 3.49% 3.32%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2015 vs YTD 2014
YTD 2015 YTD 2014
AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate
ASSETS
Interest earning assets
Loans, net of unearned interest
Taxable$ 1,040,935 $ 25,588 4.96% $ 968,221 $ 24,572 5.12%
Tax-exempt 12,516 353 5.69% 6,719 241 7.23%
Securities
Taxable 213,252 2,368 2.24% 215,220 2,481 2.32%
Tax-exempt 75,744 1,835 4.89% 79,218 1,815 4.62%
Interest bearing deposits other banks
and Federal funds sold 7,504 2 0.05% 8,666 3 0.07%
Total interest earning assets 1,349,951 30,146 4.50% 1,278,044 29,112 4.59%
Noninterest earning assets
Cash & due from banks 3,827 3,841
Premises & equipment 20,307 20,506
Other assets 97,454 115,454
Allowance for loan losses (11,166) (12,200)
Total assets$ 1,460,373 $ 1,405,645
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits$ 203,237 $ 118 0.12% $ 188,573 $ 106 0.11%
Savings deposits 253,093 857 0.68% 223,240 707 0.64%
Time deposits 486,187 3,169 1.31% 527,097 3,763 1.44%
Short-term borrowings 149,769 238 0.32% 77,444 111 0.29%
Long-term borrowings and
subordinated debentures 103,148 2,041 3.99% 167,013 3,368 4.07%
1,195,434 6,423 1.08% 1,183,367 8,055 1.37%
Noninterest bearing liabilities
Demand deposits 114,761 98,525
Other liabilities 14,435 9,155
Total liabilities 1,324,630 1,291,047
Shareholders' equity - preferred 3,602 9,287
Shareholders' equity - common 132,141 105,311
Total liabilities and
shareholders' equity$ 1,460,373 $ 1,405,645
NET INTEREST EARNINGS $ 23,723 $ 21,057
NET INTEREST MARGIN 3.54% 3.32%

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 6/30/20153/31/20156/30/2014 6/30/20156/30/2014
Core earnings applicable to common shares $ 4,069 $ 4,326 $ 2,907 $ 8,394 $ 5,748
FHLB special dividend - 176 - 176 -
Applicable income tax effect - (65) - (65) -
Realized securities gains (losses) 170 480 (43) 650 (64)
Applicable income tax effect (63) (178) 16 (241) 24
Gain (loss) on sale of foreclosed properties (103) (150) (54) (253) (129)
Applicable income tax effect 38 56 20 94 48
Other-than-temporary impairment of securities - - (1) - (1)
Applicable income tax effect - - - - -
Write-downs foreclosed properties (160) (572) (962) (732) (1,891)
Applicable income tax effect 59 212 356 271 700
(59) (41) (668) (100) (1,313)
GAAP net income applicable to common shares $ 4,010 $ 4,285 $ 2,239 $ 8,294 $ 4,435
Core diluted earnings per common share $ 0.39 $ 0.41 $ 0.32 $ 0.78 $ 0.65
FHLB special dividend - 0.02 - 0.02 -
Applicable income tax effect - (0.01) - (0.01) -
Realized securities gains (losses) 0.02 0.05 - 0.06 (0.01)
Applicable income tax effect (0.01) (0.02) - (0.02) -
Gain (loss) on sale of foreclosed properties (0.01) (0.01) (0.01) (0.02) (0.01)
Applicable income tax effect - - - 0.01 -
Other-than-temporary impairment of securities - - - - -
Applicable income tax effect - - - - -
Write-downs of foreclosed properties (0.01) (0.05) (0.10) (0.07) (0.20)
Applicable income tax effect - 0.02 0.04 0.03 0.07
(0.01) - (0.07) - (0.15)
GAAP diluted earnings per common share $ 0.38 $ 0.41 $ 0.25 $ 0.78 $ 0.50

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 6/30/20153/31/20156/30/2014 6/30/20156/30/2014
Total core revenue $ 14,148 $ 14,003 $ 13,069 $ 28,151 $ 25,911
FHLB special dividend - 176 - 176 -
Realized securities gains/(losses) 170 480 (43) 650 (64)
Other-than-temporary impairment of securities - - (1) - (1)
170 656 (44) 826 (65)
GAAP total revenue $ 14,318 $ 14,659 $ 13,025 $ 28,977 $ 25,846
Total core noninterest income $ 2,690 $ 2,659 $ 2,749 $ 5,349 $ 5,553
Realized securities gains/(losses) 170 480 (43) 650 (64)
Other-than-temporary impairment of securities - - (1) - (1)
170 480 (44) 650 (65)
GAAP total noninterest income $ 2,860 $ 3,139 $ 2,705 $ 5,999 $ 5,488
Total core noninterest expense $ 7,798 $ 7,482 $ 7,514 $ 15,281 $ 15,008
(Gains)/losses on sales of foreclosed properties 103 150 54 253 129
Write-downs of foreclosed properties 160 572 962 732 1,891
263 722 1,016 985 2,020
GAAP total noninterest expense $ 8,061 $ 8,204 $ 8,530 $ 16,266 $ 17,028

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

Source:Summit Financial Group, Inc.