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Summit Financial Group Reports Second Quarter and First Half 2016 Results

MOOREFIELD, W.Va., 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 Q4 2015 were negatively impacted by increased personnel costs and other noninterest expenses, which were offset by increased net interest earnings, reductions in write-downs of foreclosed properties, 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 2016; 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 6/30/20166/30/2015 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
6/30/20166/30/2015 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 6/30/20166/30/2015 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
6/30/20166/30/2015 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 6/30/20163/31/201612/31/20159/30/20156/30/2015
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
6/30/20163/31/201612/31/20159/30/20156/30/2015
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 6/30/20163/31/201612/31/20159/30/20156/30/2015
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)
6/30/20163/31/201612/31/20159/30/20156/30/2015
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 thousands6/30/20163/31/201612/31/20159/30/20156/30/2015
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 6/30/20163/31/201612/31/20159/30/20156/30/2015
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 6/30/20163/31/201612/31/20159/30/20156/30/2015
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 6/30/20163/31/201612/31/20159/30/20156/30/2015
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
AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate
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
AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate
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 6/30/20163/31/20166/30/2015 6/30/20166/30/2015
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 6/30/20163/31/20166/30/2015 6/30/20166/30/2015
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

Source:Summit Financial Group, Inc.