Summit Financial Group Reports Third Quarter and First Nine Months 2016 Results

MOOREFIELD, W.Va., Oct. 24, 2016 (GLOBE NEWSWIRE) — Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ:SMMF) today reported third quarter 2016 net income of $4.28 million, or $0.40 per diluted share, compared to $3.66 million, or $0.34 per diluted share, for the third quarter of 2015, representing an increase of 16.9 percent, or 17.6 percent per diluted share. Q3 2016 earnings compared to Q3 2015 and Q2 2016 were positively impacted by increased net interest earnings and reduced write-downs of foreclosed properties, which were partially offset by increased personnel costs and smaller gains realized on sales of securities.

Excluding from third quarter 2016 one-time items of income, gain, expense and loss, Q3 2016 core earnings approximated $4.38 million, or $0.41 per diluted share compared to Q3 2015 core earnings of $4.11 million, or $0.38 per diluted share, and to Q2 2016 core earnings of $4.09 million, or $0.37 per diluted share.

For the nine months ended September 30, 2016, Summit recorded net income of $12.59 million, or $1.18 per diluted share, compared with $11.96 million, or $1.12 per diluted share, for the comparable 2015 nine-month period, representing an increase of 5.3 percent, or 5.4 percent per diluted share.

Excluding from the nine-month period ended September 30, 2016 one-time items of income, gain, expense and loss, core earnings approximated $12.42 million, or $1.16 per diluted share compared to core earnings of $12.50 million, or $1.18 per diluted share, for the same period of 2015.

Highlights for Q3 2016 include:

  • Core revenues increased 9.2 percent (on an annualized basis) compared to the linked quarter, and 5.8 percent compared to the year ago quarter.
  • Loans, excluding mortgage warehouse lines of credit, grew $39.4 million during the quarter, or 14.4 percent (on an annualized basis), and have grown $46.4 million, or 5.7 percent (annualized), year-to-date.
  • Nonperforming assets as a percentage of total assets declined for the sixteenth consecutive quarter to 2.36 percent, compared to 2.47 percent for the linked quarter, reaching its lowest level since Q2 2008.
  • Net interest margin declined 9 basis points compared to Q3 2015, and 8 basis points compared to the linked quarter.
  • Recorded charges of $134,000 to write-down foreclosed properties compared to $259,000 in Q2 2016 and $1,046,000 in Q3 2015.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “I am very pleased to report Summit achieved solid operating results in third quarter 2016. I am particularly gratified by the growth in core revenues which principally resulted from a substantial increase in this past quarter’s lending activity. Further, we closed our acquisition of Highland County Bankshares on October 1, 2016, and our pending acquisition of First Century Bankshares has now received all requisite regulatory approvals and is expected to close in early 2017. The opportunities for us represented by these two acquisitions are significant. They 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 third quarter 2016, consisting of net interest income and noninterest income, grew 3.4 percent to $14.8 million compared to $14.3 million for the third quarter 2015. For the year-to-date period ended September 30, 2016, total revenue was $44.2 million compared to $43.3 million for the same period of 2015, representing a 2.0 percent increase.

Total core revenue, excluding nonrecurring items, described above, was $14.7 million for third quarter 2016 compared to $13.9 million for the same prior-year quarter, an increase of 5.8 percent. For the first nine months of 2016, total core revenue (excluding nonrecurring items) was $43.3 million compared to $42.1 million for the first nine months of 2015, a 2.9 percent improvement.

For the third quarter of 2016, net interest income was $12.0 million, an increase of 6.5 percent from the $11.3 million reported in the prior-year third quarter and increased $304,000 compared to the linked quarter. The net interest margin for third quarter 2016 was 3.32 percent compared to 3.41 percent for the year-ago quarter, and 3.40 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 third quarter 2016 was $2.75 million compared to $2.99 million for the comparable period of 2015. Excluding realized securities gains, noninterest income was $2.69 million for third quarter 2016, compared to $2.62 million reported for third quarter 2015.

We recorded no provision for loan losses during third quarter 2016, compared to $250,000 for both the linked quarter and year-ago quarter.

Noninterest expense continues to be well-controlled. Total noninterest expense decreased 5.1 percent to $8.42 million compared to $8.87 million for the prior-year third quarter. Excluding from noninterest expense (on a pre-tax basis) merger expenses, flood losses, gains/losses on sales of foreclosed properties, and write-downs of foreclosed properties, noninterest expense would have approximated $8.21 million for Q3 2016 compared to $7.79 million for the comparable period of 2015. Noninterest expense for the first nine months of 2016 increased 1.1 percent compared to the first nine months of 2015.

Balance Sheet

At September 30, 2016, total assets were $1.66 billion, an increase of $165.2 million, or 11.1 percent since December 31, 2015. Total loans, net of unearned fees and allowance for loan losses, were $1.23 billion at September 30, 2016, up $155.3 million, or 14.4 percent, from the $1.08 billion reported at year-end 2015. Excluding mortgage warehouse lines of credit, net loans increased $46.3 million or 4.3 percent from year-end 2015.

At September 30, 2016, deposits were $1.16 billion, an increase of $90.1 million, or 8.4 percent, since year end 2015. During first nine months of 2016, checking deposits remained relatively unchanged at $334.8 million, while time deposits and savings deposits increased by $35.2 million and $54.7 million, respectively, or 7.6 percent and 20.5 percent, respectively.

Asset Quality

As of September 30, 2016, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $39.2 million, or 2.36 percent of assets. This compares to $38.7 million, or 2.47 percent of assets at the linked quarter, and $45.2 million, or 3.07 percent of assets, at third quarter 2015.

Third quarter 2016 net loan charge-off recoveries were $242,000, or 0.09 percent of average loans annualized; with no provision for loan losses. The allowance for loan losses stood at $11.6 million, or 0.93 percent of total loans at September 30, 2016, compared to 1.05 percent at year-end 2015.

Capital Adequacy

Shareholders’ equity was $153.8 million as of September 30, 2016 compared to $143.7 million December 31, 2015 and $140.3 million at September 30, 2015. Tangible book value per common share increased to $13.69 at September 30, 2016 compared to $12.78 at December 31, 2015 and $12.45 at September 30, 2015.  Summit had 10,701,841 outstanding common shares at Q3 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 September 30, 2016. The Bank’s total risk-based capital ratio was 13.4 percent at September 30, 2016 compared to 14.5 percent at December 31, 2015, while its Tier 1 leverage capital ratio was 10.5 percent at September 30, 2016 compared to the 10.8 percent reported at December 31, 2015.

About the Company

Summit Financial Group, Inc. is a $1.66 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 eighteen 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 — Q3 2016 vs Q3 2015    
         
       
     For the Quarter Ended   Percent 
 Dollars in thousands  9/30/2016 9/30/2015  Change 
 Condensed Statements of Income       
   Interest income       
     Loans, including fees  $   14,142   $   12,983     8.9 %
     Securities      1,759       1,543     14.0 %
     Other      5       5     0.0 %
   Total interest income      15,906       14,531     9.5 %
   Interest expense       
    Deposits      2,209       2,106     4.9 %
    Borrowings      1,659       1,120     48.1 %
   Total interest expense      3,868       3,226     19.9 %
   Net interest income      12,038       11,305     6.5 %
   Provision for loan losses      –       250     -100.0 %
   Net interest income after provision       
    for loan losses      12,038       11,055     8.9 %
         
   Noninterest income       
    Insurance commissions      1,016       983     3.4 %
    Service fees related to deposit accounts      1,138       1,111     2.4 %
    Realized securities gains      61       372     -83.6 %
    Other income      534       527     1.3 %
  Total noninterest income     2,749       2,993     -8.2 %
   Noninterest expense       
    Salaries and employee benefits     4,819       4,479     7.6 %
    Net occupancy expense     525       496     5.8 %
    Equipment expense     716       582     23.0 %
    Professional fees     270       402     -32.8 %
    FDIC premiums     200       300     -33.3 %
    Merger expense     80       –   n/a
    Foreclosed properties expense     100       168     -40.5 %
    Loss (gain) on sales of foreclosed properties     (168 )     35   n/a
    Write-downs of foreclosed properties     134       1,046     -87.2 %
    Other expenses     1,743       1,364     27.8 %
  Total noninterest expense     8,419       8,872     -5.1 %
   Income before income taxes      6,368       5,176     23.0 %
   Income taxes      2,087       1,515     37.8 %
   Net income  $   4,281   $   3,661     16.9 %
                     

     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)    
Quarterly Performance Summary — Q3 2016 vs Q3 2015    
       
     For the Quarter Ended   Percent 
    9/30/2016 9/30/2015  Change 
 Per Share Data       
   Earnings per common share       
    Basic  $   0.40   $   0.34     17.6 %
    Diluted  $   0.40   $   0.34     17.6 %
         
   Cash dividends  $   0.10   $   0.08     25.0 %
         
   Average common shares outstanding       
    Basic      10,692,423       10,703,526     -0.1 %
    Diluted      10,727,140       10,712,203     0.1 %
         
   Common shares outstanding at period end      10,701,841       10,658,199     0.4 %
         
 Performance Ratios       
   Return on average equity    11.29 %   10.42 %   8.3 %
   Return on average tangible equity    11.86 %   11.01 %   7.7 %
   Return on average assets    1.08 %   1.00 %   8.0 %
   Net interest margin    3.32 %   3.41 %   -2.6 %
   Efficiency ratio (A)    53.30 %   52.93 %   0.7 %

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

     
     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)    
Nine Month Performance Summary — 2016 vs 2015      
         
         
     For the Nine Months Ended   Percent 
 Dollars in thousands  9/30/2016 9/30/2015  Change 
 Condensed Statements of Income       
   Interest income       
    Loans, including fees  $   41,200   $   38,804     6.2 %
    Securities      5,141       5,122     0.4 %
    Other      13       7     85.7 %
   Total interest income      46,354       43,933     5.5 %
   Interest expense       
    Deposits      6,533       6,251     4.5 %
    Borrowings      4,271       3,399     25.7 %
   Total interest expense      10,804       9,650     12.0 %
   Net interest income      35,550       34,283     3.7 %
   Provision for loan losses      500       1,000     -50.0 %
   Net interest income after provision       
    for loan losses      35,050       33,283     5.3 %
         
   Noninterest income       
    Insurance commissions      3,030       3,191     -5.0 %
    Service fees related to deposit accounts      3,175       3,159     0.5 %
    Realized securities gains      836       1,023     -18.3 %
    Other income      1,560       1,619     -3.6 %
  Total noninterest income     8,601       8,992     -4.3 %
   Noninterest expense       
    Salaries and employee benefits     14,265       13,107     8.8 %
    Net occupancy expense     1,576       1,483     6.3 %
    Equipment expense     2,059       1,677     22.8 %
    Professional fees     1,171       1,109     5.6 %
    FDIC premiums     800       950     -15.8 %
    Merger expense     345       –   n/a
    Foreclosed properties expense     317       534     -40.6 %
    Loss (gain) on sales of foreclosed properties     (451 )     288     -256.6 %
    Write-downs of foreclosed properties     503       1,779     -71.7 %
    Other expenses     4,825       4,211     14.6 %
  Total noninterest expense     25,410       25,138     1.1 %
   Income before income taxes      18,241       17,137     6.4 %
   Income taxes      5,655       5,181     9.1 %
   Net income  $   12,586   $   11,956     5.3 %
                     

     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)    
Nine Month Performance Summary — 2016 vs 2015      
       
     For the Nine Months Ended   Percent 
    9/30/2016 9/30/2015  Change 
 Per Share Data       
   Earnings per common share       
    Basic  $   1.18   $   1.19     -0.8 %
    Diluted  $   1.18   $   1.12     5.4 %
         
   Cash dividends  $   0.30   $   0.24     25.0 %
         
   Average common shares outstanding       
    Basic      10,682,129       10,069,374     6.1 %
    Diluted      10,692,346       10,628,139     0.6 %
         
   Common shares outstanding at period end      10,701,841       10,658,199     0.4 %
         
 Performance Ratios       
   Return on average equity    11.29 %   11.61 %   -2.8 %
   Return on average tangible equity    11.88 %   12.29 %   -3.3 %
   Return on average assets    1.09 %   1.09 %   0.0 %
   Net interest margin    3.40 %   3.50 %   -2.9 %
   Efficiency ratio (A)    54.84 %   51.40 %   6.7 %

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  9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
 Condensed Statements of Income           
   Interest income           
    Loans, including fees  $   14,142   $   13,622   $   13,436   $   13,265   $   12,983  
    Securities      1,759       1,656       1,726       1,685       1,543  
    Other      5       5       3       1       5  
   Total interest income      15,906       15,283       15,165       14,951       14,531  
   Interest expense           
    Deposits      2,209       2,154       2,170       2,085       2,106  
    Borrowings      1,659       1,395       1,216       1,133       1,120  
   Total interest expense      3,868       3,549       3,386       3,218       3,226  
   Net interest income      12,038       11,734       11,779       11,733       11,305  
             
   Provision for loan losses      –       250       250       250       250  
   Net interest income after provision           
    for loan losses      12,038       11,484       11,529       11,483       11,055  
             
   Noninterest income           
    Insurance commissions      1,016       1,090       924       851       983  
    Service fees related to deposit accounts      1,138       1,059       978       1,126       1,111  
    Realized securities gains      61       383       393       421       372  
    Other income      534       513       511       471       527  
  Total noninterest income     2,749       3,045       2,806       2,869       2,993  
   Noninterest expense           
    Salaries and employee benefits     4,819       4,764       4,682       4,530       4,479  
    Net occupancy expense     525       512       540       481       496  
    Equipment expense     716       686       656       617       582  
    Professional fees     270       429       472       507       402  
    FDIC premiums     200       300       300       270       300  
    Merger expense     80       153       112       –       –  
    Foreclosed properties expense     100       93       124       150       168  
    Loss (gain) on sales of foreclosed properties      (168 )     (276 )     (6 )     (314 )     35  
    Write-downs of foreclosed properties      134       259       109       636       1,046  
    Other expenses     1,743       1,517       1,565       1,617       1,364  
  Total noninterest expense     8,419       8,437       8,554       8,494       8,872  
   Income before income taxes      6,368       6,092       5,781       5,858       5,176  
   Income taxes      2,087       1,849       1,719       1,712       1,515  
   Net income  $   4,281   $   4,243   $   4,062   $   4,146   $   3,661  
                                 

           
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)          
Five Quarter Performance Summary          
           
     For the Quarter Ended 
    9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
 Per Share Data           
   Earnings per common share           
    Basic  $   0.40   $   0.40   $   0.38   $   0.39   $   0.34  
    Diluted  $   0.40   $   0.40   $   0.38   $   0.39   $   0.34  
             
   Cash dividends  $   0.10   $   0.10   $   0.10   $   0.08   $   0.08  
             
   Average common shares outstanding           
    Basic      10,692,423       10,681,995       10,671,856       10,661,700       10,703,526  
    Diluted      10,727,140       10,701,017       10,679,301       10,669,192       10,712,203  
             
   Common shares outstanding at period end      10,701,841       10,692,320       10,681,880       10,671,744       10,658,199  
             
 Performance Ratios           
   Return on average equity    11.29 %   11.49 %   11.10 %   11.66 %   10.42 %
   Return on average tangible equity    11.86 %   12.10 %   11.70 %   12.31 %   11.01 %
   Return on average assets    1.08 %   1.10 %   1.08 %   1.12 %   1.00 %
   Net interest margin    3.32 %   3.40 %   3.50 %   3.51 %   3.41 %
   Efficiency ratio (A)    53.30 %   55.35 %   55.93 %   54.46 %   52.93 %

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  9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
             
 Assets           
  Cash and due from banks $   25,067   $   4,161   $   4,005   $   3,625   $   4,232  
  Interest bearing deposits other banks     9,432       8,897       12,655       5,862       8,057  
  Securities     262,102       261,633       271,515       280,792       272,127  
  Loans, net     1,234,605       1,166,723       1,096,790       1,079,331       1,062,348  
  Property held for sale     24,767       23,425       24,684       25,567       29,713  
  Premises and equipment, net     21,802       21,405       21,589       21,572       20,457  
  Intangible assets     7,348       7,398       7,448       7,498       7,548  
  Cash surrender value of life insurance policies     38,504       38,246       37,989       37,732       37,482  
  Other assets     34,009       33,293       31,893       30,450       27,340  
    Total assets $   1,657,636   $   1,565,181   $   1,508,568   $   1,492,429   $   1,469,304  
             
 Liabilities and Shareholders’ Equity           
  Deposits $   1,156,785   $   1,096,545   $   1,094,544   $   1,066,709   $   1,072,091  
  Short-term borrowings     234,657       205,552       153,448       171,394       145,291  
  Long-term borrowings and          
    subordinated debentures     93,735       94,214       94,692       95,170       95,648  
  Other liabilities     18,640       18,201       19,755       15,412       15,985  
  Shareholders’ equity     153,819       150,669       146,129       143,744       140,289  
    Total liabilities and shareholders’ equity $   1,657,636   $   1,565,181   $   1,508,568   $   1,492,429   $   1,469,304  
             
  Book value per common share $   14.37   $   14.09   $   13.68   $   13.48   $   13.16  
  Tangible book value per common share $   13.69   $   13.40   $   12.98   $   12.78   $   12.45  
  Tangible equity to tangible assets   8.9 %   9.2 %   9.2 %   9.2 %   9.1 %
  Tangible common equity to tangible assets   8.9 %   9.2 %   9.2 %   9.2 %   9.1 %
             

           
SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)          
Regulatory Capital Ratios (A)            
               
    9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015  
Summit Financial Group, Inc.            
  CET1 Risk-based Capital   11.1 %   11.5 %   11.9 %   11.8 %   11.7 %  
  Tier 1 Risk-based Capital   12.4 %   12.9 %   13.5 %   13.4 %   13.4 %  
  Total Risk-based Capital   13.3 %   13.8 %   14.5 %   14.4 %   14.4 %  
  Tier 1 Leverage Ratio   10.4 %   10.5 %   10.7 %   10.7 %   10.5 %  
               
Summit Community Bank, Inc.            
  CET1 Risk-based Capital   12.5 %   13.0 %   13.6 %   13.6 %   13.6 %  
  Tier 1 Risk-based Capital   12.5 %   13.0 %   13.6 %   13.6 %   13.6 %  
  Total Risk-based Capital   13.4 %   13.9 %   14.5 %   14.5 %   14.6 %  
  Tier 1 Leverage Ratio   10.5 %   10.6 %   10.7 %   10.8 %   10.7 %  

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 9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015  
               
Commercial   $   110,466   $   101,521   $   101,743   $   97,201   $   89,250    
Mortgage warehouse lines     108,983       80,282       –       –       –    
Commercial real estate            
  Owner occupied     192,254       190,534       202,680       203,555       199,068    
  Non-owner occupied     367,196       348,099       353,350       337,295       336,550    
Construction and development            
  Land and development     65,430       65,702       66,483       65,500       66,164    
  Construction       11,276       8,506       7,997       9,970       8,419    
Residential real estate            
  Non-jumbo       228,777       225,919       221,368       221,749       222,739    
  Jumbo       57,276       52,105       50,057       50,313       46,092    
  Home equity       75,161       75,904       74,097       74,300       73,652    
Consumer       19,756       19,520       19,095       19,251       19,124    
Other       9,649       10,008       11,235       11,669       12,518    
  Total loans, net of unearned fees     1,246,224       1,178,100       1,108,105       1,090,803       1,073,576    
Less allowance for loan losses     11,619       11,377       11,315       11,472       11,228    
Loans, net $   1,234,605   $   1,166,723   $   1,096,790   $   1,079,331   $   1,062,348    
               

         
SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)        
Deposit Composition            
               
Dollars in thousands   9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015  
Non interest bearing checking $   122,652   $   120,845   $   122,378   $   119,010   $   118,887    
Interest bearing checking     212,172       205,095       210,878       215,721       217,242    
Savings       321,563       306,785       286,695       266,825       259,185    
Time deposits       500,398       463,820       474,593       465,153       476,777    
Total deposits $   1,156,785   $   1,096,545   $   1,094,544   $   1,066,709   $   1,072,091    
               

         
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)        
Asset Quality Information          
             
     For the Quarter Ended 
 Dollars in thousands  9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
             
  Gross loan charge-offs $   331   $   263   $   561   $   132   $   774  
  Gross loan recoveries     (573 )     (75 )     (154 )     (126 )     (481 )
    Net loan charge-offs (recoveries) $   (242 ) $   188   $   407   $   6   $   293  
             
  Net loan charge-offs to average loans (annualized)   -0.09 %   0.07 %   0.15 %   0.00 %   0.11 %
  Allowance for loan losses $   11,619   $   11,377   $   11,315   $   11,472   $   11,228  
  Allowance for loan losses as a percentage          
    of period end loans   0.93 %   0.97 %   1.02 %   1.05 %   1.05 %
  Nonperforming assets:          
    Nonperforming loans          
      Commercial $   846   $   399   $   430   $   853   $   884  
      Commercial real estate     4,867       5,773       6,140       5,955       5,294  
      Residential construction and development     4,360       5,400       5,467       5,623       5,345  
      Residential real estate     4,174       3,531       3,248       3,245       3,881  
      Consumer     169       91       121       92       53  
  Total nonperforming loans     14,416       15,194       15,406       15,768       15,457  
    Foreclosed properties          
      Commercial real estate     1,749       976       976       1,300       3,209  
      Commercial construction and development     8,664       8,708       8,717       8,717       9,328  
      Residential construction and development     13,741       12,989       13,808       14,068       14,965  
      Residential real estate     613       752       1,183       1,482       2,211  
  Total foreclosed properties     24,767       23,425       24,684       25,567       29,713  
    Other repossessed assets     12       38       –       5       –  
  Total nonperforming assets $   39,195   $   38,657   $   40,090   $   41,340   $   45,170  
             
  Nonperforming loans to period end loans   1.16 %   1.29 %   1.39 %   1.45 %   1.44 %
  Nonperforming assets to period end assets   2.36 %   2.47 %   2.66 %   2.77 %   3.07 %
             
  Troubled debt restructurings          
    Performing $   28,287   $   27,750   $   29,452   $   29,473   $   29,748  
    Nonperforming     863       2,133       897       1,051       1,294  
  Total troubled debt restructurings $   29,150   $   29,883   $   30,349   $   30,524   $   31,042  
                                 

           
Loans Past Due 30-89 Days          
     For the Quarter Ended 
 In thousands  9/30/2016 6/30/2016 3/31/2016 12/31/2015 9/30/2015
             
  Commercial $   405   $   422   $   465   $   339   $   42  
  Commercial real estate     626       214       920       543       1,926  
  Construction and development     235       520       218       1,182       39  
  Residential real estate     2,941       4,763       3,055       4,442       3,888  
  Consumer     144       177       73       186       216  
  Other     13       12       14       9       9  
    Total $   4,364   $   6,108   $   4,745   $   6,701   $   6,120  
             

             
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)            
Average Balance Sheet, Interest Earnings & Expenses and Average Rates          
Q3 2016 vs Q3 2015                
  Q3 2016   Q3 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 $   1,187,205   $   14,008     4.69 %   $   1,050,058   $   12,855     4.86 %  
    Tax-exempt     14,300       202     5.62 %       13,360       194     5.76 %  
  Securities                
    Taxable     198,411       1,139     2.28 %       208,473       933     1.78 %  
    Tax-exempt     77,489       941     4.83 %       75,571       924     4.85 %  
  Interest bearing deposits other banks                
      and Federal funds sold     10,029       5     0.20 %       13,116       5     0.15 %  
Total interest earning assets     1,487,434       16,295     4.36 %       1,360,578       14,911     4.35 %  
                 
Noninterest earning assets                
  Cash & due from banks     3,938             3,871        
  Premises & equipment     21,613             20,502        
  Other assets     87,636             93,563        
  Allowance for loan losses     (11,567 )           (11,521 )      
    Total assets $   1,589,054         $   1,466,993        
                 
 LIABILITIES AND SHAREHOLDERS’ EQUITY              
                 
Liabilities                
Interest bearing liabilities                
  Interest bearing                 
    demand deposits $   211,264   $   85     0.16 %   $   210,691   $   61     0.11 %  
  Savings deposits     316,358       608     0.76 %       251,932       450     0.71 %  
  Time deposits     481,060       1,516     1.25 %       485,453       1,595     1.30 %  
  Short-term borrowings     189,760       675     1.42 %       148,012       130     0.35 %  
  Long-term borrowings and                
    subordinated debentures     94,106       985     4.16 %       97,500       990     4.03 %  
Total interest bearing liabilities     1,292,548       3,869     1.19 %       1,193,588       3,226     1.07 %  
                 
Noninterest bearing liabilities                
  Demand deposits     124,490             118,603        
  Other liabilities     20,280             14,242        
    Total liabilities     1,437,318             1,326,433        
                 
Shareholders’ equity – preferred     –             –        
Shareholders’ equity – common     151,736             140,560        
  Total liabilities and                
    shareholders’ equity $   1,589,054         $   1,466,993        
                 
NET INTEREST EARNINGS   $   12,426         $   11,685      
                 
NET INTEREST MARGIN       3.32 %         3.41 %  
                 

             
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 $   1,134,463   $   40,788     4.80 %   $   1,044,010   $   38,443     4.92 %  
    Tax-exempt     14,890       624     5.60 %       12,801       547     5.71 %  
  Securities                
    Taxable     206,437       3,284     2.12 %       211,642       3,302     2.09 %  
    Tax-exempt     76,155       2,814     4.94 %       75,685       2,759     4.87 %  
  Interest bearing deposits other banks                
      and Federal funds sold     9,093       13     0.19 %       9,395       6     0.09 %  
Total interest earning assets     1,441,038       47,523     4.41 %       1,353,533       45,057     4.45 %  
                 
Noninterest earning assets                
  Cash & due from banks     3,819             3,842        
  Premises & equipment     21,575             20,373        
  Other assets     89,013             96,142        
  Allowance for loan losses     (11,517 )           (11,285 )      
    Total assets $   1,543,928         $   1,462,605        
                 
 LIABILITIES AND SHAREHOLDERS’ EQUITY              
                 
Liabilities                
Interest bearing liabilities                
  Interest bearing                 
    demand deposits $   208,755   $   248     0.16 %   $   205,749   $   179     0.12 %  
  Savings deposits     296,458       1,663     0.75 %       252,701       1,307     0.69 %  
  Time deposits     474,691       4,622     1.30 %       485,939       4,765     1.31 %  
  Short-term borrowings     180,694       1,334     0.99 %       149,177       368     0.33 %  
  Long-term borrowings and                
    subordinated debentures     94,574       2,937     4.15 %       101,245       3,030     4.00 %  
      1,255,172       10,804     1.15 %       1,194,811       9,649     1.08 %  
Noninterest bearing liabilities                
  Demand deposits     121,701             116,057        
  Other liabilities     18,423             14,371        
    Total liabilities     1,395,296             1,325,239        
                 
Shareholders’ equity – preferred     –             2,388        
Shareholders’ equity – common     148,632             134,978        
  Total liabilities and                
    shareholders’ equity $   1,543,928         $   1,462,605        
                 
NET INTEREST EARNINGS   $   36,719         $   35,408      
                 
NET INTEREST MARGIN       3.40 %         3.50 %  
                 

             
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)            
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures          
               
   For the Quarter Ended     For the Nine Months Ended   
 Dollars in thousands  9/30/2016 6/30/2016 9/30/2015   9/30/2016 9/30/2015  
               
 Core earnings applicable to common shares  $   4,376   $   4,087   $   4,108     $   12,415   $   12,503    
               
  FHLB special dividend      –       –       –         –       176    
  Applicable income tax effect      –       –       –         –       (65 )  
  Realized securities gains      61       383       372         836       1,023    
  Applicable income tax effect      (23 )     (142 )     (138 )       (309 )     (379 )  
  Merger expense      (80 )     (153 )     –         (345 )     –    
  Applicable income tax effect      30       57       –         128       –    
  Flood losses      (167 )     –       –         (167 )     –    
  Applicable income tax effect      62       –       –         62       –    
  Gain (loss) on sales of foreclosed properties      169       276       (35 )       451       (288 )  
  Applicable income tax effect      (63 )     (102 )     13         (167 )     107    
  Write-downs foreclosed properties      (134 )     (259 )     (1,046 )       (503 )     (1,779 )  
  Applicable income tax effect      50       96       387         186       658    
      (95 )     156       (447 )       171       (547 )  
 GAAP net income applicable to common shares  $   4,281   $   4,243   $   3,661     $   12,586   $   11,956    
               
               
 Core diluted earnings per common share  $   0.41   $   0.37   $   0.38     $   1.16   $   1.18    
               
  FHLB special dividend      –        –        –          –        0.02    
  Applicable income tax effect      –        –        –          –        (0.01 )  
  Realized securities gains      0.01       0.04       0.03         0.08       0.10    
  Applicable income tax effect      –        (0.01 )     (0.01 )       (0.03 )     (0.04 )  
  Merger expense      (0.01 )     (0.01 )     –          (0.03 )     –     
  Applicable income tax effect      –        –        –          0.01       –     
  Flood losses      (0.02 )     –        –          (0.02 )     –     
  Applicable income tax effect      0.01       –        –          0.01       –     
  Gain (loss) on sales of foreclosed properties      0.02       0.03       –          0.04       (0.03 )  
  Applicable income tax effect      (0.01 )     (0.01 )     –          (0.01 )     0.01    
  Write-downs of foreclosed properties      (0.01 )     (0.02 )     (0.10 )       (0.05 )     (0.17 )  
  Applicable income tax effect      –        0.01       0.04         0.02       0.06    
      (0.01 )     0.03       (0.04 )       0.02       (0.06 )  
 GAAP diluted earnings per common share  $   0.40   $   0.40   $   0.34     $   1.18   $   1.12    
                                   

           
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)          
Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures        
             
   For the Quarter Ended     For the Nine Months Ended 
 Dollars in thousands  9/30/2016 6/30/2016 9/30/2015   9/30/2016 9/30/2015
             
 Total core revenue  $   14,727   $   14,396   $   13,926     $   43,315   $   42,076  
             
  FHLB special dividend     –       –       –         –       176  
  Realized securities gains      60       383       372         836       1,023  
      60       383       372         836       1,199  
 GAAP total revenue  $   14,787   $   14,779   $   14,298     $   44,151   $   43,275  
             
             
 Total core noninterest income  $   2,688   $   2,662   $   2,621     $   7,765   $   7,969  
             
  Realized securities gains     61       383       372         836       1,023  
 GAAP total noninterest income  $   2,749   $   3,045   $   2,993     $   8,601   $   8,992  
             
             
 Total core noninterest expense  $   8,207   $   8,301   $   7,791     $   24,846   $   23,161  
             
  Merger expense     80       153       –         345       –  
  Flood losses     167       –       –         167       –  
  (Gain) loss on sales of foreclosed properties     (169 )     (276 )     35         (451 )     198  
  Write-downs of foreclosed properties      134       259       1,046         503       1,779  
      212       136       1,081         564       1,977  
 GAAP total noninterest expense  $   8,419   $   8,437   $   8,872     $   25,410   $   25,138  
                                 
                                 
CONTACT: Contact: Robert S. Tissue, Sr. Vice President & CFO
Telephone: (304) 530-0552
Email: rtissue@summitfgi.com

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