Summit Financial Group Reports Third Quarter and First Nine

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

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

Q3 2016 Diluted EPS $0.40 compared to $0.34 for Q3 2015 and $0.40 for Q2 2016

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