Summit Financial (SMMF) 8-K Summit Financial Group Reports Second Quarter 2012 Results

Exhibit 99

FOR RELEASE 6:00 AM ET, July 31, 2012

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

Telephone:                      (304) 530-0552

Email:                                rtissue@summitfgi.com

SUMMIT FINANCIAL GROUP REPORTS SECOND QUARTER 2012 RESULTS

MOOREFIELD, WV – July 31, 2012 (GLOBE NEWSWIRE) – Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported second quarter 2012 net income applicable to common shares of $719,000, or $0.09 per diluted share, compared with $831,000, or $0.11 per diluted share, for the second quarter of 2011. Second quarter 2012 results, as compared to the same period in 2011, were positively impacted by a lower provision for loan losses and reductions in noninterest expenses, and negatively impacted by higher charges to write-down foreclosed properties to estimated fair values and realized losses on the sales of assets, principally foreclosed properties.

Excluding from second quarter 2012 nonrecurring items (on a pre-tax basis) consisting of realized securities gains of $320,000, losses on sales of assets of $523,000, charges for other-than-temporary impairment (“OTTI”) of securities of $106,000 and write-downs of foreclosed properties of $1.63 million, and from second quarter 2011 realized securities gains of $318,000, gains on sales of assets of $77,000, OTTI of securities of $532,000, and write-downs of foreclosed properties of $689,000, pro forma second quarter 2012 earnings were approximately $1.94 million, or $0.22 per diluted share, compared to $1.35 million, or $0.17 per diluted share, for the year-ago period.

For the six months ended June 30, 2012, Summit recorded net income applicable to common shares of $2.22 million, or $0.27 per diluted share, compared with $509,000, or $0.07 per diluted share, for the comparable 2011 six-month period.

Excluding  from the six month period ended June 30, 2012 nonrecurring items (on a pre-tax basis) comprised of realized securities gains of $1.49 million, losses on sales of assets of $599,000, OTTI charges of $335,000 and write-downs of foreclosed properties of $3.54 million, and from the 2011 first six-month period realized securities gains of $1.95 million, gain on sale of assets of $147,000, OTTI charges of $1.76 million and write-downs of foreclosed properties of $4.13 million, pro forma earnings for first six months of 2011 were approximately $4.11 million, or $0.47 per diluted share, compared to $2.90 million, or $0.40 per diluted share, for the 2011 six month period.

Highlights for Q2 2012 include:

·   Achieved fifth consecutive quarter of positive quarterly earnings.

·   Earnings continue to be positively impacted by reduced provisions for loan losses.

·   Net interest margin remained unchanged compared to Q1 2012 and increased 11 basis points compared to Q2 2011.

·   Recorded charges of $1.63 million and $106,000, respectively, to write-down foreclosed properties and to recognize OTTI of securities, which were partially offset by $320,000 in realized securities gains.

·   Noninterest expenses remained well-controlled, declining 6.1 percent from the year-ago quarter.

·   Summit’s leverage capital ratio is at its highest level in five years and its total risk-based capital ratio is at highest level in eleven years.

H. Charles Maddy III, President and Chief Executive Officer of Summit, commented, “We are pleased by our continued progress having now achieved five consecutive quarters of profitability; I am particularly happy relative to our improved net interest margin, our increase in core noninterest income and our decrease in noninterest expenses during the first half of 2012. At the same time, we expect that our earnings will remain choppy in the near term as our foreclosed properties are re-appraised and written-down to estimated fair values on an ongoing basis. Reducing our portfolio of problem assets remains job one, and we did make some modest progress in this regard during Q2 2012. However, dispositions of foreclosed properties remain difficult as the recovery of our real estate markets to more normal levels is frustratingly slow -- particularly with respect to commercial and residential development properties.”

Results from Operations

Total revenue for the second quarter 2012, consisting of net interest income and noninterest income, was $10.8 million compared to $12.0 million for the second quarter 2011. For the year-to-date period ended June 30, 2012, total revenue was $22.5 million compared to $21.6 million for the same period in 2011.

Total revenue excluding nonrecurring items (as enumerated above) was $12.7 million for second quarter 2012 compared to $12.8 million for the same prior-year quarter, a decrease of 0.8 percent.  For the first half of 2012, total revenue excluding nonrecurring items was $25.5 million, and unchanged compared to the first half of 2011.

For the second quarter of 2012, net interest income remained relatively unchanged at $10.0 million, compared to $10.2 million reported in the prior-year second quarter and $10.0 million reported in the linked quarter. The net interest margin for second quarter 2012 was 3.20 percent compared to 3.09 percent for the year-ago quarter, and 3.20 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 2012 was $828,000 compared to $1.86 million for the comparable period of 2011. Excluding nonrecurring items (as enumerated above), noninterest income was $2.77 million for second quarter 2012, up $87,000 or 3.3 percent from the $2.68 million reported for second quarter 2011.

The provision for loan losses was $2.0 million for the second quarter of 2012 compared to $2.0 million and $3.0 million for the linked and year-ago quarters, respectively.

Noninterest expenses continue to be well-controlled, as total noninterest expense decreased 6.1% for the quarter to $7.3 million from the $7.9 million reported in second quarter 2011. Noninterest expense for the first half of 2012 remained nearly unchanged compared to the first half of 2011. Cost-saving initiatives continue in place and their impact remain beneficial.

Balance Sheet

At June 30, 2012, total assets were $1.42 billion, a decrease of $33.7 million, or 2.3 percent, and a decrease of $51.5 million, or 3.5 percent, since December 31, 2011 and June 30, 2011, respectively. Total loans, net of unearned fees, were $966.2 million at June 30, 2012, down $17.0 million, or 1.7 percent, from the $983.2 million reported at year end 2011.

All loan categories have declined since year end 2011, except for commercial real estate (“CRE”), the largest component of Summit’s loan portfolio, which increased $4.3 million. The second largest component of Summit’s loan portfolio, residential real estate, declined $3.2 million, or 1.0 percent, while construction and development (“C&D”) loans declined $9.8 million, or 10.2 percent and commercial (“C&I”) loans declined $7.0 million, or 7.0 percent.

At June 30, 2012, retail deposits were $767.4 million, a decrease of $16.6 million, or 2.1 percent, since year end 2011. During the first half of 2012, retail checking deposits grew $13.9 million, or 5.6 percent, to $261.0 million, while retail savings and time deposits declined during the same period by $4.3 million and $26.2 million, respectively, or 2.1 percent and 8.0 percent, respectively.  This reflects management’s ongoing effort to enhance Summit’s cost of funds by improving its deposit mix by attracting lower-cost checking deposits to replace higher-cost time deposits.

Long-term borrowings and subordinated debentures declined by 5.4 percent since year end 2011, as the Company paid down $16.6 million in maturing borrowings during this period.

Asset Quality

As of June 30, 2012, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $106.1 million, or 7.49 percent of assets. This compares to $108.6 million, or 7.52 percent of assets at the linked quarter, and $105.3 million, or 7.18 percent of assets at June 30, 2011.

Second quarter 2012 net loan charge-offs were $2.6 million, or 1.08 percent of average loans annualized, while adding $2.0 million to the allowance for loan losses. The allowance for loan losses stood at $17.9 million, or 1.85 percent of total loans at June 30, 2012, compared to 1.80 percent at December 31, 2011.

Capital Adequacy

Total shareholders’ equity was $105.7 million as of June 30, 2012 compared to $102.6 million December 31, 2011.

Summit's depository institution, Summit Community Bank, Inc. (the “Bank”), remains well in excess of regulatory requirements for a "well capitalized" institution at June 30, 2012. The Bank’s total risk-based capital ratio improved to 14.3 percent at June 30, 2012 compared to 13.6 percent at December 31, 2011, while its Tier 1 leverage capital ratio improved to 9.3 from the 8.9 percent reported at December 31, 2011. Total common shares outstanding as of June 30, 2012 were 7,425,472.

About the Company

Summit Financial Group, Inc. is a $1.42 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 these items to be unusual in nature and 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 2012 vs Q2 2011
	For the Quarter Ended						Percent
Dollars in thousands	6/30/2012			6/30/2011			Change
Condensed Statements of Income
Interest income
Loans, including fees	$	14,041		$	14,956			-6.1	%
Securities		2,225			3,125			-28.8	%
Other		12			28			-57.1	%
Total interest income		16,278			18,109			-10.1	%
Interest expense
Deposits		3,360			4,667			-28.0	%
Borrowings		2,947			3,282			-10.2	%
Total interest expense	��	6,307			7,949			-20.7	%
Net interest income		9,971			10,160			-1.9	%
Provision for loan losses		2,001			3,000			-33.3	%
Net interest income after provision
for loan losses		7,970			7,160			11.3	%
Noninterest income
Insurance commissions		1,141			1,143			-0.2	%
Service fees related to deposit accounts		1,075			1,057			1.7	%
Realized securities gains		320			318			0.6	%
Gain (loss) on sale of assets		(523	)		77		NM
Other-than-temporary impairment of securities		(106	)		(532	)		-80.1	%
Write-downs of foreclosed properties		(1,631	)		(689	)		136.7	%
Other income		552			481			14.8	%
Total noninterest income		828			1,855			-55.4	%
Noninterest expense
Salaries and employee benefits		3,892			4,055			-4.0	%
Net occupancy expense		490			481			1.9	%
Equipment expense		603			581			3.8	%
Professional fees		227			192			18.2	%
FDIC premiums		500			586			-14.7	%
Foreclosed properties expense		248			412			-39.8	%
Other expenses		1,335			1,465			-8.9	%
Total noninterest expense		7,295			7,772			-6.1	%
Income before income taxes		1,503			1,243			20.9	%
Income taxes		590			338			74.6	%
Net income		913			905			0.9	%
Preferred stock dividends		194			74			162.2	%
Net income applicable to common shares	$	719		$	831			-13.5	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q2 2012 vs Q2 2011
	For the Quarter Ended						Percent
	6/30/2012			6/30/2011			Change
Per Share Data
Earnings per common share
Basic	$	0.10		$	0.11			-9.1	%
Diluted	$	0.09		$	0.11			-18.2	%
Average shares outstanding
Basic		7,425,472			7,425,472			0.0	%
Diluted		8,927,802			7,425,472			20.2	%
Performance Ratios
Return on average equity (A)		3.44	%		3.96	%		-13.1	%
Return on average assets		0.25	%		0.24	%		4.2	%
Net interest margin		3.20	%		3.09	%		3.6	%
Efficiency ratio (B)		54.91	%		58.00	%		-5.3	%

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary -- 2012 vs 2011
	For the Six Months Ended						Percent
Dollars in thousands	6/30/2012			6/30/2011			Change
Condensed Statements of Income
Interest income
Loans, including fees	$	28,406		$	30,096			-5.6	%
Securities		4,645			6,168			-24.7	%
Other		24			45			-46.7	%
Total interest income		33,075			36,309			-8.9	%
Interest expense
Deposits		7,073			9,410			-24.8	%
Borrowings		6,013			6,637			-9.4	%
Total interest expense		13,086			16,047			-18.5	%
Net interest income		19,989			20,262			-1.3	%
Provision for loan losses		4,002			6,000			-33.3	%
Net interest income after provision
for loan losses		15,987			14,262			12.1	%
Noninterest income
Insurance commissions		2,299			2,384			-3.6	%
Service fees related to deposit accounts		2,089			1,946			7.3	%
Realized securities gains		1,485			1,946			-23.7	%
Gain (loss) on sale of assets		(599	)		147		NM
Other-than-temporary impairment of securities		(335	)		(1,761	)		-81.0	%
Write-downs of foreclosed properties		(3,543	)		(4,132	)		-14.3	%
Other income		1,135			844			34.5	%
Total noninterest income		2,531			1,374			84.2	%
Noninterest expense
Salaries and employee benefits		7,793			8,028			-2.9	%
Net occupancy expense		969			990			-2.1	%
Equipment expense		1,196			1,161			3.0	%
Professional fees		531			389			36.5	%
FDIC premiums		1,022			1,279			-20.1	%
Foreclosed properties expense		623			846			-26.4	%
Other expenses		2,701			2,186			23.6	%
Total noninterest expense		14,835			14,879			-0.3	%
Income before income taxes		3,683			757			386.5	%
Income taxes		1,073			100			973.0	%
Net income		2,610			657			297.3	%
Preferred stock dividends		388			148			162.2	%
Net income applicable to common shares	$	2,222		$	509			336.5	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary -- 2012 vs 2011
	For the Six Months Ended						Percent
	6/30/2012			6/30/2011			Change
Per Share Data
Earnings per common share
Basic	$	0.30		$	0.07			328.6	%
Diluted	$	0.27		$	0.07			285.7	%
Average shares outstanding
Basic		7,425,472			7,425,472			0.0	%
Diluted		9,601,040			7,425,472			29.3	%
Performance Ratios
Return on average equity (A)		4.96	%		1.50	%		230.7	%
Return on average assets		0.36	%		0.09	%		300.0	%
Net interest margin		3.20	%		3.10	%		3.2	%
Efficiency ratio (B)		55.66	%		58.40	%		-4.7	%

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary
	For the Quarter Ended
Dollars in thousands	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Condensed Statements of Income
Interest income
Loans, including fees	$	14,041		$	14,365		$	14,362		$	14,717		$	14,956
Securities		2,225			2,421			2,711			2,920			3,125
Other		12			11			13			15			28
Total interest income		16,278			16,797			17,086			17,652			18,109
Interest expense
Deposits		3,360			3,713			4,302			4,561			4,667
Borrowings		2,947			3,066			3,123			3,170			3,282
Total interest expense		6,307			6,779			7,425			7,731			7,949
Net interest income		9,971			10,018			9,661			9,921			10,160
Provision for loan losses		2,001			2,001			1,999			2,001			3,000
Net interest income after provision
for loan losses		7,970			8,017			7,662			7,920			7,160
Noninterest income
Insurance commissions		1,141			1,158			1,003			1,073			1,143
Service fees related to deposit accounts		1,075			1,014			1,102			1,078			1,057
Realized securities gains		320			1,165			542			1,517			318
Gain (loss) on sale of assets		(523	)		(77	)		18			130			77
Other-than-temporary impairment of securities		(106	)		(229	)		(401	)		(484	)		(532	)
Write-downs of foreclosed properties		(1,631	)		(1,912	)		(882	)		(1,637	)		(689	)
Other income		552			584			607			510			481
Total noninterest income		828			1,703			1,989			2,187			1,855
Noninterest expense
Salaries and employee benefits		3,892			3,901			3,846			3,959			4,055
Net occupancy expense		490			479			472			473			481
Equipment expense		603			594			593			589			581
Professional fees		227			304			501			265			193
FDIC premiums		500			522			564			580			586
Foreclosed properties expense		248			374			441			389			412
Other expenses		1,335			1,365			1,417			1,318			1,464
Total noninterest expense		7,295			7,539			7,834			7,573			7,772
Income before income taxes		1,503			2,181			1,817			2,534			1,243
Income taxes		590			483			337			598			338
Net income		913			1,698			1,480			1,936			905
Preferred stock dividends		194			194			149			74			74
Net income applicable to common shares	$	719		$	1,504		$	1,331		$	1,862		$	831

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Five Quarter Performance Summary
	For the Quarter Ended
	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Per Share Data
Earnings per common share
Basic	$	0.10		$	0.20		$	0.18		$	0.25		$	0.11
Diluted	$	0.09		$	0.18		$	0.16		$	0.24		$	0.11
Average shares outstanding
Basic		7,425,472			7,425,472			7,425,472			7,425,472			7,425,472
Diluted		8,927,802			9,600,017			9,044,976			8,110,070			7,425,472
Performance Ratios
Return on average equity (A)		3.47	%		6.49	%		5.87	%		8.22	%		3.96	%
Return on average assets		0.25	%		0.47	%		0.41	%		0.53	%		0.24	%
Net interest margin		3.20	%		3.20	%		3.03	%		3.08	%		3.09	%
Efficiency ratio - (B)		54.91	%		56.45	%		60.10	%		57.29	%		58.00	%

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data
	For the Quarter Ended
Dollars in thousands, except per share amounts	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Assets
Cash and due from banks	$	4,266		$	4,059		$	4,398		$	3,596		$	4,515
Interest bearing deposits other banks		14,288			26,855			28,294			39,103			24,658
Securities		289,151			292,002			286,599			292,442			295,806
Loans, net		948,294			957,797			965,516			964,349			971,127
Property held for sale		60,069			61,584			63,938			63,335			66,188
Premises and equipment, net		21,470			21,756			22,084			22,334			22,587
Intangible assets		8,475			8,563			8,651			8,739			8,826
Cash surrender value of life insurance policies		29,808			29,559			29,284			29,034			28,762
Other assets		40,620			42,190			41,357			41,652			45,517
Total assets	$	1,416,441		$	1,444,365		$	1,450,121		$	1,464,584		$	1,467,986
Liabilities and Shareholders' Equity
Retail deposits	$	767,413		$	785,283		$	784,029		$	816,904		$	809,952
Wholesale deposits		234,256			225,856			232,471			230,405			236,142
Short-term borrowings		10,957			15,956			15,956			955			2,047
Long-term borrowings and
subordinated debentures		290,024			303,510			306,643			308,420			319,020
Other liabilities		8,084			9,361			8,456			8,976			8,966
Shareholders' equity		105,707			104,399			102,566			98,924			91,859
Total liabilities and shareholders' equity	$	1,416,441		$	1,444,365		$	1,450,121		$	1,464,584		$	1,467,986
Book value per common share (A)	$	11.01		$	10.87		$	10.68		$	10.96		$	11.34
Tangible book value per common share (A)	$	10.13		$	9.98		$	9.78		$	9.99		$	10.25
Tangible equity / Tangible assets		6.9	%		6.7	%		6.5	%		6.2	%		5.7	%

NOTE  (A) – Assumes conversion of all outstanding shares of convertible preferred stock.

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios
	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Summit Financial Group, Inc.
Total Risk Based Capital		13.6	%		13.3	%		13.0	%		12.3	%		11.9	%
Tier 1 Risk Based Capital		11.1	%		10.8	%		10.5	%		9.7	%		9.3	%
Tier 1 Leverage Ratio		7.9	%		7.8	%		7.6	%		6.9	%		6.7	%
Summit Community Bank, Inc.
Total Risk Based Capital		14.3	%		14.0	%		13.6	%		13.4	%		12.8	%
Tier 1 Risk Based Capital		13.1	%		12.7	%		12.3	%		12.1	%		11.5	%
Tier 1 Leverage Ratio		9.3	%		9.1	%		8.9	%		8.7	%		8.3	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition
Dollars in thousands	6/30/2012		3/31/2012		12/31/2011		9/30/2011		6/30/2011
Commercial	$	92,060	$	99,386	$	99,024	$	94,801	$	96,796
Commercial real estate
Owner occupied		152,347		153,528		158,754		166,813		169,935
Non-owner occupied		280,891		275,727		270,226		253,538		248,930
Construction and development
Land and development		84,383		88,212		93,035		94,023		94,464
Construction		1,793		2,148		2,936		9,445		12,223
Residential real estate
Non-jumbo		217,321		219,485		221,733		224,499		228,205
Jumbo		61,962		62,836		61,535		62,255		60,817
Home equity		51,692		50,884		50,898		51,025		50,884
Consumer		21,212		21,573		22,325		22,988		23,773
Other		2,523		2,540		2,762		2,911		3,116
Total loans, net of unearned fees		966,184		976,319		983,228		982,298		989,143
Less allowance for loan losses		17,890		18,522		17,712		17,949		18,016
Loans, net	$	948,294	$	957,797	$	965,516	$	964,349	$	971,127

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Retail Deposit Composition
Dollars in thousands	6/30/2012		3/31/2012		12/31/2011		9/30/2011		6/30/2011
Non interest bearing checking	$	96,172	$	87,916	$	88,655	$	85,406	$	85,964
Interest bearing checking		164,867		172,506		158,483		163,840		150,004
Savings		204,509		212,402		208,809		208,030		212,745
Time deposits		301,865		312,459		328,082		359,628		361,239
Total retail deposits	$	767,413	$	785,283	$	784,029	$	816,904	$	809,952

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information
	For the Quarter Ended
Dollars in thousands	6/30/2012			3/31/2012			12/31/2011			9/30/2011			6/30/2011
Gross loan charge-offs	$	2,790		$	1,340		$	2,368		$	2,157		$	2,022
Gross loan recoveries		(156	)		(149	)		(133	)		(89	)		(104	)
Net loan charge-offs	$	2,634		$	1,191		$	2,235		$	2,068		$	1,918
Net loan charge-offs to average loans (annualized)		1.08	%		0.49	%		0.91	%		0.84	%		0.76	%
Allowance for loan losses	$	17,890		$	18,523		$	17,712		$	17,949		$	18,016
Allowance for loan losses as a percentage
of period end loans		1.85	%		1.89	%		1.80	%		1.82	%		1.82	%
Nonperforming assets:
Nonperforming loans
Commercial	$	6,476		$	2,477		$	3,259		$	3,473		$	2,212
Commercial real estate		3,536			4,282			7,163			8,398			8,093
Commercial construction and development		662			799			1,052			-			-
Residential construction and development		16,735			21,375			22,634			17,506			19,222
Residential real estate		18,550			17,754			18,187			6,818			9,237
Consumer		78			81			145			87			130
Total nonperforming loans		46,037			46,768			52,440			36,282			38,894
Foreclosed properties
Commercial		-			-			-			597			597
Commercial real estate		12,029			14,703			15,721			14,256			14,179
Commercial construction and development		18,632			17,377			17,101			16,960			16,886
Residential construction and development		26,014			25,724			27,877			27,804			30,512
Residential real estate		3,393			3,780			3,239			3,718			4,014
Total foreclosed properties		60,068			61,584			63,938			63,335			66,188
Other repossessed assets		-			266			263			262			264
Total nonperforming assets	$	106,105		$	108,618		$	116,641		$	99,879		$	105,346
Nonperforming loans to period end loans		4.76	%		4.79	%		5.33	%		3.69	%		3.93	%
Nonperforming assets to period end assets		7.49	%		7.52	%		8.04	%		6.82	%		7.18	%

Loans Past Due 30-89 Days
	For the Quarter Ended
In thousands	6/30/2012		3/31/2012		12/31/2011		9/30/2011		6/30/2011
Commercial	$	300	$	689	$	533	$	255	$	1,572
Commercial real estate		1,787		2,776		5,746		2,797		2,756
Construction and development		293		518		1,756		1,251		163
Residential real estate		5,763		5,509		6,633		4,779		6,603
Consumer		408		242		466		308		415
Total	$	8,551	$	9,734	$	15,134	$	9,390	$	11,509

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2012 vs Q2 2011
	Q2 2012			Q2 2011
	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	$966,068	$13,960	5.81%	$986,545	$14,884	6.05%
Tax-exempt	6,820	123	7.25%	4,783	97	8.13%
Securities
Taxable	234,196	1,554	2.67%	270,812	2,574	3.81%
Tax-exempt	71,077	1,007	5.70%	50,968	835	6.57%
Interest bearing deposits other banks
and Federal funds sold	23,671	12	0.20%	43,741	27	0.25%
Total interest earning assets	1,301,832	16,656	5.15%	1,356,849	18,417	5.44%
Noninterest earning assets
Cash & due from banks	4,266			3,756
Premises & equipment	21,656			22,737
Other assets	123,796			115,920
Allowance for loan losses	(18,503)			(18,075)
Total assets	$1,433,047			$1,481,187
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$166,309	$82	0.20%	$152,587	$101	0.27%
Savings deposits	208,277	351	0.68%	211,618	504	0.96%
Time deposits	535,649	2,926	2.20%	608,669	4,061	2.68%
Short-term borrowings	15,901	11	0.28%	2,035	1	0.20%
Long-term borrowings and
subordinated debentures	295,838	2,936	3.99%	319,533	3,282	4.12%
Total interest bearing liabilities	1,221,974	6,306	2.08%	1,294,442	7,949	2.46%
Noninterest bearing liabilities
Demand deposits	93,995			86,216
Other liabilities	11,050			9,127
Total liabilities	1,327,019			1,389,785
Shareholders' equity - preferred	9,326			3,519
Shareholders' equity - common	96,702			87,883
Total liabilities and
shareholders' equity	$1,433,047			$1,481,187
NET INTEREST EARNINGS		$10,350			$10,468
NET INTEREST MARGIN			3.20%			3.09%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2012 vs YTD 2011
	YTD 2012			YTD 2011
	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	$969,965	$28,239	5.85%	$993,905	$29,967	6.08%
Tax-exempt	7,034	253	7.23%	4,861	195	8.09%
Securities
Taxable	234,584	3,252	2.79%	270,338	5,183	3.87%
Tax-exempt	71,318	2,111	5.95%	44,434	1,492	6.77%
Interest bearing deposits other banks
and Federal funds sold	24,277	24	0.20%	40,075	45	0.23%
Total interest earning assets	1,307,178	33,879	5.21%	1,353,613	36,882	5.49%
Noninterest earning assets
Cash & due from banks	4,169			3,894
Premises & equipment	21,818			22,857
Other assets	124,321			114,467
Allowance for loan losses	(18,377)			(18,095)
Total assets	$1,439,109			$1,476,736
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$163,228	$164	0.20%	$150,437	$201	0.27%
Savings deposits	210,030	733	0.70%	204,666	1,005	0.99%
Time deposits	543,169	6,176	2.29%	615,953	8,204	2.69%
Short-term borrowings	15,145	16	0.21%	1,886	2	0.21%
Long-term borrowings and
subordinated debentures	300,433	5,996	4.01%	321,370	6,635	4.16%
	1,232,005	13,085	2.14%	1,294,312	16,047	2.50%
Noninterest bearing liabilities
Demand deposits	90,498			82,142
Other liabilities	11,323			9,378
Total liabilities	1,333,826			1,385,832
Shareholders' equity - preferred	9,326			3,519
Shareholders' equity - common	95,957			87,385
Total liabilities and
shareholders' equity	$1,439,109			$1,476,736
NET INTEREST EARNINGS		$20,794			$20,835
NET INTEREST MARGIN			3.20%			3.10%

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	6/30/2012			6/30/2011			6/30/2012			6/30/2011
Net income applicable to common shares - excluding
realized securities gains, gains/(losses) on sales of
assets, other-than-temporary impairment of securities
and write-downs of foreclosed properties	$	1,941		$	1,351		$	4,106		$	2,902
Realized securities gains		320			318			1,485			1,946
Applicable income tax effect		(118	)		(118	)		(549	)		(720	)
Gains (losses) on sales of assets		(523	)		77			(599	)		147
Applicable income tax effect		194			(28	)		222			(54	)
Other-than-temporary impairment of securities		(106	)		(532	)		(335	)		(1,761	)
Applicable income tax effect		39			197			124			652
Write-downs foreclosed properties		(1,631	)		(689	)		(3,543	)		(4,132	)
Applicable income tax effect		603			255			1,311			1,529
		(1,222	)		(520	)		(1,884	)		(2,393	)
GAAP net income applicable to common shares	$	719		$	831		$	2,222		$	509
Diluted earnings per common share - excluding
realized securities gains, gains/(losses) on sales of
assets, other-than-temporary impairment of securities
and write-downs of foreclosed properties	$	0.22		$	0.17		$	0.47		$	0.40
Realized securities gains		0.03			0.04			0.15			0.26
Applicable income tax effect		(0.01	)		(0.01	)		(0.06	)		(0.10	)
Gains (losses) on sales of assets		(0.05	)		0.01			(0.06	)		0.02
Applicable income tax effect		0.02			-			0.02			(0.01	)
Other-than-temporary impairment of securities		(0.01	)		(0.07	)		(0.03	)		(0.24	)
Applicable income tax effect		-			0.03			0.01			0.09
Write-downs of foreclosed properties		(0.17	)		(0.09	)		(0.37	)		(0.56	)
Applicable income tax effect		0.06			0.03			0.14			0.21
		(0.13	)		(0.06	)		(0.20	)		(0.33	)
GAAP diluted earnings per common share	$	0.09		$	0.11		$	0.27		$	0.07

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	6/30/2012			6/30/2011			6/30/2012			6/30/2011
Total revenue - excluding realized securities gains,
other-than-temporary impairment of securities and
write-downs of foreclosed properties	$	12,739		$	12,841		$	25,512		$	25,536
Realized securities gains		320			318			1,485			1,946
Gains (losses) on sales of assets		(523	)		77			(599	)		47
Other-than-temporary impairment of securities		(106	)		(532	)		(335	)		(1,761	)
Write-downs of foreclosed properties		(1,631	)		(689	)		(3,543	)		(4,132	)
		(1,940	)		(826	)		(2,992	)		(3,900	)
GAAP total revenue	$	10,799		$	12,015		$	22,520		$	21,636
Total noninterest income - excluding realized securities
gains, other-than-temporary impairment of securities
and write-downs of foreclosed properties	$	2,768		$	2,681		$	5,523		$	5,274
Realized securities gains		320			318			1,485			1,946
Gains (losses) on sales of assets		(523	)		77			(599	)		47
Other-than-temporary impairment of securities		(106	)		(532	)		(335	)		(1,761	)
Write-downs of foreclosed properties		(1,631	)		(689	)		(3,543	)		(4,132	)
		(1,940	)		(826	)		(2,992	)		(3,900	)
GAAP total noninterest income	$	828		$	1,855		$	2,531		$	1,374