8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

 CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):July 30, 2014

Summit Financial Group, Inc.

(Exact name of registrant as specified in its charter)

West Virginia	0-16587	55-0672148
(State or Other Jurisdiction)	(Commission File Number)	(I.R.S. Employer Identification)

300 North Main Street

       Moorefield, WV                             26836

(Address of principal executive offices)   (Zip Code)

Registrant's telephone number, including area code

(304) 530-1000

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 – Financial Information

Item 2.02.  Results of Operations and Financial Condition.

On July 30, 2014, Summit Financial Group, Inc. (“Summit”) issued a News Release announcing its earnings for the three months and six months ended June 30, 2014.  This News Release is furnished as Exhibit 99 and is incorporated herein by reference.

Section 9 – Financial Statements and Exhibits

Item 9.01  Financial Statements and Exhibits

(c)   Exhibits

99           News Release issued on July 30, 2014

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SUMMIT FINANCIAL GROUP, INC.
Date: July 30, 2014	By: /s/ Julie R. Cook
	Julie R. Cook
	Vice President and
	Chief Accounting Officer

EX-99

Exhibit 99

FOR RELEASE 6:00 AM ET, July 30, 2014

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

Telephone:                 (304) 530-0552

Email:                           rtissue@summitfgi.com

SUMMIT FINANCIAL GROUP REPORTS SECOND QUARTER 2014 RESULTS

Q2 2014 Diluted EPS $0.25 compared to $0.13 for Q2 2013 and $0.25 for Q1 2014; Quarterly core revenues grow 6.3 percent year-over-year

MOOREFIELD, WV – July 30, 2014 (GLOBE NEWSWIRE) – Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported second quarter 2014 net income applicable to common shares of $2.24 million, or $0.25 per diluted share, compared to $1.02 million, or $0.13 per diluted share, for the second quarter of 2013, representing an increase of 118.9 percent, or 92.3 percent per diluted share. Q2 2014 earnings compared to Q2 2013 were positively impacted by a $532,000 decline in write-downs of foreclosed properties and an $816,000 increase in net interest income.

Excluding from second quarter 2014 (on a pre-tax basis) realized securities losses of $43,000, losses on sales of foreclosed properties of $54,000, $1,000 in other-than-temporary impairment of securities (“OTTI”) and write-downs of foreclosed properties of $962,000, Q2 2014 core earnings approximated $2.91 million, or $0.32 per diluted share. Excluding from Q2 2013 (on a pre-tax basis) realized securities losses of $57,000, losses on sales of foreclosed properties of $523,000, OTTI charges of $27,000 and write-downs of foreclosed properties of $1.49 million, Q2 2013 core earnings approximated $2.35 million, or $0.27 per diluted share.

For the six months ended June 30, 2014, Summit recorded net income applicable to common shares of $4.44 million, or $0.50 per diluted share, compared with $2.62 million, or $0.31 per diluted share, for the comparable 2013 six-month period, representing an increase of 69.5%, or 61.3 % per diluted share.

Excluding from the six month period ended June 30, 2014 nonrecurring items (on a pre-tax basis) comprised of realized securities losses of $64,000, losses on sales of assets of $129,000, OTTI charges of $1,000 and write-downs of foreclosed properties of $1.89 million, and from the 2013 first six-month period realized securities losses of $16,000, losses on sale of foreclosed properties of $563,000, OTTI charges of $80,000 and write-downs of foreclosed properties of $2.42 million, core earnings for first six months of 2014 were approximately $5.75 million, or $0.65 per diluted share, compared to $4.56 million, or $0.52 per diluted share, for the 2013 six month period.

Highlights for Q2 2014 include:

·   Nonperforming assets declined for the tenth consecutive quarter, reaching its lowest level since Q4 2008; foreclosed properties are at the lowest level since Q4 2009.

·   Net interest margin has increased 20 basis points since Q2 2013, although it declined 1 basis point compared to Q1 2014.

·   Achieved loan growth of $30.0 million, or 3.1 percent (non-annualized) during the quarter, and $54.1 million, or 5.7 percent (non-annualized) year-to-date.

·   Core revenues increased for the fourth consecutive quarter.

·   Recorded charges of $962,000 to write-down foreclosed properties compared to $928,000 in Q1 2014 and $1.49 million in Q2 2013.

·   Noninterest expenses remained well-controlled decreasing almost 10.6 percent compared to Q2 2013.

·   Summit’s regulatory capital ratios are at the highest levels in fourteen years.

H. Charles Maddy III, President and Chief Executive Officer of Summit, commented, “I am very pleased to report another quarter of solid performance improvements. We continued to enhance earnings, grow the loan portfolio, increase revenues, enhance net interest earnings, strengthen capital and reduce the portfolio of problem assets. Reducing our portfolio of problem assets remains an important priority, and we are very pleased to have reduced nonperforming assets for ten consecutive quarters. While we anticipate earnings may continue to fluctuate from quarter-to-quarter in the short term as our foreclosed properties are re-appraised and written-down to estimated fair values on an ongoing basis, continuing revenue growth driven by an improving net interest margin and the recent uptick in lending is expected to positively impact earnings in the near term.”

Results from Operations

Total revenue for second quarter 2014, consisting of net interest income and noninterest income, grew 6.7 percent to $13.0 million compared to $12.2 million for the second quarter 2013. For the year-to-date period ended June 30, 2014, total revenue was $25.8 million compared to $24.7 million for the same period of 2013, representing a 4.4 percent increase.

Total core revenue (excluding nonrecurring items, enumerated above) was $13.1 million for second quarter 2014 compared to $12.3 million for the same prior-year quarter, an increase of 6.3 percent.  For the first half of 2014, total core revenue (excluding nonrecurring items) was $25.9 million compared to $24.8 million for the first half of 2013, a 4.4 percent improvement.

For the second quarter of 2014, net interest income was $10.3 million, an increase of 8.6 percent from the $9.5 million reported in the prior-year second quarter and increased $282,000 compared to the linked quarter. The net interest margin for second quarter 2014 was 3.32 percent compared to 3.12 percent for the year-ago quarter, and 3.33 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 2014 was $2.71 million compared to $2.70 million for the comparable period of 2014. Excluding realized securities gains/losses and OTTI of securities, noninterest income was $2.75 million for second quarter 2014, compared to $2.79 million reported for second quarter 2013.

The second quarter 2014 provision for loan losses of $1.0 million remained unchanged compared to the linked quarter and the year-ago quarter.

Noninterest expense continues to be well-controlled. Total noninterest expense decreased 10.6% to $8.53 million compared to $9.54 million for the prior-year second quarter.  Excluding from noninterest expense (on a pre-tax basis) losses on sales of foreclosed properties of $54,000 in Q2 2014 and $523,000 in Q2 2013 and write-downs of foreclosed properties of $962,000 in Q2 2014 and $1.49 million in Q2 2013, noninterest expense would have approximated $7.51 million for Q2 2014 compared to $7.52 million for the comparable period of 2013.  Noninterest expense for the first half of 2014 decreased 5.9% compared to the first half of 2013.

Balance Sheet

At June 30, 2014, total assets were $1.44 billion, an increase of $49.7 million, or 3.6 percent since December 31, 2013. Total loans, net of unearned fees and allowance for loan losses, were $992.8 million at June 30, 2014, up $55.7 million, or 5.9 percent, from the $937.1 million reported at year-end 2013.

At June 30, 2014, deposits were $1.06 billion, an increase of $54.0 million, or 5.4 percent, since year end 2013. During first half 2014, checking and savings grew by $14.6 million and $49.9 million, respectively, or 5.2 percent and 25.8 percent, respectively. Long-term borrowings and subordinated debentures declined by 20.8 percent since year end 2013, as the Company paid down $41.6 million in maturing borrowings, which was funded by growth in checking and savings deposits.

Asset Quality

As of June 30, 2014, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $63.0 million, or 4.39 percent of assets. This compares to $69.2 million, or 4.92 percent of assets at the linked quarter, and $78.2 million, or 5.70 percent of assets, at second quarter 2013.

Second quarter 2014 net loan charge-offs were $1.06 million, or 0.43 percent of average loans annualized; while adding $1.00 million to the allowance for loan losses. The allowance for loan losses stood at $11.0 million, or 1.10 percent of total loans at June 30, 2014, compared to 1.33 percent at year-end 2013.

Capital Adequacy

Shareholders’ equity was $117.5 million as of June 30, 2014 compared to $111.1 million December 31, 2013 and $107.2 million at June 30, 2013. Tangible book value per common share increased to $11.40 at June 30, 2014 compared to $10.72 at December 31, 2013 and $10.31 at June 30, 2013.

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, 2014. The Bank’s total risk-based capital ratio was 15.6 percent at June 30, 2014 compared to 15.7 percent at December 31, 2013, while its Tier 1 leverage capital ratio improved to 10.6 percent from the 10.4 percent reported at December 31, 2013.

About the Company

Summit Financial Group, Inc. is a $1.44 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle and South Central regions of West Virginia and the Northern and Shenandoah Valley regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates fifteen banking locations. Summit also operates Summit Insurance Services, LLC in Moorefield, West Virginia and Leesburg, Virginia.

FORWARD-LOOKING STATEMENTS

This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as “expects”, “anticipates”, “believes”, “estimates” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could” are intended to identify such forward-looking statements.

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially.  Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies.  We undertake no obligation to revise these statements following the date of this press release.

NON-GAAP FINANCIAL MEASURES

This press release contains financial information determined by methods other than in accordance with generally accepted accounting principles in the United States of America ("GAAP").  Specifically, Summit adjusted GAAP performance measures to exclude the effects of realized and unrealized securities gains and losses, gains/losses on sales of assets, and write-downs of foreclosed properties to estimated fair value included in its Statements of Income.  Management deems believes presentations of financial measures excluding the impact of these items provide useful supplemental information that is important for a proper understanding of the operating results of Summit's core business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q2 2014 vs Q2 2013
	For the Quarter Ended						Percent
Dollars in thousands	6/30/2014			6/30/2013			Change
Condensed Statements of Income
Interest income
Loans, including fees	$	12,515		$	12,799		-2.2%
Securities		1,827			1,507		21.2%
Other		2			2		0.0%
Total interest income		14,344			14,308		0.3%
Interest expense
Deposits		2,335			2,820		-17.2%
Borrowings		1,689			1,984		-14.9%
Total interest expense		4,024			4,804		-16.2%
Net interest income		10,320			9,504		8.6%
Provision for loan losses		1,000			1,000		0.0%
Net interest income after provision
for loan losses		9,320			8,504		9.6%
Noninterest income
Insurance commissions		1,091			1,132		-3.6%
Service fees related to deposit accounts		1,101			1,085		1.5%
Realized securities gains (losses)		(43	)		(57	)	-24.6%
Other-than-temporary impairment of securities		(1	)		(27	)	-96.3%
Other income		557			570		-2.3%
Total noninterest income		2,705			2,703		0.1%
Noninterest expense
Salaries and employee benefits		4,045			3,987		1.5%
Net occupancy expense		505			476		6.1%
Equipment expense		513			559		-8.2%
Professional fees		282			360		-21.7%
FDIC premiums		495			515		-3.9%
Foreclosed properties expense		229			295		-22.4%
Loss (gain) on sales of foreclosed properties		54			523		-89.7%
Write-downs of foreclosed properties		962			1,494		-35.6%
Other expenses		1,445			1,329		8.7%
Total noninterest expense		8,530			9,538		-10.6%
Income before income taxes		3,495			1,669		109.4%
Income taxes		1,063			452		135.2%
Net income		2,432			1,217		99.8%
Preferred stock dividends		193			194		-0.5%
Net income applicable to common shares	$	2,239		$	1,023		118.9%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q2 2014 vs Q2 2013
	For the Quarter Ended						Percent
	6/30/2014			6/30/2013			Change
Per Share Data
Earnings per common share
Basic	$	0.30		$	0.14		114.3%
Diluted	$	0.25		$	0.13		92.3%
Average shares outstanding
Basic		7,457,222			7,438,401		0.3%
Diluted		9,630,699			9,619,585		0.1%
Performance Ratios
Return on average equity (A)		8.37	%		4.40	%	90.2%
Return on average assets		0.69	%		0.35	%	97.1%
Net interest margin		3.32	%		3.12	%	6.4%
Efficiency ratio (B)		52.86	%		56.52	%	-6.5%

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary -- 2014 vs 2013
	For the Six Months Ended						Percent
Dollars in thousands	6/30/2014			6/30/2013			Change
Condensed Statements of Income
Interest income
Loans, including fees	$	24,731		$	25,703		-3.8%
Securities		3,679			3,171		16.0%
Other		4			3		33.3%
Total interest income		28,414			28,877		-1.6%
Interest expense
Deposits		4,576			5,588		-18.1%
Borrowings		3,480			4,027		-13.6%
Total interest expense		8,056			9,615		-16.2%
Net interest income		20,358			19,262		5.7%
Provision for loan losses		2,000			2,500		-20.0%
Net interest income after provision
for loan losses		18,358			16,762		9.5%
Noninterest income
Insurance commissions		2,273			2,316		-1.9%
Service fees related to deposit accounts		2,144			2,096		2.3%
Realized securities gains		(64	)		(16	)	300.0%
Other-than-temporary impairment of securities		(1	)		(80	)	-98.8%
Other income		1,137			1,134		0.3%
Total noninterest income		5,489			5,450		0.7%
Noninterest expense
Salaries and employee benefits		8,026			8,105		-1.0%
Net occupancy expense		1,046			932		12.2%
Equipment expense		1,079			1,157		-6.7%
Professional fees		598			611		-2.1%
FDIC premiums		997			1,055		-5.5%
Foreclosed properties expense		482			575		-16.2%
Loss (gain) on sales of foreclosed properties		129			563		-77.1%
Write-downs of foreclosed properties		1,891			2,423		-22.0%
Other expenses		2,780			2,679		3.8%
Total noninterest expense		17,028			18,100		-5.9%
Income before income taxes		6,819			4,112		65.8%
Income taxes		1,997			1,102		81.2%
Net income		4,822			3,010		60.2%
Preferred stock dividends		387			388		-0.3%
Net income applicable to common shares	$	4,435		$	2,622		69.1%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary -- 2014 vs 2013
	For the Six Months Ended						Percent
	6/30/2014			6/30/2013			Change
Per Share Data
Earnings per common share
Basic	$	0.59		$	0.35		68.6%
Diluted	$	0.50		$	0.31		61.3%
Average shares outstanding
Basic		7,455,307			7,435,344		0.3%
Diluted		9,629,830			9,616,918		0.1%
Performance Ratios
Return on average equity (A)		8.42	%		5.47	%	53.9%
Return on average assets		0.69	%		0.43	%	60.5%
Net interest margin		3.32	%		3.18	%	4.4%
Efficiency ratio (B)		53.49	%		56.24	%	-4.9%

                                                                                                 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	6/30/2014			3/31/2014			12/31/2013			9/30/2013			6/30/2013
Condensed Statements of Income
Interest income
Loans, including fees	$	12,515		$	12,216		$	12,507		$	12,532		$	12,799
Securities		1,827			1,852			1,850			1,512			1,507
Other		2			2			2			1			2
Total interest income		14,344			14,070			14,359			14,045			14,308
Interest expense
Deposits		2,335			2,241			2,317			2,487			2,820
Borrowings		1,689			1,791			2,039			2,020			1,984
Total interest expense		4,024			4,032			4,356			4,507			4,804
Net interest income		10,320			10,038			10,003			9,538			9,504
Provision for loan losses		1,000			1,000			1,000			1,000			1,000
Net interest income after provision
for loan losses		9,320			9,038			9,003			8,538			8,504
Noninterest income
Insurance commissions		1,091			1,181			1,056			1,057			1,132
Service fees related to deposit accounts		1,101			1,043			1,124			1,106			1,085
Realized securities gains (losses)		(43	)		(22	)		124			132			(57)
Other-than-temporary impairment of securities		(1	)		-			-			(38	)		(27)
Other income		557			581			592			606			570
Total noninterest income		2,705			2,783			2,896			2,863			2,703
Noninterest expense
Salaries and employee benefits		4,045			3,980			4,024			4,050			3,987
Net occupancy expense		505			541			466			454			476
Equipment expense		513			566			580			578			559
Professional fees		282			316			295			263			360
FDIC premiums		495			502			502			503			515
Foreclosed properties expense		229			254			209			262			295
Loss (gain) on sale of foreclosed properties		54			75			(28	)		(17	)		523
Write-downs of foreclosed properties		962			928			644			654			1,494
Other expenses		1,445			1,336			1,732			1,484			1,329
Total noninterest expense		8,530			8,498			8,424			8,231			9,538
Income before income taxes		3,495			3,323			3,475			3,170			1,669
Income taxes		1,063			934			687			898			452
Net income		2,432			2,389			2,788			2,272			1,217
Preferred stock dividends		193			193			194			194			194
Net income applicable to common shares	$	2,239		$	2,196		$	2,594		$	2,078		$	1,023

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Five Quarter Performance Summary
	For the Quarter Ended
	6/30/2014			3/31/2014			12/31/2013			9/30/2013			6/30/2013
Per Share Data
Earnings per common share
Basic	$	0.30		$	0.29		$	0.35		$	0.28		$	0.14
Diluted	$	0.25		$	0.25		$	0.29		$	0.24		$	0.13
Average shares outstanding
Basic		7,457,222			7,453,370			7,450,379			7,443,865			7,438,401
Diluted		9,630,699			9,628,927			9,624,312			9,621,957			9,619,585
Performance Ratios
Return on average equity (A)		8.37	%		8.46	%		10.15	%		8.49	%		4.40%
Return on average assets		0.69	%		0.69	%		0.80	%		0.67	%		0.35%
Net interest margin		3.32	%		3.33	%		3.24	%		3.15	%		3.12%
Efficiency ratio - (B)		52.86	%		54.13	%		57.31	%		56.22	%		56.52%

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data
	For the Quarter Ended
Dollars in thousands, except per share amounts	6/30/2014			3/31/2014			12/31/2013			9/30/2013			6/30/2013
Assets
Cash and due from banks	$	3,749		$	3,827		$	3,442		$	4,571		$	4,336
Interest bearing deposits other banks		9,970			13,424			8,340			11,532			7,971
Securities		287,883			281,865			288,780			291,258			291,180
Loans, net		992,816			962,714			937,070			939,169			925,979
Property held for sale		48,783			52,241			53,392			45,303			47,258
Premises and equipment, net		20,301			20,457			20,623			20,780			20,936
Intangible assets		7,798			7,861			7,949			8,036			8,124
Cash surrender value of life insurance policies		36,151			35,881			35,611			35,257			30,027
Other assets		28,507			27,847			31,020			31,881			34,159
Total assets	$	1,435,958		$	1,406,117		$	1,386,227		$	1,387,787		$	1,369,970
Liabilities and Shareholders' Equity
Deposits	$	1,057,795		$	1,052,630		$	1,003,812		$	1,016,735		$	1,038,163
Short-term borrowings		91,729			68,974			62,769			54,163			16,762
Long-term borrowings and
subordinated debentures		158,331			159,881			199,905			199,929			199,954
Other liabilities		10,638			10,105			8,669			8,155			7,880
Shareholders' equity		117,465			114,527			111,072			108,805			107,211
Total liabilities and shareholders' equity	$	1,435,958		$	1,406,117		$	1,386,227		$	1,387,787		$	1,369,970
Book value per common share (A)	$	12.21		$	11.91		$	11.55		$	11.32		$	11.15
Tangible book value per common share (A)	$	11.40		$	11.09		$	10.72		$	10.48		$	10.31
Tangible equity / Tangible assets		7.7	%		7.6	%		7.5	%		7.3	%		7.3%

                                                               NOTE (A) – Assumes conversion of convertible preferred stock

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios
	6/30/2014		3/31/2014		12/31/2013		9/30/2013		6/30/2013
Summit Financial Group, Inc.
Total Risk Based Capital	14.2	%	14.2	%	14.5	%	14.5	%	14.4%
Tier 1 Risk-based Capital	12.4	%	12.4	%	12.4	%	12.1	%	12.1%
Tier 1 Leverage Ratio	9.0	%	9.0	%	8.9	%	8.9	%	8.6%
Summit Community Bank, Inc.
Total Risk Based Capital	15.6	%	15.6	%	15.7	%	15.5	%	15.6%
Tier 1 Risk-based Capital	14.5	%	14.5	%	14.5	%	14.3	%	14.3%
Tier 1 Leverage Ratio	10.6	%	10.6	%	10.4	%	10.4	%	10.2%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition
Dollars in thousands	6/30/2014		3/31/2014		12/31/2013		9/30/2013		6/30/2013
Commercial	$	90,096	$	93,517	$	88,352	$	83,844	$	78,964
Commercial real estate
Owner occupied		154,260		150,025		149,618		151,261		149,660
Non-owner occupied		314,439		297,197		280,790		279,412		277,773
Construction and development
Land and development		64,246		67,342		71,453		73,089		73,426
Construction		20,902		18,327		15,155		12,323		7,634
Residential real estate
Non-jumbo		219,569		215,665		212,946		215,058		216,759
Jumbo		52,487		51,406		53,406		59,701		58,567
Home equity		61,248		56,161		54,844		53,674		53,774
Consumer		19,777		19,106		19,889		20,472		20,147
Other		6,798		5,037		3,276		3,374		3,397
Total loans, net of unearned fees		1,003,822		973,783		949,729		952,208		940,101
Less allowance for loan losses		11,006		11,069		12,659		13,039		14,122
Loans, net	$	992,816	$	962,714	$	937,070	$	939,169	$	925,979

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition
Dollars in thousands	6/30/2014		3/31/2014		12/31/2013		9/30/2013		6/30/2013
Non interest bearing checking	$	106,134	$	99,445	$	92,837	$	99,109	$	92,147
Interest bearing checking		187,855		195,898		186,578		186,702		187,244
Savings		243,323		228,854		193,446		193,285		196,069
Time deposits		520,483		528,433		530,951		537,639		562,703
Total deposits	$	1,057,795	$	1,052,630	$	1,003,812	$	1,016,735	$	1,038,163

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information
	For the Quarter Ended
Dollars in thousands	6/30/2014			3/31/2014			12/31/2013			9/30/2013			6/30/2013
Gross loan charge-offs	$	1,312		$	2,862		$	1,669		$	2,825		$	3,968
Gross loan recoveries		(249	)		(272	)		(289	)		(742	)		(70)
Net loan charge-offs	$	1,063		$	2,590		$	1,380		$	2,083		$	3,898
Net loan charge-offs to average loans (annualized)		0.43	%		1.08	%		0.58	%		0.89	%		1.63%
Allowance for loan losses	$	11,006		$	11,069		$	12,659		$	13,039		$	14,122
Allowance for loan losses as a percentage
of period end loans		1.10	%		1.14	%		1.33	%		1.37	%		1.50%
Nonperforming assets:
Nonperforming loans
Commercial	$	415		$	866		$	1,224		$	2,557		$	3,996
Commercial real estate		1,537			2,834			2,318			3,795			1,695
Commercial construction and development		3,601			3,653			3,782			3,761			-
Residential construction and development		5,248			6,599			9,048			9,128			11,505
Residential real estate		3,289			2,890			2,446			12,385			13,605
Consumer		129			73			128			145			91
Total nonperforming loans		14,219			16,915			18,946			31,771			30,892
Foreclosed properties
Commercial		110			-			-			-			-
Commercial real estate		5,762			8,523			9,903			9,961			10,310
Commercial construction and development		10,363			11,097			11,125			11,161			11,492
Residential construction and development		20,557			20,640			20,485			20,585			21,591
Residential real estate		11,991			11,981			11,879			3,596			3,865
Total foreclosed properties		48,783			52,241			53,392			45,303			47,258
Other repossessed assets		-			28			8			-			2
Total nonperforming assets	$	63,002		$	69,184		$	72,346		$	77,074		$	78,152
Nonperforming loans to period end loans		1.42	%		1.74	%		1.99	%		3.34	%		3.29%
Nonperforming assets to period end assets		4.39	%		4.92	%		5.22	%		5.55	%		5.70%

Loans Past Due 30-89 Days
	For the Quarter Ended
In thousands	6/30/2014		3/31/2014		12/31/2013		9/30/2013		6/30/2013
Commercial	$	376	$	52	$	74	$	30	$	199
Commercial real estate		1,032		1,310		1,809		1,757		626
Construction and development		156		754		1,628		154		698
Residential real estate		5,775		3,847		4,332		4,697		4,479
Consumer		585		219		292		229		286
Other		-		-		-		50		53
Total	$	7,924	$	6,182	$	8,135	$	6,917	$	6,341

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2014 vs Q2 2013
	Q2 2014						Q2 2013
	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	$	978,842		$	12,428	5.09%	$	950,397		$	12,735	5.37%
Tax-exempt		7,597			133	7.02%		5,466			98	7.19%
Securities
Taxable		213,560			1,198	2.25%		227,629			926	1.63%
Tax-exempt		82,958			952	4.60%		71,489			874	4.90%
Interest bearing deposits other banks
and Federal funds sold		8,413			2	0.10%		8,533			2	0.09%
Total interest earning assets		1,291,370			14,713	4.57%		1,263,514			14,635	4.65%
Noninterest earning assets
Cash & due from banks		3,785						4,525
Premises & equipment		20,433						21,018
Other assets		114,917						111,981
Allowance for loan losses		(11,440	)					(15,702	)
Total assets	$	1,419,065					$	1,385,336
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	190,146		$	54	0.11%	$	178,875		$	62	0.14%
Savings deposits		237,789			388	0.65%		197,362			287	0.58%
Time deposits		524,111			1,894	1.45%		580,760			2,471	1.71%
Short-term borrowings		79,687			59	0.30%		13,985			9	0.26%
Long-term borrowings and
subordinated debentures		159,550			1,629	4.10%		199,963			1,975	3.96%
Total interest bearing liabilities		1,191,283			4,024	1.35%		1,170,945			4,804	1.65%
Noninterest bearing liabilities
Demand deposits		101,874						96,059
Other liabilities		9,694						7,616
Total liabilities		1,302,851						1,274,620
Shareholders' equity - preferred		9,283						9,322
Shareholders' equity - common		106,931						101,394
Total liabilities and
shareholders' equity	$	1,419,065					$	1,385,336
NET INTEREST EARNINGS				$	10,689					$	9,831
NET INTEREST MARGIN						3.32%						3.12%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2014 vs YTD 2013
	YTD 2014						YTD 2013
	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	$	968,221		$	24,572	5.12%	$	955,425		$	25,569	5.40%
Tax-exempt		6,719			241	7.23%		5,714			203	7.16%
Securities
Taxable		215,220			2,481	2.32%		221,998			1,955	1.78%
Tax-exempt		79,218			1,815	4.62%		75,297			1,842	4.93%
Interest bearing deposits other banks
and Federal funds sold		8,666			3	0.07%		8,023			3	0.08%
Total interest earning assets		1,278,044			29,112	4.59%		1,266,457			29,572	4.71%
Noninterest earning assets
Cash & due from banks		3,841						4,384
Premises & equipment		20,506						21,059
Other assets		115,454						113,334
Allowance for loan losses		(12,200	)					(16,632	)
Total assets	$	1,405,645					$	1,388,602
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	188,573		$	106	0.11%	$	176,811		$	132	0.15%
Savings deposits		223,240			707	0.64%		196,464			597	0.61%
Time deposits		527,097			3,763	1.44%		577,669			4,859	1.70%
Short-term borrowings		77,444			111	0.29%		20,872			26	0.25%
Long-term borrowings and
subordinated debentures		167,013			3,368	4.07%		204,584			4,001	3.94%
		1,183,367			8,055	1.37%		1,176,400			9,615	1.65%
Noninterest bearing liabilities
Demand deposits		98,525						94,501
Other liabilities		9,155						7,632
Total liabilities		1,291,047						1,278,533
Shareholders' equity - preferred		9,287						9,324
Shareholders' equity - common		105,311						100,745
Total liabilities and
shareholders' equity	$	1,405,645					$	1,388,602
NET INTEREST EARNINGS				$	21,057					$	19,957
NET INTEREST MARGIN						3.32%						3.18%

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	6/30/2014			3/31/2014			6/30/2013			6/30/2014			6/30/2013
Core earnings applicable to common shares	$	2,907		$	2,842		$	2,347		$	5,749		$	4,564
Realized securities gains (losses)		(43	)		(22	)		(57	)		(64	)		(16)
Applicable income tax effect		16			8			21			24			6
Gain (loss) on sale of foreclosed properties		(54	)		(75	)		(523	)		(129	)		(563)
Applicable income tax effect		20			28			194			48			208
Other-than-temporary impairment of securities		(1	)		-			(27	)		(1	)		(80)
Applicable income tax effect		0			-			10			0			30
Write-downs foreclosed properties		(962	)		(928	)		(1,494	)		(1,891	)		(2,423)
Applicable income tax effect		356			343			553			700			897
		(668	)		(646	)		(1,324	)		(1,314	)		(1,942)
GAAP net income applicable to common shares	$	2,239		$	2,196		$	1,023		$	4,435		$	2,622
Core diluted earnings per common share	$	0.32		$	0.32		$	0.27		$	0.65		$	0.52
Realized securities gains (losses)		-			-			(0.01	)		(0.01	)		-
Applicable income tax effect		-			-			-			-			-
Gain (loss) on sale of foreclosed properties		(0.01	)		(0.01	)		(0.05	)		(0.01	)		(0.06)
Applicable income tax effect		-			-			0.02			-			0.02
Other-than-temporary impairment of securities		-			-			-			-			(0.01)
Applicable income tax effect		-			-			-			-			-
Write-downs of foreclosed properties		(0.10	)		(0.10	)		(0.16	)		(0.20	)		(0.25)
Applicable income tax effect		0.04			0.04			0.06			0.07			0.09
		(0.07	)		(0.07	)		(0.14	)		(0.15	)		(0.21)
GAAP diluted earnings per common share	$	0.25		$	0.25		$	0.13		$	0.50		$	0.31

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	6/30/2014			3/31/2014			6/30/2013			6/30/2014			6/30/2013
Total core revenue	$	13,069		$	12,843		$	12,291		$	25,911		$	24,809
Realized securities gains/(losses)		(43	)		(22	)		(57	)		(64	)		(16)
Other-than-temporary impairment of securities		(1	)		-			(27	)		(1	)		(80)
		(44	)		(22	)		(84	)		(65	)		(96)
GAAP total revenue	$	13,025		$	12,821		$	12,207		$	25,846		$	24,713
Total core noninterest income	$	2,749		$	2,805		$	2,787		$	5,553		$	5,547
Realized securities gains/(losses)		(43	)		(22	)		(57	)		(64	)		(16)
Other-than-temporary impairment of securities		(1	)		-			(27	)		(1	)		(80)
		(44	)		(22	)		(84	)		(65	)		(96)
GAAP total noninterest income	$	2,705		$	2,783		$	2,703		$	5,488		$	5,451
Total core noninterest expense	$	7,514		$	7,495		$	7,521		$	15,008		$	15,114
(Gains)/losses on sales of foreclosed properties		54			75			523			129			563
Write-downs of foreclosed properties		962			928			1,494			1,891			2,423
		1,016			1,003			2,017			2,020			2,986
GAAP total noninterest expense	$	8,530		$	8,498		$	9,538		$	17,028		$	18,100