MOOREFIELD, W.Va., Oct. 26, 2017 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (NASDAQ:SMMF) today reported third quarter 2017 net income of $5.93 million, or $0.48 per diluted share, compared to $4.28 million, or $0.40 per diluted share, for the third quarter of 2016, representing an increase of 38.5 percent, or 20.0 percent per diluted share.

For the nine months ended September 30, 2017, Summit recorded net income of $9.59 million, or $0.81 per diluted share, compared with $12.59 million, or $1.18 per diluted share, for the comparable 2016 nine-month period, representing a decrease of 23.8 percent or 31.4 percent per diluted share. The 2017 decrease in nine-month period earnings is principally attributable to a legal settlement during first quarter which reduced earnings by $0.54 per diluted share.

Highlights for Q3 2017 include:
  • Loans, excluding mortgage warehouse lines of credit, grew $22.9 million during the quarter, or 6.1 percent (on an annualized basis); loans, excluding mortgage warehouse lines of credit and First Century Bankshares, Inc.'s ("FCB") purchased loan portfolio, have grown $75.7 million, or 8.2 percent (annualized), since year-end 2016;
  • Total revenues increased 43.6 percent compared to the year ago quarter, principally as result of the acquisitions of FCB and Highland County Bankshares, Inc. ("HCB"), but decreased 2.4 percent compared to the linked-quarter primarily as result of lower net interest income;
  • Net interest margin increased 33 basis points compared to Q3 2016, reflecting FCB's higher yielding loan portfolio and lower cost of funds, but declined 16 basis points compared to Q2 2017, as the result of lower yields on loans coupled with rising funding costs.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, "I am very pleased to report Summit's record quarterly earnings in Q3 2017, but more importantly, the 20 percent growth in diluted earnings per share over that earned in Q3 a year-ago. These results are primarily attributable to our two acquisitions which closed during this timeframe, and they validate our ability to successfully execute on a disciplined M&A growth strategy, which we believe will continue to present us with significant opportunities going forward as we seek to be a consistent, high-performing community banking institution."

Acquisitions

On April 1, 2017, Summit completed its acquisition of FCB and its subsidiary, First Century Bank, headquartered in Bluefield, West Virginia.  Accordingly, FCB's results of operations are included in Summit's consolidated results of operation from the date of acquisition, and therefore Summit's results for the three and nine months ended September 30, 2017 reflect increased levels of average balances, income and expense compared to its same periods of 2016 results. At consummation, FCB had total assets of $404.8 million, loans of $229.0 million, and deposits of $350.0 million. In addition, our merger-related expenses totaled $1.58 million during first nine months of 2017, with $1.46 million of those expenses incurred during second quarter 2017.

On October 1, 2016, Summit completed its acquisition of HCB and its subsidiary, First & Citizens Bank, headquartered in Monterey, Virginia. Accordingly, HCB's results of operations are included in Summit's consolidated results of operation from the date of acquisition, and therefore Summit's results for the three and nine months ended September 30, 2017 reflect increased levels of average balances, income and expense as compared to the same periods of 2016 results. At consummation, HCB had total assets of $122.8 million, loans of $60.8 million, and deposits of $106.9 million.

In conjunction with these acquisitions, Summit recognized net accretion income related to loan and time deposit fair value acquisition accounting adjustments totaling $226,000 and $76,000 in Q3 2017 and $784,000 and $167,000 for the nine months ended September 30, 2017, respectively.

Results of Operations

Total revenue for third quarter 2017, consisting of net interest income and noninterest income, grew 43.6 percent to $21.2 million, principally as result of the FCB and HCB acquisitions, compared to $14.8 million for the third quarter 2016. For the year-to-date period ended September 30, 2017, total revenue was $59.2 million compared to $44.2 million for the same period of 2016, representing a 34.1 percent increase.

For the third quarter of 2017, net interest income was $17.2 million, an increase of 43.2 percent from the $12.0 million reported in the prior-year third quarter and decreased $616,000 compared to the linked-quarter. The net interest margin for third quarter 2017 was 3.65 percent compared to 3.32 percent for the year-ago quarter, and 3.81 percent for Q2 2017. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments related to the interest earning assets and interest bearing liabilities acquired from FCB and HCB, Summit's net interest margin was 3.59 percent for Q3 2017 and 3.61 percent for first nine months of 2017. 

Noninterest income, consisting primarily of insurance commissions from Summit's insurance agency subsidiary, trust and wealth management fees and service fee income from community banking activities, for third quarter 2017 was $4.0 million compared to $2.75 million for the comparable period of 2016. Excluding realized securities gains, noninterest income was $3.97 million for third quarter 2017, compared to $2.69 million reported for third quarter 2016 and $3.83 million for the linked-quarter.

We recorded a $375,000 provision for loan losses during third quarter 2017 and none during third quarter 2016.

Q3 2017 total noninterest expense increased 47.8% to $12.45 million compared to $8.42 million for the prior-year third quarter principally due to the acquisitions of FCB and HCB. Noninterest expense for the first nine months of 2017 increased 78.7% compared to the first nine months of 2016. Summit recorded a $9.9 million charge to resolve fully all litigation with Residential Funding Company, LLC and ResCap Liquidating Trust (collectively "ResCap") during Q1 2017. Excluding the impact of the ResCap litigation settlement charge, noninterest expense for first nine months of 2017 increased 39.7 percent to $35.5 million compared to $25.4 million for the first nine months of 2016, principally as result of the acquisitions of HCB and FCB.

Balance Sheet

At September 30, 2017, total assets were $2.10 billion, an increase of $342.5 million, or 19.5 percent since December 31, 2016. Total loans, net of unearned fees and allowance for loan losses, were $1.56 billion at September 30, 2017, up $251.5 million, or 19.2 percent, from the $1.31 billion reported at year-end 2016.  Loans, excluding mortgage warehouse lines of credit, grew $22.9 million during the quarter, or 6.1 percent (on an annualized basis), and loans, excluding mortgage warehouse lines of credit and FCB's purchased loan portfolio, have grown $75.7 million, or 8.2 percent (annualized), year-to-date.

At September 30, 2017, deposits were $1.62 billion, an increase of $321.2 million, or 24.8 percent, since year end 2016. During first nine months of 2017, checking deposits increased $201.4 million or 48.9 percent, time deposits grew by $94.5 million or 17.3 percent and savings deposits increased $25.3 million or 7.5 percent.

Shareholders' equity was $198.8 million as of September 30, 2017 compared to $155.4 million at December 31, 2016 and $153.8 million at September 30, 2016. In conjunction with the acquisition of FCB on April 1, 2017, Summit issued 1,537,912 shares of common stock valued at $33.1 million to the former FCB shareholders.

Tangible book value per common share increased to $13.88 at September 30, 2017 compared to $13.20 at December 31, 2016 and $13.69 at September 30, 2016. Summit had 12,311,723 outstanding common shares at Q3 2017 quarter end compared to 10,736,970 at year end 2016.

Asset Quality

As of September 30, 2017, nonperforming assets ("NPAs"), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $38.7 million, or 1.84 percent of assets. This compares to $37.4 million, or 1.78 percent of assets at the linked quarter-end, and $39.2 million, or 2.36 percent of assets, at third quarter-end 2016.

Third quarter 2017 net loan charge-offs were $242,000, or 0.06 percent of average loans annualized; while we added $375,000 to the allowance for loan losses through the provision for loan losses, representing a 50 percent increase over the $250,000 provision recorded in Q2 2017 primarily as result of our loan growth. The allowance for loan losses stood at 0.79 percent of total loans at September 30, 2017, compared to 0.88 percent at year-end 2016.  If the acquired FCB and HCB loans which were recorded at fair value on the acquisition dates are excluded, the allowance for loan losses to total loans ratio at September 30, 2017 and December 31, 2016 would have been 0.93 percent and 0.92 percent, respectively.

About the Company

Summit Financial Group, Inc. is a $2.10 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle and Southern regions of West Virginia and the Northern, Shenandoah Valley and Southwestern regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates thirty 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.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:   SMMF)    
Quarterly Performance Summary -- Q3 2017 vs Q3 2016    
     
    For the Quarter Ended     Percent  
  Dollars in thousands   9/30/2017 9/30/2016   Change  
  Condensed Statements of Income        
Interest income      
Loans, including fees $ 19,490   $ 14,142   37.8 %
Securities   2,397     1,759   36.3 %
Other     149       5   n/a  
Total interest income     22,036       15,906   38.5 %
Interest expense        
Deposits   2,963     2,209   34.1 %
Borrowings     1,841       1,660   10.9 %
Total interest expense     4,804       3,869   24.2 %
Net interest income   17,232     12,037   43.2 %
Provision for loan losses     375       -   n/a  
Net interest income after provision      
for loan losses     16,857       12,037   40.0 %
       
Noninterest income      
Insurance commissions   1,043     1,016   2.7 %
Trust and wealth management fees   589     126   367.5 %
Service fees related to deposit accounts   1,863     1,138   63.7 %
Realized securities gains   26     61   -57.4 %
Other income     479       408   17.4 %
Total noninterest income     4,000       2,749   45.5 %
Noninterest expense      
Salaries and employee benefits   6,610     4,819   37.2 %
Net occupancy expense   847     525   61.3 %
Equipment expense   1,093     716   52.7 %
Professional fees   373     270   38.1 %
Amortization of intangibles   448     50   796.0 %
FDIC premiums   310     200   55.0 %
Merger-related expense   11     80   -86.3 %
Foreclosed properties expense   171     100   71.0 %
Gain on sales of foreclosed properties   (29 )   (169 ) -82.8 %
Write-downs of foreclosed properties   91     134   -32.1 %
Other expenses     2,522       1,694   48.9 %
Total noninterest expense     12,447       8,419   47.8 %
Income before income taxes   8,410     6,367   32.1 %
Income taxes     2,480       2,086   18.9 %
Net income $   5,930   $   4,281   38.5 %

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:   SMMF)    
Quarterly Performance Summary -- Q3 2017 vs Q3 2016    
     
    For the Quarter Ended     Percent  
  9/30/2017 9/30/2016   Change  
  Per Share Data        
 Earnings per common share       
  Basic  $   0.48   $   0.40   20.0 %
  Diluted  $   0.48   $   0.40   20.0 %
       
 Cash dividends  $   0.11   $   0.10   10.0 %
       
 Average common shares outstanding       
  Basic      12,299,987       10,692,423   15.0 %
  Diluted      12,318,959       10,727,140   14.8 %
       
 Common shares outstanding at period end        12,311,723       10,701,841   15.0 %
       
  Performance Ratios        
 Return on average equity    12.10 %   11.29 % 7.2 %
 Return on average tangible equity    14.12 %   11.86 % 19.1 %
 Return on average assets    1.14 %   1.08 % 5.6 %
 Net interest margin    3.65 %   3.32 % 9.9 %
 Efficiency ratio (A)    53.73 %   53.30 % 0.8 %

NOTE (A) - Computed on a tax equivalent basis excluding nonrecurring income and expense items and amortization of intangibles.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:   SMMF)    
Nine Month Performance Summary -- 2017 vs 2016      
       
    For the Nine Months Ended     Percent  
  Dollars in thousands   9/30/2017 9/30/2016   Change  
  Condensed Statements of Income        
 Interest income       
  Loans, including fees  $   54,878   $   41,200   33.2 %
  Securities      6,597       5,141   28.3 %
  Other      466       13   n/a  
 Total interest income      61,941       46,354   33.6 %
 Interest expense       
  Deposits      7,987       6,533   22.3 %
  Borrowings      5,245       4,271   22.8 %
 Total interest expense      13,232       10,804   22.5 %
 Net interest income      48,709       35,550   37.0 %
 Provision for loan losses      875       500   75.0 %
 Net interest income after provision       
  for loan losses      47,834       35,050   36.5 %
       
 Noninterest income       
  Insurance commissions      3,000       3,030   -1.0 %
  Trust and wealth management fees      1,284       358   258.7 %
  Service fees related to deposit accounts      4,737       3,175   49.2 %
  Realized securities gains      58       836   -93.1 %
  Other income      1,417       1,202   17.9 %
Total noninterest income     10,496       8,601   22.0 %
 Noninterest expense       
  Salaries and employee benefits     18,555       14,265   30.1 %
  Net occupancy expense     2,239       1,576   42.1 %
  Equipment expense     2,859       2,059   38.9 %
  Professional fees     1,012       1,171   -13.6 %
  Amortization of intangibles     974       150   549.3 %
  FDIC premiums     815       800   1.9 %
  Merger-related expense     1,575       345   n/a  
  Foreclosed properties expense     397       317   25.2 %
  Gain on sales of foreclosed properties     (111 )     (451 ) -75.4 %
  Write-downs of foreclosed properties     538       503   7.0 %
  Litigation settlement     9,900       -   n/a  
  Other expenses     6,646       4,675   42.2 %
Total noninterest expense     45,399       25,410   78.7 %
 Income before income taxes      12,931       18,241   -29.1 %
 Income taxes      3,339       5,655   -41.0 %
 Net income  $   9,592   $   12,586   -23.8 %

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:   SMMF)    
Nine Month Performance Summary -- 2017 vs 2016      
     
    For the Nine Months Ended     Percent  
  9/30/2017 9/30/2016   Change  
  Per Share Data        
 Earnings per common share       
  Basic  $   0.81   $   1.18   -31.4 %
  Diluted  $   0.81   $   1.18   -31.4 %
       
 Cash dividends  $   0.33   $   0.30   10.0 %
       
 Average common shares outstanding       
  Basic      11,781,342       10,682,129   10.3 %
  Diluted      11,807,002       10,692,346   10.4 %
       
 Common shares outstanding at period end      12,311,723       10,701,841   15.0 %
       
  Performance Ratios        
 Return on average equity    7.06 %   11.29 % -37.5 %
 Return on average tangible equity    8.08 %   11.88 % -32.0 %
 Return on average assets    0.65 %   1.09 % -40.4 %
 Net interest margin    3.67 %   3.40 % 7.9 %
 Efficiency ratio (A)    52.76 %   54.84 % -3.8 %

NOTE (A) - Computed on a tax equivalent basis excluding nonrecurring income and expense items and amortization of intangibles.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:   SMMF)        
Five Quarter Performance Summary          
         
    For the Quarter Ended  
  Dollars in thousands   9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
  Condensed Statements of Income (unaudited)            
Interest income          
Loans, including fees $ 19,490   $ 19,717   $ 15,671     $ 15,780   $ 14,142  
Securities   2,397     2,349     1,851       1,796     1,759  
Other     149       165       152         161       5  
Total interest income     22,036       22,231       17,674         17,737       15,906  
Interest expense          
Deposits   2,963     2,634     2,390       2,430     2,209  
Borrowings     1,841       1,749       1,654         1,850       1,660  
Total interest expense     4,804       4,383       4,044         4,280       3,869  
Net interest income   17,232     17,848     13,630       13,457     12,037  
Provision for loan losses     375       250       250         -       -  
Net interest income after provision          
for loan losses     16,857       17,598       13,380         13,457       12,037  
Noninterest income          
Insurance commissions   1,043     988     968       992     1,016  
Trust and wealth management fees   589     595     100       111     252  
Service fees related to deposit accounts   1,863     1,706     1,168       1,194     1,138  
Realized securities gains (losses)   26     90     (58 )     291     61  
Other income     479       537       401         410       282  
Total noninterest income     4,000       3,916       2,579         2,998       2,749  
Noninterest expense          
Salaries and employee benefits   6,610     6,758     5,187       5,308     4,819  
Net occupancy expense   847     826     567       522     525  
Equipment expense   1,093     1,031     735       700     716  
Professional fees   373     354     285       344     270  
Amortization of intangibles   448     429     97       97     50  
FDIC premiums   310     295     210       75     200  
Merger-related expense   11     1,455     109       588     80  
Foreclosed properties expense   171     122     104       97     100  
(Gain) loss on sales of foreclosed properties   (29 )   73     (156 )     (465 )   (169 )
Write-downs of foreclosed properties   91     29     418       165     134  
Litigation settlement   -     -     9,900       -     -  
Other expenses     2,522       2,564       1,560         1,961       1,694  
Total noninterest expense     12,447       13,936       19,016         9,392       8,419  
Income (loss) before income taxes   8,410     7,578     (3,057 )     7,063     6,367  
Income tax expense (benefit)     2,480       2,300       (1,441 )       2,353       2,086  
Net income (loss) $   5,930   $   5,278   $   (1,616 )   $   4,710   $   4,281  

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:   SMMF)          
Five Quarter Performance Summary          
         
    For the Quarter Ended  
  9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
  Per Share Data            
 Earnings per common share           
  Basic  $   0.48   $   0.43   $   (0.15 ) $   0.44   $   0.40  
  Diluted  $   0.48   $   0.43   $   (0.15 ) $   0.44   $   0.40  
           
 Cash dividends  $   0.11   $   0.11   $   0.11   $   0.10   $   0.10  
           
 Average common shares outstanding           
  Basic      12,299,987       12,288,514       10,738,365       10,710,164       10,692,423  
  Diluted      12,318,959       12,299,187       10,738,365       10,762,445       10,727,140  
           
 Common shares outstanding at period end      12,311,723       12,299,726       10,750,477       10,736,970       10,701,841  
           
  Performance Ratios            
 Return on average equity    12.10 %   11.10 %   -4.11 %   12.22 %   11.29 %
 Return on average tangible equity    14.12 %   12.95 %   -4.51 %   13.42 %   11.86 %
 Return on average assets    1.14 %   1.01 %   -0.37 %   1.07 %   1.08 %
 Net interest margin    3.65 %   3.81 %   3.54 %   3.34 %   3.32 %
 Efficiency ratio (A)    53.73 %   53.00 %   51.16 %   56.67 %   53.30 %

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 (unaudited)          
           
  Dollars in thousands, except per share amounts    9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
           
  Assets            
Cash and due from banks $   9,220   $   9,294   $   19,326   $   4,262   $   25,067  
Interest bearing deposits other banks     41,994       44,242       38,895       42,354       9,432  
Securities     328,726       336,811       282,028       266,542       262,102  
Loans, net     1,559,328       1,538,083       1,292,915       1,307,862       1,234,605  
Property held for sale     22,622       23,592       23,491       24,504       24,767  
Premises and equipment, net     34,220       33,234       26,377       23,737       21,802  
Goodwill and other intangible assets     27,879       28,214       13,587       13,652       7,348  
Cash surrender value of life insurance policies     41,076       41,189       39,412       39,143       38,504  
Other assets     36,071       40,641       40,411       36,591       34,009  
  Total assets $   2,101,136   $   2,095,300   $   1,776,442   $   1,758,647   $   1,657,636  
           
  Liabilities and Shareholders' Equity            
Deposits $   1,616,768   $   1,613,919   $   1,301,241   $   1,295,519   $   1,156,785  
Short-term borrowings     202,988       205,728       228,868       224,461       234,657  
Long-term borrowings and          
  subordinated debentures     65,344       65,348       65,804       66,259       93,735  
Other liabilities     17,254       17,173       26,910       17,048       18,640  
Shareholders' equity     198,782       193,132       153,619       155,360       153,819  
  Total liabilities and shareholders' equity $   2,101,136   $   2,095,300   $   1,776,442   $   1,758,647   $   1,657,636  
           
Book value per common share $   16.15   $   15.70   $   14.29   $   14.47   $   14.37  
Tangible book value per common share $   13.88   $   13.41   $   13.03   $   13.20   $   13.69  
Tangible common equity to tangible assets   8.2 %   8.0 %   7.9 %   8.1 %   8.9 %

SUMMIT FINANCIAL GROUP INC. (NASDAQ:   SMMF)        
Regulatory Capital Ratios          
           
  9/30/2017    6/30/2017    3/31/2017    12/31/2016    9/30/2016
Summit Financial Group, Inc.          
CET1 Risk-based Capital 10.8% 10.5% 10.3% 10.5% 11.1%
Tier 1 Risk-based Capital 11.9% 11.7% 11.5% 11.8% 12.4%
Total Risk-based Capital 12.7% 12.4% 12.3% 12.6% 13.3%
Tier 1 Leverage Ratio 9.5% 9.2% 9.4% 9.4% 10.4%
           
Summit Community Bank, Inc.          
CET1 Risk-based Capital 11.8% 11.6% 11.6% 11.9% 12.5%
Tier 1 Risk-based Capital 11.8% 11.6% 11.6% 11.9% 12.5%
Total Risk-based Capital 12.6% 12.4% 12.4% 12.7% 13.4%
Tier 1 Leverage Ratio 9.4% 9.2% 9.4% 9.5% 10.5% 

SUMMIT FINANCIAL GROUP INC. (NASDAQ:   SMMF)      
Loan Composition          
           
Dollars in thousands 9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
           
Commercial $   187,193   $   176,362   $   134,808   $   119,088   $   110,466
Mortgage warehouse lines     33,525       35,068       30,217       85,966       108,983
Commercial real estate          
  Owner occupied     239,840       239,108       217,733       203,047       192,254
  Non-owner occupied     464,543       455,439       401,795       381,921       367,196
Construction and development          
  Land and development     71,412       74,155       68,079       72,042       65,430
  Construction     28,756       22,967       16,511       16,584       11,276
Residential real estate          
  Non-jumbo     355,642       355,546       266,140       265,641       228,777
  Jumbo     61,253       63,899       60,780       65,628       57,276
  Home equity     82,720       81,192       75,299       74,596       75,161
Consumer     36,915       37,630       24,440       25,534       19,756
Other     9,994       9,049       8,831       9,489       9,649
Total loans, net of unearned fees        1,571,793       1,550,415       1,304,633       1,319,536       1,246,224
Less allowance for loan losses     12,465       12,332       11,718       11,674       11,619
Loans, net $   1,559,328   $   1,538,083   $   1,292,915   $   1,307,862   $   1,234,605

SUMMIT FINANCIAL GROUP INC. (NASDAQ:   SMMF)      
Deposit Composition          
           
Dollars in thousands 9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Non-interest bearing checking  $ 215,910   $ 234,173   $ 152,086   $ 149,737   $ 122,652
Interest bearing checking   397,843     372,327     275,678     262,591     212,172
Savings   362,653     373,439     342,548     337,348     321,563
Time deposits     640,362       633,980       530,929       545,843       500,398
Total deposits $   1,616,768   $   1,613,919   $   1,301,241   $   1,295,519   $   1,156,785

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:   SMMF)        
Asset Quality Information          
           
    For the Quarter Ended  
  Dollars in thousands   9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
           
Gross loan charge-offs $   309     $   114     $   315     $   400     $   331  
Gross loan recoveries     (67 )       (478 )       (108 )       (456 )       (573 )
  Net loan charge-offs (recoveries) $   242     $   (364 )   $   207     $   (56 )   $   (242 )
           
Net loan charge-offs to average loans (annualized)      0.06 %     -0.09 %     0.06 %     -0.02 %     -0.09 %
Allowance for loan losses $   12,465     $   12,332     $   11,718     $   11,674     $   11,619  
Allowance for loan losses as a percentage          
  of period end loans   0.79 %     0.79 %     0.90 %     0.88 %     0.93 %
Nonperforming assets:          
  Nonperforming loans          
  Commercial $   757     $   786     $   226     $   298     $   846  
  Commercial real estate     2,773         2,051         4,734         4,844         4,867  
  Residential construction and development     3,931         3,613         3,936         4,465         4,360  
  Residential real estate     8,082         6,860         5,886         4,815         4,174  
  Consumer     529         391         162         152         169  
Total nonperforming loans     16,072         13,701         14,944         14,574         14,416  
  Foreclosed properties          
  Commercial real estate     1,988         2,126         1,749         1,749         1,749  
  Commercial construction and development     7,392         7,527         8,276         8,610         8,664  
  Residential construction and development     11,852         12,402         12,635         13,265         13,741  
  Residential real estate     1,390         1,537         831         880         613  
Total foreclosed properties     22,622         23,592         23,491         24,504         24,767  
  Other repossessed assets     12         57         12         12         12  
Total nonperforming assets $   38,706     $   37,350     $   38,447     $   39,090     $   39,195  
           
Nonperforming loans to period end loans   1.02 %     0.88 %     1.15 %     1.10 %     1.16 %
Nonperforming assets to period end assets   1.84 %     1.78 %     2.16 %     2.22 %     2.36 %
           
Troubled debt restructurings          
  Performing $   28,304     $   26,472     $   28,183     $   28,066     $   28,287  
  Nonperforming     760         464         719         564         863  
Total troubled debt restructurings $   29,064     $   26,936     $   28,902     $   28,630     $   29,150  

Loans Past Due 30-89 Days          
    For the Quarter Ended  
  In thousands     9/30/2017   6/30/2017   3/31/2017   12/31/2016   9/30/2016
           
Commercial $ 378   $ 470   $ 162   $ 175   $ 405
Commercial real estate   944     976     2,758     434     626
Construction and development   238     308     291     552     235
Residential real estate   6,260     6,943     2,924     5,517     2,941
Consumer   419     548     155     375     144
Other     92       49       17       14       13
Total $   8,331   $   9,294   $   6,307   $   7,067   $   4,364

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:   SMMF)          
Average Balance Sheet, Interest Earnings & Expenses and Average Rates         
Q3 2017 vs Q3 2016              
  Q3 2017   Q3 2016
  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 $   1,539,945     $   19,387   4.99 %   $   1,187,205     $   14,008   4.69 %
  Tax-exempt     16,314         158   3.84 %       14,300         202   5.62 %
  Securities              
  Taxable     198,913         1,283   2.56 %       198,411         1,139   2.28 %
  Tax-exempt     145,599         1,714   4.67 %       77,489         941   4.83 %
  Interest bearing deposits other banks              
  and Federal funds sold     42,926         149   1.38 %       10,029         5   0.20 %
Total interest earning assets     1,943,697         22,691   4.63 %       1,487,434         16,295   4.36 %
               
Noninterest earning assets              
  Cash & due from banks     9,591               3,938        
  Premises & equipment     33,667               21,613        
  Other assets     113,723               87,636        
  Allowance for loan losses     (12,418 )             (11,567 )      
  Total assets $   2,088,260           $   1,589,054        
               
  LIABILITIES AND SHAREHOLDERS' EQUITY            
               
Liabilities              
Interest bearing liabilities              
  Interest bearing               
  demand deposits $   384,539     $   323   0.33 %   $   211,264     $   85   0.16 %
  Savings deposits     365,150         637   0.69 %       316,358         608   0.76 %
  Time deposits     636,424         2,003   1.25 %       481,060         1,516   1.25 %
  Short-term borrowings     205,536         1,160   2.24 %       189,760         675   1.42 %
  Long-term borrowings and              
  subordinated debentures     65,346         681   4.13 %       94,106         985   4.16 %
Total interest bearing liabilities     1,656,995         4,804   1.15 %       1,292,548         3,869   1.19 %
               
Noninterest bearing liabilities              
  Demand deposits     217,760               124,490        
  Other liabilities     17,414               20,280        
  Total liabilities     1,892,169               1,437,318        
               
Shareholders' equity     196,091               151,736        
  Total liabilities and              
  shareholders' equity $   2,088,260           $   1,589,054        
               
NET INTEREST EARNINGS   $   17,887         $   12,426    
               
NET INTEREST MARGIN     3.65 %       3.32 %

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  S MMF)          
Average Balance Sheet, Interest Earnings & Expenses and Average Rates        
Q3 2017 vs Q2 2017              
  Q3 2017   Q2 2017
  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 $   1,539,945     $   19,387   4.99 %   $   1,537,317     $   19,550   5.10 %
    Tax-exempt     16,314         158   3.84 %       13,030         257   7.91 %
  Securities              
    Taxable     198,913         1,283   2.56 %       214,601         1,330   2.49 %
    Tax-exempt     145,599         1,714   4.67 %       133,130         1,568   4.72 %
  Interest bearing deposits other banks               
       and Federal funds sold     42,926         149   1.38 %       47,937         165   1.38 %
Total interest earning assets     1,943,697         22,691   4.63 %       1,946,015         22,870   4.71 %
               
Noninterest earning assets              
  Cash & due from banks     9,591               10,101        
  Premises & equipment     33,667               34,441        
  Other assets     113,723               115,728        
  Allowance for loan losses     (12,418 )             (11,966 )      
    Total assets $   2,088,260           $   2,094,319        
               
  LIABILITIES AND SHAREHOLDERS' EQUITY            
               
Liabilities              
Interest bearing liabilities              
  Interest bearing               
    demand deposits $   384,539     $   323   0.33 %   $   378,350     $   252   0.27 %
  Savings deposits     365,150         637   0.69 %       389,847         616   0.63 %
  Time deposits     636,424         2,003   1.25 %       628,358         1,766   1.13 %
  Short-term borrowings     205,536         1,160   2.24 %       200,209         1,079   2.16 %
  Long-term borrowings and              
    subordinated debentures     65,346         681   4.13 %       65,692         670   4.09 %
Total interest bearing liabilities     1,656,995         4,804   1.15 %       1,662,456         4,383   1.06 %
               
Noninterest bearing liabilities              
  Demand deposits     217,760               221,245        
  Other liabilities     17,414               20,490        
    Total liabilities     1,892,169               1,904,191        
               
Shareholders' equity      196,091               190,128        
  Total liabilities and              
   shareholders' equity $   2,088,260           $   2,094,319        
               
NET INTEREST EARNINGS   $   17,887         $   18,487    
               
NET INTEREST MARGIN     3.65 %       3.81 %

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:   SMMF)          
Average Balance Sheet, Interest Earnings & Expenses and Average Rates        
YTD 2017 vs YTD 2016              
   
  YTD 2017   YTD 2016
  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 $   1,452,840     $   54,487   5.01 %   $   1,134,463     $   40,788   4.80 %
  Tax-exempt     14,223         602   5.66 %       14,890         624   5.60 %
  Securities              
  Taxable     199,995         3,742   2.50 %       206,437         3,284   2.12 %
  Tax-exempt     124,860         4,392   4.70 %       76,155         2,814   4.94 %
  Interest bearing deposits other banks              
  and Federal funds sold     43,862         466   1.42 %       9,093         13   0.19 %
Total interest earning assets     1,835,780         63,689   4.64 %       1,441,038         47,523   4.41 %
               
Noninterest earning assets              
  Cash & due from banks     8,071               3,819        
  Premises & equipment     30,904               21,575        
  Other assets     108,783               89,013        
  Allowance for loan losses     (12,051 )             (11,517 )      
  Total assets $   1,971,487           $   1,543,928        
               
  LIABILITIES AND SHAREHOLDERS' EQUITY            
               
Liabilities              
Interest bearing liabilities              
  Interest bearing               
  demand deposits $   342,358     $   722   0.28 %   $   208,755     $   248   0.16 %
  Savings deposits     365,068         1,879   0.69 %       296,458         1,663   0.75 %
  Time deposits     602,175         5,386   1.20 %       474,691         4,622   1.30 %
  Short-term borrowings     200,929         3,233   2.15 %       180,694         1,334   0.99 %
  Long-term borrowings and              
  subordinated debentures     65,725         2,012   4.09 %       94,574         2,937   4.15 %
      1,576,255         13,232   1.12 %       1,255,172         10,804   1.15 %
Noninterest bearing liabilities              
  Demand deposits     196,019               121,701        
  Other liabilities     17,990               18,423        
  Total liabilities     1,790,264               1,395,296        
               
Shareholders' equity     181,223               148,632        
  Total liabilities and              
  shareholders' equity $   1,971,487           $   1,543,928        
               
NET INTEREST EARNINGS   $   50,457         $   36,719    
               
NET INTEREST MARGIN     3.67 %       3.40 %

Contact: Robert S. Tissue, Sr. Vice President & CFOTelephone: (304) 530-0552Email: rtissue@summitfgi.com 

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