Summit Financial Group Reports Second Quarter and First

MOOREFIELD, W.Va., July 27, 2017 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ:SMMF) today reported second quarter 2017 net income of $5.28 million, or $0.43 per diluted share, compared to $4.24 million, or $0.40 per diluted share, for the second quarter of 2016, representing an increase of 24.4 percent, or 7.5 percent per diluted share.

For the six months ended June 30, 2017, Summit recorded net income of $3.66 million, or $0.32 per diluted share, compared with $8.31 million, or $0.78 per diluted share, for the comparable 2016 six-month period, representing a decrease of 55.9 percent or 59.0 percent per diluted share. The decrease in first half 2017 earnings is principally attributable to a legal settlement during first quarter which reduced earnings by $0.54 per diluted share.

Highlights for Q2 2017 include:

Summit completed its acquisition of First Century Bankshares, Inc. (“FCB”) and its subsidiary, First Century Bank, headquartered in Bluefield, West Virginia on April 1, 2017, and converted substantially all its data processing systems to that of Summit’s effective April 21, 2017; accordingly, merger-related expenses of $1.46 million were incurred during Q2 2017 compared to $153,000 during Q2 2016;
Total revenues increased 34.3 percent compared to the linked-quarter and 47.3 percent compared to the year ago quarter, principally as result of the acquisition of FCB;
Net interest margin increased 41 basis points compared to Q2 2016, and 27 basis points compared to the linked quarter, reflecting FCB’s higher yielding loan portfolio, the impact of increasing short-term interest rates as result of recent FOMC activity and relatively stable funding costs;
Loans, excluding mortgage warehouse lines of credit and FCB’s purchased loan portfolio, grew $11.9 million during the quarter, or 3.7 percent (on an annualized basis), and have grown $52.8 million, or 8.6 percent (annualized), year-to-date;
Nonperforming assets declined for the nineteenth consecutive quarter. Compared to the linked quarter, nonperforming assets as a percentage of total assets declined from 2.16 percent to 1.78 percent, reaching its lowest level since Q2 2008;
Recorded charges of $29,000 to write-down foreclosed properties compared to $259,000 in Q2 2016 and $418,000 in Q1 2017.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “I am very pleased to report Summit achieved another quarter of solid core operating results highlighted by improvement in our net interest margin and core loan growth. Further, despite the quarter’s challenges of integrating FCB’s banking operations with that of Summit’s, we nonetheless maintained an efficiency ratio well below that of most of our peers. We are demonstrating 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.”

FCB Acquisition

On April 1, 2017, Summit completed its acquisition of FCB. Accordingly, FCB’s results of operations are included in Summit’s consolidated results of operation from the date of acquisition, and therefore Summit’s second quarter and first half 2017 results reflect increased levels of average balances, income and expense compared to its second quarter and first half 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 $1.56 million during first half 2017, with $1.46 million of those expenses incurred during second quarter 2017. Summit recognized net accretion income totaling $285,000 in Q2 2017 related to FCB’s loan fair value acquisition accounting adjustments.

HCB Acquisition

On October 1, 2016, Summit completed its acquisition of Highland County Bankshares, Inc. (“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 three and six months ended June 30, 2017 results 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. Summit recognized net accretion income totaling $59,000 in Q2 2017 and $203,000 in the first half of 2017 related to HCB’s loan fair value acquisition accounting adjustments.

Results from Operations

Total revenue for second quarter 2017 consisting of net interest income and noninterest income, grew 47.3 percent to $21.8 million, principally as result of the FCB and HCB acquisitions, compared to $14.8 million for the second quarter 2016. For the year-to-date period ended June 30, 2017, total revenue was $38.0 million compared to $29.4 million for the same period of 2016, representing a 29.3 percent increase.

For the second quarter of 2017, net interest income was $17.8 million, an increase of 52.1 percent from the $11.7 million reported in the prior-year second quarter and increased $4.2 million compared to the linked quarter. The net interest margin for second quarter 2017 was 3.81 percent compared to 3.40 percent for the year-ago quarter, and 3.54 percent for the linked quarter. 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 3.72 percent for Q2 2017 and 3.62 percent for first half 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 second quarter 2017 was $3.92 million compared to $3.05 million for the comparable period of 2016. Excluding realized securities gains, noninterest income was $3.83 million for second quarter 2017, compared to $2.67 million reported for second quarter 2016 and $2.64 million for the linked quarter.

We recorded a $250,000 provision for loan losses during second quarters 2017 and 2016.

Q2 2017 total noninterest expense increased 65.2% to $13.94 million compared to $8.44 million for the prior-year second quarter principally due to the acquisitions of FCB and HCB. Noninterest expense for the first half of 2017 increased 93.9% compared to the first half 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 half of 2017 increased 35.7 percent to $23.1 million compared to $17.0 million for the first half of 2016, principally as result of the acquisitions of HCB and FCB.

Balance Sheet

At June 30, 2017, total assets were $2.10 billion, an increase of $336.7 million, or 19.1 percent since December 31, 2016. Total loans, net of unearned fees and allowance for loan losses, were $1.54 billion at June 30, 2017, up $230.2 million, or 17.6 percent, from the $1.31 billion reported at year-end 2016. Loans, excluding mortgage warehouse lines of credit and FCB’s purchased loan portfolio, grew $11.9 million during the quarter, or 3.7 percent (on an annualized basis), and have grown $52.8 million, or 8.6 percent (annualized) since year-end 2016.

At June 30, 2017, deposits were $1.61 billion, an increase of $318.4 million, or 24.6 percent, since year end 2016. During first half 2017, checking deposits increased $194.2 million or 47.1 percent, time deposits grew by $88.1 million or 16.1 percent and savings deposits increased $36.1 million or 10.7 percent.

Shareholders’ equity was $193.1 million as of June 30, 2017 compared to $155.4 million at December 31, 2016 and $150.7 million at June 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 $13.41 at June 30, 2017 compared to $13.20 at December 31, 2016 and $13.40 at June 30, 2016. Summit had 12,299,726 outstanding common shares at Q2 2017 quarter end compared to 10,736,970 at year end 2016.

Asset Quality

As of June 30, 2016, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $37.4 million, or 1.78 percent of assets. This compares to $38.4 million, or 2.16 percent of assets at the linked quarter-end, and $38.7 million, or 2.47 percent of assets, at second quarter-end 2016.

Second quarter 2017 net loan recoveries were $364,000, or 0.09 percent of average loans annualized; while adding $250,000 to the allowance for loan losses through the provision for loan losses. The allowance for loan losses stood at 0.79 percent of total loans at June 30, 2017, compared to 0.88 percent at year-end 2016. If the acquired FCB and HCB loans are excluded, the allowance for loan losses to total loans ratio at June 30, 2017 and December 31, 2016 would have been 0.95 percent and 0.92, 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 -- Q2 2017 vs Q2 2016


		For the Quarter Ended						Percent
Dollars in thousands		6/30/2017		6/30/2016				Change
Condensed Statements of Income
	Interest income
	Loans, including fees	$	19,717		$	13,622			44.7	%
	Securities		2,349			1,656			41.8	%
	Other		165			5		n/a
	Total interest income		22,231			15,283			45.5	%
	Interest expense
	Deposits		2,634			2,154			22.3	%
	Borrowings		1,749			1,395			25.4	%
	Total interest expense		4,383			3,549			23.5	%
	Net interest income		17,848			11,734			52.1	%
	Provision for loan losses		250			250			0.0	%
	Net interest income after provision
	for loan losses		17,598			11,484			53.2	%

	Noninterest income
	Insurance commissions		988			1,090			-9.4	%
	Trust and wealth management fees		595			116			412.9	%
	Service fees related to deposit accounts		1,706			1,059			61.1	%
	Realized securities gains		90			383			-76.5	%
	Other income		537			397			35.3	%
	Total noninterest income		3,916			3,045			28.6	%
	Noninterest expense
	Salaries and employee benefits		6,758			4,764			41.9	%
	Net occupancy expense		826			512			61.3	%
	Equipment expense		1,031			686			50.3	%
	Professional fees		354			429			-17.5	%
	Amortization of intangibles		429			50			758.0	%
	FDIC premiums		295			300			-1.7	%
	Merger-related expense		1,455			153		n/a
	Foreclosed properties expense		122			93			31.2	%
	Loss (gain) on sales of foreclosed properties		73			(276	)	n/a
	Write-downs of foreclosed properties		29			259			-88.8	%
	Other expenses		2,564			1,467			74.8	%
	Total noninterest expense		13,936			8,437			65.2	%
	Income before income taxes		7,578			6,092			24.4	%
	Income taxes		2,300			1,849			24.4	%
	Net income	$	5,278		$	4,243			24.4	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q2 2017 vs Q2 2016

		For the Quarter Ended						Percent
		6/30/2017			6/30/2016			Change
Per Share Data
	Earnings per common share
	Basic	$	0.43		$	0.40		7.5	%
	Diluted	$	0.43		$	0.40		7.5	%

	Cash dividends	$	0.11		$	0.10		10.0	%

	Average common shares outstanding
	Basic		12,288,514			10,681,995		15.0	%
	Diluted		12,299,187			10,701,017		14.9	%

	Common shares outstanding at period end		12,299,726			10,692,320		15.0	%

Performance Ratios
	Return on average equity		11.10	%		11.49	%	-3.4	%
	Return on average tangible equity		12.95	%		12.10	%	7.0	%
	Return on average assets		1.01	%		1.10	%	-8.2	%
	Net interest margin		3.81	%		3.40	%	12.1	%
	Efficiency ratio (A)		53.00	%		55.35	%	-4.2	%

NOTE (A) – 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 -- 2017 vs 2016


		For the Six Months Ended						Percent
Dollars in thousands		6/30/2017			6/30/2016			Change
Condensed Statements of Income
	Interest income
	Loans, including fees	$	35,388		$	27,059		30.8	%
	Securities		4,200			3,382		24.2	%
	Other		317			7		n/a
	Total interest income		39,905			30,448		31.1	%
	Interest expense
	Deposits		5,024			4,324		16.2	%
	Borrowings		3,404			2,611		30.4	%
	Total interest expense		8,428			6,935		21.5	%
	Net interest income		31,477			23,513		33.9	%
	Provision for loan losses		500			500		0.0	%
	Net interest income after provision
	for loan losses		30,977			23,013		34.6	%

	Noninterest income
	Insurance commissions		1,957			2,013		-2.8	%
	Trust and wealth management fees		695			232		199.6	%
	Service fees related to deposit accounts		2,874			2,038		41.0	%
	Realized securities gains		32			775		-95.9	%
	Other income		938			794		18.1	%
	Total noninterest income		6,496			5,852		11.0	%
	Noninterest expense
	Salaries and employee benefits		11,945			9,446		26.5	%
	Net occupancy expense		1,393			1,051		32.5	%
	Equipment expense		1,766			1,343		31.5	%
	Professional fees		639			901		-29.1	%
	Amortization of intangibles		526			100		426.0	%
	FDIC premiums		505			600		-15.8	%
	Merger-related expense		1,564			264		n/a
	Foreclosed properties expense		226			217		4.1	%
	Gain on sales of foreclosed properties		(83	)		(282	)	-70.6	%
	Write-downs of foreclosed properties		447			369		21.1	%
	Litigation settlement		9,900			-		n/a
	Other expenses		4,125			2,982		38.3	%
	Total noninterest expense		32,953			16,991		93.9	%
	Income before income taxes		4,520			11,874		-61.9	%
	Income taxes		858			3,569		-76.0	%
	Net income	$	3,662		$	8,305		-55.9	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary -- 2017 vs 2016

		For the Six Months Ended						Percent
		6/30/2017			6/30/2016			Change
Per Share Data
	Earnings per common share
	Basic	$	0.32		$	0.78		-59.0	%
	Diluted	$	0.32		$	0.78		-59.0	%

	Cash dividends	$	0.22		$	0.20		10.0	%

	Average common shares outstanding
	Basic		11,517,721			10,676,925		7.9	%
	Diluted		11,559,990			10,685,290		8.2	%

	Common shares outstanding at period end		12,299,726			10,692,320		15.0	%

Performance Ratios
	Return on average equity		4.22	%		11.29	%	-62.6	%
	Return on average tangible equity		4.78	%		11.90	%	-59.8	%
	Return on average assets		0.38	%		1.09	%	-65.1	%
	Net interest margin		3.69	%		3.45	%	7.0	%
	Efficiency ratio (A)		52.21	%		55.63	%	-6.1	%

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		6/30/2017		3/31/2017				12/31/2016				9/30/2016				6/30/2016
Condensed Statements of Income (unaudited)
	Interest income
	Loans, including fees	$	19,717		$	15,671			$	15,780			$	14,142			$	13,622
	Securities		2,349			1,851				1,796				1,759				1,656
	Other		165			152				161				5				5
	Total interest income		22,231			17,674				17,737				15,906				15,283
	Interest expense
	Deposits		2,634			2,390				2,430				2,209				2,154
	Borrowings		1,749			1,654				1,850				1,659				1,395
	Total interest expense		4,383			4,044				4,280				3,868				3,549
	Net interest income		17,848			13,630				13,457				12,038				11,734
	Provision for loan losses		250			250				-				-				250
	Net interest income after provision
	for loan losses		17,598			13,380				13,457				12,038				11,484
	Noninterest income
	Insurance commissions		988			968				992				1,016				1,090
	Trust and wealth management fees		595			100				111				252				116
	Service fees related to deposit accounts		1,706			1,168				1,194				1,138				1,059
	Realized securities gains (losses)		90			(58	)			291				61				383
	Other income		537			401				410				282				397
	Total noninterest income		3,916			2,579				2,998				2,749				3,045
	Noninterest expense
	Salaries and employee benefits		6,758			5,187				5,308				4,819				4,764
	Net occupancy expense		826			567				522				525				512
	Equipment expense		1,031			735				700				716				686
	Professional fees		354			285				344				270				429
	Amortization of intangibles		429			97				97				50				50
	FDIC premiums		295			210				75				200				300
	Merger-related expense		1,455			109				588				80				153
	Foreclosed properties expense		122			104				97				100				93
	Loss (gain) on sales of foreclosed properties		73			(156	)			(465	)			(168	)			(276	)
	Write-downs of foreclosed properties		29			418				165				134				259
	Litigation settlement		-			9,900				-				-				-
	Other expenses		2,564			1,560				1,961				1,693				1,467
	Total noninterest expense		13,936			19,016				9,392				8,419				8,437
	Income (loss) before income taxes		7,578			(3,057	)			7,063				6,368				6,092
	Income tax expense (benefit)		2,300			(1,441	)			2,353				2,087				1,849
	Net income (loss)	$	5,278		$	(1,616	)		$	4,710			$	4,281			$	4,243

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary

		For the Quarter Ended
		6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016
Per Share Data
	Earnings per common share
	Basic	$	0.43		$	(0.15	)	$	0.44		$	0.40		$	0.40
	Diluted	$	0.43		$	(0.15	)	$	0.44		$	0.40		$	0.40

	Cash dividends	$	0.11		$	0.11		$	0.10		$	0.10		$	0.10

	Average common shares outstanding
	Basic		12,288,514			10,738,365			10,710,164			10,692,423			10,681,995
	Diluted		12,299,187			10,738,365			10,762,445			10,727,140			10,701,017

	Common shares outstanding at period end		12,299,726			10,750,477			10,736,970			10,701,841			10,692,320

Performance Ratios
	Return on average equity		11.10	%		-4.11	%		12.22	%		11.29	%		11.49	%
	Return on average tangible equity		12.95	%		-4.51	%		13.42	%		11.86	%		12.10	%
	Return on average assets		1.01	%		-0.37	%		1.07	%		1.08	%		1.10	%
	Net interest margin		3.81	%		3.54	%		3.34	%		3.32	%		3.40	%
	Efficiency ratio (A)		53.00	%		51.16	%		56.67	%		53.30	%		55.35	%

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		6/30/2017			3/31/2017			12/31/2016			9/30/2016			6/30/2016

Assets
	Cash and due from banks	$	9,294		$	19,326		$	4,262		$	25,067		$	4,161
	Interest bearing deposits other banks		44,242			38,895			42,354			9,432			8,897
	Securities		336,811			282,028			266,542			262,102			261,633
	Loans, net		1,538,083			1,292,915			1,307,862			1,234,605			1,166,723
	Property held for sale		23,592			23,491			24,504			24,767			23,425
	Premises and equipment, net		33,234			26,377			23,737			21,802			21,405
	Goodwill and other intangible assets		28,214			13,587			13,652			7,348			7,398
	Cash surrender value of life insurance policies		41,189			39,412			39,143			38,504			38,246
	Other assets		40,641			40,411			36,591			34,009			33,293
	Total assets	$	2,095,300		$	1,776,442		$	1,758,647		$	1,657,636		$	1,565,181

Liabilities and Shareholders' Equity
	Deposits	$	1,613,919		$	1,301,241		$	1,295,519		$	1,156,785		$	1,096,545
	Short-term borrowings		205,728			228,868			224,461			234,657			205,552
	Long-term borrowings and
	subordinated debentures		65,348			65,804			66,259			93,735			94,214
	Other liabilities		17,173			26,910			17,048			18,640			18,201
	Shareholders' equity		193,132			153,619			155,360			153,819			150,669
	Total liabilities and shareholders' equity	$	2,095,300		$	1,776,442		$	1,758,647		$	1,657,636		$	1,565,181

	Book value per common share	$	15.70		$	14.29		$	14.47		$	14.37		$	14.09

	Tangible book value per common share	$	13.41		$	13.03		$	13.20		$	13.69		$	13.40

	Tangible common equity to tangible assets		8.0	%		7.9	%		8.1	%		8.9	%		9.2	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios

		6/30/2017		3/31/2017		12/31/2016		9/30/2016		6/30/2016
Summit Financial Group, Inc.
	CET1 Risk-based Capital	10.5	%	10.3	%	10.5	%	11.1	%	11.5	%
	Tier 1 Risk-based Capital	11.7	%	11.5	%	11.8	%	12.4	%	12.9	%
	Total Risk-based Capital	12.4	%	12.3	%	12.6	%	13.3	%	13.8	%
	Tier 1 Leverage Ratio	9.2	%	9.4	%	9.4	%	10.4	%	10.5	%

Summit Community Bank, Inc.
	CET1 Risk-based Capital	11.6	%	11.6	%	11.9	%	12.5	%	13.0	%
	Tier 1 Risk-based Capital	11.6	%	11.6	%	11.9	%	12.5	%	13.0	%
	Total Risk-based Capital	12.4	%	12.4	%	12.7	%	13.4	%	13.9	%
	Tier 1 Leverage Ratio	9.2	%	9.4	%	9.5	%	10.5	%	10.6	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition

Dollars in thousands	6/30/2017		3/31/2017			12/31/2016			9/30/2016			6/30/2016

Commercial	$	176,362		$	134,808		$	119,088		$	110,466		$	101,521
Mortgage warehouse lines		35,068			30,217			85,966			108,983			80,282
Commercial real estate
Owner occupied		239,108			217,733			203,047			192,254			190,534
Non-owner occupied		455,439			401,795			381,921			367,196			348,099
Construction and development
Land and development		74,155			68,079			72,042			65,430			65,702
Construction		22,967			16,511			16,584			11,276			8,506
Residential real estate
Non-jumbo		355,546			266,140			265,641			228,777			225,919
Jumbo		63,899			60,780			65,628			57,276			52,105
Home equity		81,192			75,299			74,596			75,161			75,904
Consumer		37,630			24,440			25,534			19,756			19,520
Other		9,049			8,831			9,489			9,649			10,008
Total loans, net of unearned fees		1,550,415			1,304,633			1,319,536			1,246,224			1,178,100
Less allowance for loan losses		12,332			11,718			11,674			11,619			11,377
Loans, net	$	1,538,083		$	1,292,915		$	1,307,862		$	1,234,605		$	1,166,723

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition

Dollars in thousands	6/30/2017		3/31/2017			12/31/2016			9/30/2016			6/30/2016
Non-interest bearing checking	$	234,173		$	152,086		$	149,737		$	122,652		$	120,845
Interest bearing checking		372,327			275,678			262,591			212,172			205,095
Savings		373,439			342,548			337,348			321,563			306,785
Time deposits		633,980			530,929			545,843			500,398			463,820
Total deposits	$	1,613,919		$	1,301,241		$	1,295,519		$	1,156,785		$	1,096,545

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information

		For the Quarter Ended
Dollars in thousands		6/30/2017			3/31/2017				12/31/2016				9/30/2016				6/30/2016

	Gross loan charge-offs	$	114			$	315			$	400			$	331			$	263
	Gross loan recoveries		(478	)			(108	)			(456	)			(573	)			(75	)
	Net loan charge-offs (recoveries)	$	(364	)		$	207			$	(56	)		$	(242	)		$	188

	Net loan charge-offs to average loans (annualized)		-0.09	%			0.06	%			-0.02	%			-0.09	%			0.07	%
	Allowance for loan losses	$	12,332			$	11,718			$	11,674			$	11,619			$	11,377
	Allowance for loan losses as a percentage
	of period end loans		0.79	%			0.90	%			0.88	%			0.93	%			0.97	%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	786			$	226			$	298			$	846			$	399
	Commercial real estate		2,051				4,734				4,844				4,867				5,773
	Residential construction and development		3,613				3,936				4,465				4,360				5,400
	Residential real estate		6,860				5,886				4,815				4,174				3,531
	Consumer		391				162				152				169				91
	Total nonperforming loans		13,701				14,944				14,574				14,416				15,194
	Foreclosed properties
	Commercial real estate		2,126				1,749				1,749				1,749				976
	Commercial construction and development		7,527				8,276				8,610				8,664				8,708
	Residential construction and development		12,402				12,635				13,265				13,741				12,989
	Residential real estate		1,537				831				880				613				752
	Total foreclosed properties		23,592				23,491				24,504				24,767				23,425
	Other repossessed assets		57				12				12				12				38
	Total nonperforming assets	$	37,350			$	38,447			$	39,090			$	39,195			$	38,657

	Nonperforming loans to period end loans		0.88	%			1.15	%			1.10	%			1.16	%			1.29	%
	Nonperforming assets to period end assets		1.78	%			2.16	%			2.22	%			2.36	%			2.47	%

	Troubled debt restructurings
	Performing	$	26,472			$	28,183			$	28,066			$	28,287			$	27,750
	Nonperforming		464				719				564				863				2,133
	Total troubled debt restructurings	$	26,936			$	28,902			$	28,630			$	29,150			$	29,883

Loans Past Due 30-89 Days
		For the Quarter Ended
In thousands		6/30/2017		3/31/2017			12/31/2016			9/30/2016			6/30/2016

	Commercial	$	470		$	162		$	175		$	405		$	422
	Commercial real estate		976			2,758			434			626			214
	Construction and development		308			291			552			235			520
	Residential real estate		6,943			2,924			5,517			2,941			4,763
	Consumer		548			155			375			144			177
	Other		49			17			14			13			12
	Total	$	9,294		$	6,307		$	7,067		$	4,364		$	6,108

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2017 vs Q2 2016
	Q2 2017									Q2 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	$	1,537,317			$	19,550		5.10	%	$	1,126,519			$	13,488		4.82	%
Tax-exempt		13,030				257		7.91	%		14,554				203		5.61	%
Securities
Taxable		214,601				1,330		2.49	%		211,624				1,062		2.02	%
Tax-exempt		133,130				1,568		4.72	%		71,649				900		5.05	%
Interest bearing deposits other banks
and Federal funds sold		47,937				165		1.38	%		9,152				4		0.18	%
Total interest earning assets		1,946,015				22,870		4.71	%		1,433,498				15,657		4.39	%

Noninterest earning assets
Cash & due from banks		10,101									3,752
Premises & equipment		34,441									21,517
Other assets		115,728									89,773
Allowance for loan losses		(11,966	)								(11,420	)
Total assets	$	2,094,319								$	1,537,120

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	378,350			$	252		0.27	%	$	205,242			$	79		0.15	%
Savings deposits		389,847				616		0.63	%		295,402				550		0.75	%
Time deposits		628,358				1,766		1.13	%		471,343				1,526		1.30	%
Short-term borrowings		200,209				1,079		2.16	%		183,673				419		0.92	%
Long-term borrowings and
subordinated debentures		65,692				670		4.09	%		94,568				975		4.15	%
Total interest bearing liabilities		1,662,456				4,383		1.06	%		1,250,228				3,549		1.14	%

Noninterest bearing liabilities
Demand deposits		221,245									120,118
Other liabilities		20,490									19,044
Total liabilities		1,904,191									1,389,390

Shareholders' equity - preferred		-									-
Shareholders' equity - common		190,128									147,730
Total liabilities and
shareholders' equity	$	2,094,319								$	1,537,120

NET INTEREST EARNINGS					$	18,487								$	12,108

NET INTEREST MARGIN								3.81	%								3.40	%

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	$	1,408,566			$	35,100		5.03	%	$	1,107,801			$	26,778		4.86	%
Tax-exempt		13,161				443		6.79	%		15,189				424		5.61	%
Securities
Taxable		200,544				2,459		2.47	%		210,494				2,146		2.05	%
Tax-exempt		114,320				2,678		4.72	%		75,482				1,873		4.99	%
Interest bearing deposits other banks
and Federal funds sold		44,338				317		1.44	%		8,621				7		0.16	%
Total interest earning assets		1,780,929				40,997		4.64	%		1,417,587				31,228		4.43	%

Noninterest earning assets
Cash & due from banks		7,298									3,757
Premises & equipment		29,500									21,556
Other assets		106,440									89,708
Allowance for loan losses		(11,864	)								(11,491	)
Total assets	$	1,912,303								$	1,521,117

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	320,918			$	399		0.25	%	$	207,487			$	162		0.16	%
Savings deposits		365,026				1,242		0.69	%		286,399				1,055		0.74	%
Time deposits		584,767				3,383		1.17	%		471,470				3,106		1.32	%
Short-term borrowings		198,587				2,073		2.11	%		176,111				659		0.75	%
Long-term borrowings and
subordinated debentures		65,918				1,331		4.07	%		94,811				1,952		4.14	%
		1,535,216				8,428		1.11	%		1,236,278				6,934		1.13	%
Noninterest bearing liabilities
Demand deposits		184,968									120,291
Other liabilities		18,454									17,485
Total liabilities		1,738,638									1,374,054

Shareholders' equity - preferred		-									-
Shareholders' equity - common		173,665									147,063
Total liabilities and
shareholders' equity	$	1,912,303								$	1,521,117

NET INTEREST EARNINGS					$	32,569								$	24,294

NET INTEREST MARGIN								3.69	%								3.45	%

Summit Financial Group Reports Second Quarter and First Half 2017 Results

Q2 2017 Diluted EPS of $0.43 compared to $0.40 for Q2 2016 and Diluted Loss Per Share of $0.15 for Q1 2017

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