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Summit Financial Group Reports Second Quarter and First Half 2017 Results

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 6/30/20176/30/2016 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
6/30/20176/30/2016 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 6/30/20176/30/2016 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
6/30/20176/30/2016 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 6/30/20173/31/201712/31/20169/30/20166/30/2016
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
6/30/20173/31/201712/31/20169/30/20166/30/2016
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 6/30/20173/31/201712/31/20169/30/20166/30/2016
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
6/30/20173/31/201712/31/20169/30/20166/30/2016
Summit Financial Group, Inc.
CET1 Risk-based Capital10.5%10.3%10.5%11.1%11.5%
Tier 1 Risk-based Capital11.7%11.5%11.8%12.4%12.9%
Total Risk-based Capital12.4%12.3%12.6%13.3%13.8%
Tier 1 Leverage Ratio9.2%9.4%9.4%10.4%10.5%
Summit Community Bank, Inc.
CET1 Risk-based Capital11.6%11.6%11.9%12.5%13.0%
Tier 1 Risk-based Capital11.6%11.6%11.9%12.5%13.0%
Total Risk-based Capital12.4%12.4%12.7%13.4%13.9%
Tier 1 Leverage Ratio9.2%9.4%9.5%10.5%10.6%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition
Dollars in thousands6/30/20173/31/201712/31/20169/30/20166/30/2016
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 6/30/20173/31/201712/31/20169/30/20166/30/2016
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 6/30/20173/31/201712/31/20169/30/20166/30/2016
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 6/30/20173/31/201712/31/20169/30/20166/30/2016
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
AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate
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
AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate
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%

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

Source:Summit Financial Group, Inc.