SUMMIT FINANCIAL GROUP INC (Form: 8-K, Received: 01/26/2018 15:59:25)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 25, 2018

Summit Financial Group, Inc.

(Exact name of registrant as specified in its charter)



West Virginia	No. 0-16587	55-0672148
(State or other jurisdiction of	(Commission File Number)	(I.R.S. Employer
incorporation or organization)		Identification No.)

300 North Main Street

Moorefield, West Virginia 26836

(Address of Principal Executive Offices)

(304) 530-1000

(Registrant’s telephone number, including area code)

Not Applicable

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

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



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

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

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

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

Indicate by check mark whether the registrant is an emerging growth company as defined by Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Section 2 - Financial Information

Item 2.02. Results of Operations and Financial Condition

On January 26, 2018, Summit Financial Group, Inc. (“Summit”) issued a News Release announcing its earnings for the three months and year ended December 31, 2017. This News Release is furnished as Exhibit 99 and is incorporated herein by reference.

Section 5 - Corporate Governance and Management

Item 5.02 Departure of Directors or Certain Officers, Election of Directors; Appointment of Certain Officers, Compensatory Arrangements of Certain Officers

On January 25, 2018, the Compensation and Nominating Committee of the Board of Directors of Summit Financial Group, Inc. (the “Company”) (the “Committee”) amended the terms of the Company’s Executive Officer Management Incentive Plan for 2017 to eliminate the impact of the Tax Cuts and Jobs Act (“TCJA”) from the computation of the Company’s annual return on average tangible equity (“ROATE”), the metric used to calculate bonuses under the Executive Officer Management Incentive Plan for 2017.

The Committee amended the Company’s Executive Officer Management Incentive Plan for 2017 to add to net income the tax expense that the Company recognized due to the re-measurement of net deferred tax assets resulting from enactment of the TCJA for purposes of calculating the ROATE. The Committee believes that the impact of the accounting adjustments required by TCJA should not adversely affect the ability of the participants in the Executive Officer Management Incentive Plan for 2017 to earn a bonus, since this expense was entirely outside the participant’s control and could not have been reasonably anticipated when the Committee adopted the ROATE metric.

As previously disclosed, the Executive Officer Management Incentive Plan for 2017 provides eligible participants, including executive officers of the Company, with the opportunity to earn a bonus equal to 25% of the executive officer’s base salary as of January 1, 2017 multiplied by a multiplier based on the Company’s ROATE for 2017. The targeted range for the Company’s ROATE for 2017 is 10.00 to 10.99 percent. If the Company’s actual ROATE for 2017 is within this targeted range, each executive officer will receive an incentive payment equal to 25% of their respective annual base salary as of January 1, 2017 (the “Targeted Incentive”).

If the Company’s actual ROATE for 2017 is greater than the targeted range, executive officers will be eligible to receive an incentive that is greater than the Targeted Incentive; conversely, if the Company’s actual ROATE for 2017 is less than the targeted range, executive officers will be eligible to receive an incentive that is less than the Targeted Incentive.

A copy of the amended Executive Officer Management Incentive Plan for 2017 is included as Exhibit 10.1 and is incorporated herein by reference. The above summary is qualified in its entirety by reference to the amended Executive Officer Management Incentive Plan for 2017 attached as Exhibit 10.1.

Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(d) The following exhibit 10.1 is being filed and the following exhibit 99 is being furnished as part of this Form 8-K.



Exhibit No.	Description

10.1	Amended Executive Officer Management Incentive Plan for 2017

99	News Release issued on January 26, 2018

SIGNATURE

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



		SUMMIT FINANCIAL GROUP, INC.

Date: January 26, 2018		By: /s/ Julie R. Markwood
		Julie R. Markwood
		Vice President and Chief Accounting Officer

EXHIBIT 10.1

S UMMIT FINANCIAL GROUP, INC.

Executive Officer Management Incentive Plan

for 2017

Amended January 25, 2018

OBJECTIVE

The objective of the Executive Officer Management Incentive Plan for 2017 (“2017 MIP”) is to incent and reward select members of Summit Financial Group, Inc.’s and its subsidiaries’ (collectively hereafter, “Summit’s”) management team for their exceptional performance, while still balancing risk with reward.

PARTICIPANT ELIGIBILITY

Eligibility for participation in the 2017 MIP is extended to the following executive officers (“Eligible Participants”):



Summit Financial Group, Inc.		Summit Community Bank, Inc.
Chief Executive Officer		President
Chief Financial Officer		Chief Operating Officer
Chief Accounting Officer		Chief of Credit Administration

To be eligible to receive a 2017 MIP payment, Eligible Participants must be employed for the entirety of 2017. If an otherwise Eligible Participant separates from employment at Summit for any reason, voluntarily or involuntarily, prior to January 1, 2018, no incentive will be paid to such Eligible Participant.

MIP COMPUTATION

The 2017 MIP computation is based upon Summit achieving a targeted annual return on average tangible equity (“ROATE”). For purposes of the 2017 MIP, Summit’s ROATE is to be calculated on a consolidated basis for the year ended 2017, as follows:

Net Income + (Amortization of Intangibles x 0.63) + Tax Expense Recognized due to Re-measurement of

Net Deferred Tax Assets Resulting from Change in U.S. Corporate Income Tax Rate

Average Shareholders’ Equity - Average Intangibles

For purposes of the 2017 MIP, Summit’s targeted ROATE for 2017 is 10.00 to 10.99 percent. If Summit’s actual ROATE for 2017 is within this targeted range, each Eligible Participant will receive an incentive payment equal to 25% of their respective annual base salary as of January 1, 2017 (the “Targeted Incentive”).

If Summit’s actual ROATE for 2017 is greater than the targeted range, Eligible Participants will be eligible to receive an incentive that is greater than the Targeted Incentive; conversely, if Summit’s actual ROATE for 2017 is less than the targeted range, Eligible Participants will be eligible to receive an incentive that is less than the Targeted Incentive.

The formula to compute each Eligible Participant’s incentive payment under the 2017 MIP is as follows:



Eligible Participant’s Annual Base Salary on January 1, 2017	X	25%	X	MIP Multiplier	=	Eligible Participant's 2017 MIP Incentive

The MIP Multiplier to be used for purposes of the above formula varies based upon Summit’s actual ROATE for 2017, as follows:



Summit’s Actual ROATE for 2017		MIP Multiplier
Less than 8%		0%
8.00% to 8.99%		80%
9.00% to 9.99%		90%
10.00% to 10.99%	Target	100%
11.00% to 11.99%		127%
12.00% to 12.99%		162%
13.00% to 13.99%		195%
14.00% and greater		210%

In addition to the 2017 MIP incentives which may be awarded to Eligible Participants in accordance with the above formula, an additional incentive totaling no more than $50,000 may be awarded at the discretion of Summit’s Chief Executive Officer, in whole or in part, to one or more deserving Summit employees who are not Eligible Participants.

OTHER MIP TERMS

No incentive under the 2017 MIP will be made, if at December 31, 2017 through the time of payment of the 2017 MIP incentive, Summit or any affiliate is subject to any active or pending, formal or informal, agreement or enforcement action to which any bank regulatory authority is a party, including but not limited to a memorandum of understanding, written agreement, or order of cease and desist.

PAYMENT OF INCENTIVES

The 2017 MIP incentive will be calculated after January 1, 2018 and paid as soon as practicable following Summit’s public release of its 2017 earnings, but no later than March 31, 2018.

INTERPRETATIONS, AMENDMENTS OR DISCONTINUATION

All interpretations of or amendments to the 2017 MIP will be made at the sole discretion of Compensation and Nominating Committee of the Summit Financial Group, Inc. Board of Directors. The 2017 MIP may be discontinued or revised by the Compensation and Nomination Committee at any time.

EXHIBIT 99

FOR RELEASE 6:00 AM ET, January 26, 2018

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

Telephone: (304) 530-0552

Email: rtissue@summitfgi.com

SUMMIT FINANCIAL GROUP REPORTS FOURTH QUARTER AND FULL YEAR 2017 RESULTS

Q4 2017 Diluted EPS $0.19 compared to $0.48 for Q3 2017 and $0.44 for Q4 2016

MOOREFIELD, WV - January 26, 2018 (GLOBE NEWSWIRE) - Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported fourth quarter 2017 net income of $2.32 million, or $0.19 per diluted share. In comparison, earnings for third quarter 2017 were $5.93 million, or $0.48 per diluted share, and for fourth quarter 2016 were $4.71 million, or $0.44 per diluted share. Earnings per diluted share for fourth quarter 2017 were negatively impacted (on an after-tax basis) by the one-time charge of $0.28 to re-measure the Company’s net deferred tax assets as result of enactment of the Tax Cuts and Jobs Act (“TCJA”).

For the full year, Summit recorded net income of $11.92 million, or $1.00 per diluted share, for 2017 compared with $17.30 million, or $1.61 per diluted share, for 2016. Earnings per diluted share for the full year of 2017 were negatively impacted (on an after-tax basis) by the following non-core or one-time items: $0.52 as result of a litigation settlement, $0.29 due to the enactment of the TCJA, and $0.08 as result of merger-related expenses.

Highlights for Q4 2017 include:


•	Recorded a $3.5 million charge to income tax expense to re-measure net deferred tax assets at the lower corporate federal income tax rate due to enactment of the TCJA;


•	Loans, excluding mortgage warehouse lines of credit, grew $37.3 million during the quarter, or 9.7 percent (on an annualized basis); excluding mortgage warehouse lines of credit and First Century Bankshares, Inc.’s (“FCB”) purchased loan portfolio, loans grew $113.0 million, or 9.2 percent, since year-end 2016;


•	Total revenues increased 0.6 percent compared to the linked-quarter and increased 29.9 percent compared to the year ago quarter, principally as result of the acquisitions of FCB and Highland County Bankshares, Inc. (“HCB”);


•	Net interest margin was unchanged compared to Q3 2017, but increased 31 basis points compared to Q4 2016, reflecting FCB’s higher yielding loan portfolio and lower cost of funds as well as the positive impact from FOMC rate increases during 2017;


•	Efficiency ratio improved to 51.47 percent compared to 53.73 percent for Q3 2017 and 56.67 percent for Q4 2016, as result of the improved net interest margin and well-controlled overhead;


•	Provision for loan losses remained unchanged from the linked quarter at $375,000, compared to no provision for the year-ago quarter;


•	Realized securities losses of $71,000 in Q4 2017 compared to realized securities gains of $291,000 in the year-ago quarter;


•	Write-downs of foreclosed properties were $347,000 in Q4 2017 compared to $165,000 in Q4 2016, while gains on sales of foreclosed properties declined from $465,000 in Q4 2016 to $46,000 in Q4 2017;


•	Nonperforming assets as a percentage of total assets declined to 1.73 percent compared to 1.84 percent for the linked quarter and to 2.22 percent a year-ago, reaching its lowest level since Q2 2008.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “Despite the noise in this past quarter’s earnings as result of enactment of Tax Reform legislation, I was very pleased by our Q4 2017 core operating performance - the net interest margin remained stable, loan growth was strong and the efficiency ratio improved markedly. Furthermore, these results combined with our proven ability in 2017 to successfully execute on a disciplined M&A growth strategy gives us optimism as we look forward to 2018 and beyond.”

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 months and year ended December 31, 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 $1.59 million during 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 year ended December 31, 2017 reflect increased levels of average balances, income and expense as compared to 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 $113,000 and $70,000 in Q4 2017 and $825,000 and $237,000 for the year ended December 31, 2017, respectively.

Results of Operations

Total revenue for fourth quarter 2017, consisting of net interest income and noninterest income, grew 29.9 percent to $21.4 million, principally as result of the FCB acquisition, compared to $16.5 million for the fourth quarter 2016. For the year-to-date period ended December 31, 2017, total revenue was $80.6 million compared to $60.6 million for the same period of 2016, representing a 32.9 percent increase.

For the fourth quarter of 2017, net interest income was $17.4 million, an increase of 29.6 percent from the $13.5 million reported in the prior-year fourth quarter and increased $206,000 compared to the linked-quarter. The net interest margin for fourth quarter 2017 was 3.65 percent compared to 3.34 percent for the year-ago quarter, and 3.65 percent for Q3 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 3.60 percent for Q4 2017 and 3.61 percent for full year 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 fourth quarter 2017 was $3.93 million compared to $3.00 million for the comparable period of 2016. Excluding realized securities gains and losses, noninterest income was $4.00 million for fourth quarter 2017, compared to $2.71 million reported for fourth quarter 2016.

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

Q4 2017 total noninterest expense increased 31.5 percent to $12.35 million compared to $9.39 million for the prior-year fourth quarter principally due to the acquisition of FCB. Noninterest expense for full-year 2017 increased 65.9 percent compared to 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 2017 increased 37.5 percent to $47.8 million compared to $34.8 million for 2016, principally as result of the acquisitions of HCB and FCB.

Balance Sheet

At December 31, 2017, total assets were $2.13 billion, an increase of $375.6 million, or 21.4 percent since December 31, 2016. Total loans, net of unearned fees and allowance for loan losses, were $1.59 billion at December 31, 2017, up $285.9 million, or 21.9 percent, from the $1.31 billion reported at year-end 2016. Loans, excluding mortgage warehouse lines of credit, grew $37.3 million during the quarter, or 9.7 percent (on an annualized basis), and loans, excluding mortgage warehouse lines of credit and FCB’s purchased loan portfolio, have grown $113.0 million, or 9.2 percent year-to-date.

At December 31, 2017, deposits were $1.60 billion, an increase of $305.1 million, or 23.5 percent, since year end 2016. During 2017, checking deposits increased $215.8 million or 52.3 percent, time deposits grew by $68.5 million or 12.5 percent and savings deposits increased $20.8 million or 6.2 percent.

Shareholders’ equity was $201.5 million as of December 31, 2017 compared to $155.4 million at December 31, 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 $14.08 at December 31, 2017 compared to $13.20 at December 31, 2016. Summit had 12,358,562 outstanding common shares at year end 2017 compared to 10,736,970 at year end 2016.

Asset Quality

As of December 31, 2017, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $36.9 million, or 1.73 percent of assets. This compares to $38.7 million, or 1.84 percent of assets at the linked quarter-end, and $39.1 million, or 2.22 percent of assets, at year end 2016.

Fourth quarter 2017 net loan charge-offs were $274,000, or 0.07 percent of average loans annualized; while we added $375,000 to the allowance for loan losses through the provision for loan losses. The allowance for loan losses stood at 0.78 percent of total loans at December 31, 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 December 31, 2017 and December 31, 2016 would have been 0.91 percent and 0.92 percent, respectively.

About the Company

Summit Financial Group, Inc. is a $2.13 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 -- Q4 2017 vs Q4 2016
	For the Quarter Ended						Percent
Dollars in thousands	12/31/2017			12/31/2016			Change
Condensed Statements of Income
Interest income
Loans, including fees	$	20,031		$	15,780		26.9	%
Securities	2,412			1,796			34.3	%
Other	144			161			-10.6	%
Total interest income	22,587			17,737			27.3	%
Interest expense
Deposits	3,224			2,430			32.7	%
Borrowings	1,925			1,850			4.1	%
Total interest expense	5,149			4,280			20.3	%

Net interest income	17,438			13,457			29.6	%
Provision for loan losses	375			—			n/a
Net interest income after provision for loan losses	17,063			13,457			26.8	%

Noninterest income
Insurance commissions	1,005			992			1.3	%
Trust and wealth management fees	578			91			535.2	%
Service fees related to deposit accounts	1,906			1,194			59.6	%
Realized securities (losses) gains	(71		)	291			-124.4	%
Other income	513			430			19.3	%
Total noninterest income	3,931			2,998			31.1	%
Noninterest expense
Salaries and employee benefits	6,520			5,308			22.8	%
Net occupancy expense	772			522			47.9	%
Equipment expense	1,095			700			56.4	%
Professional fees	355			344			3.2	%
Amortization of intangibles	435			97			348.5	%
FDIC premiums	250			75			233.3	%
Merger-related expense	14			588			-97.6	%
Foreclosed properties expense	215			97			121.6	%
Gain on sales of foreclosed properties	(46		)	(465		)	-90.1	%
Write-downs of foreclosed properties	347			165			110.3	%
Other expenses	2,389			1,961			21.8	%
Total noninterest expense	12,346			9,392			31.5	%
Income before income taxes	8,648			7,063			22.4	%
Income tax expense	6,325			2,353			168.8	%
Net income	$	2,323		$	4,710		-50.7	%



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary -- Q4 2017 vs Q4 2016

	For the Quarter Ended						Percent
	12/31/2017			12/31/2016			Change
Per Share Data
Earnings per common share
Basic	$	0.19		$	0.44		-56.8	%
Diluted	$	0.19		$	0.44		-56.8	%

Cash dividends	$	0.11		$	0.10		10.0	%

Average common shares outstanding
Basic	12,325,067			10,710,164			15.1	%
Diluted	12,371,507			10,762,445			15.0	%

Common shares outstanding at period end	12,358,562			10,736,970			15.1	%

Performance Ratios
Return on average equity	4.62		%	12.22		%	-62.2	%
Return on average tangible equity	5.36		%	13.42		%	-60.1	%
Return on average assets	0.44		%	1.07		%	-58.9	%
Net interest margin	3.65		%	3.34		%	9.3	%
Efficiency ratio (A)	51.47		%	56.67		%	-9.2	%


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



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Annual Performance Summary -- 2017 vs 2016
	For the Year Ended						Percent
Dollars in thousands	12/31/2017			12/31/2016			Change
Condensed Statements of Income
Interest income
Loans, including fees	$	74,908		$	56,980		31.5	%
Securities	9,010			6,938			29.9	%
Other	609			173			252.0	%
Total interest income	84,527			64,091			31.9	%
Interest expense
Deposits	11,210			8,964			25.1	%
Borrowings	7,170			6,120			17.2	%
Total interest expense	18,380			15,084			21.9	%
Net interest income	66,147			49,007			35.0	%
Provision for loan losses	1,250			500			150.0	%
Net interest income after provision for loan losses	64,897			48,507			33.8	%

Noninterest income
Insurance commissions	4,005			4,022			-0.4	%
Trust and wealth management fees	1,863			449			314.9	%
Service fees related to deposit accounts	6,643			4,370			52.0	%
Realized securities (losses) gains	(14		)	1,127			-101.2	%
Other income	1,930			1,632			18.3	%
Total noninterest income	14,427			11,600			24.4	%
Noninterest expense
Salaries and employee benefits	25,075			19,573			28.1	%
Net occupancy expense	3,011			2,098			43.5	%
Equipment expense	3,954			2,759			43.3	%
Professional fees	1,367			1,515			-9.8	%
Amortization of intangibles	1,410			247			470.9	%
FDIC premiums	1,065			875			21.7	%
Merger-related expense	1,589			933			70.3	%
Foreclosed properties expense	611			414			47.6	%
Gain on sales of foreclosed properties	(157		)	(916		)	-82.9	%
Write-downs of foreclosed properties	885			668			32.5	%
Litigation settlement	9,900			—			n/a
Other expenses	9,035			6,636			36.2	%
Total noninterest expense	57,745			34,802			65.9	%
Income before income taxes	21,579			25,305			-14.7	%
Income tax expense	9,664			8,008			20.7	%
Net income	$	11,915		$	17,297		-31.1	%



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

	For the Year Ended						Percent
	12/31/2017			12/31/2016			Change
Per Share Data
Earnings per common share
Basic	$	1.00		$	1.62		-38.3	%
Diluted	$	1.00		$	1.61		-37.9	%

Cash dividends	$	0.44		$	0.40		10.0	%

Average common shares outstanding
Basic	11,918,390			10,689,224			11.5	%
Diluted	11,949,245			10,716,871			11.5	%

Common shares outstanding at period end	12,358,562			10,736,970			15.1	%

Performance Ratios
Return on average equity	6.40		%	11.53		%	-44.5	%
Return on average tangible equity	7.35		%	12.27		%	-40.1	%
Return on average assets	0.59		%	1.08		%	-45.4	%
Net interest margin	3.67		%	3.39		%	8.3	%
Efficiency ratio (A)	52.41		%	55.34		%	-5.3	%


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	12/31/2017			9/30/2017			6/30/2017		3/31/2017			12/31/2016
Condensed Statements of Income (unaudited)
Interest income
Loans, including fees	$	20,031		$	19,490		$	19,717	$	15,671		$	15,780
Securities	2,412			2,397			2,349		1,851			1,796
Other	144			149			165		152			161
Total interest income	22,587			22,036			22,231		17,674			17,737
Interest expense
Deposits	3,224			2,963			2,634		2,390			2,430
Borrowings	1,925			1,841			1,749		1,654			1,850
Total interest expense	5,149			4,804			4,383		4,044			4,280

Net interest income	17,438			17,232			17,848		13,630			13,457
Provision for loan losses	375			375			250		250			—
Net interest income after provision for loan losses	17,063			16,857			17,598		13,380			13,457

Noninterest income
Insurance commissions	1,005			1,043			988		968			992
Trust and wealth management fees	578			589			595		100			91
Service fees related to deposit accounts	1,906			1,863			1,706		1,168			1,194
Realized securities gains (losses)	(71		)	26			90		(58		)	291
Other income	513			479			537		401			430
Total noninterest income	3,931			4,000			3,916		2,579			2,998
Noninterest expense
Salaries and employee benefits	6,520			6,610			6,758		5,187			5,308
Net occupancy expense	772			847			826		567			522
Equipment expense	1,095			1,093			1,031		735			700
Professional fees	355			373			354		285			344
Amortization of intangibles	435			448			429		97			97
FDIC premiums	250			310			295		210			75
Merger-related expenses	14			11			1,455		109			588
Foreclosed properties expense	215			171			122		104			97
(Gain) loss on sales of foreclosed properties	(46		)	(29		)	73		(156		)	(465		)
Write-downs of foreclosed properties	347			91			29		418			165
Litigation settlement	—			—			—		9,900			—
Other expenses	2,389			2,522			2,564		1,560			1,961
Total noninterest expense	12,346			12,447			13,936		19,016			9,392
Income (loss) before income taxes	8,648			8,410			7,578		(3,057		)	7,063
Income tax expense (benefit)	6,325			2,480			2,300		(1,441		)	2,353
Net income (loss)	$	2,323		$	5,930		$	5,278	$	(1,616	)	$	4,710



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

	For the Quarter Ended
	12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016
Per Share Data
Earnings per common share
Basic	$	0.19		$	0.48		$	0.43		$	-0.15		$	0.44
Diluted	$	0.19		$	0.48		$	0.43		$	-0.15		$	0.44

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

Average common shares outstanding
Basic	12,325,067			12,299,987			12,288,514			10,738,365			10,710,164
Diluted	12,371,507			12,318,959			12,299,187			10,738,365			10,762,445

Common shares outstanding at period end	12,358,562			12,311,723			12,299,726			10,750,477			10,736,970

Performance Ratios
Return on average equity	4.62		%	12.10		%	11.10		%	-4.11		%	12.22		%
Return on average tangible equity	5.36		%	14.12		%	12.95		%	-4.51		%	13.42		%
Return on average assets	0.44		%	1.14		%	1.01		%	-0.37		%	1.07		%
Net interest margin	3.65		%	3.65		%	3.81		%	3.54		%	3.34		%
Efficiency ratio - (A)	51.47		%	53.73		%	53.00		%	51.16		%	56.67		%

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

Assets
Cash and due from banks	$	9,641		$	9,220		$	9,294		$	19,326		$	4,262
Interest bearing deposits other banks	42,990			41,994			44,242			38,895			42,354
Securities	328,723			328,726			336,811			282,028			266,542
Loans, net	1,593,744			1,559,328			1,538,083			1,292,915			1,307,862
Property held for sale	21,470			22,622			23,592			23,491			24,504
Premises and equipment, net	34,209			34,220			33,234			26,377			23,737
Goodwill and other intangible assets	27,513			27,879			28,214			13,587			13,652
Cash surrender value of life insurance policies	41,358			41,076			41,189			39,412			39,143
Other assets	34,592			36,071			40,641			40,411			36,591
Total assets	$	2,134,240		$	2,101,136		$	2,095,300		$	1,776,442		$	1,758,647

Liabilities and Shareholders' Equity
Deposits	$	1,600,601		$	1,616,768		$	1,613,919		$	1,301,241		$	1,295,519
Short-term borrowings	250,499			202,988			205,728			228,868			224,461
Long-term borrowings and subordinated debentures	65,340			65,344			65,348			65,804			66,259
Other liabilities	16,295			17,254			17,173			26,910			17,048
Shareholders' equity	201,505			198,782			193,132			153,619			155,360
Total liabilities and shareholders' equity	$	2,134,240		$	2,101,136		$	2,095,300		$	1,776,442		$	1,758,647

Book value per common share	$	16.30		$	16.15		$	15.70		$	14.29		$	14.47
Tangible book value per common share	$	14.08		$	13.88		$	13.41		$	13.03		$	13.20
Tangible common equity to tangible assets	8.3		%	8.2		%	8.0		%	7.9		%	8.1		%



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

	12/31/2017		9/30/2017		6/30/2017		3/31/2017		12/31/2016
Summit Financial Group, Inc.
CET1 Risk-based Capital	10.6	%	10.8	%	10.5	%	10.3	%	10.5	%
Tier 1 Risk-based Capital	11.8	%	11.9	%	11.7	%	11.5	%	11.8	%
Total Risk Based Capital	12.5	%	12.7	%	12.4	%	12.3	%	12.6	%
Tier 1 Leverage Ratio	9.4	%	9.5	%	9.2	%	9.4	%	9.4	%

Summit Community Bank, Inc.
CET1 Risk-based Capital	11.7	%	11.8	%	11.6	%	11.6	%	11.9	%
Tier 1 Risk-based Capital	11.7	%	11.8	%	11.6	%	11.6	%	11.9	%
Total Risk Based Capital	12.5	%	12.6	%	12.4	%	12.4	%	12.7	%
Tier 1 Leverage Ratio	9.4	%	9.4	%	9.2	%	9.4	%	9.5	%



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

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

Commercial	$	189,981	$	187,193	$	176,362	$	134,808	$	119,088
Mortgage warehouse lines	30,757		33,525		35,068		30,217		85,966
Commercial real estate
Owner occupied	250,202		239,840		239,108		217,733		203,047
Non-owner occupied	484,902		464,543		455,439		401,795		381,921
Construction and development
Land and development	67,219		71,412		74,155		68,079		72,042
Construction	33,412		28,756		22,967		16,511		16,584
Residential real estate
Non-jumbo	354,101		355,642		355,546		266,140		265,641
Jumbo	62,267		61,253		63,899		60,780		65,628
Home equity	84,028		82,720		81,192		75,299		74,596
Consumer	36,202		36,915		37,630		24,440		25,534
Other	13,238		9,994		9,049		8,831		9,489
Total loans, net of unearned fees	1,606,309		1,571,793		1,550,415		1,304,633		1,319,536
Less allowance for loan losses	12,565		12,465		12,332		11,718		11,674
Loans, net	$	1,593,744	$	1,559,328	$	1,538,083	$	1,292,915	$	1,307,862



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

Dollars in thousands	12/31/2017		9/30/2017		6/30/2017		3/31/2017		12/31/2016
Non interest bearing checking	$	217,493	$	215,910	$	234,173	$	152,086	$	149,737
Interest bearing checking	410,606		397,843		372,327		275,678		262,591
Savings	358,168		362,653		373,439		342,548		337,348
Time deposits	614,334		640,362		633,980		530,929		545,843
Total deposits	$	1,600,601	$	1,616,768	$	1,613,919	$	1,301,241	$	1,295,519



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information
	For the Quarter Ended
Dollars in thousands	12/31/2017			9/30/2017			6/30/2017			3/31/2017			12/31/2016

Gross loan charge-offs	$	550		$	309		$	114		$	315		$	400
Gross loan recoveries	(276		)	(67		)	(478		)	(108		)	(456		)
Net loan charge-offs (recoveries)	$	274		$	242		$	(364	)	$	207		$	(56	)

Net loan charge-offs to average loans (annualized)	0.07		%	0.06		%	-0.09		%	0.06		%	-0.02		%
Allowance for loan losses	$	12,565		$	12,465		$	12,332		$	11,718		$	11,674
Allowance for loan losses as a percentage of period end loans	0.78		%	0.79		%	0.79		%	0.90		%	0.88		%

Nonperforming assets:
Nonperforming loans
Commercial	$	696		$	757		$	786		$	226		$	298
Commercial real estate	3,164			2,773			2,051			4,734			4,844
Residential construction and development	3,569			3,931			3,613			3,936			4,465
Residential real estate	7,656			8,082			6,860			5,886			4,815
Consumer	238			529			391			162			152
Total nonperforming loans	15,323			16,072			13,701			14,944			14,574
Foreclosed properties
Commercial real estate	1,789			1,988			2,126			1,749			1,749
Commercial construction and development	7,392			7,392			7,527			8,276			8,610
Residential construction and development	11,182			11,852			12,402			12,635			13,265
Residential real estate	1,107			1,390			1,537			831			880
Total foreclosed properties	21,470			22,622			23,592			23,491			24,504
Other repossessed assets	68			12			57			12			12
Total nonperforming assets	$	36,861		$	38,706		$	37,350		$	38,447		$	39,090

Nonperforming loans to period end loans	0.95		%	1.02		%	0.88		%	1.15		%	1.10		%
Nonperforming assets to period end assets	1.73		%	1.84		%	1.78		%	2.16		%	2.22		%

Troubled debt restructurings
Performing	$	28,347		$	28,304		$	26,472		$	28,183		$	28,066
Nonperforming	26			760			464			719			564
Total troubled debt restructurings	$	28,373		$	29,064		$	26,936		$	28,902		$	28,630



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

Commercial	$	586	$	378	$	470	$	162	$	175
Commercial real estate	1,082		944		976		2,758		434
Construction and development	1,127		238		308		291		552
Residential real estate	7,236		6,260		6,943		2,924		5,517
Consumer	504		419		548		155		375
Other	38		92		49		17		14
Total	$	10,573	$	8,331	$	9,294	$	6,307	$	7,067



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q4 2017 vs Q4 2016
	Q4 2017							Q4 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	$	1,562,978		$	19,879	5.05	%	$	1,308,418		$	15,650	4.76	%
Tax-exempt	16,902			234		5.49	%	13,845			195		5.60	%
Securities
Taxable	202,377			1,328		2.60	%	191,951			1,111		2.30	%
Tax-exempt	142,641			1,668		4.64	%	89,745			1,039		4.61	%
Interest bearing deposits other banks and Federal funds sold	42,021			144		1.36	%	49,341			161		1.30	%
Total interest earning assets	1,966,919			23,253		4.69	%	1,653,300			18,156		4.37	%

Noninterest earning assets
Cash & due from banks	9,753							4,650
Premises & equipment	34,263							23,616
Other assets	111,596							96,165
Allowance for loan losses	(12,628		)					(11,905		)
Total assets	$	2,109,903						$	1,765,826

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	405,307		$	447	0.44	%	$	256,307		$	128	0.20	%
Savings deposits	360,630			684		0.75	%	335,658			633		0.75	%
Time deposits	629,871			2,093		1.32	%	542,602			1,669		1.22	%
Short-term borrowings	220,027			1,240		2.24	%	221,200			954		1.72	%
Long-term borrowings and subordinated debentures	65,342			685		4.16	%	85,699			896		4.16	%
Total interest bearing liabilities	1,681,177			5,149		1.22	%	1,441,466			4,280		1.18	%

Noninterest bearing liabilities
Demand deposits	214,624							150,318
Other liabilities	12,886							19,902
Total liabilities	1,908,687							1,611,686

Shareholders' equity - common	201,216							154,140
Total liabilities and shareholders' equity	$	2,109,903						$	1,765,826

NET INTEREST EARNINGS				$	18,104						$	13,876

NET INTEREST MARGIN						3.65	%						3.34	%



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q4 2017 vs Q3 2017
	Q4 2017							Q3 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	$	1,562,978		$	19,879	5.05	%	$	1,539,945		$	19,387	4.99	%
Tax-exempt	16,902			234		5.49	%	16,314			158		3.84	%
Securities
Taxable	202,377			1,328		2.60	%	198,913			1,283		2.56	%
Tax-exempt	142,641			1,668		4.64	%	145,599			1,714		4.67	%
Interest bearing deposits other banks and Federal funds sold	42,021			144		1.36	%	42,926			149		1.38	%
Total interest earning assets	1,966,919			23,253		4.69	%	1,943,697			22,691		4.63	%

Noninterest earning assets
Cash & due from banks	9,753							9,591
Premises & equipment	34,263							33,667
Other assets	111,596							113,723
Allowance for loan losses	(12,628		)					(12,418		)
Total assets	$	2,109,903						$	2,088,260

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	405,307		$	447	0.44	%	$	384,539		$	323	0.33	%
Savings deposits	360,630			684		0.75	%	365,150			637		0.69	%
Time deposits	629,871			2,093		1.32	%	636,424			2,003		1.25	%
Short-term borrowings	220,027			1,240		2.24	%	205,536			1,160		2.24	%
Long-term borrowings and subordinated debentures	65,342			685		4.16	%	65,346			681		4.13	%
Total interest bearing liabilities	1,681,177			5,149		1.22	%	1,656,995			4,804		1.15	%

Noninterest bearing liabilities
Demand deposits	214,624							217,760
Other liabilities	12,886							17,414
Total liabilities	1,908,687							1,892,169

Shareholders' equity - common	201,216							196,091
Total liabilities and shareholders' equity	$	2,109,903						$	2,088,260

NET INTEREST EARNINGS				$	18,104						$	17,887

NET INTEREST MARGIN						3.65	%						3.65	%



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	$	1,480,601		$	74,365	5.02	%	$	1,177,445		$	56,439	4.79	%
Tax-exempt	14,899			835		5.60	%	14,628			820		5.61	%
Securities
Taxable	200,596			5,071		2.53	%	202,795			4,395		2.17	%
Tax-exempt	129,342			6,060		4.69	%	79,571			3,853		4.84	%
Interest bearing deposits other banks and Federal funds sold	43,400			609		1.40	%	19,211			173		0.90	%
Total interest earning assets	1,868,838			86,940		4.65	%	1,493,650			65,680		4.40	%

Noninterest earning assets
Cash & due from banks	8,492							3,968
Premises & equipment	31,750							21,858
Other assets	109,456							90,957
Allowance for loan losses	(12,196		)					(10,836		)
Total assets	$	2,006,340						$	1,599,597

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	358,225		$	1,169	0.33	%	$	220,708		$	376	0.17	%
Savings deposits	363,949			2,563		0.70	%	306,312			2,296		0.75	%
Time deposits	609,156			7,478		1.23	%	491,652			6,292		1.28	%
Short-term borrowings	205,743			4,473		2.17	%	190,876			2,288		1.20	%
Long-term borrowings and subordinated debentures	65,629			2,697		4.11	%	92,343			3,832		4.15	%
Total interest bearing liabilities	1,602,702			18,380		1.15	%	1,301,891			15,084		1.16	%

Noninterest bearing liabilities
Demand deposits	200,707							128,894
Other liabilities	16,669							18,795
Total liabilities	1,820,078							1,449,580

Shareholders' equity - common	186,262							150,017
Total liabilities and shareholders' equity	$	2,006,340						$	1,599,597

NET INTEREST EARNINGS				$	68,560						$	50,596

NET INTEREST MARGIN						3.67	%						3.39	%