Market Overview

Summit Financial Group Reports Second Quarter and First Half 2018 Results

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MOOREFIELD, W.V. , July 26, 2018 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (NASDAQ:SMMF) today reported record second quarter 2018 net income of $6.28 million, or $0.51 per diluted share, compared to $5.28 million, or $0.43 per diluted share, for the second quarter of 2017, an increase of 19.0 percent, or 18.6 percent per diluted share.

For the six months ended June 30, 2018, Summit recorded net income of $13.72 million, or $1.10 per diluted share, compared with $3.66 million, or $0.32 per diluted share, for the comparable 2017 six-month period, representing an increase of 274.7 percent or 243.8 percent per diluted share.  The lower earnings in the first half of 2017 were principally attributable to a legal settlement during first quarter 2017 which reduced earnings by $0.54 per diluted share.

Highlights for Q2 2018 include:

  • Loan balances, excluding mortgage warehouse lines of credit, declined $22.1 million during the quarter, principally due to seasonal reductions in certain significant commercial lines of credit, and are unchanged year-to-date;
  • Net interest margin was unchanged at 3.58 percent compared to Q1 2018;
  • Efficiency ratio was 55.88 percent compared to 53.84 percent for Q1 2018, due to flat net interest income coupled with marginally higher operating expenses, principally due to increased personnel costs, resulting from normal merit wage increases;
  • Provision for loan losses increased $250,000 during the quarter principally to provide for an expected loss relative to a single commercial loan secured by residential rental real estate;
  • Realized securities gains of $87,000 in Q2 2018 compared to $732,000 in the linked quarter;
  • Write-downs of foreclosed properties were $163,000 in Q2 2018 compared to $257,000 in Q1 2018, while the net gain on sales of foreclosed properties decreased from $64,000 in Q1 2018 to a net loss of $58,000 in Q2 2018;
  • Announced our entering into a definitive merger agreement to acquire Peoples Bankshares, Inc. and its wholly-owned subsidiary, First Peoples Bank, Inc., headquartered in Mullens, West Virginia; and
  • Forbes Magazine recognized Summit Community Bank as the #1 Best-in-State Bank in West Virginia for 2018. This ranking was based upon the results of surveys conducted by the market research firm Statista of more than 25,000 customers in the U.S. for their opinions on their current and former banking relationships. Banks were rated on customers' overall recommendations and satisfaction, as well as their opinions in regard to each institution's trust, terms and conditions, branch services, digital services and financial advice.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, "Summit achieved record second quarter earnings, despite the challenges of softening loan demand and somewhat higher overhead costs from the important investments we are making both in our people and in our infrastructure to maintain our growth momentum. Further, I am particularly pleased by the opportunities represented by our pending acquisition of Peoples Bankshares, Inc., announced recently and expected to close at beginning of 2019. This deal will serve to combine Summit with a financially strong bank that has a similar culture, core values and guiding principles as ours, and shares the same commitment to build long-term client relationships by providing ‘Service Beyond Expectations.'"

Results from Operations

Total revenue for second quarter 2018, consisting of net interest income and noninterest income, declined 1.6 percent to $21.4 million, principally as a result of lower net interest income, compared to $21.8 million for the second quarter 2017. For the year-to-date period ended June 30, 2018, total revenue was $43.6 million compared to $38.0 million for the same period of 2017, representing a 14.7 percent increase primarily due to the acquisition of First Century Bankshares, Inc. in Q2 2017.

For the second quarter of 2018, net interest income was $17.3 million, a decrease of 3.2 percent from the $17.8 million reported in the prior-year second quarter and remained nearly unchanged compared to the linked quarter. The net interest margin for second quarter 2018 was 3.58 percent compared to 3.81 percent for the same year-ago quarter, and 3.58 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 3.56 percent for Q2 2018 and 3.55 percent for first half of 2018.  

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 2018 was $4.15 million compared to $3.92 million for the comparable period of 2017. Excluding realized securities gains, noninterest income was $4.06 million for second quarter 2018, compared to $3.83 million reported for second quarter 2017 and $4.14 million for the linked quarter.

We recorded a $750,000 provision for loan losses during second quarter 2018 and $250,000 in Q2 2017.  The need for increased loan loss provisioning during 2018 is directionally consistent with changes in the credit quality in our loan portfolio.

Q2 2018 total noninterest expense decreased 8.6 percent to $12.74 million compared to $13.94 million for the prior-year second quarter principally due to no merger expenses being incurred in the 2018 quarter compared to $1.46 million in Q2 2017. Noninterest expense for the first half of 2018 decreased 24.0 percent compared to the first half of 2017. 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 2018 increased 8.66 percent to $25.0 million compared to $23.1 million for the first half of 2017, principally as result of the FCB acquisition.

Balance Sheet

At June 30, 2018, total assets were $2.11 billion, a decrease of $26.6 million, or 1.2 percent since December 31, 2017. Total loans, net of unearned fees and allowance for loan losses, were $1.62 billion at June 30, 2018, up $23.6 million, or 1.5 percent, from the $1.59 billion reported at year-end 2017.  Loans, excluding mortgage warehouse lines of credit, declined $22.1 million during the quarter, or 5.5 percent (on an annualized basis), and have remained nearly unchanged since year-end 2017.

At June 30, 2018, deposits were $1.64 billion, an increase of $39.4 million, or 2.5 percent, since year end 2017. During first half 2018, checking deposits increased $61.1 million or 9.7 percent, time deposits grew by $13.5 million or 2.2 percent and savings deposits declined $35.2 million or 9.8 percent.

Shareholders' equity was $209.9 million as of June 30, 2018 compared to $201.5 million at December 31.

Tangible book value per common share increased to $14.81 at June 30, 2018 compared to $14.08 at December 31, 2017. Summit had 12,373,747 outstanding common shares at Q2 2018 quarter end compared to 12,358,562 at year end 2017.

Asset Quality

As of June 30, 2018, nonperforming assets ("NPAs"), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $37.4 million, or 1.77 percent ofassets. This compares to $36.9 million, or 1.73 percent of assets at the linked quarter-end, and $37.4 million, or 1.78 percent of assets, at second quarter-end 2017.

Second quarter 2018 net loan charge-offs were $428,000, or 0.10 percent of average loans annualized; while adding $750,000 to the allowance for loan losses through the provision for loan losses. The allowance for loan losses stood at 0.77 percent of total loans at June 30, 2018, compared to 0.78 percent at year-end 2017.  If the acquired FCB and HCB loans which were recorded at fair value on the acquisition dates were excluded, the allowance for loan losses to total loans ratio at June 30, 2018 and December 31, 2017 would have been 0.87 percent and 0.91 percent, respectively.

About the Company

Summit Financial Group, Inc. is a $2.11 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.

ADDITIONAL INFORMATION ABOUT THE MERGER WITH PEOPLES BANKSHARES, INC. ("PEOPLES") AND WHERE TO FIND IT

This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed Merger, Summit will file with the SEC a Registration Statement on Form S-4 with respect to the offering of Summit common stock as the Merger Consideration under the Securities Act, which will include a proxy statement of Peoples seeking approval of the Merger by Peoples' shareholders and a prospectus of Summit. Peoples will deliver the proxy statement/prospectus to its shareholders. In addition, Summit may file other relevant documents concerning the proposed Merger with the SEC. Investors and security holders are urged to read the registration statement and proxy statement/prospectus and other relevant documents when they become available because they will contain important information about the proposed Merger.

Investors and security holders may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov. Security holders of Summit and Peoples may also obtain free copies of these documents by directing a request to Ms. Teresa Ely, Summit's Director of Shareholder Relations, by telephone at (304) 530-0526 or by email at tely@summitfgi.com or by accessing these documents at Summit's website: www.summitfgi.com.

     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)    
Quarterly Performance Summary (unaudited)      
Q2 2018 vs Q2 2017      
       
     For the Quarter Ended  Percent
 Dollars in thousands 6/30/2018 6/30/2017  Change
 Statements of Income      
   Interest income      
    Loans, including fees $   20,962 $   19,717 6.3 %
    Securities      2,303     2,349 -2.0 %
    Other     134     165 -18.8 %
   Total interest income     23,399     22,231 5.3 %
   Interest expense      
    Deposits     4,309     2,634 63.6 %
    Borrowings     1,815     1,749 3.8 %
   Total interest expense     6,124     4,383 39.7 %
   Net interest income     17,275     17,848 -3.2 %
   Provision for loan losses     750     250 200.0 %
   Net interest income after provision      
    for loan losses     16,525     17,598 -6.1 %
         
   Noninterest income      
    Insurance commissions     1,013     988 2.5 %
    Trust and wealth management fees     672     595 12.9 %
    Service charges on deposit accounts     1,116     1,065 4.8 %
    Bank card revenue     801     683 17.3 %
    Realized securities gains     87     90 -3.3 %
    Other income     459     495 -7.3 %
  Total noninterest income     4,148     3,916 5.9 %
   Noninterest expense      
    Salaries and employee benefits     6,922     6,758 2.4 %
    Net occupancy expense     840     826 1.7 %
    Equipment expense     1,071     1,031 3.9 %
    Professional fees     385     354 8.8 %
    Amortization of intangibles     413     429 -3.7 %
    FDIC premiums     240     295 -18.6 %
    Bank card expense     361     381 -5.2 %
    Foreclosed properties expense, net of losses     350     224 56.3 %
    Merger-related expense     -     1,455 n/a  
    Other expenses     2,153     2,183 -1.4 %
  Total noninterest expense     12,735     13,936 -8.6 %
   Income before income taxes     7,938     7,578 4.8 %
   Income taxes     1,658     2,300 -27.9 %
   Net income $   6,280 $   5,278 19.0 %
               


     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)    
Quarterly Performance Summary (unaudited)      
Q2 2018 vs Q2 2017    
         
     For the Quarter Ended  Percent
    6/30/2018 6/30/2017  Change
 Per Share Data      
   Earnings per common share      
    Basic $   0.51   $   0.43   18.6 %
    Diluted  $   0.51   $   0.43   18.6 %
         
   Cash dividends $   0.13   $   0.11   18.2 %
         
   Average common shares outstanding      
    Basic     12,366,522       12,288,514   0.6 %
    Diluted     12,431,984       12,299,187   1.1 %
         
   Common shares outstanding at period end     12,373,747       12,299,726   0.6 %
         
 Performance Ratios      
   Return on average equity   12.16 %   11.10 % 9.5 %
   Return on average tangible equity   13.98 %   12.95 % 8.0 %
   Return on average assets   1.19 %   1.01 % 17.8 %
   Net interest margin   3.58 %   3.81 % -6.0 %
   Efficiency ratio (A)   55.88 %   53.00 % 5.4 %

NOTE (A) – Computed on a tax equivalent basis excluding gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)    
Six Month Performance Summary (unaudited)      
2018 vs 2017      
         
     For the Six Months Ended  Percent
 Dollars in thousands 6/30/2018 6/30/2017  Change
 Statements of Income      
   Interest income      
    Loans, including fees $   41,329 $   35,388 16.8 %
    Securities      4,694     4,200 11.8 %
    Other     274     317 -13.6 %
   Total interest income     46,297     39,905 16.0 %
   Interest expense      
    Deposits     7,858     5,024 56.4 %
    Borrowings     3,906     3,404 14.7 %
   Total interest expense     11,764     8,428 39.6 %
   Net interest income     34,533     31,477 9.7 %
   Provision for loan losses     1,250     500 150.0 %
   Net interest income after provision      
    for loan losses     33,283     30,977 7.4 %
         
   Noninterest income      
    Insurance commissions     2,126     1,957 8.6 %
    Trust and wealth management fees     1,339     695 92.7 %
    Service charges on deposit accounts     2,207     1,747 26.3 %
    Bank card revenue     1,550     1,216 27.5 %
    Realized securities gains     819     32 n/m  
    Other income     982     849 15.7 %
  Total noninterest income     9,023     6,496 38.9 %
   Noninterest expense      
    Salaries and employee benefits     13,744     11,945 15.1 %
    Net occupancy expense     1,672     1,393 20.0 %
    Equipment expense     2,153     1,766 21.9 %
    Professional fees     719     639 12.5 %
    Amortization of intangibles     848     526 61.2 %
    FDIC premiums     480     505 -5.0 %
    Bank card expense     696     718 -3.1 %
    Foreclosed properties expense, net of losses     675     590 14.4 %
    Litigation settlement     -     9,900 n/a  
    Merger-related expense     -     1,564 n/a  
    Other expenses     4,062     3,407 19.2 %
  Total noninterest expense     25,049     32,953 -24.0 %
   Income before income taxes     17,257     4,520 281.8 %
   Income taxes     3,534     858 311.9 %
   Net income  $   13,723 $   3,662 274.7 %
               


     
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)    
Six Month Performance Summary (unaudited)      
2018 vs 2017      
         
     For the Six Months Ended  Percent
    6/30/2018 6/30/2017  Change
 Per Share Data      
   Earnings per common share      
    Basic $   1.11   $   0.32   246.9 %
    Diluted  $   1.10   $   0.32   243.8 %
         
   Cash dividends $   0.26   $   0.22   18.2 %
         
   Average common shares outstanding      
    Basic     12,362,679       11,517,721   7.3 %
    Diluted     12,425,751       11,559,990   7.5 %
         
   Common shares outstanding at period end     12,373,747       12,299,726   0.6 %
         
 Performance Ratios      
   Return on average equity   13.43 %   4.22 % 218.2 %
   Return on average tangible equity   15.49 %   4.78 % 224.1 %
   Return on average assets   1.29 %   0.38 % 239.5 %
   Net interest margin   3.58 %   3.69 % -3.0 %
   Efficiency ratio (A)   54.86 %   52.21 % 5.1 %

NOTE (A) – Computed on a tax equivalent basis excluding gains/losses on sales of assets, litigation settlement, write-downs of OREO properties to fair value and amortization of intangibles.

         
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)        
Five Quarter Performance Summary (unaudited)        
           
     For the Quarter Ended
 Dollars in thousands 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
 Statements of Income          
   Interest income          
    Loans, including fees $   20,962 $   20,366 $   20,031   $   19,490 $   19,717
    Securities      2,303     2,391     2,412       2,397     2,349
    Other     134     140     144       149     165
   Total interest income     23,399     22,897     22,587       22,036     22,231
   Interest expense          
    Deposits     4,309     3,549     3,224       2,963     2,634
    Borrowings     1,815     2,091     1,925       1,841     1,749
   Total interest expense     6,124     5,640     5,149       4,804     4,383
   Net interest income     17,275     17,257     17,438       17,232     17,848
   Provision for loan losses     750     500     375       375     250
   Net interest income after provision          
    for loan losses     16,525     16,757     17,063       16,857     17,598
   Noninterest income          
    Insurance commissions     1,013     1,113     1,005       1,043     988
    Trust and wealth management fees     672     667     578       589     595
    Service charges on deposit accounts     1,116     1,091     1,200       1,162     1,065
    Bank card revenue     801     749     742       738     683
    Realized securities gains (losses)     87     732     (71 )     26     90
    Other income     459     524     477       442     495
  Total noninterest income     4,148     4,876     3,931       4,000     3,916
   Noninterest expense          
    Salaries and employee benefits     6,922     6,821     6,520       6,610     6,758
    Net occupancy expense     840     832     772       847     826
    Equipment expense     1,071     1,083     1,095       1,093     1,031
    Professional fees     385     333     355       373     354
    Amortization of intangibles     413     436     435       448     429
    FDIC premiums     240     240     250       310     295
    Bank card expense     361     335     319       395     381
    Foreclosed properties expense, net of losses     350     325     516       233     224
    Merger-related expense     -     -     14       11     1,455
    Other expenses     2,153     1,909     2,070       2,127     2,183
  Total noninterest expense     12,735     12,314     12,346       12,447     13,936
   Income before income taxes     7,938     9,319     8,648       8,410     7,578
   Income tax expense     1,658     1,876     6,325       2,480     2,300
   Net income $   6,280 $   7,443 $   2,323   $   5,930 $   5,278
                         


           
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)          
Five Quarter Performance Summary (unaudited)          
           
     For the Quarter Ended
    6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
 Per Share Data          
   Earnings per common share          
    Basic $   0.51   $   0.60   $   0.19   $   0.48   $   0.43  
    Diluted  $   0.51   $   0.60   $   0.19   $   0.48   $   0.43  
             
   Cash dividends $   0.13   $   0.13   $   0.11   $   0.11   $   0.11  
             
   Average common shares outstanding          
    Basic     12,366,522       12,358,849       12,325,067       12,299,987       12,288,514  
    Diluted     12,431,984       12,383,757       12,371,507       12,318,959       12,299,187  
             
   Common shares outstanding at period end     12,373,747       12,366,360       12,358,562       12,311,723       12,299,726  
             
 Performance Ratios          
   Return on average equity   12.16 %   14.73 %   4.62 %   12.10 %   11.10 %
   Return on average tangible equity   13.98 %   17.04 %   5.36 %   14.12 %   12.95 %
   Return on average assets   1.19 %   1.40 %   0.44 %   1.14 %   1.01 %
   Net interest margin   3.58 %   3.58 %   3.65 %   3.65 %   3.81 %
   Efficiency ratio (A)   55.88 %   53.84 %   52.44 %   54.51 %   53.55 %
                                 

NOTE (A) – Computed on a tax equivalent basis excluding gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

         
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)        
Selected Balance Sheet Data (unaudited)          
             
 Dollars in thousands, except per share amounts 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
             
 Assets          
  Cash and due from banks $   8,314   $   9,042   $   9,641   $   9,220   $   9,294  
  Interest bearing deposits other banks     38,097       38,365       42,990       41,994       44,242  
  Securities     283,221       296,890       328,723       328,726       336,811  
  Loans, net     1,617,373       1,631,150       1,593,744       1,559,328       1,538,083  
  Property held for sale     21,606       21,442       21,470       22,622       23,592  
  Premises and equipment, net     36,017       35,554       34,209       34,220       33,234  
  Goodwill and other intangible assets     26,665       27,077       27,513       27,879       28,214  
  Cash surrender value of life insurance policies     41,932       41,668       41,358       41,076       41,189  
  Other assets     34,427       33,707       34,592       36,071       40,641  
    Total assets $   2,107,652   $   2,134,895   $   2,134,240   $   2,101,136   $   2,095,300  
                                 
 Liabilities and Shareholders' Equity          
  Deposits $   1,639,996   $   1,654,523   $   1,600,601   $   1,616,768   $   1,613,919  
  Short-term borrowings     202,429       193,513       250,499       202,988       205,728  
  Long-term borrowings and          
    subordinated debentures     40,332       65,336       65,340       65,344       65,348  
  Other liabilities     15,016       16,514       16,295       17,254       17,173  
  Shareholders' equity     209,879       205,009       201,505       198,782       193,132  
    Total liabilities and shareholders' equity $   2,107,652   $   2,134,895   $   2,134,240   $   2,101,136   $   2,095,300  
                                 
  Book value per common share $   16.96   $   16.55   $   16.30   $   16.15   $   15.70  
  Tangible book value per common share $   14.81   $   14.36   $   14.08   $   13.88   $   13.41  
  Tangible common equity to tangible assets   8.8 %   8.4 %   8.3 %   8.2 %   8.0 %
                                 


         
SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)        
Regulatory Capital Ratios (unaudited)          
             
    6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Summit Financial Group, Inc.          
  CET1 Risk-based Capital 11.0 % 10.7 % 10.6 % 10.8 % 10.5 %
  Tier 1 Risk-based Capital 12.1 % 11.8 % 11.8 % 11.9 % 11.7 %
  Total Risk-based Capital 12.8 % 12.5 % 12.5 % 12.7 % 12.4 %
  Tier 1 Leverage Ratio 9.9 % 9.5 % 9.4 % 9.5 % 9.2 %
             
Summit Community Bank, Inc.          
  CET1 Risk-based Capital 12.0 % 11.7 % 11.7 % 11.8 % 11.6 %
  Tier 1 Risk-based Capital 12.0 % 11.7 % 11.7 % 11.8 % 11.6 %
  Total Risk-based Capital 12.8 % 12.5 % 12.5 % 12.6 % 12.4 %
  Tier 1 Leverage Ratio 9.8 % 9.5 % 9.4 % 9.4 % 9.2 %
                       


       
SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)      
Loan Composition (unaudited)          
             
Dollars in thousands 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
             
Commercial   $   171,410 $   189,586 $   189,981 $   187,193 $   176,362
Mortgage warehouse lines     54,332     45,702     30,757     33,525     35,068
Commercial real estate          
  Owner occupied     262,174     265,075     250,202     239,840     239,108
  Non-owner occupied     503,047     498,445     484,902     464,543     455,439
Construction and development          
  Land and development     74,018     66,841     67,219     71,412     74,155
  Construction       25,711     33,327     33,412     28,756     22,967
Residential real estate          
  Non-jumbo       343,044     346,477     354,101     355,642     355,546
  Jumbo       66,831     67,169     62,267     61,253     63,899
  Home equity       82,409     83,382     84,028     82,720     81,192
Consumer       34,249     34,825     36,202     36,915     37,630
Other       12,728     12,578     13,238     9,994     9,049
Total loans, net of unearned fees     1,629,953     1,643,407     1,606,309     1,571,793     1,550,415
Less allowance for loan losses     12,580     12,257     12,565     12,465     12,332
Loans, net $   1,617,373 $   1,631,150 $   1,593,744 $   1,559,328 $   1,538,083
                     


       
SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)      
Deposit Composition (unaudited)        
             
Dollars in thousands   6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Core deposits            
  Non-interest bearing checking $   217,134 $   219,293 $   217,493 $   215,910 $   234,173
  Interest bearing checking     472,041     447,172     410,606     397,843     372,327
  Savings       322,940     346,962     358,168     362,653     373,439
  Time deposits       322,801     318,556     318,036     322,338     321,826
Total core deposits     1,334,916     1,331,983     1,304,303     1,298,744     1,301,765
             
  Brokered deposits       238,662     242,049     202,509     205,274     198,368
  Other non-core time deposits     66,418     80,491     93,789     112,750     113,786
Total deposits $   1,639,996 $   1,654,523 $   1,600,601 $   1,616,768 $   1,613,919
                     


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)        
Asset Quality Information (unaudited)          
             
     For the Quarter Ended
 Dollars in thousands 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
             
  Gross loan charge-offs $   525   $   960   $   550   $   309   $   114  
  Gross loan recoveries     (97 )     (153 )     (276 )     (67 )     (478 )
    Net loan charge-offs (recoveries) $   428   $   807   $   274   $   242   $   (364 )
                                 
  Net loan charge-offs to average loans (annualized)   0.10 %   0.20 %   0.07 %   0.06 %   -0.09 %
  Allowance for loan losses $   12,580   $   12,257   $   12,565   $   12,465   $   12,332  
  Allowance for loan losses as a percentage          
    of period end loans   0.77 %   0.75 %   0.78 %   0.79 %   0.79 %
  Nonperforming assets:          
    Nonperforming loans          
    Commercial $   954   $   734   $   696   $   757   $   786  
    Commercial real estate     3,238       3,400       3,164       2,773       2,051  
    Residential construction and development     3,233       3,642       3,569       3,931       3,613  
    Residential real estate     8,241       7,521       7,656       8,082       6,860  
    Consumer     110       160       238       529       391  
  Total nonperforming loans     15,776       15,457       15,323       16,072       13,701  
    Foreclosed properties                              
    Commercial real estate     1,818       1,875       1,789       1,988       2,126  
    Commercial construction and development     6,815       7,140       7,392       7,392       7,527  
    Residential construction and development     11,517       11,053       11,182       11,852       12,402  
    Residential real estate     1,456       1,374       1,107       1,390       1,537  
  Total foreclosed properties     21,606       21,442       21,470       22,622       23,592  
    Other repossessed assets     12       18       68       12       57  
  Total nonperforming assets $   37,394   $   36,917   $   36,861   $   38,706   $   37,350  
                                 
  Nonperforming loans to period end loans   0.97 %   0.94 %   0.95 %   1.02 %   0.88 %
  Nonperforming assets to period end assets   1.77 %   1.73 %   1.73 %   1.84 %   1.78 %
             
  Troubled debt restructurings          
    Performing $   27,559   $   27,408   $   28,347   $   28,304   $   26,472  
    Nonperforming     281       76       26       760       464  
  Total troubled debt restructurings $   27,840   $   27,484   $   28,373   $   29,064   $   26,936  
                                 


Loans Past Due 30-89 Days (unaudited)          
     For the Quarter Ended
 Dollars in thousands 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
             
  Commercial $   319 $   539 $   586 $   378 $   470
  Commercial real estate     546     601     1,082     944     976
  Construction and development     264     174     1,127     238     308
  Residential real estate     4,125     5,218     7,236     6,260     6,943
  Consumer     337     425     504     419     548
  Other     8     15     38     92     49
    Total $   5,599 $   6,972 $   10,573 $   8,331 $   9,294
                       


                   
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)                  
Average Balance Sheet, Interest Earnings & Expenses and Average Rates            
Q2 2018 vs Q1 2018 vs Q2 2017 (unaudited)                    
  Q2 2018   Q1 2018   Q2 2017
  Average Earnings / Yield /   Average Earnings / Yield /   Average Earnings / Yield /
Dollars in thousands Balances Expense Rate   Balances Expense Rate   Balances Expense Rate
                       
ASSETS                      
Interest earning assets                      
  Loans, net of unearned  interest                      
  Taxable $   1,618,726   $   20,820   5.16 %   $   1,611,813   $   20,223   5.09 %   $   1,537,317   $   19,550   5.10 %
  Tax-exempt     15,800       180   4.57 %       16,307       182   4.53 %       13,030       257   7.91 %
  Securities                      
  Taxable     160,632       1,240   3.10 %       191,713       1,372   2.90 %       214,601       1,330   2.49 %
  Tax-exempt     136,984       1,346   3.94 %       132,306       1,290   3.95 %       133,130       1,568   4.72 %
  Interest bearing deposits other banks                    
  and Federal funds sold     38,936       134   1.38 %       39,656       140   1.43 %       47,937       165   1.38 %
Total interest earning assets     1,971,078       23,720   4.83 %       1,991,795       23,207   4.73 %       1,946,015       22,870   4.71 %
                       
Noninterest earning assets                      
  Cash & due from banks     9,100             9,962             10,101      
  Premises & equipment     35,721             34,586             34,441      
  Other assets     108,073             107,125             115,728      
  Allowance for loan losses     (12,541 )           (12,737 )           (11,966 )    
  Total assets $   2,111,431         $   2,130,731         $   2,094,319      
                                                 
 LIABILITIES AND SHAREHOLDERS' EQUITY                  
                       
Liabilities                      
Interest bearing liabilities                      
  Interest bearing                      
  demand deposits $   457,016   $   901   0.79 %   $   423,095   $   632   0.61 %   $   378,350   $   252   0.27 %
  Savings deposits     332,809       798   0.96 %       346,358       717   0.84 %       389,847       616   0.63 %
  Time deposits     640,626       2,610   1.63 %       622,543       2,200   1.43 %       628,358       1,766   1.13 %
  Short-term borrowings     187,475       1,242   2.66 %       243,686       1,405   2.34 %       200,209       1,079   2.16 %
  Long-term borrowings and                      
  subordinated debentures     52,147       572   4.40 %       65,338       686   4.26 %       65,692       670   4.09 %
Total interest bearing liabilities     1,670,073       6,123   1.47 %       1,701,020       5,640   1.34 %       1,662,456       4,383   1.06 %
                       
Noninterest bearing liabilities                      
  Demand deposits     219,134             210,883             221,245      
  Other liabilities     15,608             16,771             20,490      
  Total liabilities     1,904,815             1,928,674             1,904,191      
                       
Shareholders' equity - common     206,616             202,057             190,128      
  Total liabilities and                      
  shareholders' equity $   2,111,431         $   2,130,731         $   2,094,319      
                           
NET INTEREST EARNINGS   $   17,597       $   17,567       $   18,487  
                       
NET INTEREST MARGIN       3.58 %         3.58 %         3.81 %
                                   


           
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)          
Average Balance Sheet, Interest Earnings & Expenses and Average Rates        
YTD 2018 vs YTD 2017 (unaudited)              
   
  YTD 2018   YTD 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 $   1,615,289   $   41,043   5.12 %   $   1,408,566   $   35,100   5.03 %
  Tax-exempt     16,052       362   4.55 %       13,161       443   6.79 %
  Securities              
  Taxable     176,091       2,612   2.99 %       200,544       2,459   2.47 %
  Tax-exempt     134,658       2,635   3.95 %       114,320       2,678   4.72 %
  Interest bearing deposits other banks              
  and Federal funds sold     39,294       274   1.41 %       44,338       317   1.44 %
Total interest earning assets     1,981,384       46,926   4.78 %       1,780,929       40,997   4.64 %
               
Noninterest earning assets              
  Cash & due from banks     9,528             7,298      
  Premises & equipment     35,156             29,500      
  Other assets     107,603             106,440      
  Allowance for loan losses     (12,639 )           (11,864 )    
  Total assets $   2,121,032         $   1,912,303      
               
 LIABILITIES AND SHAREHOLDERS' EQUITY            
               
Liabilities              
Interest bearing liabilities              
  Interest bearing              
  demand deposits $   440,149   $   1,533   0.70 %   $   320,918   $   399   0.25 %
  Savings deposits     339,546       1,515   0.90 %       365,026       1,242   0.69 %
  Time deposits     631,634       4,810   1.54 %       584,767       3,383   1.17 %
  Short-term borrowings     215,425       2,647   2.48 %       198,587       2,073   2.11 %
  Long-term borrowings and              
  subordinated debentures     58,706       1,259   4.32 %       65,918       1,331   4.07 %
      1,685,460       11,764   1.41 %       1,535,216       8,428   1.11 %
Noninterest bearing liabilities              
  Demand deposits     215,031             184,968      
  Other liabilities     16,188             18,454      
  Total liabilities     1,916,679             1,738,638      
               
Shareholders' equity - common     204,353             173,665      
  Total liabilities and              
  shareholders' equity $   2,121,032         $   1,912,303      
               
NET INTEREST EARNINGS   $   35,162       $   32,569  
               
NET INTEREST MARGIN       3.58 %         3.69 %
                       

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

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