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 6/30/20186/30/2017 Change
 Statements of Income    
  Interest income   
   Loans, including fees$  20,962$  19,7176.3%
   Securities    2,303   2,349-2.0%
   Other   134   165-18.8%
  Total interest income   23,399   22,2315.3%
  Interest expense   
   Deposits   4,309   2,63463.6%
   Borrowings   1,815   1,7493.8%
  Total interest expense   6,124   4,38339.7%
  Net interest income   17,275   17,848-3.2%
  Provision for loan losses   750   250200.0%
  Net interest income after provision   
   for loan losses   16,525   17,598-6.1%
     
  Noninterest income   
   Insurance commissions   1,013   9882.5%
   Trust and wealth management fees   672   59512.9%
   Service charges on deposit accounts   1,116   1,0654.8%
   Bank card revenue   801   68317.3%
   Realized securities gains   87   90-3.3%
   Other income   459   495-7.3%
 Total noninterest income   4,148   3,9165.9%
  Noninterest expense   
   Salaries and employee benefits   6,922   6,7582.4%
   Net occupancy expense   840   8261.7%
   Equipment expense   1,071   1,0313.9%
   Professional fees   385   3548.8%
   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   22456.3%
   Merger-related expense   -   1,455n/a 
   Other expenses   2,153   2,183-1.4%
 Total noninterest expense   12,735   13,936-8.6%
  Income before income taxes   7,938   7,5784.8%
  Income taxes   1,658   2,300-27.9%
  Net income$  6,280$  5,27819.0%
        


   
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)  
Quarterly Performance Summary (unaudited)   
Q2 2018 vs Q2 2017  
     
   For the Quarter Ended  Percent
  6/30/20186/30/2017 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 6/30/20186/30/2017 Change
 Statements of Income    
  Interest income   
   Loans, including fees$  41,329$  35,38816.8%
   Securities    4,694   4,20011.8%
   Other   274   317-13.6%
  Total interest income   46,297   39,90516.0%
  Interest expense   
   Deposits   7,858   5,02456.4%
   Borrowings   3,906   3,40414.7%
  Total interest expense   11,764   8,42839.6%
  Net interest income   34,533   31,4779.7%
  Provision for loan losses   1,250   500150.0%
  Net interest income after provision   
   for loan losses   33,283   30,9777.4%
     
  Noninterest income   
   Insurance commissions   2,126   1,9578.6%
   Trust and wealth management fees   1,339   69592.7%
   Service charges on deposit accounts   2,207   1,74726.3%
   Bank card revenue   1,550   1,21627.5%
   Realized securities gains   819   32n/m 
   Other income   982   84915.7%
 Total noninterest income   9,023   6,49638.9%
  Noninterest expense   
   Salaries and employee benefits   13,744   11,94515.1%
   Net occupancy expense   1,672   1,39320.0%
   Equipment expense   2,153   1,76621.9%
   Professional fees   719   63912.5%
   Amortization of intangibles   848   52661.2%
   FDIC premiums   480   505-5.0%
   Bank card expense   696   718-3.1%
   Foreclosed properties expense, net of losses   675   59014.4%
   Litigation settlement   -   9,900n/a 
   Merger-related expense   -   1,564n/a 
   Other expenses   4,062   3,40719.2%
 Total noninterest expense   25,049   32,953-24.0%
  Income before income taxes   17,257   4,520281.8%
  Income taxes   3,534   858311.9%
  Net income $  13,723$  3,662274.7%
        


   
SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)  
Six Month Performance Summary (unaudited)   
2018 vs 2017   
     
   For the Six Months Ended  Percent
  6/30/20186/30/2017 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 6/30/20183/31/201812/31/20179/30/20176/30/2017
 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
  6/30/20183/31/201812/31/20179/30/20176/30/2017
 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 6/30/20183/31/201812/31/20179/30/20176/30/2017
       
 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)     
       
  6/30/20183/31/201812/31/20179/30/20176/30/2017
Summit Financial Group, Inc.     
 CET1 Risk-based Capital11.0%10.7%10.6%10.8%10.5%
 Tier 1 Risk-based Capital12.1%11.8%11.8%11.9%11.7%
 Total Risk-based Capital12.8%12.5%12.5%12.7%12.4%
 Tier 1 Leverage Ratio9.9%9.5%9.4%9.5%9.2%
       
Summit Community Bank, Inc.     
 CET1 Risk-based Capital12.0%11.7%11.7%11.8%11.6%
 Tier 1 Risk-based Capital12.0%11.7%11.7%11.8%11.6%
 Total Risk-based Capital12.8%12.5%12.5%12.6%12.4%
 Tier 1 Leverage Ratio9.8%9.5%9.4%9.4%9.2%
            


    
SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)   
Loan Composition (unaudited)     
       
Dollars in thousands6/30/20183/31/201812/31/20179/30/20176/30/2017
       
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 6/30/20183/31/201812/31/20179/30/20176/30/2017
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 6/30/20183/31/201812/31/20179/30/20176/30/2017
       
 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 6/30/20183/31/201812/31/20179/30/20176/30/2017
       
 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
 AverageEarnings /Yield / AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate BalancesExpenseRate
            
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
 AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate
        
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: