Summit Financial Group Reports Second Quarter and First Half 2018 Results

Q2 2018 Diluted EPS up 18.6% to $0.51 compared to $0.43 for Q2 2017

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