Summit Financial Group Reports Record Second Quarter and First Half 2019 Results

Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported record second quarter 2019 net income of $8.56 million, or $0.68 per diluted share. In comparison, earnings for first quarter 2019 were $7.09 million, or $0.56 per diluted share, and for second quarter 2018 were $6.28 million, or $0.51 per diluted share.

For the six months ended June 30, 2019, Summit recorded net income of $15.7 million, or $1.23 per diluted share, compared with $13.7 million, or $1.10 per diluted share, for the comparable 2018 six-month period, representing an increase of 14.1 percent or 11.8 percent per diluted share.

Both quarterly and six-month 2019 earnings were positively impacted by increased net interest income resulting primarily from loan growth as well as a higher net interest margin, significant realized securities gains, and the previously announced gain on sale of our insurance agency, Summit Insurance Services, LLC (“SIS”) in Q2. These results were partially offset by larger write-downs on foreclosed properties in Q2 with the goal of selling such properties more rapidly.

Summit completed its acquisition of Peoples Bankshares, Inc. (“PBI”) and its subsidiary, First Peoples Bank, headquartered in Mullens, West Virginia on January 1, 2019 and converted its business processes and accounts to that of Summit’s during Q2 2019; accordingly, PBI’s results of operations are included in Summit’s consolidated results of operations from the date of acquisition. Therefore, Summit’s second quarter and six months ended June 30, 2019 period results reflect increased levels of average balances, income and expenses compared to the same periods of 2018. At consummation, PBI had total assets of $133.1 million, loans of $42.4 million, and deposits of $112.9 million. In addition, our merger-related expenses totaled $382,000 in Q2 2019 versus $63,000 in the prior quarter.

Highlights for Q2 2019

Loan balances, excluding mortgage warehouse lines of credit, grew $28.6 million during the quarter, and $61.5 million year-to-date;
Net interest income increased 14.90 percent (annualized) primarily as result of loan growth and higher loan yields, while funding costs remained well controlled; these factors also contributed to the 6 basis points increase in net interest margin to 3.72 percent;
Efficiency ratio was 56.21 percent compared to 55.88 percent for Q2 2018;
Provision for loan losses was $300,000 for the quarter compared to $250,000 for the linked quarter;
Realized securities gains of $1.09 million in Q2 2019;
Write-downs of foreclosed properties were $1.20 million in Q2 2019 compared to $249,000 in Q1 2019, while the net gain on sales of foreclosed properties increased from $1,000 in Q1 2019 to $156,000 in Q2 2019; and
Recognized a $1.91 million pre-tax gain on the sale of SIS.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “I am very pleased to report that Summit achieved record earnings both for the quarter and the six-month periods just ended. I am particularly gratified by this past quarter’s solid core operating performance highlighted by our quarter-over-quarter strong lending activity, growth in net interest income and higher net interest margin. Further, this past quarter’s sale of SIS unlocked significant value for our shareholders, as the transaction resulted in a $0.54 increase in the Company’s tangible book value per share, while the entity’s earnings historically accounted for less than $0.01 per share of our quarterly earnings.”

Results from Operations

Total revenue for second quarter 2019, consisting of net interest income and noninterest income, increased 21.7 percent to $26.1 million, principally as a result of higher net interest income, increased realized securities gains and the gain on the sale of Summit Insurance Services, LLC, compared to $21.4 million for the second quarter 2018. For the year-to-date period ended June 30, 2019, total revenue was $48.9 million compared to $43.6 million for the same period of 2018, representing a 12.2 percent increase primarily as a result of higher net interest income and the gain on the sale of Summit Insurance Services, LLC.

For the second quarter of 2019, net interest income was $19.3 million, an increase of 11.5 percent from the $17.3 million reported in the prior-year second quarter and a 3.7 percent increase compared to the linked quarter. The net interest margin for second quarter 2019 was 3.72 percent compared to 3.66 percent for the linked quarter and 3.58 percent for the year-ago quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summit’s net interest margin would have been 3.62 percent for Q2 2019, 3.64 percent for Q1 2019 and 3.56 percent for Q2 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 2019 was $6.81 million compared to $4.15 million for the comparable period of 2018. Excluding realized securities gains and the gain on the sale of Summit Insurance Services, LLC, noninterest income was $3.82 million for second quarter 2019, compared to $4.06 million reported for second quarter 2018 and $4.23 million for the linked quarter.

We recorded a $300,000 provision for loan losses during second quarter 2019 and $750,000 in Q2 2018. Our provision continues to be directionally consistent with changes in the credit quality in our loan portfolio.

Q2 2019 total noninterest expense increased 20.4 percent to $15.3 million compared to $12.7 million for the prior-year second quarter and increased 10.6 percent compared to the linked quarter. Our increased noninterest expense is principally due to higher foreclosed properties expense due to increased write-downs on foreclosed properties with the goal of selling such properties more rapidly and to merger-related expenses.

Noninterest expense for the first half of 2019 increased 16.5 percent compared to the first half of 2018. Our increased noninterest expense is principally due to expenses associated with the acquired PBI operations (including merger-related expenses), increased write-downs of foreclosed properties and to deferred director compensation plan expense of $594,000 for the first six months of 2019 compared to $145,000 for the same period of 2018. Under our director deferred compensation plans, directors optionally elect to defer their director fees into a "phantom" investment plan whereby the Company recognizes expense or benefit relative to the phantom returns or losses of such investments. As result of the stock market’s exceptionally robust performance during Q1 2019, we recognized significantly greater quarterly deferred director compensation expense than we recognized previously when market values were lower.

Balance Sheet

At June 30, 2019, total assets were $2.30 billion, an increase of $98.6 million, or 4.5 percent since December 31, 2018. Total loans, net of unearned fees and allowance for loan losses, were $1.81 billion at June 30, 2019, up $123.8 million, or 7.4 percent, from the $1.68 billion reported at year-end 2018. Loans, excluding mortgage warehouse lines of credit, increased $28.6 million during the quarter, or 6.8 percent (on an annualized basis), and have increased $61.5 million, or 7.4 percent (on an annualized basis) since year-end 2018.

At June 30, 2019, deposits were $1.80 billion, an increase of $162.7 million, or 10.0 percent, since year end 2018. During first half 2019, checking deposits increased $78.0 million or 10.5 percent, time deposits grew by $67.5 million or 11.1 percent and savings deposits increased $17.2 million or 6.1 percent.

Shareholders’ equity was $235.7 million as of June 30, 2019 compared to $219.8 million at December 31, 2018. In conjunction with the acquisition of PBI on January 1, 2019, Summit issued 465,931 shares of common stock valued at $9.0 million to the former PBI shareholders.

Tangible book value per common share increased to $17.04 at June 30, 2019 compared to $15.75 at December 31, 2018. Summit had 12,449,986 outstanding common shares at Q2 2019 quarter end compared to 12,312,933 at year end 2018.

As announced in Q3 2018, the Board of Directors authorized the open market repurchase of up to 500,000 shares of the issued and outstanding shares of Summit's common stock. The timing and quantity of stock purchases under this repurchase plan are at the discretion of management. The plan will expire December 31, 2019, but may be discontinued, suspended, or restarted at any time at the Company's discretion. During Q2 2019, 235,717 shares of our common stock were repurchased under the Plan at an average price of $25.74 per share. Through June 30, 2019, the Company has repurchased 447,540 shares under the Plan since its inception at an average price of $23.99 per share.

Asset Quality

As of June 30, 2019, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $34.9 million, or 1.52 percent of assets. This compares to $34.4 million, or 1.53 percent of assets at the linked quarter-end, and $36.5 million, or 1.66 percent of assets at year end 2018. During Q2 2019, nonperforming loans increased $3.50 million as result of two commercial real estate loan relationships in Virginia totaling $3.85 million that became nonperforming, while foreclosed properties declined by $3.00 million as result of sales activity and the prior noted write-downs.

Second quarter 2019 net loan charge-offs were $280,000, or 0.06 percent of average loans annualized; while adding $300,000 to the allowance for loan losses through the provision for loan losses. The allowance for loan losses stood at 0.72 percent of total loans at June 30, 2019, compared to 0.77 percent at year-end 2018.

About the Company

Summit Financial Group, Inc. is a $2.30 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-two banking locations.

FORWARD-LOOKING STATEMENTS

This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as “expects”, “anticipates”, “believes”, “estimates” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could” are intended to identify such forward-looking statements.

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies. We undertake no obligation to revise these statements following the date of this press release.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q2 2019 vs Q2 2018

		For the Quarter Ended					Percent
Dollars in thousands		6/30/2019		6/30/2018			Change
Statements of Income
	Interest income
	Loans, including fees	$	24,352		$	20,962	16.2	%
	Securities		2,396			2,303	4.0	%
	Other		134			134	0.0	%
	Total interest income		26,882			23,399	14.9	%
	Interest expense
	Deposits		5,967			4,309	38.5	%
	Borrowings		1,652			1,815	-9.0	%
	Total interest expense		7,619			6,124	24.4	%
	Net interest income		19,263			17,275	11.5	%
	Provision for loan losses		300			750	-60.0	%
	Net interest income after provision
	for loan losses		18,963			16,525	14.8	%

	Noninterest income
	Insurance commissions		606			1,013	-40.2	%
	Trust and wealth management fees		612			672	-8.9	%
	Service charges on deposit accounts		1,224			1,116	9.7	%
	Bank card revenue		893			801	11.5	%
	Realized securities gains		1,086			87	n/m
	Gain on sale of Summit Insurance Services, LLC		1,906			-	n/a
	Bank owned life insurance income		248			249	-0.4	%
	Other income		235			210	11.9	%
	Total noninterest income		6,810			4,148	64.2	%
	Noninterest expense
	Salaries and employee benefits		7,576			6,922	9.4	%
	Net occupancy expense		880			840	4.8	%
	Equipment expense		1,219			1,071	13.8	%
	Professional fees		475			385	23.4	%
	Advertising and public relations		155			188	-17.6	%
	Amortization of intangibles		420			413	1.7	%
	FDIC premiums		88			240	-63.3	%
	Bank card expense		473			361	31.0	%
	Foreclosed properties expense, net of losses		1,545			350	341.4	%
	Merger-related expense		382			-	n/a
	Other expenses		2,116			1,965	7.7	%
	Total noninterest expense		15,329			12,735	20.4	%
	Income before income taxes		10,444			7,938	31.6	%
	Income taxes		1,880			1,658	13.4	%
	Net income	$	8,564		$	6,280	36.4	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q2 2019 vs Q2 2018

		For the Quarter Ended						Percent
		6/30/2019			6/30/2018			Change
Per Share Data
	Earnings per common share
	Basic	$	0.68		$	0.51		33.3	%
	Diluted	$	0.68		$	0.51		33.3	%

	Cash dividends	$	0.15		$	0.13		15.4	%

	Average common shares outstanding
	Basic		12,539,095			12,366,522		1.4	%
	Diluted		12,600,071			12,431,984		1.4	%

	Common shares outstanding at period end		12,449,986			12,373,747		0.6	%

Performance Ratios
	Return on average equity		14.62	%		12.16	%	20.2	%
	Return on average tangible equity		17.02	%		14.68	%	15.9	%
	Return on average assets		1.52	%		1.19	%	27.7	%
	Net interest margin (A)		3.72	%		3.58	%	3.9	%
	Efficiency ratio (B)		56.21	%		55.88	%	0.6	%

NOTE (A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

NOTE (B) – 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)
2019 vs 2018

		For the Six Months Ended					Percent
Dollars in thousands		6/30/2019		6/30/2018			Change
Statements of Income
	Interest income
	Loans, including fees	$	47,404		$	41,329	14.7	%
	Securities		4,981			4,694	6.1	%
	Other		365			274	33.2	%
	Total interest income		52,750			46,297	13.9	%
	Interest expense
	Deposits		11,531			7,858	46.7	%
	Borrowings		3,383			3,906	-13.4	%
	Total interest expense		14,914			11,764	26.8	%
	Net interest income		37,836			34,533	9.6	%
	Provision for loan losses		550			1,250	-56.0	%
	Net interest income after provision
	for loan losses		37,286			33,283	12.0	%

	Noninterest income
	Insurance commissions		1,780			2,126	-16.3	%
	Trust and wealth management fees		1,198			1,339	-10.5	%
	Service charges on deposit accounts		2,405			2,207	9.0	%
	Bank card revenue		1,707			1,550	10.1	%
	Realized securities gains		1,082			819	32.1	%
	Gain on sale of Summit Insurance Services, LLC		1,906			-	n/a
	Bank owned life insurance income		486			523	-7.1	%
	Other income		476			459	3.7	%
	Total noninterest income		11,040			9,023	22.4	%
	Noninterest expense
	Salaries and employee benefits		14,923			13,744	8.6	%
	Net occupancy expense		1,803			1,672	7.8	%
	Equipment expense		2,398			2,153	11.4	%
	Professional fees		878			719	22.1	%
	Advertising and public relations		308			291	5.8	%
	Amortization of intangibles		897			848	5.8	%
	FDIC premiums		88			480	-81.7	%
	Bank card expense		911			696	30.9	%
	Foreclosed properties expense, net of losses		1,930			675	185.9	%
	Merger-related expense		445			-	n/a
	Other expenses		4,608			3,771	22.2	%
	Total noninterest expense		29,189			25,049	16.5	%
	Income before income taxes		19,137			17,257	10.9	%
	Income taxes		3,481			3,534	-1.5	%
	Net income	$	15,656		$	13,723	14.1	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary (unaudited)
2019 vs 2018

		For the Six Months Ended						Percent
		6/30/2019			6/30/2018			Change
Per Share Data
	Earnings per common share
	Basic	$	1.24		$	1.11		11.7	%
	Diluted	$	1.23		$	1.10		11.8	%

	Cash dividends	$	0.29		$	0.26		11.5	%

	Average common shares outstanding
	Basic		12,627,806			12,362,679		2.1	%
	Diluted		12,688,865			12,425,751		2.1	%

	Common shares outstanding at period end		12,449,986			12,373,747		0.6	%

Performance Ratios
	Return on average equity		13.46	%		13.43	%	0.2	%
	Return on average tangible equity		15.93	%		16.21	%	-1.7	%
	Return on average assets		1.39	%		1.29	%	7.8	%
	Net interest margin (A)		3.69	%		3.58	%	3.1	%
	Efficiency ratio (B)		56.35	%		54.86	%	2.7	%

NOTE (A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

NOTE (B) – 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)
Five Quarter Performance Summary (unaudited)

		For the Quarter Ended
Dollars in thousands		6/30/2019		3/31/2019				12/31/2018				9/30/2018			6/30/2018
Statements of Income
	Interest income
	Loans, including fees	$	24,352		$	23,051			$	22,659			$	21,295		$	20,962
	Securities		2,396			2,586				2,527				2,367			2,303
	Other		134			231				127				138			134
	Total interest income		26,882			25,868				25,313				23,800			23,399
	Interest expense
	Deposits		5,967			5,564				5,103				4,714			4,309
	Borrowings		1,652			1,731				2,158				1,873			1,815
	Total interest expense		7,619			7,295				7,261				6,587			6,124
	Net interest income		19,263			18,573				18,052				17,213			17,275
	Provision for loan losses		300			250				500				500			750
	Net interest income after provision
	for loan losses		18,963			18,323				17,552				16,713			16,525
	Noninterest income
	Insurance commissions		606			1,174				1,132				1,062			1,013
	Trust and wealth management fees		612			586				627				687			672
	Service charges on deposit accounts		1,224			1,180				1,209				1,215			1,116
	Bank card revenue		893			814				809				793			801
	Realized securities gains (losses)		1,086			(3	)			(205	)			8			87
	Gain on sale of Summit Insurance Services, LLC		1,906			-				-				-			-
	Bank owned life insurance income		248			238				248				250			249
	Other income		235			241				367				196			210
	Total noninterest income		6,810			4,230				4,187				4,211			4,148
	Noninterest expense
	Salaries and employee benefits		7,576			7,347				6,928				6,806			6,922
	Net occupancy expense		880			924				836				856			840
	Equipment expense		1,219			1,179				1,139				1,118			1,071
	Professional fees		475			403				385				503			385
	Advertising and public relations		155			153				193				170			188
	Amortization of intangibles		420			476				410				413			413
	FDIC premiums		88			-				140				210			240
	Bank card expense		473			439				395				384			361
	Foreclosed properties expense, net of losses		1,545			384				507				169			350
	Merger-related expense		382			63				59				86			-
	Other expenses		2,116			2,492				1,474				1,643			1,965
	Total noninterest expense		15,329			13,860				12,466				12,358			12,735
	Income before income taxes		10,444			8,693				9,273				8,566			7,938
	Income tax expense		1,880			1,601				1,823				1,667			1,658
	Net income	$	8,564		$	7,092			$	7,450			$	6,899		$	6,280

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

		For the Quarter Ended
		6/30/2019			3/31/2019			12/31/2018			9/30/2018			6/30/2018
Per Share Data
	Earnings per common share
	Basic	$	0.68		$	0.56		$	0.60		$	0.56		$	0.51
	Diluted	$	0.68		$	0.56		$	0.60		$	0.55		$	0.51

	Cash dividends	$	0.15		$	0.14		$	0.14		$	0.13		$	0.13

	Average common shares outstanding
	Basic		12,539,095			12,717,501			12,358,104			12,374,350			12,366,522
	Diluted		12,600,071			12,778,644			12,407,678			12,439,051			12,431,984

	Common shares outstanding at period end		12,449,986			12,661,528			12,312,933			12,382,450			12,373,747

Performance Ratios
	Return on average equity		14.62	%		12.28	%		13.85	%		13.00	%		12.16	%
	Return on average tangible equity		17.02	%		14.80	%		16.41	%		15.53	%		14.68	%
	Return on average assets		1.52	%		1.27	%		1.38	%		1.31	%		1.19	%
	Net interest margin (A)		3.72	%		3.66	%		3.61	%		3.53	%		3.58	%
	Efficiency ratio (B)		56.21	%		56.50	%		51.02	%		54.25	%		55.88	%

NOTE (A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

NOTE (B) – 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		6/30/2019			3/31/2019			12/31/2018			9/30/2018			6/30/2018

Assets
	Cash and due from banks	$	13,481		$	14,265		$	23,061		$	9,382		$	8,314
	Interest bearing deposits other banks		42,994			43,689			36,479			44,452			38,097
	Securities		269,920			297,126			293,284			288,040			283,221
	Loans, net		1,805,850			1,725,064			1,682,005			1,632,747			1,617,373
	Property held for sale		21,390			24,393			21,432			22,017			21,606
	Premises and equipment, net		42,896			39,345			37,553			36,888			36,017
	Goodwill and other intangible assets		23,585			29,349			25,842			26,252			26,665
	Cash surrender value of life insurance policies		42,976			42,714			42,420			42,208			41,932
	Other assets		36,022			33,696			38,510			36,741			34,427
	Total assets	$	2,299,114		$	2,249,641		$	2,200,586		$	2,138,727		$	2,107,652

Liabilities and Shareholders' Equity
	Deposits	$	1,797,493		$	1,789,032		$	1,634,826		$	1,651,064		$	1,639,996
	Short-term borrowings		225,343			186,292			309,084			238,403			202,429
	Long-term borrowings and
	subordinated debentures		20,315			20,319			20,324			20,328			40,332
	Other liabilities		20,262			20,368			16,522			15,376			15,016
	Shareholders' equity		235,701			233,630			219,830			213,556			209,879
	Total liabilities and shareholders' equity	$	2,299,114		$	2,249,641		$	2,200,586		$	2,138,727		$	2,107,652

	Book value per common share	$	18.93		$	18.45		$	17.85		$	17.25		$	16.96
	Tangible book value per common share	$	17.04		$	16.13		$	15.75		$	15.13		$	14.81
	Tangible common equity to tangible assets		9.3	%		9.2	%		8.9	%		8.9	%		8.8	%

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

		6/30/2019		3/31/2019		12/31/2018		9/30/2018		6/30/2018
Summit Financial Group, Inc.
	CET1 Risk-based Capital	11.1	%	11.4	%	11.1	%	11.1	%	11.0	%
	Tier 1 Risk-based Capital	12.1	%	12.5	%	12.2	%	12.2	%	12.1	%
	Total Risk-based Capital	12.8	%	13.2	%	12.9	%	12.9	%	12.8	%
	Tier 1 Leverage	10.4	%	10.2	%	10.1	%	10.1	%	9.9	%

Summit Community Bank, Inc.
	CET1 Risk-based Capital	11.9	%	12.3	%	12.0	%	12.0	%	12.0	%
	Tier 1 Risk-based Capital	11.9	%	12.3	%	12.0	%	12.0	%	12.0	%
	Total Risk-based Capital	12.6	%	13.0	%	12.8	%	12.7	%	12.8	%
	Tier 1 Leverage	10.2	%	10.0	%	10.0	%	9.9	%	9.8	%

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

Dollars in thousands	6/30/2019		3/31/2019			12/31/2018			9/30/2018			6/30/2018

Commercial	$	204,138		$	189,248		$	194,315		$	167,972		$	171,410
Mortgage warehouse lines		101,607			49,355			39,140			35,910			54,332
Commercial real estate
Owner occupied		262,901			256,671			257,256			261,290			256,827
Non-owner occupied		574,677			585,809			573,932			541,753			508,394
Construction and development
Land and development		67,769			64,192			68,833			71,819			74,018
Construction		46,975			36,040			24,731			25,703			25,711
Residential real estate
Non-jumbo		360,752			359,107			336,977			340,783			343,044
Jumbo		70,171			69,313			73,599			72,327			66,831
Home equity		81,373			80,370			80,910			82,018			82,409
Consumer		36,715			36,046			32,460			33,664			34,249
Other		11,924			12,045			12,899			12,452			12,728
Total loans, net of unearned fees		1,819,002			1,738,196			1,695,052			1,645,691			1,629,953
Less allowance for loan losses		13,152			13,132			13,047			12,944			12,580
Loans, net	$	1,805,850		$	1,725,064		$	1,682,005		$	1,632,747		$	1,617,373

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

Dollars in thousands	6/30/2019		3/31/2019			12/31/2018			9/30/2018			6/30/2018
Core deposits
Non-interest bearing checking	$	234,397		$	258,679		$	222,120		$	232,697		$	217,134
Interest bearing checking		588,948			560,800			523,257			505,411			472,041
Savings		301,403			310,646			284,173			301,269			322,940
Time deposits		365,275			359,141			316,914			316,941			322,801
Total core deposits		1,490,023			1,489,266			1,346,464			1,356,318			1,334,916

Brokered time deposits		222,901			218,913			220,497			227,312			238,662
Other non-core time deposits		84,569			80,852			67,866			67,434			66,418
Total deposits	$	1,797,493		$	1,789,031		$	1,634,827		$	1,651,064		$	1,639,996

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)

		For the Quarter Ended
Dollars in thousands		6/30/2019			3/31/2019			12/31/2018			9/30/2018			6/30/2018

	Gross loan charge-offs	$	391		$	414		$	705		$	413		$	525
	Gross loan recoveries		(111	)		(249	)		(307	)		(278	)		(97	)
	Net loan charge-offs (recoveries)	$	280		$	165		$	398		$	135		$	428

	Net loan charge-offs to average loans (annualized)		0.06	%		0.04	%		0.10	%		0.03	%		0.10	%
	Allowance for loan losses	$	13,152		$	13,132		$	13,047		$	12,944		$	12,580
	Allowance for loan losses as a percentage
	of period end loans		0.72	%		0.76	%		0.77	%		0.79	%		0.77	%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	948		$	729		$	935		$	801		$	954
	Commercial real estate		6,544			2,981			3,239			5,090			3,238
	Residential construction and development		66			24			3,198			3,200			3,233
	Residential real estate		5,657			5,928			7,506			7,760			8,241
	Consumer		160			182			147			118			110
	Other		100			130			-			-			-
	Total nonperforming loans		13,475			9,974			15,025			16,969			15,776
	Foreclosed properties
	Commercial real estate		1,544			1,841			1,762			1,762			1,818
	Commercial construction and development		4,910			6,326			6,479			6,790			6,815
	Residential construction and development		13,132			14,347			11,543			11,614			11,517
	Residential real estate		1,804			1,879			1,648			1,851			1,456
	Total foreclosed properties		21,390			24,393			21,432			22,017			21,606
	Other repossessed assets		12			34			5			5			12
	Total nonperforming assets	$	34,877		$	34,401		$	36,462		$	38,991		$	37,394

	Nonperforming loans to period end loans		0.74	%		0.57	%		0.89	%		1.03	%		0.97	%
	Nonperforming assets to period end assets		1.52	%		1.53	%		1.66	%		1.82	%		1.77	%

Loans Past Due 30-89 Days (unaudited)
		For the Quarter Ended
Dollars in thousands		6/30/2019		3/31/2019			12/31/2018			9/30/2018			6/30/2018

	Commercial	$	375		$	264		$	219		$	607		$	319
	Commercial real estate		1,719			4,128			161			988			546
	Construction and development		235			179			194			393			264
	Residential real estate		5,670			2,944			6,249			5,513			4,125
	Consumer		234			432			593			345			337
	Other		9			52			38			11			8
	Total	$	8,242		$	7,999		$	7,454		$	7,857		$	5,599

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2019 vs Q1 2019 vs Q2 2018 (unaudited)
	Q2 2019								Q1 2019								Q2 2018
	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 (1)
Taxable	$	1,749,032		$	24,184		5.55	%	$	1,712,286		$	22,907		5.43	%	$	1,618,726		$	20,820		5.16	%
Tax-exempt (2)		14,695			213		5.81	%		14,907			184		5.01	%		15,800			180		4.57	%
Securities
Taxable		203,049			1,607		3.17	%		195,932			1,687		3.49	%		160,632			1,240		3.10	%
Tax-exempt (2)		100,307			999		3.99	%		114,831			1,139		4.02	%		136,984			1,346		3.94	%
Interest bearing deposits other banks
and Federal funds sold		38,214			134		1.41	%		51,187			230		1.82	%		38,936			134		1.38	%
Total interest earning assets		2,105,297			27,137		5.17	%		2,089,143			26,147		5.08	%		1,971,078			23,720		4.83	%

Noninterest earning assets
Cash & due from banks		14,124								12,825								9,100
Premises & equipment		41,318								38,834								35,721
Other assets		109,642								112,910								108,073
Allowance for loan losses		(13,260	)							(13,309	)							(12,541	)
Total assets	$	2,257,121							$	2,240,403							$	2,111,431

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	575,240		$	1,731		1.21	%	$	556,766		$	1,663		1.21	%	$	457,016		$	901		0.79	%
Savings deposits		305,342			921		1.21	%		310,848			898		1.17	%		332,809			798		0.96	%
Time deposits		673,272			3,315		1.97	%		654,404			3,003		1.86	%		640,626			2,610		1.63	%
Short-term borrowings		187,120			1,397		2.99	%		200,297			1,472		2.98	%		187,475			1,242		2.66	%
Long-term borrowings and
subordinated debentures		20,317			255		5.03	%		20,321			259		5.17	%		52,147			573		4.41	%
Total interest bearing liabilities		1,761,291			7,619		1.74	%		1,742,636			7,295		1.70	%		1,670,073			6,124		1.47	%

Noninterest bearing liabilities
Demand deposits		241,811								248,354								219,134
Other liabilities		19,750								18,322								15,608
Total liabilities		2,022,852								2,009,312								1,904,815

Shareholders' equity		234,269								231,091								206,616
Total liabilities and
shareholders' equity	$	2,257,121							$	2,240,403							$	2,111,431

NET INTEREST EARNINGS				$	19,518							$	18,852							$	17,596

NET INTEREST MARGIN							3.72	%							3.66	%							3.58	%

(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented.
The tax equivalent adjustment resulted in an increase in interest income of $255,000, $279,000, and $321,000 for Q2 2019,
Q1 2019 and Q2 2018, respectively.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2019 vs YTD 2018 (unaudited)

	YTD 2019								YTD 2018
	Average			Earnings /		Yield /			Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate			Balances			Expense		Rate

ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable	$	1,730,801		$	47,090		5.49	%	$	1,615,289		$	41,043		5.12	%
Tax-exempt (2)		14,801			397		5.41	%		16,052			362		4.55	%
Securities
Taxable		199,759			3,292		3.32	%		176,091			2,612		2.99	%
Tax-exempt (2)		107,586			2,138		4.01	%		134,658			2,635		3.95	%
Interest bearing deposits other banks
and Federal funds sold		44,910			365		1.64	%		39,294			274		1.41	%
Total interest earning assets		2,097,857			53,282		5.12	%		1,981,384			46,926		4.78	%

Noninterest earning assets
Cash & due from banks		13,005								9,528
Premises & equipment		39,877								35,156
Other assets		111,334								107,603
Allowance for loan losses		(13,287	)							(12,639	)
Total assets	$	2,248,786							$	2,121,032

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	566,183		$	3,395		1.21	%	$	440,149		$	1,533		0.70	%
Savings deposits		307,990			1,819		1.19	%		339,546			1,515		0.90	%
Time deposits		663,853			6,317		1.92	%		631,634			4,810		1.54	%
Short-term borrowings		193,672			2,869		2.99	%		215,425			2,647		2.48	%
Long-term borrowings and
subordinated debentures		20,319			514		5.10	%		58,706			1,259		4.32	%
		1,752,017			14,914		1.72	%		1,685,460			11,764		1.41	%
Noninterest bearing liabilities
Demand deposits		244,984								215,031
Other liabilities		19,096								16,188
Total liabilities		2,016,097								1,916,679

Shareholders' equity		232,689								204,353
Total liabilities and
shareholders' equity	$	2,248,786							$	2,121,032

NET INTEREST EARNINGS				$	38,368							$	35,162

NET INTEREST MARGIN							3.69	%							3.58	%

(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21%.
The tax equivalent adjustment resulted in an increase in interest income of $532,000 and $629,000 for the
YTD 2019 and YTD 2018, respectively.