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Section 1: 425 (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________

FORM 8-K
__________________________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 26, 2018

 394394247_sfglogousethisone.jpg

Summit Financial Group, Inc.
(Exact name of registrant as specified in its charter)

West Virginia
 
No. 0-16587
 
55-0672148
(State or other jurisdiction of
 
(Commission File Number)
 
(I.R.S. Employer
incorporation or organization)
 
 
 
Identification No.)
 
300 North Main Street
Moorefield, West Virginia 26836
(Address of Principal Executive Offices)

(304) 530-1000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or address, if changed since last report)

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

[ X]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
 
 
 
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
 
 
 
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
 
 
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




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

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

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Section 2 - Financial Information

Item 2.02. Results of Operations and Financial Condition

On July 26, 2018, Summit Financial Group, Inc. (“Summit”) issued a News Release announcing its earnings for the three months and six months ended June 30, 2018. This News Release is furnished as Exhibit 99 and is incorporated herein by reference.

Item 8.01 Other Events

Additional Information About the Merger and Where to Find It

The information in this Current Report on Form 8-K and the exhibit incorporated herein by reference 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. The information on Summit’s website is not, and shall not be deemed to be, a part of this Report or the exhibits incorporated herein or incorporated into other filings made with the SEC.

Participants in the Solicitation

Summit, Peoples and their respective directors, executive officers and certain other members of management and employees may be deemed “participants” in the solicitation of proxies from Peoples’ shareholders in connection with the Merger. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the Peoples shareholders in connection with the Merger will be set forth in the proxy statement/prospectus when it is filed with the SEC.

You can find information about the executive officers and directors of Summit in its Annual Report on Form 10-K for the year ended December 31, 2017 and in its definitive proxy statement filed with the SEC on April 11, 2018.  Information about the directors and executive officers of Peoples may be obtained by reading the proxy statement/prospectus regarding the Merger when it becomes available. You can obtain free copies of these documents from Summit or Peoples using the contact information above.









3




Section 9 - Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(d)    Exhibits
99


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

 
 
SUMMIT FINANCIAL GROUP, INC.
 
 
 
 
 
Date: July 27, 2018
 
By: /s/ Robert S. Tissue           
 
 
Robert S. Tissue
 
 
Sr. Vice President & Chief Financial Officer


    


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(Back To Top)

Section 2: EX-99 (EXHIBIT 99)

Exhibit


EXHIBIT 99
394394247_sfglogousethisone.jpg
FOR RELEASE 6:00 AM ET, July 26, 2018

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

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, WV - 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 of assets. 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 tax expense
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 tax expense
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