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Summit Financial Group Reports 37% Increase In Q3 2020 EPS Versus Q2 2020

Q3 2020 Diluted EPS $0.74 compared to $0.54 for Q2 2020 and $0.65 for Q3 2019

MOOREFIELD, W.V., Oct. 22, 2020 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported third quarter 2020 net income of $9.62 million, or $0.74 per diluted share. In comparison, earnings for second quarter 2020 were $6.95 million, or $0.54 per diluted share, and for third quarter 2019 were $8.06 million, or $0.65 per diluted share.

For the nine months ended September 30, 2020, Summit recorded net income of $21.1 million, or $1.62 per diluted share, compared with $23.7 million, or $1.88 per diluted share, for the comparable 2019 nine-month period, representing a decrease of 11.1 percent or 13.8 percent per diluted share.

“I am very pleased to report Summit continues to rise to meet the unique challenges posed by 2020 and deliver well for our stakeholders,” commented H. Charles Maddy, III, President and Chief Executive Officer. “We posted another quarter of strong core operating performance, highlighted by record levels of net revenue resulting from continuing good growth in net interest income, a relatively stable net interest margin and well-controlled noninterest expenses. These results validate not only our core strategies but also our ability to remain disciplined in trying times. This is a tribute to our management and employees as they continue to put forth consistent, high levels of client service assisting our clients and communities.”

Highlights for Q3 2020

  • Net interest income increased 29.5 percent (annualized) compared to Q2 2020 and increased 27.5 percent versus the same period in 2019, primarily due to loan growth and lower funding costs.
  • Net interest margin in Q3 2020 decreased 4 basis points to 3.64 percent as compared to the linked quarter, as yield on interest earning assets and cost of deposits and other funding each declined 16 basis points.
  • Excluding mortgage warehouse lines of credit, loan balances increased $40.8 million during the quarter.
  • Provision for credit losses of $3.25 million in Q3 2020 compared to $3.00 million in Q2 2020 and $500,000 in Q3 2019; our increased credit provisions in 2020 are principally due to the estimated potential future economic impact of the COVID-19 crisis. Since year end 2019, Summit’s allowances for credit losses on loans and unfunded loan commitments have increased a combined 151 percent.
  • Efficiency ratio improved to 48.95 percent compared to 51.97 percent in the linked quarter and 52.91 percent for Q3 2019.
  • Net foreclosed properties expenses increased to $607,000 in Q3 2020 compared to $240,000 in Q2 2020 and $305,000 in Q3 2019; this is primarily the result of write downs of foreclosed properties to estimated fair values totaling $555,000 in Q3 2020 compared to $218,000 in Q2 2020 and $133,000 in Q3 2019, while realized net gains on sales of foreclosed properties were $44,000 and $61,000 during Q3 and Q2 2020, respectively and realized net losses of $66,000 during Q3 2019.
  • Realized $1.52 million securities gains in Q3 2020 compared to no realized securities gains or losses in the linked quarter and realized securities gains of $453,000 in Q3 2019.
  • Merger expenses were $28,000 in Q3 2020 compared to $637,000 in the linked quarter, and $74,000 in Q3 2019.
  • Nonperforming assets as a percentage of total assets improved to 0.94 percent compared to 1.07 percent for the linked quarter and 1.28 percent at year end 2019.
  • We announced our entering into a definitive merger agreement to acquire WinFirst Financial Corp. (“WinFirst”) and its wholly-owned subsidiary, WinFirst Bank, headquartered in Winchester, Kentucky.

Merger & Acquisition Activity

On September 28, 2020, Summit announced the signing of a definitive merger agreement between Summit Community Bank, Inc., a wholly-owned subsidiary of Summit, and WinFirst Corp., pursuant to which Summit Community Bank will acquire all of the outstanding shares of common stock of WinFirst in exchange for cash.   This transaction is expected to close by year end 2020. WinFirst, a savings and loan holding company reported approximately $146 million in assets as of September 30, 2020 and operates two community banking offices in Winchester, Kentucky through its subsidiary, WinFirst Bank. Following the consummation of the merger, Summit Community Bank expects to consolidate WinFirst Bank with Summit Community Bank.

Further, on April 24, 2020, Summit Community Bank completed its acquisition of four branch banking offices located in the Eastern Panhandle of West Virginia from MVB Bank, Inc., a bank subsidiary of MVB Financial Corp. Summit assumed approximately $195.0 million in deposits and acquired approximately $35.3 million in loans in conjunction with this purchase. Also, Summit completed its acquisition of Cornerstone Financial Services, Inc. (“Cornerstone”) and its subsidiary, Cornerstone Bank, headquartered in West Union, West Virginia on January 1, 2020. At consummation, Cornerstone had total assets of $195.0 million, loans of $39.8 million, and deposits of $173.0 million.

Accordingly, the results of operations of Cornerstone and acquired MVB Bank branches are included in Summit’s consolidated results of operations from the dates of acquisition, and therefore Summit’s third quarter and first nine months of 2020 results reflect increased levels of average balances, income and expenses compared to comparable prior year periods.

Results from Operations

Total revenue for third quarter 2020, consisting of net interest income and noninterest income, increased 33.6 percent to $31.0 million, which included $1.52 million realized securities gains, compared to $23.2 million for third quarter 2019. For the year-to-date period ended September 30, 2020, total revenue was $83.6 million compared to $72.1 million for the same period of 2019, representing a 16.0 percent increase primarily as a result of higher net interest income.

For the third quarter of 2020, net interest income was $24.8 million, an increase of 27.5 percent from the $19.4 million reported in the prior-year third quarter and a 7.4 percent increase compared to the linked quarter. The net interest margin for third quarter 2020 was 3.64 percent compared to 3.68 percent for the linked quarter and 3.63 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 3.59 percent for Q3 2020, 3.61 percent for Q2 2020 and 3.59 percent for Q3 2019.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for third quarter 2020 was $6.21 million compared to $3.60 million for the linked quarter and $3.76 million for the comparable period of 2019, which included $1.52 million realized securities gains. Excluding realized securities gains, noninterest income was $4.69 million for third quarter 2020 and $3.3 million for third quarter 2019. Mortgage origination revenue increased to $780,000 for Q3 2020 compared to $77,000 in Q3 2019 due to higher volumes of secondary market loans driven primarily by historically low interest rates. Also included in Q3 2020 noninterest income is one-time income approximating $475,000 earned in conjunction with the recent investment in $9.3 million of annuities.

We recorded a $3.25 million provision for credit losses during third quarter 2020 compared to $3.0 million for the linked quarter and $500,000 in Q3 2019. As result of the adoption of CECL, the provision for credit losses now represents an estimate of the full amount of expected credit losses relative to loans, whereas under the pre-CECL incurred loss accounting method, the provision was only an estimate of probable existing loan losses.

Q3 2020 total noninterest expense increased 21.1 percent to $15.5 million compared to $12.8 million for the prior-year third quarter. This year-over-year increase resulted primarily due to the acquisition of Cornerstone and MVB Bank branches during 2020. Additionally, other significant factors contributing to the changes in total noninterest expense period over period are as follows: higher FDIC premiums, as we fully utilized in prior periods our FDIC’s Small Bank Assessment Credits, increased write downs of foreclosed properties to estimated fair values totaling $555,000 in Q3 2020 compared to $218,000 in Q2 2020 and $133,000 in Q3 2019 and deferred director compensation expense totaling $325,000 in Q3 2020, compared to $6,000 in Q2 2020 and $432,000 in Q3 2019. Also, merger expenses have declined to $28,000 in Q3 2020 compared to $637,000 in Q2 2020 and $74,000 in Q3 2019.

Balance Sheet

At September 30, 2020, total assets were $2.95 billion, an increase of $543.4 million, or 22.6 percent since December 31, 2019. Total loans, net of unearned fees and allowance for loan losses, were $2.22 billion at September 30, 2020, up $322.0 million, or 16.9 percent, from the $1.90 billion reported at year-end 2019. Loans, excluding mortgage warehouse lines of credit, increased $40.8 million during the quarter, or 8.3 percent (annualized). Loans, excluding mortgage warehouse lines of credit, PPP loans and acquired Cornerstone and MVB loans, have increased $44.4 million, or 3.3 percent (on an annualized basis) since year-end 2019.

At September 30, 2020, core deposits were $2.30 billion, an increase of $618.5 million, or 36.8 percent, since year end 2019. During the first nine months of 2020, checking deposits increased $396.6 million or 44.5 percent, core time deposits grew by $41.4 million or 11.1 percent and savings deposits increased $180.5 million or 43.2 percent. Excluding acquired deposits (of both Cornerstone and MVB branches), core deposits have increased $250.5 million, or 14.9 percent, since year end 2019.  

Shareholders’ equity was $272.0 million as of September 30, 2020 compared to $247.8 million at December 31, 2019. In conjunction with the acquisition of Cornerstone on January 1, 2020, Summit issued 570,000 shares of common stock valued at $15.4 million to the former Cornerstone shareholders.

Tangible book value per common share increased to $17.31 at September 30, 2020 compared to $16.63 at June 30, 2020, although it decreased from $18.11 at December 31, 2019 as result of the somewhat dilutive impacts of the Cornerstone and MVB Branches acquisitions. Summit had 12,932,415 outstanding common shares at Q3 2020 quarter end compared to 12,408,542 at year end 2019.

As announced in Q1 2020, the Board of Directors authorized the open market repurchase of up to 750,000 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. During Q3 2020, no shares of our common stock were repurchased under the Plan.

Asset Quality

We incurred net loan charge-offs of $1,014,000 in third quarter 2020 (0.18 percent of average loans annualized), which included an $880,000 charge-off of a commercial real estate relationship which had previously been fully reserved and exhibited weakness prior to the COVID-19 pandemic, compared to second quarter 2020 net loan recoveries of $51,000 while $3.20 million and $2.51 million were added to the allowance for loan credit losses through the provision for credit losses during Q3 2020 and Q2 2020, respectively. The allowance for loan credit losses stood at 1.30 percent of total loans as of September 30, 2020, compared to 0.68 percent at year-end 2019.

Similarly, during Q3 2020 and Q2 2020, we also added $48,000 and $493,000, respectively, to the allowance for credit losses on unfunded loan commitments through the provision for credit losses.

As of September 30, 2020, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $27.8 million, or 0.94 percent of assets. This compares to $30.5 million, or 1.07 percent of assets at the linked quarter-end and $33.7 million, or 1.45 percent of assets at the end of Q3 2019.

Our actions to identify and assess our COVID-19 related credit exposures by asset classes and borrower types continue, as does our loan modification program to assist both consumer and business borrowers that are experiencing financial hardships due to COVID-19 related challenges. Accordingly, the following tables summarize the aggregate balances of loans the Company has modified as result of COVID-19 as of September 30, 2020 and June 30, 2020 classified by types of loans and impacted borrowers.

    Loan Balances Modified Due to COVID-19 as of 9/30/2020
Dollars in thousands Total Loan Balance as of 9/30/2020  Loans Modified to Interest Only Payments Loans Modified to Payment Deferral Total Loans Modified Percentage of Loans Modified
Hospitality Industry $ 120,324 $ 36,803 $ 11,466 $ 48,269 40.1 %
Non-Owner Occupied Retail Stores   108,326   19,497   -   19,497 18.0 %
Owner-Occupied Retail Stores   100,926   1,601   1,409   3,010 3.0 %
Restaurants   7,968   -   -   - 0.0 %
Oil & Gas Industry   24,404   914   -   914 3.7 %
Other Commercial Loans   1,084,385   40,846   -   40,846 3.8 %
Total Commercial Loans   1,446,333   99,661   12,875   112,536 7.8 %
Residential 1-4 Family Personal   263,315   195   991   1,186 0.5 %
Residential 1-4 Family Rentals   178,529   3,567   336   3,903 2.2 %
Home Equity Loans   82,991   -   -   - 0.0 %
Total Residential Real Estate Loans   524,835   3,762   1,327   5,089 1.0 %
Consumer Loans   34,655   34   22   56 0.2 %
Mortgage Warehouse Loans   243,730   -   -   - 0.0 %
Credit Cards and Overdrafts   2,251   -   -   - 0.0 %
Total Loans $ 2,251,804 $ 103,457 $ 14,224 $ 117,681 5.2 %
           


    Loan Balances Modified Due to COVID-19 as of 6/30/2020
Dollars in thousands Total Loan Balance as of 6/30/2020  Loans Modified to Interest Only Payments Loans Modified to Payment Deferral Total Loans Modified Percentage of Loans Modified
Hospitality Industry $ 119,204 $ 55,849 $ 43,030 $ 98,879 82.9 %
Non-Owner Occupied Retail Stores   109,078   38,354   13,802   52,156 47.8 %
Owner-Occupied Retail Stores   119,794   21,956   9,372   31,328 26.2 %
Restaurants   8,126   2,392   1,877   4,269 52.5 %
Oil & Gas Industry   31,977   914   4,378   5,292 16.5 %
Other Commercial Loans   1,005,740   88,285   34,634   122,919 12.2 %
Total Commercial Loans   1,393,919   207,750   107,093   314,843 22.6 %
Residential 1-4 Family Personal   267,170   3,933   13,404   17,337 6.5 %
Residential 1-4 Family Rentals   180,415   20,348   6,032   26,380 14.6 %
Home Equity Loans   88,929   -   569   569 0.6 %
Total Residential Real Estate Loans   536,514   24,281   20,005   44,286 8.3 %
Consumer Loans   34,640   595   605   1,200 3.5 %
Mortgage Warehouse Loans   252,472   -   -   - 0.0 %
Credit Cards and Overdrafts   2,162   -   -   - 0.0 %
Total Loans $ 2,219,707 $ 232,626 $ 127,703 $ 360,329 16.2 %
           

About the Company

Summit Financial Group, Inc. is a $2.95 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle, Southern and North Central regions of West Virginia and the Northern, Shenandoah Valley and Southwestern regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates 41 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: the effect of the COVID-19 crisis, including the negative impacts and disruptions on the communities we serve, and the domestic and global economy, which may have an adverse effect on our business; current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; fiscal and monetary policies of the Federal Reserve; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; the successful integration of operations of our acquisitions; 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)      
Q3 2020 vs Q3 2019      
     
  For the Quarter Ended Percent
Dollars in thousands 9/30/2020
  9/30/2019 Change
Statements of Income              
Interest income              
Loans, including fees $ 26,807   $ 24,940 7.5 %
Securities   2,382     2,184 9.1 %
Other   57     125 -54.4 %
Total interest income   29,246     27,249 7.3 %
Interest expense              
Deposits   3,552     6,214 -42.8 %
Borrowings   928     1,615 -42.5 %
Total interest expense   4,480     7,829 -42.8 %
Net interest income   24,766     19,420 27.5 %
Provision for credit losses   3,250     500 n/m  
Net interest income after provision for credit losses   21,516     18,920 13.7 %
               
Noninterest income              
Insurance commissions   44     40 10.0 %
Trust and wealth management fees   622     632 -1.6 %
Mortgage origination revenue   780     77 n/m  
Service charges on deposit accounts   1,138     1,312 -13.3 %
Bank card revenue   1,237     924 33.9 %
Realized securities gains   1,522     453 236.0 %
Bank owned life insurance and annuity income   795     247 221.9 %
Other income   69     74 -6.8 %
Total noninterest income   6,207     3,759 65.1 %
Noninterest expense              
Salaries and employee benefits   8,108     7,044 15.1 %
Net occupancy expense   1,057     799 32.3 %
Equipment expense   1,474     1,296 13.7 %
Professional fees   364     388 -6.2 %
Advertising and public relations   145     177 -18.1 %
Amortization of intangibles   412     404 2.0 %
FDIC premiums   320     - n/a  
Bank card expense   589     455 29.5 %
Foreclosed properties expense, net   607     305 99.0 %
Merger-related expense   28     74 -62.2 %
Other expenses   2,405     1,864 29.0 %
Total noninterest expense   15,509     12,806 21.1 %
Income before income taxes   12,214     9,873 23.7 %
Income taxes   2,594     1,812 43.2 %
Net income $ 9,620   $ 8,061 19.3 %
               


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Quarterly Performance Summary (unaudited)    
Q3 2020 vs Q3 2019    
       
  For the Quarter Ended Percent
  9/30/2020 9/30/2019 Change
Per Share Data      
Earnings per common share      
Basic $ 0.74   $ 0.65   13.8 %
Diluted $ 0.74   $ 0.65   13.8 %
       
Cash dividends $ 0.17   $ 0.15   13.3 %
Dividend payout ratio   22.9 %   23.0 % -0.4 %
       
Average common shares outstanding      
Basic   12,922,158     12,412,982   4.1 %
Diluted   12,949,584     12,467,777   3.9 %
       
Common shares outstanding at period end   12,932,415     12,400,804   4.3 %
       
Performance Ratios      
Return on average equity   14.38 %   13.51 % 6.4 %
Return on average tangible equity   18.12 %   15.55 % 16.5 %
Return on average assets   1.31 %   1.41 % -7.1 %
Net interest margin (A)   3.64 %   3.63 % 0.3 %
Efficiency ratio (B)   48.95 %   52.91 % -7.5 %
       

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Nine Month Performance Summary (unaudited)      
2020 vs 2019      
       
  For the Nine Months Ended Percent
Dollars in thousands 9/30/2020
  9/30/2019 Change
Statements of Income      
Interest income      
Loans, including fees $ 77,666   $ 72,344 7.4 %
Securities   6,944     7,166 -3.1 %
Other   216     490 -55.9 %
Total interest income   84,826     80,000 6.0 %
Interest expense              
Deposits   13,088     17,745 -26.2 %
Borrowings   2,463     4,998 -50.7 %
Total interest expense   15,551     22,743 -31.6 %
Net interest income   69,275     57,257 21.0 %
Provision for credit losses   11,500     1,050 n/m  
Net interest income after provision for credit losses   57,775     56,207 2.8 %
               
Noninterest income              
Insurance commissions   75     1,821 -95.9 %
Trust and wealth management fees   1,870     1,830 2.2 %
Mortgage origination revenue   1,636     392 n/m
Service charges on deposit accounts   3,283     3,716 -11.7 %
Bank card revenue   3,257     2,631 23.8 %
Realized securities gains   2,560     1,535 66.8 %
Gain on sale of Summit Insurance Services, LLC   -     1,906 n/a  
Bank owned life insurance and annuity income   1,334     733 82.0 %
Other income   292     235 24.3 %
Total noninterest income   14,307     14,799 -3.3 %
Noninterest expense              
Salaries and employee benefits   23,709     21,966 7.9 %
Net occupancy expense   2,917     2,602 12.1 %
Equipment expense   4,263     3,694 15.4 %
Professional fees   1,168     1,266 -7.7 %
Advertising and public relations   389     484 -19.6 %
Amortization of intangibles   1,251     1,300 -3.8 %
FDIC premiums   595     88 576.1 %
Bank card expense   1,652     1,367 20.8 %
Foreclosed properties expense, net   1,815     2,236 -18.8 %
Merger-related expense   1,453     519 180.0 %
Other expenses   6,493     6,473 0.3 %
Total noninterest expense   45,705     41,995 8.8 %
Income before income taxes   26,377     29,011 -9.1 %
Income taxes   5,302     5,293 0.2 %
Net income $ 21,075   $ 23,718 -11.1 %
             


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Nine Month Performance Summary (unaudited)      
2020 vs 2019    
       
  For the Nine Months Ended Percent
  9/30/2020 9/30/2019 Change
Per Share Data      
Earnings per common share      
Basic $ 1.63   $ 1.89   -13.8 %
Diluted $ 1.62   $ 1.88   -13.8 %
       
Cash dividends $ 0.51   $ 0.44   15.9 %
Dividend payout ratio   31.4 %   23.2 % 35.3 %
       
Average common shares outstanding      
Basic   12,934,401     12,555,411   3.0 %
Diluted   12,971,792     12,614,382   2.8 %
       
Common shares outstanding at period end   12,932,415     12,400,804   4.3 %
       
Performance Ratios      
Return on average equity   10.72 %   13.48 % -20.5 %
Return on average tangible equity   13.36 %   15.80 % -15.4 %
Return on average assets   1.04 %   1.40 % -25.7 %
Net interest margin (A)   3.69 %   3.67 % 0.5 %
Efficiency ratio (B)   50.70 %   55.34 % -8.4 %
       

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

NOTE (B) – Computed on a tax equivalent basis excluding merger-related expenses, 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 9/30/2020
  6/30/2020
  3/31/2020
  12/31/2019
  9/30/2019
Statements of Income                            
Interest income                            
Loans, including fees $ 26,807   $ 25,624   $ 25,235   $ 24,772   $ 24,940
Securities   2,382     2,253     2,310     2,195     2,184
Other   57     60     98     105     125
Total interest income   29,246     27,937     27,643     27,072     27,249
Interest expense                            
Deposits   3,552     4,186     5,351     5,952     6,214
Borrowings   928     685     849     1,292     1,615
Total interest expense   4,480     4,871     6,200     7,244     7,829
Net interest income   24,766     23,066     21,443     19,828     19,420
Provision for credit losses   3,250     3,000     5,250     500     500
                             
Net interest income after provision for credit losses   21,516     20,066     16,193     19,328     18,920
Noninterest income                            
Insurance commissions   44     24     7     90     40
Mortgage origination revenue   780     641     214     379     77
Trust and wealth management fees   622     582     665     734     632
Service charges on deposit accounts   1,138     882     1,263     1,377     1,312
Bank card revenue   1,237     1,087     933     906     924
Realized securities gains (losses)   1,522     -     1,038     403     453
Bank owned life insurance and annuity income   795     275     264     310     247
Other income   69     107     118     205     74
Total noninterest income   6,207     3,598     4,502     4,404     3,759
Noninterest expense                            
Salaries and employee benefits   8,108     7,930     7,672     7,099     7,044
Net occupancy expense   1,057     977     883     815     799
Equipment expense   1,474     1,360     1,429     1,278     1,296
Professional fees   364     417     387     412     388
Advertising and public relations   145     93     152     214     177
Amortization of intangibles   412     410     429     401     404
FDIC premiums   320     110     165     -     -
Bank card expense   589     560     503     454     455
Foreclosed properties expense, net   607     240     966     262     305
Merger-related expenses   28     637     788     98     74
Other expenses   2,405     2,463     1,625     2,126     1,864
Total noninterest expense   15,509     15,197     14,999     13,159     12,806
Income before income taxes   12,214     8,467     5,696     10,573     9,873
Income tax expense   2,594     1,518     1,190     2,424     1,812
Net income $ 9,620   $ 6,949   $ 4,506   $ 8,149   $ 8,061
                             


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)        
Five Quarter Performance Summary (unaudited)          
         
  For the Quarter Ended
  9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019
Per Share Data          
Earnings per common share          
Basic $ 0.74   $ 0.54   $ 0.35   $ 0.66   $ 0.65  
Diluted $ 0.74   $ 0.54   $ 0.35   $ 0.65   $ 0.65  
           
Cash dividends $ 0.17   $ 0.17   $ 0.17   $ 0.15   $ 0.15  
Dividend payout ratio   22.9 %   31.7 %   49.1 %   22.3 %   23.0 %
           
Average common shares outstanding          
Basic   12,922,158     12,911,979     12,975,429     12,400,932     12,412,982  
Diluted   12,949,584     12,943,804     13,028,409     12,458,702     12,467,777  
           
Common shares outstanding at period end   12,932,415     12,922,045     12,920,244     12,408,542     12,400,804  
           
Performance Ratios          
Return on average equity   14.38 %   10.75 %   6.92 %   13.32 %   13.51 %
Return on average tangible equity   18.12 %   13.57 %   8.55 %   15.25 %   15.55 %
Return on average assets   1.31 %   1.02 %   0.73 %   1.39 %   1.41 %
Net interest margin (A)   3.64 %   3.68 %   3.76 %   3.63 %   3.63 %
Efficiency ratio (B)   48.95 %   51.97 %   51.41 %   52.25 %   52.91 %
           

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

NOTE (B) – Computed on a tax equivalent basis excluding merger-related expenses, 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 9/30/2020
  6/30/2020
  3/31/2020
  12/31/2019
  9/30/2019
                                       
Assets                                      
Cash and due from banks $ 16,257     $ 16,572     $ 18,633     $ 28,137     $ 12,374  
Interest bearing deposits other banks   92,729       26,218       22,821       33,751       40,296  
Securities, available for sale   297,989       322,539       305,045       276,355       265,347  
Securities, held to maturity   91,600       80,497       -       -       -  
Loans, net   2,222,450       2,192,541       1,982,661       1,900,425       1,838,891  
Property held for sale   17,831       17,954       18,287       19,276       20,979  
Premises and equipment, net   52,880       51,847       47,078       44,168       43,592  
Goodwill and other intangible assets   48,101       48,513       34,132       23,022       23,182  
Cash surrender value of life insurance policies and annuities   57,029       55,315       46,497       43,603       43,216  
Other assets   49,996       49,355       38,168       34,755       35,732  
Total assets $ 2,946,862     $ 2,861,351     $ 2,513,322     $ 2,403,492     $ 2,323,609  
                                       
Liabilities and Shareholders' Equity                                      
Deposits $ 2,451,891     $ 2,451,769     $ 2,044,914     $ 1,913,237     $ 1,832,285  
Short-term borrowings   140,145       90,945       161,745       199,345       206,694  
Long-term borrowings and subordinated debentures   50,292       20,297       20,301       20,306       20,311  
Other liabilities   32,571       34,909       30,337       22,840       21,897  
Shareholders' equity   271,963       263,431       256,025       247,764       242,422  
Total liabilities and shareholders' equity $ 2,946,862     $ 2,861,351     $ 2,513,322     $ 2,403,492     $ 2,323,609  
                                       
Book value per common share $ 21.03     $ 20.39     $ 19.82     $ 19.97     $ 19.55  
Tangible book value per common share $ 17.31     $ 16.63     $ 17.17     $ 18.11     $ 17.68  
Tangible common equity to tangible assets   7.7 %     7.6 %     9.0 %     9.4 %     9.5 %
                                       


SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)      
Regulatory Capital Ratios (unaudited)          
           
  9/30/2020   6/30/2020   3/31/2020   12/31/2019   9/30/2019  
Summit Financial Group, Inc.          
CET1 Risk-based Capital 9.9 % 9.7 % 10.8 % 11.1 % 11.2 %
Tier 1 Risk-based Capital 10.7 % 10.5 % 11.7 % 12.1 % 12.2 %
Total Risk-based Capital 12.9 % 11.3 % 12.5 % 12.7 % 12.8 %
Tier 1 Leverage 8.7 % 9.0 % 10.2 % 10.5 % 10.4 %
           
Summit Community Bank, Inc.          
CET1 Risk-based Capital 11.8 % 10.5 % 11.7 % 12.1 % 12.2 %
Tier 1 Risk-based Capital 11.8 % 10.5 % 11.7 % 12.1 % 12.2 %
Total Risk-based Capital 12.7 % 11.4 % 12.5 % 12.7 % 12.9 %
Tier 1 Leverage 9.6 % 9.0 % 10.2 % 10.6 % 10.4 %
           


SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)      
Loan Composition (unaudited)          
           
Dollars in thousands 9/30/2020
  6/30/2020
  3/31/2020
  12/31/2019
  9/30/2019
           
Commercial $ 338,685   $ 311,755   $ 224,659   $ 207,138   $ 199,391
Mortgage warehouse lines   243,730     252,472     166,826     126,237     145,039
Commercial real estate                            
Owner occupied   312,502     336,143     331,486     276,218     255,828
Non-owner occupied   618,624     593,168     580,619     629,206     567,670
Construction and development                            
Land and development   97,343     92,706     92,332     84,112     69,589
Construction   66,878     48,115     43,121     37,523     56,255
Residential real estate                            
Conventional   368,008     371,225     378,540     354,963     359,399
Jumbo   73,836     76,360     64,944     70,947     69,815
Home equity   82,991     88,929     75,170     76,568     78,493
Consumer   35,905     35,781     36,611     36,470     36,982
Other   13,302     13,053     12,961     14,117     13,371
Total loans, net of unearned fees   2,251,804     2,219,707     2,007,269     1,913,499     1,851,832
Less allowance for credit losses   29,354     27,166     24,608     13,074     12,941
Loans, net $ 2,222,450   $ 2,192,541   $ 1,982,661   $ 1,900,425   $ 1,838,891
                             


SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)      
Deposit Composition (unaudited)        
           
Dollars in thousands 9/30/2020
  6/30/2020
  3/31/2020
  12/31/2019
  9/30/2019
Core deposits                            
Non-interest bearing checking $ 420,070   $ 443,190   $ 337,446   $ 260,553   $ 241,999
Interest bearing checking   867,442     830,258     648,214     630,352     602,059
Savings   598,564     561,029     457,010     418,096     305,891
Time deposits   414,542     422,286     384,062     373,125     371,178
Total core deposits   2,300,618     2,256,763     1,826,732     1,682,126     1,521,127
                             
Brokered time deposits   64,120     90,279     111,156     150,554     227,369
Other non-core time deposits   87,153     104,727     107,026     80,557     83,789
Total deposits $ 2,451,891   $ 2,451,769   $ 2,044,914   $ 1,913,237   $ 1,832,285
                             


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)        
Asset Quality Information (unaudited)          
  For the Quarter Ended
Dollars in thousands 9/30/2020
  6/30/2020
  3/31/2020
  12/31/2019
  9/30/2019
                                       
Gross loan charge-offs $ 1,259     $ 218     $ 698     $ 455     $ 843  
Gross loan recoveries   (245 )     (269 )     (197 )     (88 )     (132 )
Net loan charge-offs/(recoveries) $ 1,014     $ (51 )   $ 501     $ 367     $ 711  
                                       
Net loan charge-offs to average loans (annualized)   0.18 %     -0.01 %     0.10 %     0.08 %     0.16 %
Allowance for loan credit losses $ 29,354     $ 27,166     $ 24,608     $ 13,074     $ 12,941  
Allowance for loan credit losses as a percentage of period end loans   1.30 %     1.22 %     1.23 %     0.68 %     0.70 %
Allowance for credit losses on unfunded loan commitments $ 3,525     $ 3,477     $ 2,984     $ -     $ -  
Nonperforming assets:                                      
Nonperforming loans                                      
Commercial $ 553     $ 754     $ 560     $ 764     $ 835  
Commercial real estate   4,313       5,822       5,644       5,800       7,037  
Residential construction and development   2       14       11       326       191  
Residential real estate   5,104       5,873       4,343       4,404       4,461  
Consumer   31       29       65       116       115  
Other   -       35       100       100       100  
Total nonperforming loans   10,003       12,527       10,723       11,510       12,739  
Foreclosed properties                                      
Commercial real estate   2,500       1,774       1,866       1,930       1,514  
Commercial construction and development   4,154       4,511       4,511       4,601       4,909  
Residential construction and development   10,330       10,645       10,774       11,169       12,847  
Residential real estate   847       1,024       1,136       1,576       1,709  
Total foreclosed properties   17,831       17,954       18,287       19,276       20,979  
Other repossessed assets   -       -       49       17       16  
Total nonperforming assets $ 27,834     $ 30,481     $ 29,059     $ 30,803     $ 33,734  
                                       
Nonperforming loans to period end loans   0.44 %     0.56 %     0.53 %     0.60 %     0.69 %
Nonperforming assets to period end assets   0.94 %     1.07 %     1.16 %     1.28 %     1.45 %
                                       
Troubled debt restructurings                                      
Performing $ 22,232     $ 22,117     $ 22,966     $ 23,339     $ 23,420  
Nonperforming   2,988       3,003       2,831       2,337       2,443  
Total troubled debt restructurings $ 25,220     $ 25,120     $ 25,797     $ 25,676     $ 25,863  
                                       


Loans Past Due 30-89 Days (unaudited)          
  For the Quarter Ended
Dollars in thousands 9/30/2020
  6/30/2020
  3/31/2020
  12/31/2019
  9/30/2019
                             
Commercial $ 147   $ 196   $ 160   $ 111   $ 390
Commercial real estate   1,740     1,231     2,106     1,196     312
Construction and development   422     8     53     236     65
Residential real estate   4,464     2,763     5,178     4,775     5,573
Consumer   160     164     222     269     365
Other   2     3     7     25     63
Total $ 6,935   $ 4,365   $ 7,726   $ 6,612   $ 6,768
                             


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)                  
Average Balance Sheet, Interest Earnings & Expenses and Average Rates            
Q3 2020 vs Q2 2020 vs Q3 2019 (unaudited)                  
                       
  Q3 2020   Q2 2020   Q3 2019
  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 $ 2,251,722     $ 26,656   4.71 %   $ 2,118,158     $ 25,466   4.84 %   $ 1,813,555     $ 24,786   5.42 %
Tax-exempt (2)   16,245       191   4.68 %     17,244       200   4.66 %     15,903       195   4.86 %
Securities                                                          
Taxable   261,231       1,445   2.20 %     248,792       1,453   2.35 %     203,288       1,566   3.06 %
Tax-exempt (2)   150,350       1,186   3.17 %     120,385       1,012   3.38 %     79,387       782   3.91 %
Interest bearing deposits other banks and Federal funds sold   60,639       57   0.37 %     41,776       60   0.58 %     35,214       125   1.41 %
Total interest earning assets   2,740,187       29,535   4.29 %     2,546,355       28,191   4.45 %     2,147,347       27,454   5.07 %
                                                           
Noninterest earning assets                                                          
Cash & due from banks   16,603                   16,672                   12,815              
Premises & equipment   52,329                   50,457                   43,160              
Other assets   154,578                   140,355                   104,789              
Allowance for credit losses   (28,144 )                 (25,799 )                 (13,276 )            
Total assets $ 2,935,553                 $ 2,728,040                 $ 2,294,835              
                                                           
LIABILITIES AND SHAREHOLDERS' EQUITY                                                          
                                                           
Liabilities                                                          
Interest bearing liabilities                                                          
Interest bearing demand deposits $ 850,281     $ 380   0.18 %   $ 764,852     $ 369   0.19 %   $ 594,772     $ 1,621   1.08 %
Savings deposits   588,085       925   0.63 %     512,634       1,200   0.94 %     302,331       949   1.25 %
Time deposits   585,092       2,247   1.53 %     625,717       2,617   1.68 %     674,869       3,644   2.14 %
Short-term borrowings   165,555       734   1.76 %     95,744       499   2.10 %     202,425       1,372   2.69 %
Long-term borrowings and subordinated debentures   23,230       194   3.32 %     20,299       186   3.69 %     20,312       243   4.75 %
Total interest bearing liabilities   2,212,243       4,480   0.81 %     2,019,246       4,871   0.97 %     1,794,709       7,829   1.73 %
                                                           
Noninterest bearing liabilities                                                          
Demand deposits   421,741                   417,992                   240,193              
Other liabilities   33,978                   32,238                   21,320              
Total liabilities   2,667,962                   2,469,476                   2,056,222              
                                                           
Shareholders' equity   267,591                   258,564                   238,613              
Total liabilities and shareholders' equity $ 2,935,553                 $ 2,728,040                 $ 2,294,835              
                                                           
NET INTEREST EARNINGS         $ 25,055                 $ 23,320                 $ 19,625      
                                                           
NET INTEREST MARGIN               3.64 %       3.68 %       3.63 %
                                                           
(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 $289,000, $254,000, and $205,000 for Q3 2020, Q2 2020 and Q3 2019, respectively.
 


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)          
Average Balance Sheet, Interest Earnings & Expenses and Average Rates        
YTD 2020 vs YTD 2019 (unaudited)              
   
  YTD 2020   YTD 2019
  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 $ 2,102,331     $ 77,211   4.91 %   $ 1,758,645     $ 71,877   5.46 %
Tax-exempt (2)   16,121       576   4.77 %     15,172       591   5.21 %
Securities              
Taxable   256,322       4,657   2.43 %     200,947       4,858   3.23 %
Tax-exempt (2)   113,793       2,897   3.40 %     98,084       2,920   3.98 %
Interest bearing deposits other banks and Federal funds sold   46,074       215   0.62 %     41,642       490   1.57 %
Total interest earning assets   2,534,641       85,556   4.51 %     2,114,490       80,736   5.10 %
               
Noninterest earning assets              
Cash & due from banks   15,901             12,941        
Premises & equipment   49,655             40,983        
Other assets   138,651             108,984        
Allowance for loan losses   (25,618 )           (13,283 )      
Total assets $ 2,713,230           $ 2,264,115        
                                     
LIABILITIES AND SHAREHOLDERS' EQUITY            
               
Liabilities              
Interest bearing liabilities              
Interest bearing demand deposits $ 753,384     $ 1,830   0.32 %   $ 575,817     $ 5,016   1.16 %
Savings deposits   516,841       3,462   0.89 %     306,083       2,768   1.21 %
Time deposits   608,551       7,796   1.71 %     667,565       9,960   1.99 %
Short-term borrowings   127,109       1,863   1.96 %     196,622       4,241   2.88 %
Long-term borrowings and subordinated debentures   21,284       600   3.77 %     20,317       757   4.98 %
    2,027,169       15,551   1.02 %     1,766,404       22,742   1.72 %
Noninterest bearing liabilities              
Demand deposits   393,128             243,356        
Other liabilities   30,741             19,669        
Total liabilities   2,451,038             2,029,429        
               
Shareholders' equity   262,192             234,686        
Total liabilities and shareholders' equity $ 2,713,230           $ 2,264,115        
                                       
NET INTEREST EARNINGS   $ 70,005         $ 57,994    
                                       
NET INTEREST MARGIN     3.69 %       3.67 %
                                 
(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 $730,000 and $737,000 for the YTD 2020 and YTD 2019 periods, respectively.
   


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

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