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

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Summit Financial Group, Inc. (SMMF) reported Q3 2020 net income of $9.62 million, translating to $0.74 per diluted share, an increase from $6.95 million in Q2 2020. Year-to-date net income stood at $21.1 million, down 11.1% from 2019. The company saw a 29.5% rise in net interest income compared to Q2 2020, driven by loan growth. Nonperforming assets decreased to 0.94% of total assets. Summit announced a merger agreement to acquire WinFirst Financial Corp, expected to close by year-end 2020, enhancing its market presence.

Positive
  • Q3 2020 net income increased to $9.62 million from $6.95 million in Q2 2020.
  • Net interest income grew by 29.5% compared to Q2 2020.
  • Nonperforming assets improved to 0.94% of total assets from 1.07% in the previous quarter.
  • Total revenue for Q3 2020 rose 33.6% to $31.0 million compared to Q3 2019.
Negative
  • Net income for the first nine months decreased by 11.1% year-over-year.
  • Provision for credit losses increased to $3.25 million, up from $500,000 in Q3 2019.
  • Net foreclosed properties expenses rose to $607,000 from $240,000 in 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 thousandsTotal Loan Balance as of 9/30/2020 Loans Modified to Interest Only PaymentsLoans Modified to Payment DeferralTotal Loans ModifiedPercentage of Loans Modified
Hospitality Industry$120,324$36,803$11,466$48,26940.1%
Non-Owner Occupied Retail Stores 108,326 19,497 - 19,49718.0%
Owner-Occupied Retail Stores 100,926 1,601 1,409 3,0103.0%
Restaurants 7,968 - - -0.0%
Oil & Gas Industry 24,404 914 - 9143.7%
Other Commercial Loans 1,084,385 40,846 - 40,8463.8%
Total Commercial Loans 1,446,333 99,661 12,875 112,5367.8%
Residential 1-4 Family Personal 263,315 195 991 1,1860.5%
Residential 1-4 Family Rentals 178,529 3,567 336 3,9032.2%
Home Equity Loans 82,991 - - -0.0%
Total Residential Real Estate Loans 524,835 3,762 1,327 5,0891.0%
Consumer Loans 34,655 34 22 560.2%
Mortgage Warehouse Loans 243,730 - - -0.0%
Credit Cards and Overdrafts 2,251 - - -0.0%
Total Loans$ 2,251,804$ 103,457$ 14,224$ 117,6815.2%
      


  Loan Balances Modified Due to COVID-19 as of 6/30/2020
Dollars in thousandsTotal Loan Balance as of 6/30/2020 Loans Modified to Interest Only PaymentsLoans Modified to Payment DeferralTotal Loans ModifiedPercentage of Loans Modified
Hospitality Industry$119,204$55,849$43,030$98,87982.9%
Non-Owner Occupied Retail Stores 109,078 38,354 13,802 52,15647.8%
Owner-Occupied Retail Stores 119,794 21,956 9,372 31,32826.2%
Restaurants 8,126 2,392 1,877 4,26952.5%
Oil & Gas Industry 31,977 914 4,378 5,29216.5%
Other Commercial Loans 1,005,740 88,285 34,634 122,91912.2%
Total Commercial Loans 1,393,919 207,750 107,093 314,84322.6%
Residential 1-4 Family Personal 267,170 3,933 13,404 17,3376.5%
Residential 1-4 Family Rentals 180,415 20,348 6,032 26,38014.6%
Home Equity Loans 88,929 - 569 5690.6%
Total Residential Real Estate Loans 536,514 24,281 20,005 44,2868.3%
Consumer Loans 34,640 595 605 1,2003.5%
Mortgage Warehouse Loans 252,472 - - -0.0%
Credit Cards and Overdrafts 2,162 - - -0.0%
Total Loans$ 2,219,707$ 232,626$ 127,703$ 360,32916.2%
      

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 EndedPercent
Dollars in thousands9/30/2020
 9/30/2019Change
Statements of Income       
Interest income       
Loans, including fees$26,807 $24,9407.5%
Securities 2,382  2,1849.1%
Other 57  125-54.4%
Total interest income 29,246  27,2497.3%
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  19,42027.5%
Provision for credit losses 3,250  500n/m 
Net interest income after provision for credit losses 21,516  18,92013.7%
        
Noninterest income       
Insurance commissions 44  4010.0%
Trust and wealth management fees 622  632-1.6%
Mortgage origination revenue 780  77n/m 
Service charges on deposit accounts 1,138  1,312-13.3%
Bank card revenue 1,237  92433.9%
Realized securities gains 1,522  453236.0%
Bank owned life insurance and annuity income 795  247221.9%
Other income 69  74-6.8%
Total noninterest income 6,207  3,75965.1%
Noninterest expense       
Salaries and employee benefits 8,108  7,04415.1%
Net occupancy expense 1,057  79932.3%
Equipment expense 1,474  1,29613.7%
Professional fees 364  388-6.2%
Advertising and public relations 145  177-18.1%
Amortization of intangibles 412  4042.0%
FDIC premiums 320  -n/a 
Bank card expense 589  45529.5%
Foreclosed properties expense, net 607  30599.0%
Merger-related expense 28  74-62.2%
Other expenses 2,405  1,86429.0%
Total noninterest expense 15,509  12,80621.1%
Income before income taxes 12,214  9,87323.7%
Income taxes 2,594  1,81243.2%
Net income$9,620 $8,06119.3%
        


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)  
Quarterly Performance Summary (unaudited)  
Q3 2020 vs Q3 2019  
    
 For the Quarter EndedPercent
 9/30/20209/30/2019Change
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 EndedPercent
Dollars in thousands9/30/2020
 9/30/2019Change
Statements of Income   
Interest income   
Loans, including fees$77,666 $72,3447.4%
Securities 6,944  7,166-3.1%
Other 216  490-55.9%
Total interest income 84,826  80,0006.0%
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  57,25721.0%
Provision for credit losses 11,500  1,050n/m 
Net interest income after provision for credit losses 57,775  56,2072.8%
        
Noninterest income       
Insurance commissions 75  1,821-95.9%
Trust and wealth management fees 1,870  1,8302.2%
Mortgage origination revenue 1,636  392n/m
Service charges on deposit accounts 3,283  3,716-11.7%
Bank card revenue 3,257  2,63123.8%
Realized securities gains 2,560  1,53566.8%
Gain on sale of Summit Insurance Services, LLC -  1,906n/a 
Bank owned life insurance and annuity income 1,334  73382.0%
Other income 292  23524.3%
Total noninterest income 14,307  14,799-3.3%
Noninterest expense       
Salaries and employee benefits 23,709  21,9667.9%
Net occupancy expense 2,917  2,60212.1%
Equipment expense 4,263  3,69415.4%
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  88576.1%
Bank card expense 1,652  1,36720.8%
Foreclosed properties expense, net 1,815  2,236-18.8%
Merger-related expense 1,453  519180.0%
Other expenses 6,493  6,4730.3%
Total noninterest expense 45,705  41,9958.8%
Income before income taxes 26,377  29,011-9.1%
Income taxes 5,302  5,2930.2%
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 EndedPercent
 9/30/20209/30/2019Change
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 thousands9/30/2020
 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
 9/30/20206/30/20203/31/202012/31/20199/30/2019
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 amounts9/30/2020
 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 Capital9.9%9.7%10.8%11.1%11.2%
Tier 1 Risk-based Capital10.7%10.5%11.7%12.1%12.2%
Total Risk-based Capital12.9%11.3%12.5%12.7%12.8%
Tier 1 Leverage8.7%9.0%10.2%10.5%10.4%
      
Summit Community Bank, Inc.     
CET1 Risk-based Capital11.8%10.5%11.7%12.1%12.2%
Tier 1 Risk-based Capital11.8%10.5%11.7%12.1%12.2%
Total Risk-based Capital12.7%11.4%12.5%12.7%12.9%
Tier 1 Leverage9.6%9.0%10.2%10.6%10.4%
      


SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)   
Loan Composition (unaudited)     
      
Dollars in thousands9/30/2020
 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 thousands9/30/2020
 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 thousands9/30/2020
 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 thousands9/30/2020
 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 thousandsBalances
 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 thousandsBalances
 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
   

FAQ

What were Summit Financial Group's earnings for Q3 2020?

Summit Financial Group reported a net income of $9.62 million or $0.74 per diluted share for Q3 2020.

How did Summit's net interest income change in Q3 2020?

Net interest income increased by 29.5% compared to Q2 2020, driven by loan growth.

What was the nonperforming assets ratio for Summit Financial Group in Q3 2020?

Nonperforming assets decreased to 0.94% of total assets in Q3 2020.

What is the significance of the merger with WinFirst Financial Corp?

The merger, announced on September 28, 2020, aims to enhance Summit's market presence and is expected to close by year-end 2020.

Summit Financial Group, Inc.

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