Press Release SUMMIT FINANCIAL GROUP, INC. (NASDAQ - SMMF)

Summit Financial Group Reports Third Quarter and First Nine-Months 2019 Results

Q3 2019 Diluted EPS $0.65 compared to $0.68 for Q2 2019 and $0.55 for Q3 2018

Company Release - 10/24/2019 6:00 AM ET

MOOREFIELD, W.Va., Oct. 24, 2019 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported third quarter 2019 net income of $8.06 million, or $0.65 per diluted share. In comparison, earnings for second quarter 2019 were $8.56 million, or $0.68 per diluted share, and for third quarter 2018 were $6.90 million, or $0.55 per diluted share. In the second quarter 2019, we recognized a $1.91 million pre-tax gain on the sale of our former insurance agency, Summit Insurance Services, LLC (“SIS”). Summit achieved returns on average assets and average tangible equity in third quarter 2019 of 1.41 percent and 15.55 percent, respectively, compared to 1.31 percent and 15.53 percent, respectively, in the same period of 2018.

Third quarter 2019 earnings compared to both the linked quarter and third quarter 2018 were positively impacted by increased net interest income resulting primarily from loan growth and higher realized securities gains. Also positively impacting third quarter 2019 results, write-downs on foreclosed properties were $133,000 in Q3 2019 compared to $1.2 million in Q2 2019. 

For the nine months ended September 30, 2019, Summit recorded net income of $23.7 million, or $1.88 per diluted share, compared with $20.6 million, or $1.66 per diluted share, for the comparable 2018 nine-month period, representing an increase of 15.0 percent or 13.3 percent per diluted share.  Our returns on average assets and average tangible equity for the nine months ended September 30, 2019 were 1.40 percent and 15.80 percent, respectively, compared to 1.30 percent and 15.97 percent, respectively, for the same period of 2018.

Earnings for the nine months ended September 30, 2019 were positively impacted by increased net interest income resulting primarily from loan growth as well as a higher net interest margin, increased realized securities gains and the SIS gain. These results were partially offset by larger write-downs on foreclosed properties in Q2 2019 with the goal of selling such properties more rapidly, lower insurance commission revenue during 2019 and increased merger-related expenses.

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

Highlights for Q3 2019

  • Mortgage warehouse lines of credit increased $43.4 million during the quarter as we expanded our existing line participations and established several new participations in light of strong mortgage refinance and home purchase activity nationally;
  • Loan balances, excluding mortgage warehouse lines of credit, declined $10.6 million during the quarter, despite having increased $50.9 million year-to-date.  The Q3 2019 decline in such loan balances is principally the result of payoffs of a couple significant commercial real estate loan participations;
  • Net interest income increased 3.26 percent (annualized) compared to Q2 2019 and increased 10.7 percent year-to-date 2019 versus the same period in 2018, primarily due to our loan growth;
  • Net interest margin in Q3 2019 declined 9 basis points to 3.63 percent as compared to Q2 2019 as yields on loans declined, while deposit and other funding costs remained stable;
  • Efficiency ratio improved to 52.91 percent compared to 56.45 percent in the linked quarter and 54.25 percent for Q3 2018, primarily as result of our sale of SIS which traditionally had a low operating margin;
  • Realized securities gains of $453,000 in Q3 2019 compared to $1.09 million in Q2;
  • Write-downs of foreclosed properties were $133,000 in Q3 2019 compared to $1.20 million in Q2 2019, while the net gain on sales of foreclosed properties decreased from $156,000 in Q2 2019 to $66,000 in Q3 2019;
  • Nonperforming assets as a percentage of total assets declined to 1.45 percent compared to 1.52 percent for the linked quarter and 1.82 percent for the year ago quarter; and
  • Announced our entering into a definitive merger agreement to acquire Cornerstone Financial Services, Inc. and its wholly-owned subsidiary, Cornerstone Bank, Inc., headquartered in West Union, West Virginia.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “I am very pleased to report that Summit achieved another quarter of solid core operating performance highlighted by core revenue growth, an improved efficiency ratio and continued improvement in asset quality. Further, I am encouraged that while the balances of our commercial and commercial real estate loan portfolios exhibited some modest contraction over the past quarter, we currently also have a robust pipeline of new loans located within our core footprint which have been approved and scheduled to close over the next few months. I am also particularly pleased by the opportunities represented by our pending acquisition of Cornerstone Financial Services, Inc., announced recently and expected to close at beginning of 2020. 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 third quarter 2019, consisting of net interest income and noninterest income, increased 8.2 percent to $23.2 million, principally as a result of higher net interest income compared to $21.4 million for the third quarter 2018. For the year-to-date period ended September 30, 2019, total revenue was $72.1 million compared to $65.0 million for the same period of 2018, representing a 10.9 percent increase primarily as a result of higher net interest income, increased realized securities gains and the gain on the sale of SIS.

For the third quarter of 2019, net interest income was $19.4 million, an increase of 12.8 percent from the $17.2 million reported in the prior-year third quarter and a 0.8 percent increase compared to the linked quarter. The net interest margin for third quarter 2019 was 3.63 percent compared to 3.72 percent for the linked quarter and 3.53 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 2019, 3.62 percent for Q2 2019 and 3.51 percent for Q3 2018.  

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for third quarter 2019 was $3.76 million compared to $4.21 million for the comparable period of 2018. Excluding realized securities gains, noninterest income was $3.31 million for third quarter 2019, compared to $4.20 million reported for third quarter 2018 and was $3.82 million for the linked quarter, excluding realized securities gains and the gain on the sale of SIS. Q3 2019 noninterest income declined compared to prior periods primarily due to the elimination of insurance commission revenue as result of SIS’ sale in Q2 2019.

We recorded a $500,000 provision for loan losses during third quarter 2019 and 2018. Our provision continues to be directionally consistent with changes in the credit quality in our loan portfolio.

Q3 2019 total noninterest expense increased 3.6 percent to $12.8 million compared to $12.4 million for the prior-year third quarter and decreased 16.5 percent compared to the linked quarter.  Our decreased noninterest expense compared to the linked quarter is principally due to reductions in personnel costs resulting from the sale of SIS and due to increased write-downs on foreclosed properties during Q2 2019. In addition, our merger-related expenses totaled $74,000 in Q3 2019 compared to $382,000 in Q2 2019 and $86,000 in Q3 2018.

Noninterest expense for the first nine months of 2019 increased 12.3 percent compared to the first nine months of 2018. Our increased noninterest expense is principally due to expenses associated with the acquired PBI operations (including merger-related expenses), increased write-downs of foreclosed properties and to deferred director compensation plan expense of $560,000 for the first nine months of 2019 compared to $104,000 for the same period of 2018.

Balance Sheet

At September 30, 2019, total assets were $2.32 billion, an increase of $123.0 million, or 5.6 percent since December 31, 2018. Total loans, net of unearned fees and allowance for loan losses, were $1.84 billion at September 30, 2019, up $156.9 million, or 9.3 percent, from the $1.68 billion reported at year-end 2018.  Loans, excluding mortgage warehouse lines of credit, decreased $10.6 million during the quarter, or 2.5 percent (on an annualized basis), and have increased $50.9 million, or 4.1 percent (on an annualized basis) since year-end 2018.

At September 30, 2019, deposits were $1.83 billion, an increase of $197.5 million, or 12.1 percent, since year end 2018. During the first nine months of 2019, checking deposits increased $98.7 million or 13.2 percent, time deposits grew by $77.1 million or 12.7 percent and savings deposits increased $21.7 million or 7.6 percent.

Shareholders’ equity was $242.4 million as of September 30, 2019 compared to $219.8 million at December 31, 2018.  In conjunction with the acquisition of PBI on January 1, 2019, Summit issued 465,931 shares of common stock valued at $9.0 million to the former PBI shareholders.

Tangible book value per common share increased to $17.68 at September 30, 2019 compared to $15.75 at December 31, 2018. Summit had 12,400,804 outstanding common shares at Q3 2019 quarter end compared to 12,312,933 at year end 2018.

As announced in Q3 2018, the Board of Directors authorized the open market repurchase of up to 500,000 shares of the issued and outstanding shares of Summit's common stock.  The timing and quantity of stock purchases under this repurchase plan were at the discretion of management.  During Q3 2019, the repurchase of all shares authorized under the Plan was completed, whereby 52,460 shares were repurchased at an average price of $25.59 per share. The average price of all shares repurchased under the Plan since its inception was $24.15 per share.

Asset Quality

As of September 30, 2019, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $33.7 million, or 1.45 percent of assets. This compares to $34.9 million, or 1.52 percent of assets at the linked quarter-end, and $36.5 million, or 1.66 percent of assets at year end 2018.

Third quarter 2019 net loan charge-offs were $711,000, or 0.16 percent of average loans annualized, while adding $500,000 to the allowance for loan losses through the provision for loan losses. The allowance for loan losses stood at 0.70 percent of total loans at September 30, 2019, compared to 0.77 percent at year-end 2018. 

About the Company

Summit Financial Group, Inc. is a $2.32 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle and Southern regions of West Virginia and the Northern, Shenandoah Valley and Southwestern regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates thirty-two banking locations.

FORWARD-LOOKING STATEMENTS

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

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

ADDITIONAL INFORMATION ABOUT THE MERGER WITH CORNERSTONE FINANCIAL SERVICES, INC. (“CORNERSTONE”) 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 has filed with the Securities and Exchange Commission (“SEC”) a Preliminary Registration Statement on Form S-4 with respect to the offering of Summit common stock as the merger consideration under the Securities Act of 1933, which includes include a proxy statement of Cornerstone seeking approval of the merger by Cornerstone’s shareholders and a prospectus of Summit. Summit will request effectiveness of its Registration Statement on Form S-4 with the SEC and Cornerstone will deliver the proxy statement/prospectus to its shareholders. In addition, Summit has filed 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, 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 Cornerstone 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.

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

            

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)   
Quarterly Performance Summary (unaudited)      
Q3 2019 vs Q3 2018      
    
  For the Quarter Ended Percent 
 Dollars in thousands  9/30/2019  9/30/2018 Change 
Statements of Income       
 Interest income       
 Loans, including fees  $  24,940  $  21,29517.1%
 Securities    2,184    2,367-7.7%
 Other    125    138-9.4%
  Total interest income    27,249    23,80014.5%
 Interest expense       
 Deposits    6,214    4,71431.8%
 Borrowings    1,615    1,873-13.8%
  Total interest expense    7,829    6,58718.9%
 Net interest income    19,420    17,21312.8%
 Provision for loan losses    500    5000.0%
 Net interest income after provision for loan losses    18,920    16,71313.2%
        
 Noninterest income       
 Insurance commissions    40    1,062-96.2%
 Trust and wealth management fees    632    687-8.0%
 Service charges on deposit accounts    1,312    1,2158.0%
 Bank card revenue    924    79316.5%
 Realized securities gains    453    8n/m
 Bank owned life insurance income    247    250-1.2%
 Other income    151    196-23.0%
 Total noninterest income   3,759    4,211-10.7%
 Noninterest expense       
 Salaries and employee benefits   7,044    6,8063.5%
 Net occupancy expense   799    856-6.7%
 Equipment expense   1,296    1,11815.9%
 Professional fees   388    503-22.9%
 Advertising and public relations   177    1704.1%
 Amortization of intangibles   404    413-2.2%
 FDIC premiums   -    210n/m
 Bank card expense   455    38418.5%
 Foreclosed properties expense, net of losses   305    16980.5%
 Merger-related expenses   74    86-14.0%
 Other expenses   1,864    1,64313.5%
 Total noninterest expense   12,806    12,3583.6%
 Income before income taxes    9,873    8,56615.3%
 Income taxes    1,812    1,6678.7%
 Net income  $ 8,061  $6,89916.8%


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)   
Quarterly Performance Summary (unaudited)     
Q3 2019 vs Q3 2018  
       
   For the Quarter Ended  Percent 
   9/30/2019 9/30/2018 Change 
Per Share Data      
 Earnings per common share      
 Basic  $  0.65 $  0.5616.1%
 Diluted  $  0.65 $  0.5518.2%
       
 Cash dividends  $  0.15 $  0.1315.4%
 Dividend payout ratio  23.0% 23.3%-1.3%
       
 Average common shares outstanding      
 Basic    12,412,982   12,374,3500.3%
 Diluted    12,467,777   12,439,0510.2%
       
 Common shares outstanding at period end    12,400,804   12,382,4500.1%
       
 Performance Ratios      
 Return on average equity  13.51% 13.00%3.9%
 Return on average tangible equity  15.55% 15.53%0.1%
 Return on average assets  1.41% 1.31%7.6%
 Net interest margin (A)  3.63% 3.53%2.8%
 Efficiency ratio (B)  52.91% 54.25%-2.5%

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)      
2019 vs 2018      
        
   For the Nine Months Ended  Percent 
 Dollars in thousands  9/30/2019  9/30/2018 Change 
Statements of Income       
 Interest income       
 Loans, including fees $   72,344 $   62,62415.5%
 Securities    7,166    7,0601.5%
 Other    490    41218.9%
  Total interest income    80,000    70,09614.1%
 Interest expense       
 Deposits    17,745    12,57241.1%
 Borrowings    4,998    5,779-13.5%
  Total interest expense    22,743    18,35123.9%
 Net interest income    57,257    51,74510.7%
 Provision for loan losses    1,050    1,750-40.0%
 Net interest income after provision for loan losses    56,207    49,99512.4%
        
 Noninterest income       
 Insurance commissions    1,821    3,188-42.9%
 Trust and wealth management fees    1,830    2,026-9.7%
 Service charges on deposit accounts    3,716    3,4218.6%
 Bank card revenue    2,631    2,34312.3%
 Realized securities gains    1,535    82885.4%
 Gain on sale of Summit Insurance Services, LLC    1,906    -n/a
 Bank owned life insurance income    733    773-5.2%
 Other income    627    656-4.4%
 Total noninterest income   14,799    13,23511.8%
 Noninterest expense       
 Salaries and employee benefits   21,966    20,5506.9%
 Net occupancy expense   2,602    2,5282.9%
 Equipment expense   3,694    3,27112.9%
 Professional fees   1,266    1,2223.6%
 Advertising and public relations   484    4615.0%
 Amortization of intangibles   1,300    1,2613.1%
 FDIC premiums   88    690-87.2%
 Bank card expense   1,367    1,08026.6%
 Foreclosed properties expense, net of losses   2,236    843165.2%
 Merger-related expenses   519    86503.5%
 Other expenses   6,473    5,41519.5%
 Total noninterest expense   41,995    37,40712.3%
 Income before income taxes    29,011    25,82312.3%
 Income taxes    5,293    5,2011.8%
 Net income $  23,718 $  20,62215.0%


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)   
Nine Month Performance Summary (unaudited)     
2019 vs 2018  
       
   For the Nine Months Ended  Percent 
   9/30/2019 9/30/2018 Change 
Per Share Data      
 Earnings per common share      
 Basic  $  1.89 $  1.6713.2%
 Diluted  $  1.88 $   1.6613.3%
       
 Cash dividends  $  0.44 $   0.3912.8%
 Dividend payout ratio  23.2% 23.4%-0.9%
       
 Average common shares outstanding      
 Basic    12,555,411   12,366,6121.5%
 Diluted    12,614,382   12,430,2271.5%
       
 Common shares outstanding at period end    12,400,804   12,382,4500.1%
       
Performance Ratios      
 Return on average equity  13.48% 13.28%1.5%
 Return on average tangible equity  15.80% 15.97%-1.1%
 Return on average assets  1.40% 1.30%7.7%
 Net interest margin (A)  3.67% 3.56%3.1%
 Efficiency ratio (B)  55.34% 54.66%1.2%

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  9/30/2019  6/30/2019  3/31/2019  12/31/2018  9/30/2018
Statements of Income               
 Interest income               
 Loans, including fees $   24,940 $   24,352 $   23,051 $  22,659 $  21,295
 Securities    2,184    2,396    2,586    2,527    2,367
 Other    125    134    231    127    138
 Total interest income    27,249    26,882    25,868    25,313    23,800
 Interest expense               
 Deposits    6,214    5,967    5,564    5,103    4,714
 Borrowings    1,615    1,652    1,731    2,158    1,873
 Total interest expense    7,829    7,619    7,295    7,261    6,587
 Net interest income    19,420    19,263    18,573    18,052    17,213
 Provision for loan losses    500    300    250    500    500
 Net interest income after provision for loan losses    18,920    18,963    18,323    17,552    16,713
 Noninterest income               
 Insurance commissions    40    606    1,174    1,132    1,062
 Trust and wealth management fees    632    612    586    627    687
 Service charges on deposit accounts    1,312    1,224    1,180    1,209    1,215
 Bank card revenue    924    893    814    809    793
 Realized securities gains (losses)    453    1,086    (3)    (205)    8
 Gain on sale of Summit Insurance Services, LLC    -    1,906    -    -    -
 Bank owned life insurance income    247    248    238    248    250
 Other income    151    235    241    367    196
 Total noninterest income   3,759    6,810    4,230    4,187    4,211
 Noninterest expense               
 Salaries and employee benefits   7,044    7,576    7,347    6,928    6,806
 Net occupancy expense   799    880    924    836    856
 Equipment expense   1,296    1,219    1,179    1,139    1,118
 Professional fees   388    475    403    385    503
 Advertising and public relations   177    155    153    193    170
 Amortization of intangibles   404    420    476    410    413
 FDIC premiums   -    88    -    140    210
 Bank card expense   455    473    439    395    384
 Foreclosed properties expense, net of losses   305    1,545    384    507    169
 Merger-related expenses   74    382    63    59    86
 Other expenses   1,864    2,116    2,492    1,474    1,643
 Total noninterest expense   12,806    15,329    13,860    12,466    12,358
 Income before income taxes    9,873    10,444    8,693    9,273    8,566
 Income tax expense    1,812    1,880    1,601    1,823    1,667
 Net income $   8,061 $ 8,564 $ 7,092 $ 7,450 $  6,899


 

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)          
Five Quarter Performance Summary (unaudited)          
         
   For the Quarter Ended 
   9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018
Per Share Data           
 Earnings per common share           
 Basic  $  0.65 $   0.68 $   0.56 $   0.60 $   0.56
 Diluted  $   0.65 $   0.68 $   0.56 $   0.60 $   0.55
            
 Cash dividends  $    0.15 $   0.15 $   0.14 $   0.14 $   0.13
 Dividend payout ratio  23.0% 21.9% 25.0% 23.3% 23.3%
            
 Average common shares outstanding           
 Basic    12,412,982   12,539,095   12,717,501   12,358,104   12,374,350
 Diluted    12,467,777   12,600,071   12,778,644   12,407,678   12,439,051
            
 Common shares outstanding at period end    12,400,804   12,449,986   12,661,528   12,312,933   12,382,450
            
Performance Ratios           
 Return on average equity  13.51% 14.62% 12.28% 13.85% 13.00%
 Return on average tangible equity  15.55% 17.02% 14.80% 16.41% 15.53%
 Return on average assets  1.41% 1.52% 1.27% 1.38% 1.31%
 Net interest margin (A)  3.63% 3.72% 3.66% 3.61% 3.53%
 Efficiency ratio (B)  52.91% 56.45% 56.63% 51.02% 54.25%

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  9/30/2019  6/30/2019  3/31/2019  12/31/2018  9/30/2018
                
 Assets               
 Cash and due from banks $    12,374  $  $  13,481  $  $  14,265  $   23,061  $  $  9,382
 Interest bearing deposits other banks   40,296    42,994    43,689    36,479    44,452
 Securities   265,347    269,920    297,126    293,284    288,040
 Loans, net   1,838,891    1,805,850    1,725,064    1,682,005    1,632,747
 Property held for sale   20,979    21,390    24,393    21,432    22,017
 Premises and equipment, net   43,592    42,896    39,345    37,553    36,888
 Goodwill and other intangible assets   23,182    23,585    29,349    25,842    26,252
 Cash surrender value of life insurance policies   43,216    42,976    42,714    42,420    42,208
 Other assets   35,732    36,022    33,696    38,510    36,741
   Total assets $    2,323,609  $  $  2,299,114  $   2,249,641  $   2,200,586  $   2,138,727
                
 Liabilities and Shareholders' Equity               
 Deposits  $  1,832,285   $  1,797,493   $  1,789,032   $  1,634,826   $  1,651,064
 Short-term borrowings   206,694    225,343    186,292    309,084    238,403
 Long-term borrowings and  subordinated debentures   20,311    20,315    20,319    20,324    20,328
 Other liabilities   21,897    20,262    20,368    16,522    15,376
 Shareholders' equity   242,422    235,701    233,630    219,830    213,556
   Total liabilities and shareholders' equity  $  2,323,609   $  2,299,114   $  2,249,641   $  2,200,586   $  2,138,727
                
 Book value per common share  $  19.55   $  18.93   $  18.45   $  17.85   $  17.25
 Tangible book value per common share  $  17.68   $  17.04   $  16.13   $  15.75   $  15.13
 Tangible common equity to tangible assets 9.5%  9.3%  9.2%  8.9%  8.9%



SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)    
Regulatory Capital Ratios (unaudited)     
       
  9/30/20196/30/20193/31/201912/31/20189/30/2018
Summit Financial Group, Inc.     
 CET1 Risk-based Capital11.2%11.1%11.4%11.1%11.1%
 Tier 1 Risk-based Capital12.2%12.1%12.5%12.2%12.2%
 Total Risk-based Capital12.8%12.8%13.2%12.9%12.9%
 Tier 1 Leverage10.4%10.4%10.2%10.1%10.1%
       
Summit Community Bank, Inc.     
 CET1 Risk-based Capital12.2%11.9%12.3%12.0%12.0%
 Tier 1 Risk-based Capital12.2%11.9%12.3%12.0%12.0%
 Total Risk-based Capital12.9%12.6%13.0%12.8%12.7%
 Tier 1 Leverage10.4%10.2%10.0%10.0%9.9%

 

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)         
Loan Composition (unaudited)              
                
Dollars in thousands 9/30/2019  6/30/2019  3/31/2019  12/31/2018  9/30/2018
                
Commercial $   199,391 $   204,138 $  189,248 $  194,315 $  167,972
Mortgage warehouse lines   145,039    101,607    49,355    39,140    35,910
Commercial real estate              
Owner occupied   255,828    262,901    256,671    257,256    261,290
Non-owner occupied   567,670    574,677    585,809    573,932    541,753
Construction and development              
Land and development   69,589    67,769    64,192    68,833    71,819
Construction    56,255    46,975    36,040    24,731    25,703
Residential real estate              
Non-jumbo    359,399    360,752    359,107    336,977    340,783
Jumbo    69,815    70,171    69,313    73,599    72,327
Home equity    78,493    81,373    80,370    80,910    82,018
Consumer    36,982    36,715    36,046    32,460    33,664
Other    13,371    11,924    12,045    12,899    12,452
Total loans, net of unearned fees   1,851,832    1,819,002    1,738,196    1,695,052    1,645,691
Less allowance for loan losses   12,941    13,152    13,132    13,047    12,944
Loans, net$  1,838,891 $  1,805,850 $  1,725,064 $  1,682,005 $  1,632,747


SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)         
Deposit Composition (unaudited)            
                
Dollars in thousands  9/30/2019  6/30/2019  3/31/2019  12/31/2018  9/30/2018
Core deposits               
Non-interest bearing checking$   241,999 $  234,397 $  258,679 $   222,120 $  232,697
Interest bearing checking   602,059    588,948    560,800    523,257    505,411
Savings    305,891    301,403    310,646    284,173    301,269
Time deposits    371,178    365,275    359,141    316,914    316,941
Total core deposits   1,521,127    1,490,023    1,489,266    1,346,464    1,356,318
                
Brokered time deposits   227,369    222,901    218,913    220,497    227,312
Other non-core time deposits   83,789    84,569    80,853    67,865    67,434
Total deposits$   1,832,285 $  1,797,493 $  1,789,032 $  1,634,826 $  1,651,064


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)            
Asset Quality Information (unaudited)              
                
   For the Quarter Ended 
Dollars in thousands  9/30/2019  6/30/2019  3/31/2019  12/31/2018  9/30/2018
                
 Gross loan charge-offs$  843 $  391 $  414 $  705 $  413
 Gross loan recoveries   (132)    (111)    (249)    (307)    (278)
 Net loan charge-offs (recoveries)$  711 $  280 $  165 $  398 $   135
                
 Net loan charge-offs to average loans (annualized) 0.16%  0.06%  0.04%  0.10%  0.03%
 Allowance for loan losses$  12,941 $   13,152 $  13,132 $  13,047 $   12,944
                
 Allowance for loan losses as a percentage of period end loans 0.70%  0.72%  0.76%  0.77%  0.79%
 Nonperforming assets:              
 Nonperforming loans              
 Commercial$  835 $  948 $  729 $  935 $  801
 Commercial real estate   7,037    6,544    2,981    3,239    5,090
 Residential construction and development   191    66    24    3,198    3,200
 Residential real estate   4,461    5,657    5,928    7,506    7,760
 Consumer   115    160    182    147    118
 Other   100    100    130    -    -
 Total nonperforming loans   12,739    13,475    9,974    15,025    16,969
 Foreclosed properties              
 Commercial real estate   1,514    1,544    1,841    1,762    1,762
 Commercial construction and development   4,909    4,910    6,326    6,479    6,790
 Residential construction and development   12,847    13,132    14,347    11,543    11,614
 Residential real estate   1,709    1,804    1,879    1,648    1,851
 Total foreclosed properties   20,979    21,390    24,393    21,432    22,017
 Other repossessed assets   16    12    34    5    5
 Total nonperforming assets$  33,734 $  34,877 $  34,401 $  36,462 $  38,991
                
 Nonperforming loans to period end loans 0.69%  0.74%  0.57%  0.89%  1.03%
 Nonperforming assets to period end assets 1.45%  1.52%  1.53%  1.66%  1.82%
                
 Troubled debt restructurings              
 Performing$   23,420 $  23,266 $  27,845 $  26,609 $  27,441
 Nonperforming   2,443    2,915    -    388    113
 Total troubled debt restructurings$  25,863 $  26,181 $  27,845 $  26,997 $  27,554


Loans Past Due 30-89 Days (unaudited)              
   For the Quarter Ended 
Dollars in thousands  9/30/2019  6/30/2019  3/31/2019  12/31/2018  9/30/2018
                
 Commercial$   390 $  375 $  264 $  219 $  607
 Commercial real estate   312    1,719    4,128    161    988
 Construction and development   65    235    179    194    393
 Residential real estate   5,573    5,670    2,944    6,249    5,513
 Consumer   365    234    432    593    345
 Other   63    9    52    38    11
 Total$ 6,768 $  8,242 $  7,999 $  7,454 $  7,857


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)                  
Average Balance Sheet, Interest Earnings & Expenses and Average Rates             
Q3 2019 vs Q2 2019 vs Q3 2018 (unaudited)                     
 Q3 2019 Q2 2019 Q3 2018
  Average  Earnings / Yield /  Average  Earnings / Yield /  Average  Earnings / Yield /
Dollars in thousands Balances  Expense Rate  Balances  Expense Rate  Balances  Expense Rate
                        
ASSETS                       
Interest earning assets                       
Loans, net of unearned  interest (1)                     
Taxable$ 1,813,555 $   24,786 5.42% $1,749,032 $  24,184 5.55% $1,615,700 $ 21,154 5.19%
Tax-exempt (2)   15,903    195 4.86%    14,695    213 5.81%    15,688    178 4.50%
Securities                       
Taxable   203,288    1,566 3.06%    203,049    1,607 3.17%    155,574    1,227 3.13%
Tax-exempt (2)   79,387    782 3.91%    100,307    999 3.99%    146,174    1,443 3.92%
Interest bearing deposits other banks and Federal funds sold   35,214    125 1.41%    38,214    134 1.41%    38,642    138 1.42%
Total interest earning assets   2,147,347    27,454 5.07%    2,105,297    27,137 5.17%    1,971,778    24,140 4.86%
                        
Noninterest earning assets                       
Cash & due from banks   12,815         14,124         9,326     
Premises & equipment   43,160         41,318         36,533     
Other assets   104,789         109,642         108,628     
Allowance for loan losses   (13,276)         (13,260)         (12,865)     
Total assets$ 2,294,835      $2,257,121      $ 2,113,400     
                        
 LIABILITIES AND SHAREHOLDERS' EQUITY                  
                        
Liabilities                       
Interest bearing liabilities                       
Interest bearing  demand deposits$  594,772 $  1,621 1.08% $  575,240 $  1,731 1.21% $ 486,107 $ 1,168 0.95%
Savings deposits   302,331    949 1.25%    305,342    921 1.21%    312,467    857 1.09%
Time deposits   674,869    3,644 2.14%    673,272    3,315 1.97%    616,657    2,689 1.73%
Short-term borrowings   202,425    1,372 2.69%    187,120    1,397 2.99%    211,211    1,436 2.70%
Long-term borrowings and  subordinated debentures   20,312    243 4.75%    20,317    255 5.03%    39,265    437 4.42%
Total interest bearing liabilities   1,794,709    7,829 1.73%    1,761,291    7,619 1.74%    1,665,707    6,587 1.57%
                        
Noninterest bearing liabilities                       
Demand deposits   240,193         241,811         219,986     
Other liabilities   21,320         19,750         15,447     
Total liabilities   2,056,222         2,022,852         1,901,140     
                        
Shareholders' equity   238,613         234,269         212,260     
Total liabilities and  shareholders' equity$ 2,294,835      $ 2,257,121      $ 2,113,400     
                        
NET INTEREST EARNINGS   $  19,625      $ 19,518      $ 17,553  
                        
NET INTEREST MARGIN      3.63%       3.72%       3.53%
                        
(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 $205,000, $255,000, and $340,000 for Q3 2019, Q2 2019 and Q3 2018, respectively.     


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)          
Average Balance Sheet, Interest Earnings & Expenses and Average Rates        
YTD 2019 vs YTD 2018 (unaudited)               
  
 YTD 2019 YTD 2018
  Average  Earnings / Yield /  Average  Earnings / Yield /
Dollars in thousands Balances  Expense Rate  Balances  Expense Rate
                
ASSETS               
Interest earning assets               
Loans, net of unearned  interest (1)               
Taxable$  1,758,645 $   71,877 5.46% $   1,615,427 $   62,196 5.15%
Tax-exempt (2)   15,172    591 5.21%    15,929    542 4.55%
Securities               
Taxable   200,947    4,858 3.23%    169,177    3,839 3.03%
Tax-exempt (2)   98,084    2,920 3.98%    138,539    4,078 3.94%
Interest bearing deposits other banks and Federal funds sold   41,642    490 1.57%    39,075    412 1.41%
Total interest earning assets   2,114,490    80,736 5.10%    1,978,147    71,067 4.80%
                
Noninterest earning assets               
Cash & due from banks   12,941         9,459     
Premises & equipment   40,983         35,620     
Other assets   108,984         107,789     
Allowance for loan losses   (13,283)         (12,715)     
Total assets$  2,264,115      $  2,118,300     
                
 LIABILITIES AND SHAREHOLDERS' EQUITY             
                
Liabilities               
Interest bearing liabilities               
                
Interest bearing demand deposits$  575,817 $  5,016 1.16% $  455,637 $  2,701 0.79%
Savings deposits   306,083    2,768 1.21%    330,420    2,373 0.96%
Time deposits   667,565    9,960 1.99%    626,587    7,498 1.60%
Short-term borrowings   196,622    4,241 2.88%    214,005    4,084 2.55%
Long-term borrowings and subordinated debentures   20,317    757 4.98%    52,155    1,696 4.35%
    1,766,404    22,742 1.72%    1,678,804    18,352 1.46%
Noninterest bearing liabilities               
Demand deposits   243,356         216,701     
Other liabilities   19,669         15,778     
Total liabilities   2,029,429         1,911,283     
                
Shareholders' equity   234,686         207,017     
Total liabilities and shareholders' equity$  2,264,115      $  2,118,300     
                
NET INTEREST EARNINGS   $ $  57,994      $  52,715  
                
NET INTEREST MARGIN      3.67%       3.56%
                
(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 $737,000 and $970,000 for the     
  YTD 2019 and YTD 2018, respectively.             

Summit Financial Group, Inc.

Source: Summit Financial Group, Inc.