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

Summit Financial Group Reports First Quarter 2020 Results

Q1 2020 Diluted EPS $0.35 compared to $0.65 for Q4 2019 and $0.56 for Q1 2019

Company Release - 4/30/2020 6:00 AM ET

MOOREFIELD, W.V., April 30, 2020 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported first quarter 2020 net income of $4.51 million, or $0.35 per diluted share. In comparison, earnings for fourth quarter 2019 were $8.15 million, or $0.65 per diluted share, and for first quarter 2019, $7.09 million, or $0.56 per diluted share. Summit achieved returns on average assets and average tangible equity in first quarter 2020 of 0.73 percent and 8.55 percent, respectively, compared to 1.27 percent and 14.80 percent, respectively, in the same period of 2019.

“Despite the unprecedented challenges posed by the COVID-19 crisis and its resulting business conditions, Summit produced solid core earnings this past quarter,” commented H. Charles Maddy, III, President and Chief Executive Officer of Summit. “As we navigate the COVID-19 crisis, we believe our Company is well-prepared to endure its impacts. The Company has strong levels of capital and liquidity, diversified revenue streams, a sound credit record and an experienced management team. I am extremely proud of the diligent efforts and steadfast commitment put forth by our management and employees to maintain operational continuity and a high level of client service during this crisis. We are very concerned about the health and welfare of our employees, clients, shareholders and communities, and are supporting all our stakeholders throughout this crisis in a thoughtful, disciplined and compassionate manner. We especially appreciate our employees’ efforts in this uncertain time, and we will continue to persevere.”

Highlights for Q1 2020

  • Provision for credit losses of $5.25 million in Q1 2020 compared to $500,000 in Q4 2019 and $250,000 in Q1 2019; the increase in this quarter’s provision resulted principally due to the estimated potential future economic impact of the COVID-19 crisis.
  • Net interest income increased 32.6 percent (annualized) compared to Q4 2019 and increased 15.5 percent versus the same period in 2019, primarily due to loan growth and lower funding costs.
  • Despite volatile markets, net interest margin in Q1 2020 increased 13 basis points to 3.76 percent as compared to the linked quarter, as yields on interest earning assets declined 11 basis points while deposit and other funding costs declined 23 basis points.
  • Loan balances, excluding mortgage warehouse lines of credit, increased $53.2 million during the quarter, including $39.8 million in loans acquired from Cornerstone; excluding mortgage warehouse lines of credit and acquired Cornerstone loans, loans increased $13.4 million during the quarter, or 3.0 percent (annualized).
  • Mortgage warehouse lines of credit increased $40.6 million during the quarter.
  • Efficiency ratio improved to 51.41 percent compared to 52.25 percent in the linked quarter and 56.63 percent for Q1 2019.
  • Realized securities gains of $1.04 million in Q1 2020 compared to $403,000 in the linked quarter.
  • Merger expenses were $788,000 in Q1 2020 compared to $98,000 in the linked quarter.
  • Net foreclosed properties expenses increased to $966,000 in Q1 2020 compared to $262,000 in Q4 2019; this is primarily the result of write downs of foreclosed properties to fair values totaling $946,000 in Q1 2020 compared to $497,000 in Q4 2019, while realized net gains on sales of foreclosed properties were $61,000 during Q1 2020 compared to $312,000 in Q4 2019.
  • Nonperforming assets as a percentage of total assets improved to 1.16 percent from 1.28 percent for the linked quarter and 1.53 percent at the end of Q1 2019.

COVID-19 Impacts

Operations

As the COVID-19 related events unfolded throughout Q1 2020, Summit implemented various plans, strategies and protocols to protect our employees, maintain services for clients, assure the functional continuity of our operating systems, controls and processes, and mitigate financial risks posed by changing market conditions. In order to protect employees and assure workforce continuity and operational redundancy, we imposed business travel restrictions, enhanced our sanitizing protocols within our facilities and physically separated, to the extent possible, our critical operations workforce that cannot work remotely. To limit the risk of virus spread, the Company implemented drive-thru only and by appointment operating protocols throughout its bank branch network. We also maintained active communications with our critical vendors to assure all mission-critical activities and functions are being performed in line with our client-service standards.

Capital and Liquidity

Although there is a high degree of uncertainty around the magnitude and duration of the economic impact of the COVID-19 pandemic, management believes that our financial position, including high levels of capital and liquidity, will allow us to successfully endure the negative economic impacts of the crisis. Our capital management activities, coupled with our historically strong earnings performance and prudent dividend practices, have allowed us to build and maintain strong capital reserves. At March 31, 2020, all of Summit’s regulatory capital ratios significantly exceeded well-capitalized standards. More specifically, the Company bank subsidiary’s Tier 1 Leverage Ratio, a common measure to evaluate a financial institutions capital strength, was 10.2% at March 31, 2020, which represents over two times its well-capitalized regulatory minimum of 5.0%.

In addition, management believes the Company’s liquidity position is strong. The Company’s bank subsidiary maintains a funding base largely comprised of core noninterest bearing demand deposit accounts and low cost interest-bearing transactional deposit accounts with clients that operate or reside within the footprint of its branch bank network. At March 31, 2020, the Company’s cash and cash equivalent balances were $41.5 million. In addition, Summit maintains an available-for-sale securities portfolio, comprised primarily of highly liquid U.S. agency securities, highly-rated municipal securities and U.S. agency-backed mortgage backed securities, which serves as a ready source of liquidity. At March 31, 2020, the Company’s available-for-sale securities portfolio totaled $305.0 million, $205.8 million of which was unpledged as collateral. The Company bank subsidiary’s unused borrowing capacity at the Federal Home Loan Bank of Pittsburgh at March 31, 2020 was $689.2 million, and it maintained $177.1 million of borrowing availability at the Federal Reserve Bank of Richmond’s discount window. The Company has not experienced significant draws on clients’ available commercial lines of credit and home equity lines of credit due to the COVID-19 crisis, nor has it observed any significant or unusual client activity that portends unmanageable levels of stress on the our liquidity profile.

Summit is participating in the Paycheck Protection Program (“PPP”), a $660 billion low-interest business loan program funded by the U.S. Treasury Department and administered by the U.S. Small Business Administration. The PPP Loan Program provides U.S. government guarantees for lenders, as well as loan forgiveness incentives for borrowers that predominately utilize the loan proceeds to cover employee compensation-related business costs. Through April 28, 2020, Summit had approved 468 PPP loans totaling $83.8 million. While we anticipate high levels of client utilization of the PPP loan program, our liquidity resources are adequate to meet the funding requirements of these loans.

Lending

We have taken actions to identify and assess our COVID-19 related credit exposures by asset classes and borrower types. We implemented a loan modification program to assist both consumer and business borrowers that are experiencing or expect to experience financial hardships due to COVID-19 related challenges. Accordingly, the following table summarizes the aggregate balances of loans the Company has modified as result of COVID-19 through April 24, 2020 classified by types of loans and impacted borrowers.

   Loan Balances Modified Due to COVID-19 through 4/24/2020
Dollars in thousands Total Loan Balance as of  3/31/2020  Loans Modified  to Interest Only Payments (6 Months or Less)  Loans Modified to Payment Deferral (3 Months)  Total Loans Modified  Percentage of  Loans Modified
Hospitality Industry$120,201$56,006$45,778$101,78484.7%
Non-Owner Occupied Retail Stores 107,420 34,774 12,518 47,29244.0%
Owner-Occupied Retail Stores 118,535 21,103 8,715 29,81825.2%
Restaurants 7,416 2,173 1,765 3,93853.1%
Oil & Gas Industry 32,297 914 4,425 5,33916.5%
Other Commercial Loans 898,310 78,836 29,061 107,89712.0%
Total Commercial Loans 1,284,179 193,806 102,262 296,06823.1%
Residential 1-4 Family Personal 276,189 3,278 13,061 16,3395.9%
Residential 1-4 Family Rentals 167,295 15,467 4,841 20,30812.1%
Home Equity Loans 75,170 - 402 4020.5%
Total Residential Real Estate Loans 518,654 18,745 18,304 37,0497.1%
Consumer Loans 35,344 365 613 9782.8%
Mortgage Warehouse Loans 166,826 - - -0.0%
Credit Cards and Overdrafts 2,266 - - -0.0%
Total Loans$  2,007,269 $  212,916 $  121,179 $  334,095 16.6%
           

Modified loans with deferred payments will continue to accrue interest during the deferral period unless otherwise classified as nonperforming. Consistent with bank regulatory guidance, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals will continue to be reported as current loans throughout the agreed upon deferral periods.  COVID-19 related loan modifications are also deemed to be insignificant borrower concessions, and therefore, such modified loans were not classified as troubled-debt restructured loans as of March 31, 2020. We anticipate that the amounts of COVID-19 related loan modifications will continue to increase during Q2 2020.

The COVID-19 crisis is expected to continue to impact our financial results, as well as demand for our services and products during the second quarter of 2020 and potentially beyond. The short and long-term implications of the COVID-19 crisis, and related monetary and fiscal stimulus measures, on our future revenues, earnings results, allowance for credit losses, capital reserves and liquidity are unknown at present.

CECL Adoption and Asset Quality

Effective January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments – Credit Losses, also known as Current Expected Credit Losses (“CECL”). Upon the adoption of CECL, the Company recorded a net cumulative-effect adjustment that decreased retained earnings by $6.76 million. This adjustment was the result of a $6.93 million net increase in the allowance for credit losses (“ACL”), from $13.07 million at December 31, 2019 to $20.00 million upon adoption (including a $470,000 reclassification from loans to the ACL for purchased credit deteriorated (“PCD”) loans now accounted for in the ACL), a $2.43 million increase in other liabilities to provide an allowance for off-balance sheet credit exposures, offset by an increase to deferred income tax assets of $2.13 million.

The table below summarizes the changes in the ACL prior to CECL adoption through March 31, 2020.

Dollars in thousandsAllowance for Loan Losses at December 31, 2019Impact of CECL AdoptionAllowance for Loan Credit Losses at January 1, 2020Provision for Loan Credit Losses for Q1 2020  Cornerstone
Day 1 PCD Loan Credit Marks
Loan Net Charge-offs for Q1 2020Allowance for Loan Credit Losses at March 31, 2020
Balance$13,074$6,927 $20,001$4,699 $409 $(501)$24,608 
% ChangesNA 53.0%NA 35.9% 3.1% -3.8% 88.2%
                  

We have recorded no allowance for credit losses relative to the Company’s available-for-sale debt securities or its other instruments carried at amortized cost.

First quarter 2020 net loan charge-offs were $501,000, or 0.10 percent of average loans annualized, while $4.7 million was added to the allowance for loan credit losses through the provision for loan credit losses. The allowance for loan credit losses stood at 1.23 percent of total loans at March 31, 2020, compared to 0.68 percent at year-end 2019.

As of March 31, 2020, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, improved to $29.1 million, or 1.16 percent of assets. This compares to $30.8 million, or 1.28 percent of assets at the linked quarter-end and $34.4 million, or 1.53 percent of assets at the end of Q1 2019.

Merger & Acquisition Activity

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 and converted substantially all of its data processing systems to that of Summit’s on March 21, 2020; accordingly, Cornerstone’s results of operations are included in Summit’s consolidated results of operations from the date of acquisition, and therefore Summit’s first quarter 2020 results reflect increased levels of average balances, income and expenses compared to its first quarter 2019 and fourth quarter 2019 results.  At consummation, Cornerstone had total assets of $195.0 million, loans of $39.8 million, and deposits of $173.0 million.

On April 24, 2020, Summit’s bank subsidiary, 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. (NASDAQ: MVBF). Summit assumed approximately $195.0 million in deposits and acquired approximately $35.3 million in loans in conjunction with this purchase.

Results of Operations

Total revenue for first quarter 2020, consisting of net interest income and noninterest income, increased 13.8 percent to $25.9 million, principally as a result of higher net interest income compared to $22.8 million for the first quarter 2019.

For the first quarter of 2020, net interest income was $21.4 million, an increase of 15.5 percent from the $18.6 million reported in the prior-year first quarter and an 8.1 percent increase compared to the linked quarter. The net interest margin for first quarter 2020 increased to 3.76 percent compared to 3.63 percent for the linked quarter and 3.66 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 3.70 percent for Q1 2020, 3.60 percent for Q4 2019 and 3.64 percent for Q1 2019.  

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for first quarter 2020 was $4.50 million compared to $4.23 million for the comparable period of 2019. Excluding realized securities gains, noninterest income was $3.46 million for first quarter 2020, compared to $4.23 million reported for first quarter 2019 and was $4.00 million for the linked quarter. The lower levels of 2020 noninterest income compared to 2019 periods are primarily due to the elimination of insurance commission revenue as result of SIS’ sale in Q2 2019.

We recorded a $5.25 million provision for credit losses during first quarter 2020 compared to $500,000 for the linked quarter and $250,000 for the comparable period of 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. Our Q1 2020 provision for credit losses reflects a change in our CECL computational model’s forecasted economic conditions over the next four quarters from “major improvement” as of January 1, 2020 to “major risk” as of March 31, 2020 due to the COVID-19 crisis.

Q1 2020 total noninterest expense increased 8.2 percent to $15.0 million compared to $13.9 million for the prior-year first quarter and increased 14.0 percent compared to the linked quarter.  Our increased noninterest expense is principally due to expenses associated with the acquired Cornerstone operations, higher writedowns of foreclosed properties and increased merger expenses.  This increase is partially offset by income related to our deferred director compensation plan of $483,000 recognized in Q1 2020 compared to deferred director compensation plan expense of $484,000 and $239,000 recorded in Q1 2019 and Q4 2019, respectively.  Under our director deferred compensation plans, directors optionally elect to defer their director fees into a "phantom" investment plan whereby the Company recognizes expense or benefit relative to the phantom returns or losses of such investments. As result of the stock market’s deterioration during Q1 2020, we recognized income related to deferred director compensation this quarter.

Balance Sheet

At March 31, 2020, total assets were $2.51 billion, an increase of $109.8 million, or 4.6 percent since December 31, 2019. Total loans, net of unearned fees and allowance for loan credit losses, were $1.98 billion at March 31, 2020, up $82.2 million, or 4.3 percent, from the $1.90 billion reported at year-end 2019.  Loans, excluding mortgage warehouse lines of credit and acquired Cornerstone loans, increased $13.4 million during the quarter, or 3.0 percent (on an annualized basis).

At March 31, 2020, core deposits were $1.83 billion, an increase of $144.6 million or 8.6 percent during first quarter 2020 -- as checking deposits increased $94.8 million or 10.6 percent, core time deposits increased by $10.9 million or 2.9 percent and savings deposits increased $38.9 million or 9.3 percent.  Excluding acquired deposits, Q1 2020 core deposit growth was $3.44 million or 2.0 percent.

Shareholders’ equity was $256.0 million as of March 31, 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 decreased to $17.17 at March 31, 2020 compared to $18.11 at December 31, 2019. Summit had 12,920,244 outstanding common shares at March 31, 2020 compared to 12,408,542 at year end 2019.

As announced this quarter, 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 Q1 2020, 66,611 shares of our common stock were repurchased under the Plan at an average price of 19.21 per share.

About the Company

Summit Financial Group, Inc. is a $2.51 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 thirty-nine 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)
Q1 2020 vs Q1 2019

   
  For the Quarter Ended  Percent
 Dollars in thousands 3/31/20203/31/2019 Change
 Statements of Income    
Interest income   
Loans, including fees$25,235 $23,051 9.5%
Securities 2,310  2,586 -10.7%
Other 98  231 -57.6%
Total interest income 27,643  25,868 6.9%
Interest expense   
Deposits 5,351  5,564 -3.8%
Borrowings 849  1,731 -51.0%
Total interest expense 6,200  7,295 -15.0%
Net interest income 21,443  18,573 15.5%
Provision for credit losses 5,250  250 2000.0%
Net interest income after provision for credit losses 16,193  18,323 -11.6%
    
Noninterest income   
Insurance commissions 7  1,174 -99.4%
Trust and wealth management fees 665  586 13.5%
Service charges on deposit accounts 1,263  1,180 7.0%
Bank card revenue 933  814 14.6%
Realized securities gains (losses) 1,038  (3)n/m 
Bank owned life insurance income 264  238 10.9%
Other income 332  241 37.8%
Total noninterest income 4,502  4,230 6.4%
Noninterest expense   
Salaries and employee benefits 7,672  7,347 4.4%
Net occupancy expense 883  924 -4.4%
Equipment expense 1,429  1,179 21.2%
Professional fees 387  403 -4.0%
Advertising and public relations 152  153 -0.7%
Amortization of intangibles 429  476 -9.9%
FDIC premiums 165  - n/m 
Bank card expense 503  439 14.6%
Foreclosed properties expense, net 966  384 151.6%
Merger-related expenses 788  63 1150.8%
Other expenses 1,625  2,492 -34.8%
Total noninterest expense 14,999  13,860 8.2%
Income before income taxes 5,696  8,693 -34.5%
Income taxes 1,190  1,601 -25.7%
Net income$4,506 $7,092 -36.5%
         


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)  
Quarterly Performance Summary (unaudited)  
Q1 2020 vs Q1 2019  
    
  For the Quarter Ended  Percent
 3/31/20203/31/2019 Change
Per Share Data    
Earnings per common share   
Basic$0.35 $0.56 -37.5%
Diluted$0.35 $0.56 -37.5%
    
Cash dividends$0.17 $0.14 21.4%
Dividend payout ratio 49.1% 25.0%96.4%
    
Average common shares outstanding   
Basic 12,975,429  12,717,501 2.0%
Diluted 13,028,409  12,778,644 2.0%
    
Common shares outstanding at period end 12,920,244  12,661,528 2.0%
    
Performance Ratios    
Return on average equity 6.92% 12.28%-43.6%
Return on average tangible equity 8.55% 14.80%-42.2%
Return on average assets 0.73% 1.27%-42.5%
Net interest margin (A) 3.76% 3.66%2.7%
Efficiency ratio (B) 51.41% 56.63%9.2%
         

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 3/31/202012/31/20199/30/20196/30/20193/31/2019
Statements of Income      
Interest income     
Loans, including fees$25,235 $24,772 $24,940 $24,352 $23,051 
Securities 2,310  2,195  2,184  2,396  2,586 
Other 98  105  125  134  231 
Total interest income 27,643  27,072  27,249  26,882  25,868 
Interest expense               
Deposits 5,351  5,952  6,214  5,967  5,564 
Borrowings 849  1,292  1,615  1,652  1,731 
Total interest expense 6,200  7,244  7,829  7,619  7,295 
Net interest income 21,443  19,828  19,420  19,263  18,573 
Provision for credit losses 5,250  500  500  300  250 
Net interest income after provision for credit losses 16,193  19,328  18,920  18,963  18,323 
Noninterest income               
Insurance commissions 7  90  40  606  1,174 
Trust and wealth management fees 665  734  632  612  586 
Service charges on deposit accounts 1,263  1,377  1,312  1,224  1,180 
Bank card revenue 933  906  924  893  814 
Realized securities gains (losses) 1,038  403  453  1,086  (3)
Gain on sale of Summit Insurance Services, LLC -  -  -  1,906  - 
Bank owned life insurance income 264  310  247  248  238 
Other income 332  584  151  235  241 
Total noninterest income 4,502  4,404  3,759  6,810  4,230 
Noninterest expense               
Salaries and employee benefits 7,672  7,099  7,044  7,576  7,347 
Net occupancy expense 883  815  799  880  924 
Equipment expense 1,429  1,278  1,296  1,219  1,179 
Professional fees 387  412  388  475  403 
Advertising and public relations 152  214  177  155  153 
Amortization of intangibles 429  401  404  420  476 
FDIC premiums 165  -  -  88  - 
Bank card expense 503  454  455  473  439 
Foreclosed properties expense, net 966  262  305  1,545  384 
Merger-related expenses 788  98  74  382  63 
Other expenses 1,625  2,126  1,864  2,116  2,492 
Total noninterest expense 14,999  13,159  12,806  15,329  13,860 
Income before income taxes 5,696  10,573  9,873  10,444  8,693 
Income tax expense 1,190  2,424  1,812  1,880  1,601 
Net income$4,506 $8,149 $8,061 $8,564 $7,092 
                


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)     
Five Quarter Performance Summary (unaudited)     
     
  For the Quarter Ended
 3/31/202012/31/20199/30/20196/30/20193/31/2019
Per Share Data      
Earnings per common share     
Basic$0.35 $0.66 $0.65 $0.68 $0.56 
Diluted$0.35 $0.65 $0.65 $0.68 $0.56 
      
Cash dividends$0.17 $0.15 $0.15 $0.15 $0.14 
Dividend payout ratio 49.1% 22.3% 23.0% 21.9% 25.0%
      
Average common shares outstanding     
Basic 12,975,429  12,400,932  12,412,982  12,539,095  12,717,501 
Diluted 13,028,409  12,458,702  12,467,777  12,600,071  12,778,644 
      
Common shares outstanding at period end 12,920,244  12,408,542  12,400,804  12,449,986  12,661,528 
      
Performance Ratios      
Return on average equity 6.92% 13.32% 13.51% 14.62% 12.28%
Return on average tangible equity 8.55% 15.25% 15.55% 17.02% 14.80%
Return on average assets 0.73% 1.39% 1.41% 1.52% 1.27%
Net interest margin (A) 3.76% 3.63% 3.63% 3.72% 3.66%
Efficiency ratio (B) 51.41% 52.25% 52.91% 56.45% 56.63%
                

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 3/31/202012/31/20199/30/20196/30/20193/31/2019
                    
Assets                    
Cash and due from banks$18,633  $28,137  $12,374  $13,481  $14,265 
Interest bearing deposits other banks 22,821   33,751   40,296   42,994   43,689 
Securities 305,045   276,355   265,347   269,920   297,126 
Loans, net 1,982,661   1,900,425   1,838,891   1,805,850   1,725,064 
Property held for sale 18,287   19,276   20,979   21,390   24,393 
Premises and equipment, net 47,078   44,168   43,592   42,896   39,345 
Goodwill and other intangible assets 34,132   23,022   23,182   23,585   29,349 
Cash surrender value of life insurance policies 46,497   43,603   43,216   42,976   42,714 
Other assets 38,168   34,755   35,732   36,022   33,696 
Total assets$2,513,322  $2,403,492  $2,323,609  $2,299,114  $2,249,641 
                    
Liabilities and Shareholders' Equity                    
Deposits$2,044,914  $1,913,237  $1,832,285  $1,797,493  $1,789,032 
Short-term borrowings 161,745   199,345   206,694   225,343   186,292 
Long-term borrowings and subordinated debentures 20,301   20,306   20,311   20,315   20,319 
Other liabilities 30,337   22,840   21,897   20,262   20,368 
Shareholders' equity 256,025   247,764   242,422   235,701   233,630 
Total liabilities and shareholders' equity$2,513,322  $2,403,492  $2,323,609  $2,299,114  $2,249,641 
                    
Book value per common share$19.82  $19.97  $19.55  $18.93  $18.45 
Tangible book value per common share$17.17  $18.11  $17.68  $17.04  $16.13 
Tangible common equity to tangible assets 9.0%  9.4%  9.5%  9.3%  9.2%
                    


SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)    
Regulatory Capital Ratios (unaudited)     
      
 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 
Summit Financial Group, Inc.     
CET1 Risk-based Capital10.8%11.1%11.2%11.1%11.4%
Tier 1 Risk-based Capital11.7%12.1%12.2%12.1%12.5%
Total Risk-based Capital12.5%12.7%12.8%12.8%13.2%
Tier 1 Leverage10.2%10.5%10.4%10.4%10.2%
      
Summit Community Bank, Inc.     
CET1 Risk-based Capital11.7%12.1%12.2%11.9%12.3%
Tier 1 Risk-based Capital11.7%12.1%12.2%11.9%12.3%
Total Risk-based Capital12.5%12.7%12.9%12.6%13.0%
Tier 1 Leverage10.2%10.6%10.4%10.2%10.0%
           


SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)   
Loan Composition (unaudited)     
      
Dollars in thousands3/31/202012/31/20199/30/20196/30/20193/31/2019
      
Commercial$224,659 $207,138 $199,391 $204,138 $189,248
Mortgage warehouse lines 166,826  126,237  145,039  101,607  49,355
Commercial real estate              
Owner occupied 331,486  276,218  255,828  262,901  256,671
Non-owner occupied 580,619  629,206  567,670  574,677  585,809
Construction and development              
Land and development 92,332  84,112  69,589  67,769  64,192
Construction 43,121  37,523  56,255  46,975  36,040
Residential real estate              
Non-jumbo 378,540  354,963  359,399  360,752  359,107
Jumbo 64,944  70,947  69,815  70,171  69,313
Home equity 75,170  76,568  78,493  81,373  80,370
Consumer 36,611  36,470  36,982  36,715  36,046
Other 12,961  14,117  13,371  11,924  12,045
Total loans, net of unearned fees 2,007,269  1,913,499  1,851,832  1,819,002  1,738,196
Less allowance for credit losses 24,608  13,074  12,941  13,152  13,132
Loans, net$1,982,661 $1,900,425 $1,838,891 $1,805,850 $1,725,064
               


SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)   
Deposit Composition (unaudited)    
      
Dollars in thousands3/31/202012/31/20199/30/20196/30/20193/31/2019
Core deposits     
Non-interest bearing checking$337,446 $260,553 $241,999 $234,397 $258,679
Interest bearing checking 648,214  630,352  602,059  588,948  560,800
Savings 457,010  418,096  305,891  301,403  310,646
Time deposits 384,062  373,125  371,178  365,275  359,141
Total core deposits 1,826,732  1,682,126  1,521,127  1,490,023  1,489,266
               
Brokered time deposits 111,156  150,554  227,369  222,901  218,913
Other non-core time deposits 107,026  80,557  83,789  84,569  80,853
Total deposits$2,044,914 $1,913,237 $1,832,285 $1,797,493 $1,789,032
               


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)    
Asset Quality Information (unaudited)     
      
  For the Quarter Ended
 Dollars in thousands 3/31/202012/31/20199/30/20196/30/20193/31/2019
      
Gross loan charge-offs$698  $455  $843  $391  $414 
Gross loan recoveries (197)  (88)  (132)  (111)  (249)
Net loan charge-offs$501  $367  $711  $280  $165 
                    
Net loan charge-offs to average loans (annualized) 0.10%  0.08%  0.16%  0.06%  0.04%
Allowance for loan credit losses$24,608  $13,074  $12,941  $13,152  $13,132 
Allowance for loan credit losses as a percentage of period end loans 1.23%  0.68%  0.70%  0.72%  0.76%
Nonperforming assets:                   
Nonperforming loans                   
Commercial$560  $764  $835  $948  $729 
Commercial real estate 5,644   5,800   7,037   6,544   2,981 
Residential construction and development 11   326   191   66   24 
Residential real estate 4,343   4,404   4,461   5,657   5,928 
Consumer 65   116   115   160   182 
Other 100   100   100   100   130 
Total nonperforming loans 10,723   11,510   12,739   13,475   9,974 
Foreclosed properties                   
Commercial real estate 1,866   1,930   1,514   1,544   1,841 
Commercial construction and development 4,511   4,601   4,909   4,910   6,326 
Residential construction and development 10,774   11,169   12,847   13,132   14,347 
Residential real estate 1,136   1,576   1,709   1,804   1,879 
Total foreclosed properties 18,287   19,276   20,979   21,390   24,393 
Other repossessed assets 49   17   16   12   34 
Total nonperforming assets$29,059  $30,803  $33,734  $34,877  $34,401 
                    
Nonperforming loans to period end loans 0.53%  0.60%  0.69%  0.74%  0.57%
Nonperforming assets to period end assets 1.16%  1.28%  1.45%  1.52%  1.53%
                    
Troubled debt restructurings                   
Performing$22,966  $23,339  $23,420  $23,266  $27,845 
Nonperforming 2,831   2,337   2,443   2,915   - 
Total troubled debt restructurings$25,797  $25,676  $25,863  $26,181  $27,845 
                    


Loans Past Due 30-89 Days (unaudited)     
  For the Quarter Ended
 Dollars in thousands 3/31/202012/31/20199/30/20196/30/20193/31/2019
               
Commercial$160 $111 $390 $375 $264
Commercial real estate 2,106  1,196  312  1,719  4,128
Construction and development 53  236  65  235  179
Residential real estate 5,178  4,775  5,573  5,670  2,944
Consumer 222  269  365  234  432
Other 7  25  63  9  52
Total$7,726 $6,612 $6,768 $8,242 $7,999
               


SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)         
Average Balance Sheet, Interest Earnings & Expenses and Average Rates      
Q1 2020 vs Q4 2019 vs Q1 2019 (unaudited)          
            
 Q1 2020 Q4 2019 Q1 2019
 AverageEarnings /Yield / AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate BalancesExpenseRate
            
ASSETS           
Interest earning assets           
Loans, net of unearned interest (1)             
Taxable$1,935,473  $25,089 5.21% $1,853,197  $24,622 5.27% $1,712,286  $22,907 5.43%
Tax-exempt (2) 14,873   185 5.00%  15,738   189 4.76%  14,907   184 5.01%
Securities           
Taxable 258,889   1,757 2.73%  218,375   1,654 3.00%  195,932   1,687 3.49%
Tax-exempt (2) 70,239   699 4.00%  69,276   686 3.93%  114,831   1,139 4.02%
Interest bearing deposits other banks and Federal funds sold 35,648   98 1.11%  32,779   105 1.27%  51,187   230 1.82%
Total interest earning assets 2,315,122   27,828 4.83%  2,189,365   27,256 4.94%  2,089,143   26,147 5.08%
            
Noninterest earning assets           
Cash & due from banks 14,422     12,932     12,825   
Premises & equipment 46,151     44,136     38,404   
Other assets 120,846     103,481     113,340   
Allowance for credit losses (20,452)    (13,055)    (13,309)  
Total assets$2,476,089    $2,336,859    $2,240,403   
            
LIABILITIES AND SHAREHOLDERS' EQUITY                             
            
Liabilities           
Interest bearing liabilities           
Interest bearing demand deposits$643,955  $1,081 0.68% $619,939  $1,378 0.88% $556,766  $1,663 1.21%
Savings deposits 449,021   1,337 1.20%  351,653   1,201 1.35%  310,848   898 1.17%
Time deposits 615,102   2,933 1.92%  641,160   3,373 2.09%  654,404   3,003 1.86%
Short-term borrowings 119,607   630 2.12%  188,007   1,062 2.24%  200,297   1,472 2.98%
Long-term borrowings and subordinated debentures 20,304   219 4.34%  20,308   230 4.49%  20,321   259 5.17%
Total interest bearing liabilities 1,847,989   6,200 1.35%  1,821,067   7,244 1.58%  1,742,636   7,295 1.70%
            
Noninterest bearing liabilities           
Demand deposits 339,340     248,159     248,354   
Other liabilities 28,400     22,856     18,322   
Total liabilities 2,215,729     2,092,082     2,009,312   
            
Shareholders' equity 260,360     244,777     231,091   
Total liabilities and shareholders' equity$2,476,089    $2,336,859    $2,240,403   
            
NET INTEREST EARNINGS  $21,628    $20,012    $18,852 
            
NET INTEREST MARGIN   3.76%    3.63%    3.66%
            

(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 $185,000, $184,000, and $279,000 for Q1 2020, Q4 2019 and Q1 2019, respectively.

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

Summit Financial Group, Inc.

Source: Summit Financial Group, Inc.