SMMF Summit Financial Group Inc

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		$	21,295	17.1%
	Securities		2,184			2,367	-7.7%
	Other		125			138	-9.4%
	Total interest income		27,249			23,800	14.5%
	Interest expense
	Deposits		6,214			4,714	31.8%
	Borrowings		1,615			1,873	-13.8%
	Total interest expense		7,829			6,587	18.9%
	Net interest income		19,420			17,213	12.8%
	Provision for loan losses		500			500	0.0%
	Net interest income after provision for loan losses		18,920			16,713	13.2%
	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			1,215	8.0%
	Bank card revenue		924			793	16.5%
	Realized securities gains		453			8	n/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			6,806	3.5%
	Net occupancy expense		799			856	-6.7%
	Equipment expense		1,296			1,118	15.9%
	Professional fees		388			503	-22.9%
	Advertising and public relations		177			170	4.1%
	Amortization of intangibles		404			413	-2.2%
	FDIC premiums		-			210	n/m
	Bank card expense		455			384	18.5%
	Foreclosed properties expense, net of losses		305			169	80.5%
	Merger-related expenses		74			86	-14.0%
	Other expenses		1,864			1,643	13.5%
	Total noninterest expense		12,806			12,358	3.6%
	Income before income taxes		9,873			8,566	15.3%
	Income taxes		1,812			1,667	8.7%
	Net income	$	8,061		$	6,899	16.8%

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	$	0.56	16.1%
	Diluted	$	0.65	$	0.55	18.2%
	Cash dividends	$	0.15	$	0.13	15.4%
	Dividend payout ratio		23.0%		23.3%	-1.3%
	Average common shares outstanding
	Basic		12,412,982		12,374,350	0.3%
	Diluted		12,467,777		12,439,051	0.2%
	Common shares outstanding at period end		12,400,804		12,382,450	0.1%
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		$	62,624	15.5%
	Securities		7,166			7,060	1.5%
	Other		490			412	18.9%
	Total interest income		80,000			70,096	14.1%
	Interest expense
	Deposits		17,745			12,572	41.1%
	Borrowings		4,998			5,779	-13.5%
	Total interest expense		22,743			18,351	23.9%
	Net interest income		57,257			51,745	10.7%
	Provision for loan losses		1,050			1,750	-40.0%
	Net interest income after provision for loan losses		56,207			49,995	12.4%
	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			3,421	8.6%
	Bank card revenue		2,631			2,343	12.3%
	Realized securities gains		1,535			828	85.4%
	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			13,235	11.8%
	Noninterest expense
	Salaries and employee benefits		21,966			20,550	6.9%
	Net occupancy expense		2,602			2,528	2.9%
	Equipment expense		3,694			3,271	12.9%
	Professional fees		1,266			1,222	3.6%
	Advertising and public relations		484			461	5.0%
	Amortization of intangibles		1,300			1,261	3.1%
	FDIC premiums		88			690	-87.2%
	Bank card expense		1,367			1,080	26.6%
	Foreclosed properties expense, net of losses		2,236			843	165.2%
	Merger-related expenses		519			86	503.5%
	Other expenses		6,473			5,415	19.5%
	Total noninterest expense		41,995			37,407	12.3%
	Income before income taxes		29,011			25,823	12.3%
	Income taxes		5,293			5,201	1.8%
	Net income	$	23,718		$	20,622	15.0%

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	$	1.67	13.2%
	Diluted	$	1.88	$	1.66	13.3%
	Cash dividends	$	0.44	$	0.39	12.8%
	Dividend payout ratio		23.2%		23.4%	-0.9%
	Average common shares outstanding
	Basic		12,555,411		12,366,612	1.5%
	Diluted		12,614,382		12,430,227	1.5%
	Common shares outstanding at period end		12,400,804		12,382,450	0.1%
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)
		9/30/2019	6/30/2019	3/31/2019	12/31/2018	9/30/2018
Summit Financial Group, Inc.
	CET1 Risk-based Capital	11.2%	11.1%	11.4%	11.1%	11.1%
	Tier 1 Risk-based Capital	12.2%	12.1%	12.5%	12.2%	12.2%
	Total Risk-based Capital	12.8%	12.8%	13.2%	12.9%	12.9%
	Tier 1 Leverage	10.4%	10.4%	10.2%	10.1%	10.1%
Summit Community Bank, Inc.
	CET1 Risk-based Capital	12.2%	11.9%	12.3%	12.0%	12.0%
	Tier 1 Risk-based Capital	12.2%	11.9%	12.3%	12.0%	12.0%
	Total Risk-based Capital	12.9%	12.6%	13.0%	12.8%	12.7%
	Tier 1 Leverage	10.4%	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.