SMMF Summit Financial Group Inc

Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported second quarter 2020 net income of $6.95 million, or $0.54 per diluted share. In comparison, earnings for first quarter 2020 were $4.51 million, or $0.35 per diluted share, and for second quarter 2019 were $8.56 million, or $0.68 per diluted share.

For the six months ended June 30, 2020, Summit recorded net income of $11.5 million, or $0.88 per diluted share, compared with $15.7 million, or $1.23 per diluted share, for the comparable 2019 six-month period, representing a decrease of 26.8 percent or 28.5 percent per diluted share. 

H. Charles Maddy, III, President and Chief Executive Officer of Summit commented, “I am very gratified to report Summit achieved another quarter of strong core operating performance, highlighted by exceptional growth in net interest income, a relatively stable net interest margin and well-controlled noninterest expenses, despite the many economic and operational challenges posed by the COVID-19 crisis. I am especially proud of our management and employees as they continue to put forth consistent, high levels of client service during this uncertain time.”

Highlights for Q2 2020

• Provision for credit losses of $3.00 million in Q2 2020 compared to $5.25 million in Q1 2020 and $300,000 in Q2 2019; while the increased credit provisions in 2020 resulted principally due to the estimated potential future economic impact of the COVID-19 crisis, $908,000 of the Q2 2020 provision for credit losses was attributable to loans acquired in conjunction with the purchase of the MVB Bank branches.
• Net interest income increased 30.3 percent (annualized) compared to Q1 2020 and increased 19.7 percent versus the same period in 2019, primarily due to loan growth and lower funding costs.
• Net interest margin in Q2 2020 decreased 8 basis points to 3.68 percent as compared to the linked quarter, as both yields on interest earning assets and deposit and other funding costs declined 38 basis points.
• Completed acquisition of four branch banking offices located in the economically vibrant Eastern Panhandle of West Virginia from MVB Bank, Inc.
• Mortgage warehouse lines of credit increased $85.6 million during Q2 2020.
• 760 SBA PPP loans were originated during the quarter totaling $99.1 million.
• Excluding mortgage warehouse lines of credit, SBA PPP loans and loans acquired in conjunction with the purchase of the MVB Bank branches, loan balances decreased $7.39 million during the quarter.
• Efficiency ratio was 51.97 percent compared to 51.41 percent in the linked quarter and 56.45 percent for Q2 2019.
• Realized no securities gains or losses in Q2 2020 compared to realized net securities gains of $1.04 million in the linked quarter.
• Merger expenses were $637,000 in Q2 2020 compared to $788,000 in the linked quarter.
• Net foreclosed properties expenses decreased to $240,000 in Q2 2020 compared to $966,000 in Q1 2020; this is primarily the result of write downs of foreclosed properties to fair values totaling $946,000 in Q1 2020 compared to $218,000 in Q2 2020, while realized net gains on sales of foreclosed properties were $61,000 during both Q1 and Q2 2020.
• Nonperforming assets as a percentage of total assets improved to 1.07 percent compared to 1.16 percent for the linked quarter and 1.52 percent at the end of Q2 2019.

COVID-19 Impacts

Operations

As the COVID-19 related events unfolded throughout first half 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. 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 remains 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 June 30, 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 9.0% at June 30, 2020, which is well in excess of the well-capitalized regulatory minimum of 5.0%.

In addition, management believes the Company’s liquidity position remains 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 June 30, 2020, the Company’s cash and cash equivalent balances were $42.8 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 June 30, 2020, the Company’s available-for-sale securities portfolio totaled $322.5 million, $175.1 million of which was unpledged as collateral. The Company bank subsidiary’s unused borrowing capacity at the Federal Home Loan Bank of Pittsburgh at June 30, 2020 was $758.3 million, and it maintained $171.6 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 our liquidity profile.

Lending

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

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

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 June 30, 2020. We anticipate that COVID-19 related loan modifications will continue throughout 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 half 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 remain unknown at present.

Merger & Acquisition Activity

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. Summit assumed approximately $195.0 million in deposits and acquired approximately $35.3 million in loans in conjunction with this purchase. Further, 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. At consummation, Cornerstone had total assets of $195.0 million, loans of $39.8 million, and deposits of $173.0 million.

Accordingly, the results of operations of Cornerstone and acquired MVB Bank branches are included in Summit’s consolidated results of operations from the dates of acquisition, and therefore Summit’s first half 2020 results reflect increased levels of average balances, income and expenses compared to its first quarter 2019 and fourth quarter 2019 results. 

Asset Quality

We realized net loan recoveries of $51,000 in second quarter 2020 compared to first quarter 2020 net loan charge-offs of $501,000 (0.10 percent of average loans annualized) while $2.51 million and $4.73 million were added to the allowance for loan credit losses through the provision for credit losses during Q2 2020 and Q1 2020, respectively. The allowance for loan credit losses stood at 1.22 percent of total loans at June 30, 2020, compared to 0.68 percent at year-end 2019.

Similarly, during Q2 2020 and Q1 2020, we also added $493,000 and $551,000, respectively, to the allowance for credit losses on unfunded loan commitments through the provision for credit losses.

As of June 30, 2020, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $30.5 million, or 1.07 percent of assets. This compares to $29.1 million, or 1.16 percent of assets at the linked quarter-end and $34.9 million, or 1.52 percent of assets at the end of Q2 2019.

Results from Operations

Total revenue for second quarter 2020, consisting of net interest income and noninterest income, increased 2.3 percent to $26.7 million compared to $26.1 million for second quarter 2019, which included $1.1 million realized securities gains and $1.9 million gain on sale of Summit Insurance Services, LLC. For the year-to-date period ended June 30, 2020, total revenue was $52.6 million compared to $48.9 million for the same period of 2019, representing a 7.6 percent increase primarily as a result of higher net interest income.

For the second quarter of 2020, net interest income was $23.1 million, an increase of 19.7 percent from the $19.3 million reported in the prior-year second quarter and a 7.6 percent increase compared to the linked quarter. The net interest margin for second quarter 2020 was 3.68 percent compared to 3.76 percent for the linked quarter and 3.72 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 3.61 percent for Q2 2020, 3.70 percent for Q1 2020 and 3.62 percent for Q2 2019. 

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for second quarter 2020 was $3.60 million compared to $4.50 million for the linked quarter and $6.81 million for the comparable period of 2019, which included $1.09 million realized securities gains and $1.91 million gain on sale of Summit Insurance Services, LLC. Excluding realized securities gains and the gain on the sale of Summit Insurance Services, LLC, noninterest income was $3.82 million for second quarter 2019.

We recorded a $3.0 million provision for credit losses during second quarter 2020 compared to $5.25 million for the linked quarter and $300,000 in Q2 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.

Q2 2020 total noninterest expense decreased 0.9 percent to $15.2 million compared to $15.3 million for the prior-year second quarter and increased 1.3 percent compared to the linked quarter. 

Noninterest expense for the first half of 2020 increased 3.4 percent compared to the first half of 2019. Our well-controlled noninterest expense includes increased expenses associated with the acquired Cornerstone and MVB branch operations (including merger-related expenses), decreased write-downs of foreclosed properties and income related to deferred director compensation plan expense of $100,000 for the first six months of 2020 compared to expense of $594,000 for the same period of 2019.  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 2020, we recognized income related to deferred director compensation this quarter.

Balance Sheet

At June 30, 2020, total assets were $2.86 billion, an increase of $457.9 million, or 19.0 percent since December 31, 2019. Total loans, net of unearned fees and allowance for loan losses, were $2.19 billion at June 30, 2020, up $292.1 million, or 15.4 percent, from the $1.90 billion reported at year-end 2019.  Loans, excluding mortgage warehouse lines of credit and acquired MVB loans, increased $91.7 million during the quarter, or 19.9 percent (annualized), and have increased $144.9 million, or 16.2 percent (on an annualized basis) since year-end 2019.

At June 30, 2020, core deposits were $2.26 billion, an increase of $574.6 million, or 34.2 percent, since year end 2019. During first half 2020, checking deposits increased $382.5 million or 42.9 percent, core time deposits grew by $49.2 million or 13.2 percent and savings deposits increased $142.9 million or 34.2 percent.  Excluding acquired deposits (of both Cornerstone and MVB branches), core deposits have increased $206.6 million, or 12.3 percent, since year end 2019.

Shareholders’ equity was $263.4 million as of June 30, 2020 compared to $247.8 million at December 31, 2019.  In conjunction with the acquisition of Cornerstone on January 1, 2020, Summit issued 570,000 shares of common stock valued at $15.4 million to the former Cornerstone shareholders.

Tangible book value per common share decreased to $16.63 at June 30, 2020 compared to $18.11 at December 31, 2019. Summit had 12,922,045 outstanding common shares at Q2 2020 quarter end compared to 12,408,542 at year end 2019.

As announced in Q1 2020, the Board of Directors authorized the open market repurchase of up to 750,000 shares of the issued and outstanding shares of Summit's common stock. The timing and quantity of stock purchases under this repurchase plan are at the discretion of management. During Q2 2020, 8,722 shares of our common stock were repurchased under the Plan at an average price of $18.69 per share.

Asset Quality

As of June 30, 2020, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $30.5 million, or 1.07 percent of assets. This compares to $29.1 million, or 1.16 percent of assets at the linked quarter-end, and $30.8 million, or 1.28 percent of assets at year end 2019.

Second quarter 2020 net loan recoveries were $51,000, or 0.01 percent of average loans annualized; while adding $3.0 million to the allowance for loan losses through the provision for loan credit losses. The allowance for loan credit losses stood at 1.22 percent of total loans at June 30, 2020, compared to 0.68 percent at year-end 2019. 

About the Company

Summit Financial Group, Inc. is a $2.86 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 40 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)
Q2 2020 vs Q2 2019
	For the Quarter Ended					Percent
Dollars in thousands	6/30/2020		6/30/2019			Change
Statements of Income
Interest income
Loans, including fees	$	25,624		$	24,352	5.2	%
Securities		2,253			2,396	-6.0	%
Other		60			134	-55.2	%
Total interest income		27,937			26,882	3.9	%
Interest expense
Deposits		4,186			5,967	-29.8	%
Borrowings		685			1,652	-58.5	%
Total interest expense		4,871			7,619	-36.1	%
Net interest income		23,066			19,263	19.7	%
Provision for credit losses		3,000			300	n/m
Net interest income after provision for credit losses		20,066			18,963	5.8	%
Noninterest income
Insurance commissions		24			606	-96.0	%
Trust and wealth management fees		582			612	-4.9	%
Service charges on deposit accounts		882			1,224	-27.9	%
Bank card revenue		1,087			893	21.7	%
Realized securities gains		-			1,086	n/a
Gain on sale of Summit Insurance Services, LLC		-			1,906	n/a
Bank owned life insurance income		275			248	10.9	%
Other income		748			235	218.3	%
Total noninterest income		3,598			6,810	-47.2	%
Noninterest expense
Salaries and employee benefits		7,930			7,576	4.7	%
Net occupancy expense		977			880	11.0	%
Equipment expense		1,360			1,219	11.6	%
Professional fees		417			475	-12.2	%
Advertising and public relations		93			155	-40.0	%
Amortization of intangibles		410			420	-2.4	%
FDIC premiums		110			88	25.0	%
Bank card expense		560			473	18.4	%
Foreclosed properties expense, net of losses		240			1,545	-84.5	%
Merger-related expense		637			382	66.8	%
Other expenses		2,463			2,116	16.4	%
Total noninterest expense		15,197			15,329	-0.9	%
Income before income taxes		8,467			10,444	-18.9	%
Income taxes		1,518			1,880	-19.3	%
Net income	$	6,949		$	8,564	-18.9	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Quarterly Performance Summary (unaudited)
Q2 2020 vs Q2 2019
	For the Quarter Ended						Percent
	6/30/2020			6/30/2019			Change
Per Share Data
Earnings per common share
Basic	$	0.54		$	0.68		-20.6	%
Diluted	$	0.54		$	0.68		-20.6	%
Cash dividends	$	0.17		$	0.15		13.3	%
Dividend payout ratio		31.7	%		21.9	%	44.7	%
Average common shares outstanding
Basic		12,911,979			12,539,095		3.0	%
Diluted		12,943,804			12,600,071		2.7	%
Common shares outstanding at period end		12,922,045			12,449,986		3.8	%
Performance Ratios
Return on average equity		10.75	%		14.62	%	-26.5	%
Return on average tangible equity		13.57	%		17.02	%	-20.3	%
Return on average assets		1.02	%		1.52	%	-32.9	%
Net interest margin (A)		3.68	%		3.72	%	-1.1	%
Efficiency ratio (B)		51.97	%		56.45	%	-7.9	%

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)
Six Month Performance Summary (unaudited)
2020 vs 2019
	For the Six Months Ended					Percent
Dollars in thousands	6/30/2020		6/30/2019			Change
Statements of Income
Interest income
Loans, including fees	$	50,859		$	47,404	7.3	%
Securities		4,563			4,981	-8.4	%
Other		158			365	-56.7	%
Total interest income		55,580			52,750	5.4	%
Interest expense
Deposits		9,537			11,531	-17.3	%
Borrowings		1,534			3,383	-54.7	%
Total interest expense		11,071			14,914	-25.8	%
Net interest income		44,509			37,836	17.6	%
Provision for credit losses		8,250			550	n/m
Net interest income after provision for credit losses		36,259			37,286	-2.8	%
Noninterest income
Insurance commissions		31			1,780	-98.3	%
Trust and wealth management fees		1,247			1,198	4.1	%
Service charges on deposit accounts		2,145			2,405	-10.8	%
Bank card revenue		2,020			1,707	18.3	%
Realized securities gains		1,038			1,082	-4.1	%
Gain on sale of Summit Insurance Services, LLC		-			1,906	n/a
Bank owned life insurance income		539			486	10.9	%
Other income		1,079			476	126.7	%
Total noninterest income		8,099			11,040	-26.6	%
Noninterest expense
Salaries and employee benefits		15,601			14,923	4.5	%
Net occupancy expense		1,860			1,803	3.2	%
Equipment expense		2,789			2,398	16.3	%
Professional fees		804			878	-8.4	%
Advertising and public relations		244			308	-20.8	%
Amortization of intangibles		839			897	-6.5	%
FDIC premiums		275			88	212.5	%
Bank card expense		1,063			911	16.7	%
Foreclosed properties expense, net of losses		1,207			1,930	-37.5	%
Merger-related expense		1,425			445	220.2	%
Other expenses		4,088			4,608	-11.3	%
Total noninterest expense		30,195			29,189	3.4	%
Income before income taxes		14,163			19,137	-26.0	%
Income taxes		2,708			3,481	-22.2	%
Net income	$	11,455		$	15,656	-26.8	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Six Month Performance Summary (unaudited)
2020 vs 2019
	For the Six Months Ended						Percent
	6/30/2020			6/30/2019			Change
Per Share Data
Earnings per common share
Basic	$	0.89		$	1.24		-28.2	%
Diluted	$	0.88		$	1.23		-28.5	%
Cash dividends	$	0.34		$	0.29		17.2	%
Dividend payout ratio		38.6	%		23.3	%	65.7	%
Average common shares outstanding
Basic		12,940,590			12,627,806		2.5	%
Diluted		12,983,146			12,688,865		2.3	%
Common shares outstanding at period end		12,922,045			12,449,986		3.8	%
Performance Ratios
Return on average equity		8.83	%		13.46	%	-34.4	%
Return on average tangible equity		10.99	%		15.93	%	-31.0	%
Return on average assets		0.78	%		1.39	%	-43.9	%
Net interest margin (A)		3.72	%		3.69	%	0.8	%
Efficiency ratio (B)		51.70	%		56.35	%	-8.3	%

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	6/30/2020		3/31/2020			12/31/2019			9/30/2019			6/30/2019
Statements of Income
Interest income
Loans, including fees	$	25,624		$	25,235		$	24,772		$	24,940		$	24,352
Securities		2,253			2,310			2,195			2,184			2,396
Other		60			98			105			125			134
Total interest income		27,937			27,643			27,072			27,249			26,882
Interest expense
Deposits		4,186			5,351			5,952			6,214			5,967
Borrowings		685			849			1,292			1,615			1,652
Total interest expense		4,871			6,200			7,244			7,829			7,619
Net interest income		23,066			21,443			19,828			19,420			19,263
Provision for credit losses		3,000			5,250			500			500			300
Net interest income after provision for credit losses		20,066			16,193			19,328			18,920			18,963
Noninterest income
Insurance commissions		24			7			90			40			606
Trust and wealth management fees		582			665			734			632			612
Service charges on deposit accounts		882			1,263			1,377			1,312			1,224
Bank card revenue		1,087			933			906			924			893
Realized securities gains (losses)		-			1,038			403			453			1,086
Gain on sale of Summit Insurance Services, LLC		-			-			-			-			1,906
Bank owned life insurance income		275			264			310			247			248
Other income		748			332			584			151			235
Total noninterest income		3,598			4,502			4,404			3,759			6,810
Noninterest expense
Salaries and employee benefits		7,930			7,672			7,099			7,044			7,576
Net occupancy expense		977			883			815			799			880
Equipment expense		1,360			1,429			1,278			1,296			1,219
Professional fees		417			387			412			388			475
Advertising and public relations		93			152			214			177			155
Amortization of intangibles		410			429			401			404			420
FDIC premiums		110			165			-			-			88
Bank card expense		560			503			454			455			473
Foreclosed properties expense, net		240			966			262			305			1,545
Merger-related expenses		637			788			98			74			382
Other expenses		2,463			1,625			2,126			1,864			2,116
Total noninterest expense		15,197			14,999			13,159			12,806			15,329
Income before income taxes		8,467			5,696			10,573			9,873			10,444
Income tax expense		1,518			1,190			2,424			1,812			1,880
Net income	$	6,949		$	4,506		$	8,149		$	8,061		$	8,564

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Five Quarter Performance Summary (unaudited)
	For the Quarter Ended
	6/30/2020			3/31/2020			12/31/2019			9/30/2019			6/30/2019
Per Share Data
Earnings per common share
Basic	$	0.54		$	0.35		$	0.66		$	0.65		$	0.68
Diluted	$	0.54		$	0.35		$	0.65		$	0.65		$	0.68
Cash dividends	$	0.17		$	0.17		$	0.15		$	0.15		$	0.15
Dividend payout ratio		31.7	%		49.1	%		22.3	%		23.0	%		21.9	%
Average common shares outstanding
Basic		12,911,979			12,975,429			12,400,932			12,412,982			12,539,095
Diluted		12,943,804			13,028,409			12,458,702			12,467,777			12,600,071
Common shares outstanding at period end		12,922,045			12,920,244			12,408,542			12,400,804			12,449,986
Performance Ratios
Return on average equity		10.75	%		6.92	%		13.32	%		13.51	%		14.62	%
Return on average tangible equity		13.57	%		8.55	%		15.25	%		15.55	%		17.02	%
Return on average assets		1.02	%		0.73	%		1.39	%		1.41	%		1.52	%
Net interest margin (A)		3.68	%		3.76	%		3.63	%		3.63	%		3.72	%
Efficiency ratio (B)		51.97	%		51.41	%		52.25	%		52.91	%		56.45	%

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	6/30/2020			3/31/2020				12/31/2019				9/30/2019				6/30/2019
Assets
Cash and due from banks	$	16,572			$	18,633			$	28,137			$	12,374			$	13,481
Interest bearing deposits other banks		26,218				22,821				33,751				40,296				42,994
Securities, available for sale		322,539				305,045				276,355				265,347				269,920
Securities, held to maturity		80,497				-				-				-				-
Loans, net		2,192,541				1,982,661				1,900,425				1,838,891				1,805,850
Property held for sale		17,954				18,287				19,276				20,979				21,390
Premises and equipment, net		51,847				47,078				44,168				43,592				42,896
Goodwill and other intangible assets		48,513				34,132				23,022				23,182				23,585
Cash surrender value of life insurance policies		55,315				46,497				43,603				43,216				42,976
Other assets		49,355				38,168				34,755				35,732				36,022
Total assets	$	2,861,351			$	2,513,322			$	2,403,492			$	2,323,609			$	2,299,114
Liabilities and Shareholders' Equity
Deposits	$	2,451,769			$	2,044,914			$	1,913,237			$	1,832,285			$	1,797,493
Short-term borrowings		90,945				161,745				199,345				206,694				225,343
Long-term borrowings and subordinated debentures		20,297				20,301				20,306				20,311				20,315
Other liabilities		34,909				30,337				22,840				21,897				20,262
Shareholders' equity		263,431				256,025				247,764				242,422				235,701
Total liabilities and shareholders' equity	$	2,861,351			$	2,513,322			$	2,403,492			$	2,323,609			$	2,299,114
Book value per common share	$	20.39			$	19.82			$	19.97			$	19.55			$	18.93
Tangible book value per common share	$	16.63			$	17.17			$	18.11			$	17.68			$	17.04
Tangible common equity to tangible assets		7.6	%			9.0	%			9.4	%			9.5	%			9.3	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)
Regulatory Capital Ratios (unaudited)
	6/30/2020		3/31/2020		12/31/2019		9/30/2019		6/30/2019
Summit Financial Group, Inc.
CET1 Risk-based Capital	10.5	%	10.8	%	11.1	%	11.2	%	11.1	%
Tier 1 Risk-based Capital	9.7	%	11.7	%	12.1	%	12.2	%	12.1	%
Total Risk-based Capital	11.3	%	12.5	%	12.7	%	12.8	%	12.8	%
Tier 1 Leverage	9.0	%	10.2	%	10.5	%	10.4	%	10.4	%
Summit Community Bank, Inc.
CET1 Risk-based Capital	10.5	%	11.7	%	12.1	%	12.2	%	11.9	%
Tier 1 Risk-based Capital	10.5	%	11.7	%	12.1	%	12.2	%	11.9	%
Total Risk-based Capital	11.4	%	12.5	%	12.7	%	12.9	%	12.6	%
Tier 1 Leverage	9.0	%	10.2	%	10.6	%	10.4	%	10.2	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)
Loan Composition (unaudited)
Dollars in thousands	6/30/2020		3/31/2020			12/31/2019			9/30/2019			6/30/2019
Commercial	$	311,755		$	224,659		$	207,138		$	199,391		$	204,138
Mortgage warehouse lines		252,472			166,826			126,237			145,039			101,607
Commercial real estate
Owner occupied		336,143			331,486			276,218			255,828			262,901
Non-owner occupied		593,168			580,619			629,206			567,670			574,677
Construction and development
Land and development		92,706			92,332			84,112			69,589			67,769
Construction		48,115			43,121			37,523			56,255			46,975
Residential real estate
Conventional		371,225			378,540			354,963			359,399			360,752
Jumbo		76,360			64,944			70,947			69,815			70,171
Home equity		88,929			75,170			76,568			78,493			81,373
Consumer		35,781			36,611			36,470			36,982			36,715
Other		13,053			12,961			14,117			13,371			11,924
Total loans, net of unearned fees		2,219,707			2,007,269			1,913,499			1,851,832			1,819,002
Less allowance for credit losses		27,166			24,608			13,074			12,941			13,152
Loans, net	$	2,192,541		$	1,982,661		$	1,900,425		$	1,838,891		$	1,805,850

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)
Deposit Composition (unaudited)
Dollars in thousands	6/30/2020		3/31/2020			12/31/2019			9/30/2019			6/30/2019
Core deposits
Non-interest bearing checking	$	443,190		$	337,446		$	260,553		$	241,999		$	234,397
Interest bearing checking		830,258			648,214			630,352			602,059			588,948
Savings		561,029			457,010			418,096			305,891			301,403
Time deposits		422,286			384,062			373,125			371,178			365,275
Total core deposits		2,256,763			1,826,732			1,682,126			1,521,127			1,490,023
Brokered time deposits		90,279			111,156			150,554			227,369			222,901
Other non-core time deposits		104,727			107,026			80,557			83,789			84,569
Total deposits	$	2,451,769		$	2,044,914		$	1,913,237		$	1,832,285		$	1,797,493

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Asset Quality Information (unaudited)
	For the Quarter Ended
Dollars in thousands	6/30/2020			3/31/2020				12/31/2019				9/30/2019				6/30/2019
Gross loan charge-offs	$	218			$	698			$	455			$	843			$	391
Gross loan recoveries		(269	)			(197	)			(88	)			(132	)			(111	)
Net loan charge-offs/(recoveries)	$	(51	)		$	501			$	367			$	711			$	280
Net loan charge-offs to average loans (annualized)		-0.01	%			0.10	%			0.08	%			0.16	%			0.06	%
Allowance for loan credit losses	$	27,166			$	24,608			$	13,074			$	12,941			$	13,152
Allowance for loan credit losses as a percentage of period end loans		1.22	%			1.23	%			0.68	%			0.70	%			0.72	%
Allowance for credit losses on unfunded loan commitments	$	3,477			$	2,984			$	-			$	-			$	-
Nonperforming assets:
Nonperforming loans
Commercial	$	754			$	560			$	764			$	835			$	948
Commercial real estate		5,822				5,644				5,800				7,037				6,544
Residential construction and development		14				11				326				191				66
Residential real estate		5,873				4,343				4,404				4,461				5,657
Consumer		29				65				116				115				160
Other		35				100				100				100				100
Total nonperforming loans		12,527				10,723				11,510				12,739				13,475
Foreclosed properties
Commercial real estate		1,774				1,866				1,930				1,514				1,544
Commercial construction and development		4,511				4,511				4,601				4,909				4,910
Residential construction and development		10,645				10,774				11,169				12,847				13,132
Residential real estate		1,024				1,136				1,576				1,709				1,804
Total foreclosed properties		17,954				18,287				19,276				20,979				21,390
Other repossessed assets		-				49				17				16				12
Total nonperforming assets	$	30,481			$	29,059			$	30,803			$	33,734			$	34,877
Nonperforming loans to period end loans		0.56	%			0.53	%			0.60	%			0.69	%			0.74	%
Nonperforming assets to period end assets		1.07	%			1.16	%			1.28	%			1.45	%			1.52	%
Troubled debt restructurings
Performing	$	22,117			$	22,966			$	23,339			$	23,420			$	23,266
Nonperforming		3,003				2,831				2,337				2,443				2,915
Total troubled debt restructurings	$	25,120			$	25,797			$	25,676			$	25,863			$	26,181

Loans Past Due 30-89 Days (unaudited)
	For the Quarter Ended
Dollars in thousands	6/30/2020		3/31/2020			12/31/2019			9/30/2019			6/30/2019
Commercial	$	196		$	160		$	111		$	390		$	375
Commercial real estate		1,231			2,106			1,196			312			1,719
Construction and development		8			53			236			65			235
Residential real estate		2,763			5,178			4,775			5,573			5,670
Consumer		164			222			269			365			234
Other		3			7			25			63			9
Total	$	4,365		$	7,726		$	6,612		$	6,768		$	8,242

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2020 vs Q1 2020 vs Q2 2019 (unaudited)
	Q2 2020										Q1 2020										Q2 2019
	Average			Earnings /			Yield /				Average			Earnings /			Yield /				Average			Earnings /			Yield /
Dollars in thousands	Balances			Expense			Rate				Balances			Expense			Rate				Balances			Expense			Rate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable	$	2,118,158			$	25,466		4.84	%		$	1,935,473			$	25,089		5.21	%		$	1,749,032			$	24,184		5.55	%
Tax-exempt (2)		17,244				200		4.66	%			14,873				185		5.00	%			14,695				213		5.81	%
Securities
Taxable		248,792				1,453		2.35	%			258,889				1,757		2.73	%			203,049				1,607		3.17	%
Tax-exempt (2)		120,385				1,012		3.38	%			70,239				699		4.00	%			100,307				999		3.99	%
Interest bearing deposits other banks and Federal funds sold		41,776				60		0.58	%			35,648				98		1.11	%			38,214				134		1.41	%
Total interest earning assets		2,546,355				28,191		4.45	%			2,315,122				27,828		4.83	%			2,105,297				27,137		5.17	%
Noninterest earning assets
Cash & due from banks		16,672										14,422										14,124
Premises & equipment		50,457										46,151										41,318
Other assets		140,355										120,846										109,642
Allowance for credit losses		(25,799	)									(20,452	)									(13,260	)
Total assets	$	2,728,040									$	2,476,089									$	2,257,121
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits	$	764,852			$	369		0.19	%		$	643,955			$	1,081		0.68	%		$	575,240			$	1,731		1.21	%
Savings deposits		512,634				1,200		0.94	%			449,021				1,337		1.20	%			305,342				921		1.21	%
Time deposits		625,717				2,617		1.68	%			615,102				2,933		1.92	%			673,272				3,315		1.97	%
Short-term borrowings		95,744				499		2.10	%			119,607				630		2.12	%			187,120				1,397		2.99	%
Long-term borrowings and subordinated debentures		20,299				186		3.69	%			20,304				219		4.34	%			20,317				255		5.03	%
Total interest bearing liabilities		2,019,246				4,871		0.97	%			1,847,989				6,200		1.35	%			1,761,291				7,619		1.74	%
Noninterest bearing liabilities
Demand deposits		417,992										339,340										241,811
Other liabilities		32,238										28,400										19,750
Total liabilities		2,469,476										2,215,729										2,022,852
Shareholders' equity		258,564										260,360										234,269
Total liabilities and shareholders' equity	$	2,728,040									$	2,476,089									$	2,257,121
NET INTEREST EARNINGS					$	23,320									$	21,628									$	19,518
NET INTEREST MARGIN								3.68	%									3.76	%									3.72	%
(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 $254,000, $185,000, and $256,000 for Q2 2020, Q1 2020 and Q2 2019, respectively.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2020 vs YTD 2019 (unaudited)
	YTD 2020										YTD 2019
	Average			Earnings /			Yield /				Average			Earnings /			Yield /
Dollars in thousands	Balances			Expense			Rate				Balances			Expense			Rate
ASSETS
Interest earning assets
Loans, net of unearned  interest (1)
Taxable	$	2,026,814			$	50,555		5.02	%		$	1,730,801			$	47,090		5.49	%
Tax-exempt (2)		16,059				385		4.82	%			14,801				397		5.41	%
Securities
Taxable		253,840				3,211		2.54	%			199,759				3,292		3.32	%
Tax-exempt (2)		95,313				1,710		3.61	%			107,586				2,138		4.01	%
Interest bearing deposits other banks and Federal funds sold		38,712				159		0.83	%			44,910				365		1.64	%
Total interest earning assets		2,430,738				56,020		4.63	%			2,097,857				53,282		5.12	%
Noninterest earning assets
Cash & due from banks		15,548										13,005
Premises & equipment		48,303										39,877
Other assets		130,604										111,334
Allowance for loan losses		(24,342	)									(13,287	)
Total assets	$	2,600,851									$	2,248,786
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits	$	704,404			$	1,449		0.41	%		$	566,183			$	3,395		1.21	%
Savings deposits		480,827				2,537		1.06	%			307,990				1,819		1.19	%
Time deposits		620,409				5,550		1.80	%			663,853				6,317		1.92	%
Short-term borrowings		107,675				1,129		2.11	%			193,672				2,869		2.99	%
Long-term borrowings and subordinated debentures		20,301				405		4.01	%			20,319				514		5.10	%
		1,933,616				11,070		1.15	%			1,752,017				14,914		1.72	%
Noninterest bearing liabilities
Demand deposits		378,667										244,984
Other liabilities		29,106										19,096
Total liabilities		2,341,389										2,016,097
Shareholders' equity		259,462										232,689
Total liabilities and shareholders' equity	$	2,600,851									$	2,248,786
NET INTEREST EARNINGS					$	44,950									$	38,368
NET INTEREST MARGIN								3.72	%									3.69	%
(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 $440,000 and $532,000 for the YTD 2020 and YTD 2019 periods, respectively.

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