EX-99 2 exhibit99earnings3rdquarte.htm EXHIBIT 99 Exhibit


EXHIBIT 99
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FOR RELEASE 6:00 AM ET, October 24, 2019

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

SUMMIT FINANCIAL GROUP REPORTS THIRD QUARTER AND FIRST NINE-MONTHS 2019 RESULTS
Q3 2019 Diluted EPS $0.65 compared to $0.68 for Q2 2019 and $0.55 for Q3 2018
MOOREFIELD, WV - October 24, 2019 (GLOBE NEWSWIRE) - Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported third quarter 2019 net income of $8.06 million, or $0.65 per diluted share. In comparison, earnings for second quarter 2019 were $8.56 million, or $0.68 per diluted share, and for third quarter 2018 were $6.90 million, or $0.55 per diluted share. In the second quarter 2019, we recognized a $1.91 million pre-tax gain on the sale of our former insurance agency, Summit Insurance Services, LLC (“SIS”). Summit achieved returns on average assets and average tangible equity in third quarter 2019 of 1.41 percent and 15.55 percent, respectively, compared to 1.31 percent and 15.53 percent, respectively, in the same period of 2018.
Third quarter 2019 earnings compared to both the linked quarter and third quarter 2018 were positively impacted by increased net interest income resulting primarily from loan growth and higher realized securities gains. Also positively impacting third quarter 2019 results, write-downs on foreclosed properties were $133,000 in Q3 2019 compared to $1.2 million in Q2 2019.
For the nine months ended September 30, 2019, Summit recorded net income of $23.7 million, or $1.88 per diluted share, compared with $20.6 million, or $1.66 per diluted share, for the comparable 2018 nine-month period, representing an increase of 15.0 percent or 13.3 percent per diluted share. Our returns on average assets and average tangible equity for the nine months ended September 30, 2019 were 1.40 percent and 15.80 percent, respectively, compared to 1.30 percent and 15.97 percent, respectively, for the same period of 2018.
Earnings for the nine months ended September 30, 2019 were positively impacted by increased net interest income resulting primarily from loan growth as well as a higher net interest margin, increased realized securities gains and the SIS gain. These results were partially offset by larger write-downs on foreclosed properties in Q2 2019 with the goal of selling such properties more rapidly, lower insurance commission revenue during 2019 and increased merger-related expenses.
Summit completed its acquisition of Peoples Bankshares, Inc. (“PBI”) and its subsidiary, First Peoples Bank, headquartered in Mullens, West Virginia on January 1, 2019 and converted its business processes and accounts to that of Summit’s during Q2 2019; accordingly, PBI’s results




of operations are included in Summit’s consolidated results of operations from the date of acquisition. Therefore, Summit’s third quarter and nine months ended September 30, 2019 period results reflect increased levels of average balances, income and expenses compared to the same periods of 2018. At consummation, PBI had total assets of $133.1 million, loans of $42.4 million, and deposits of $112.9 million.
Highlights for Q3 2019
Mortgage warehouse lines of credit increased $43.4 million during the quarter as we expanded our existing line participations and established several new participations in light of strong mortgage refinance and home purchase activity nationally;
Loan balances, excluding mortgage warehouse lines of credit, declined $10.6 million during the quarter, despite having increased $50.9 million year-to-date. The Q3 2019 decline in such loan balances is principally the result of payoffs of a couple significant commercial real estate loan participations;
Net interest income increased 3.26 percent (annualized) compared to Q2 2019 and increased 10.7 percent year-to-date 2019 versus the same period in 2018, primarily due to our loan growth;
Net interest margin in Q3 2019 declined 9 basis points to 3.63 percent as compared to Q2 2019 as yields on loans declined, while deposit and other funding costs remained stable;
Efficiency ratio improved to 52.91 percent compared to 56.45 percent in the linked quarter and 54.25 percent for Q3 2018, primarily as result of our sale of SIS which traditionally had a low operating margin;
Realized securities gains of $453,000 in Q3 2019 compared to $1.09 million in Q2;
Write-downs of foreclosed properties were $133,000 in Q3 2019 compared to $1.20 million in Q2 2019, while the net gain on sales of foreclosed properties decreased from $156,000 in Q2 2019 to $66,000 in Q3 2019;
Nonperforming assets as a percentage of total assets declined to 1.45 percent compared to 1.52 percent for the linked quarter and 1.82 percent for the year ago quarter; and
Announced our entering into a definitive merger agreement to acquire Cornerstone Financial Services, Inc. and its wholly-owned subsidiary, Cornerstone Bank, Inc., headquartered in West Union, West Virginia.
H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “I am very pleased to report that Summit achieved another quarter of solid core operating performance highlighted by core revenue growth, an improved efficiency ratio and continued improvement in asset quality. Further, I am encouraged that while the balances of our commercial and commercial real estate loan portfolios exhibited some modest contraction over the past quarter, we currently also have a robust pipeline of new loans located within our core footprint which have been approved and scheduled to close over the next few months. I am also particularly pleased by the opportunities represented by our pending acquisition of Cornerstone Financial Services, Inc., announced recently and expected to close at beginning of 2020. This deal will serve to combine Summit with a financially strong bank that has a similar culture, core values and guiding principles as ours, and shares the same commitment to build long-term client relationships by providing ‘Service Beyond Expectations’.”




Results from Operations
Total revenue for third quarter 2019, consisting of net interest income and noninterest income, increased 8.2 percent to $23.2 million, principally as a result of higher net interest income compared to $21.4 million for the third quarter 2018. For the year-to-date period ended September 30, 2019, total revenue was $72.1 million compared to $65.0 million for the same period of 2018, representing a 10.9 percent increase primarily as a result of higher net interest income, increased realized securities gains and the gain on the sale of SIS.
For the third quarter of 2019, net interest income was $19.4 million, an increase of 12.8 percent from the $17.2 million reported in the prior-year third quarter and a 0.8 percent increase compared to the linked quarter. The net interest margin for third quarter 2019 was 3.63 percent compared to 3.72 percent for the linked quarter and 3.53 percent for the year-ago quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summit’s net interest margin would have been 3.59 percent for Q3 2019, 3.62 percent for Q2 2019 and 3.51 percent for Q3 2018.
Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for third quarter 2019 was $3.76 million compared to $4.21 million for the comparable period of 2018. Excluding realized securities gains, noninterest income was $3.31 million for third quarter 2019, compared to $4.20 million reported for third quarter 2018 and was $3.82 million for the linked quarter, excluding realized securities gains and the gain on the sale of SIS. Q3 2019 noninterest income declined compared to prior periods primarily due to the elimination of insurance commission revenue as result of SIS’ sale in Q2 2019.
We recorded a $500,000 provision for loan losses during third quarter 2019 and 2018. Our provision continues to be directionally consistent with changes in the credit quality in our loan portfolio.
Q3 2019 total noninterest expense increased 3.6 percent to $12.8 million compared to $12.4 million for the prior-year third quarter and decreased 16.5 percent compared to the linked quarter. Our decreased noninterest expense compared to the linked quarter is principally due to reductions in personnel costs resulting from the sale of SIS and due to increased write-downs on foreclosed properties during Q2 2019. In addition, our merger-related expenses totaled $74,000 in Q3 2019 compared to $382,000 in Q2 2019 and $86,000 in Q3 2018.
Noninterest expense for the first nine months of 2019 increased 12.3 percent compared to the first nine months of 2018. Our increased noninterest expense is principally due to expenses associated with the acquired PBI operations (including merger-related expenses), increased write-downs of foreclosed properties and to deferred director compensation plan expense of $560,000 for the first nine months of 2019 compared to $104,000 for the same period of 2018.
Balance Sheet
At September 30, 2019, total assets were $2.32 billion, an increase of $123.0 million, or 5.6 percent since December 31, 2018. Total loans, net of unearned fees and allowance for loan losses, were $1.84 billion at September 30, 2019, up $156.9 million, or 9.3 percent, from the $1.68 billion reported at year-end 2018. Loans, excluding mortgage warehouse lines of credit, decreased $10.6 million during the quarter, or 2.5 percent (on an annualized basis), and have increased $50.9 million, or 4.1 percent (on an annualized basis) since year-end 2018.
At September 30, 2019, deposits were $1.83 billion, an increase of $197.5 million, or 12.1 percent, since year end 2018. During the first nine months of 2019, checking deposits increased




$98.7 million or 13.2 percent, time deposits grew by $77.1 million or 12.7 percent and savings deposits increased $21.7 million or 7.6 percent.
Shareholders’ equity was $242.4 million as of September 30, 2019 compared to $219.8 million at December 31, 2018. In conjunction with the acquisition of PBI on January 1, 2019, Summit issued 465,931 shares of common stock valued at $9.0 million to the former PBI shareholders.
Tangible book value per common share increased to $17.68 at September 30, 2019 compared to $15.75 at December 31, 2018. Summit had 12,400,804 outstanding common shares at Q3 2019 quarter end compared to 12,312,933 at year end 2018.
As announced in Q3 2018, the Board of Directors authorized the open market repurchase of up to 500,000 shares of the issued and outstanding shares of Summit's common stock. The timing and quantity of stock purchases under this repurchase plan were at the discretion of management. During Q3 2019, the repurchase of all shares authorized under the Plan was completed, whereby 52,460 shares were repurchased at an average price of $25.59 per share. The average price of all shares repurchased under the Plan since its inception was $24.15 per share.
Asset Quality
As of September 30, 2019, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $33.7 million, or 1.45 percent of assets. This compares to $34.9 million, or 1.52 percent of assets at the linked quarter-end, and $36.5 million, or 1.66 percent of assets at year end 2018.
Third quarter 2019 net loan charge-offs were $711,000, or 0.16 percent of average loans annualized, while adding $500,000 to the allowance for loan losses through the provision for loan losses. The allowance for loan losses stood at 0.70 percent of total loans at September 30, 2019, compared to 0.77 percent at year-end 2018.
About the Company
Summit Financial Group, Inc. is a $2.32 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle and Southern regions of West Virginia and the Northern, Shenandoah Valley and Southwestern regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates thirty-two banking locations.
FORWARD-LOOKING STATEMENTS
This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as “expects”, “anticipates”, “believes”, “estimates” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could” are intended to identify such forward-looking statements.
Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies. We undertake no obligation to revise these statements following the date of this press release.





ADDITIONAL INFORMATION ABOUT THE MERGER WITH CORNERSTONE FINANCIAL SERVICES, INC. (“CORNERSTONE”) AND WHERE TO FIND IT
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed merger, Summit has filed with the Securities and Exchange Commission (“SEC”) a Preliminary Registration Statement on Form S-4 with respect to the offering of Summit common stock as the merger consideration under the Securities Act of 1933, which includes include a proxy statement of Cornerstone seeking approval of the merger by Cornerstone’s shareholders and a prospectus of Summit. Summit will request effectiveness of its Registration Statement on Form S-4 with the SEC and Cornerstone will deliver the proxy statement/prospectus to its shareholders. In addition, Summit has filed other relevant documents concerning the proposed merger with the SEC. Investors and security holders are urged to read the Registration Statement and proxy statement/prospectus and other relevant documents, because they will contain important information about the proposed merger.
Investors and security holders may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov. Security holders of Summit and Cornerstone may also obtain free copies of these documents by directing a request to Ms. Teresa Ely, Summit’s Director of Shareholder Relations, by telephone at (304) 530-0526 or by email at tely@summitfgi.com or by accessing these documents at Summit’s website: www.summitfgi.com.










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

 
 %
 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 tax expense
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 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 tax expense
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 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