Summit Financial Group Reports Record Quarterly EPS and Net Income

Rhea-AI Summary

Summit Financial Group, Inc. (SMMF) reported a record Q4 2020 net income of $10.3 million, or $0.79 per diluted share, up from $9.62 million in Q3 2020. For 2020, net income was $31.3 million, a decrease from $31.9 million in 2019, mainly due to a $13 million increase in credit loss provisions. The bank's acquisition of WinFirst Financial Corp. contributed to its growth. Net interest income rose by 23.3% from Q3 2020 and 32.2% year-over-year, while total assets increased by 29.2% to $3.11 billion.

Positive

• Record Q4 2020 net income of $10.3 million (+7.3% QoQ, +26.5% YoY).
• Net interest income increased by 23.3% QoQ and 32.2% YoY.
• Successful acquisition of WinFirst Financial Corp. added significant assets.

Negative

• Full-year net income decreased by 1.7% due to increased credit loss provisions.
• Provision for credit losses increased by $13 million in 2020 related to COVID-19 impacts.
• Nonperforming assets increased to 1.16% of total assets, up from 0.94% in Q3 2020.

Q4 2020 Diluted EPS $0.79 compared to $0.74 for Q3 2020 and $0.65 for Q4 2019

MOOREFIELD, W.Va., Feb. 01, 2021 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported fourth quarter 2020 net income of $10.3 million, or $0.79 per diluted share, both representing a quarterly record. In comparison, earnings for third quarter 2020 were $9.62 million, or $0.74 per diluted share, and for fourth quarter 2019 were $8.15 million, or $0.65 per diluted share.

For the full year 2020, Summit recorded net income of $31.3 million, or $2.41 per diluted share, compared with $31.9 million, or $2.53 per diluted share, for 2019, representing a decrease of 1.7 percent or 4.7 percent per diluted share. The principal factor negatively impacting our earnings this past year was the $13.0 million increase in our provision for credit losses ($9.84 million after taxes, or $0.76 per diluted share) compared to 2019. Recently adopted loan loss accounting rules now require us to record all estimated future losses in our loan portfolio, and this contributed significantly to our credit loss provision for 2020 as we recorded our estimate of loan losses expected to result from the COVID-19 pandemic.

Summit completed its acquisition of WinFirst Financial Corp. (“WFC”) and its subsidiary, WinFirst Bank, headquartered in Winchester, Kentucky on December 14, 2020; accordingly, WFC’s results of operations are included in Summit’s consolidated results of operations from the date of acquisition. At consummation, WFC had total assets of $143.4 million, loans of $123.8 million, and deposits of $103.6 million.

H. Charles Maddy, III, President and Chief Executive Officer commented, “I am very pleased to report Summit concluded a challenging year by achieving both record quarterly earnings and net revenues in fourth quarter of 2020. I am particularly gratified by our continued strong core operating performance, highlighted by strong growth in net interest income, all while maintaining a stable net interest margin and well-controlled noninterest expenses. These results validate not only our core growth strategies, but our ability to remain disciplined in trying times. This is also a tribute to our management and employees who have worked tirelessly the past year to put forth consistent, high levels of client service despite the many challenges. Looking ahead, I am inspired by our gaining momentum towards the goal to be a consistently growing, high-performing community banking institution. We are both fundamentally and financially strong as we face the challenges of 2021 and beyond.”

Highlights for Q4 2020

• Net interest income increased 23.3 percent (annualized) compared to Q3 2020 and increased 32.2 percent year over year, primarily due to loan growth and lower funding costs.
• Net interest margin in Q4 2020 increased 12 basis points to 3.76 percent as compared to the linked quarter, as yield on interest earning assets increased 4 basis points while the cost of deposits and other funding declined 11 basis points, as well as our diligence and disciplined approach toward asset/liability management.
• Excluding mortgage warehouse lines of credit and acquired WFC loans, loan balances increased $29.8 million during the quarter, despite PPP loan pay downs totaling $22.6 million in Q4 2020.
• Recorded provision for credit losses of $3.00 million (of which $2.0 million is attributable to acquired WFC loans) in Q4 2020 compared to $3.25 million in Q3 2020 and $500,000 in Q4 2019; our increased credit provisions in 2020 are principally due to the estimated potential future economic impact of the COVID-19 crisis.
• Efficiency ratio was 49.38 percent compared to 48.95 percent in the linked quarter and 52.25 percent for Q4 2019.
• Net foreclosed properties expenses increased to $676,000 in Q4 2020 compared to $607,000 in Q3 2020 as net losses on sales of foreclosed properties in Q4 2020 totaled $489,000 compared to $44,000 net gains in Q3 2020 and write downs of foreclosed properties to estimated fair values totaled $64,000 in Q4 2020 compared to $555,000 in Q3 2020. During Q4 2019, such write downs totaled $497,000 and realized net gains were $312,000.
• Realized $912,000 securities gains in Q4 2020 compared to $1.52 million in the linked quarter and $403,000 in Q4 2019.
• Nonperforming assets as a percentage of total assets increased to 1.16 percent compared to 0.94 percent for the linked quarter and 1.28 percent at year end 2019.
• Completed acquisition of WinFirst Financial Corp. (“WFC”) and its wholly-owned subsidiary, WinFirst Bank, headquartered in Winchester, Kentucky.
  

Merger & Acquisition Activity

On December 14, 2020, Summit’s bank subsidiary, Summit Community Bank completed its acquisition of WinFirst Corp. and its subsidiary WinFirst Bank, headquartered in Winchester, Kentucky. At consummation, WinFirst had total assets of $143.4 million, loans of $123.8 million and deposits of $103.6 million.

Further, on April 24, 2020, 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. Also, 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. 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 WinFirst, Cornerstone and acquired MVB Bank branches are included in Summit’s consolidated results of operations from the dates of acquisition, and therefore Summit’s 2020 results reflect increased levels of average balances, income and expenses compared to comparable prior year periods.

Results from Operations

Total revenue for fourth quarter 2020, consisting of net interest income and noninterest income, increased 32.0 percent to $32.0 million, which included $912,000 in realized securities gains, compared to $24.2 million for fourth quarter 2019. For full year 2020, total revenue was $115.6 million compared to $96.3 million for 2019, representing a 20.0 percent increase primarily as result of higher net interest income.

For the fourth quarter of 2020, net interest income was $26.2 million, an increase of 32.2 percent from the $19.8 million reported in the prior-year fourth quarter and a 5.8 percent increase compared to the linked quarter. The net interest margin for fourth quarter 2020 was 3.76 percent compared to 3.64 percent for the linked quarter and 3.63 percent for the year-ago quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summit’s net interest margin would have been 3.70 percent for Q4 2020, 3.59 percent for Q3 2020 and 3.60 percent for Q4 2019.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for fourth quarter 2020 was $5.78 million compared to $6.21 million for the linked quarter and $4.40 million for the comparable period of 2019, which included realized securities gains of $912,000 in Q4 2020, $1.52 million in the linked quarter and $403,000 in Q4 2019. Excluding realized securities gains, noninterest income was $4.87 million for fourth quarter 2020 and $4.00 million for fourth quarter 2019. Mortgage origination revenue increased to $1.16 million for Q4 2020 compared to $379,000 in Q4 2019 due to higher volumes of secondary market loans driven primarily by historically low interest rates. Also included in Q3 2020 noninterest income is one-time income approximating $475,000 earned in conjunction with the recent investment in $9.3 million of annuities.

We recorded a $3.0 million provision for credit losses during fourth quarter 2020 compared to $3.25 million for the linked quarter and $500,000 in Q4 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.

Q4 2020 total noninterest expense increased 26.2 percent to $16.6 million compared to $13.2 million for the prior-year fourth quarter. This year-over-year increase resulted primarily due to the acquisition of Cornerstone and MVB Bank branches during early 2020. Additionally, other significant factors contributing to the changes in total noninterest expense period over period are as follows: higher FDIC premiums, as we fully utilized in prior periods our FDIC’s Small Bank Assessment Credits, decreased write downs of foreclosed properties to estimated fair values totaling $64,000 in Q4 2020 compared to $555,000 in Q3 2020 and $497,000 in Q4 2019, net losses on sales of foreclosed properties in Q4 2020 of $489,000 compared to net gains during Q3 2020 of $44,000 and Q4 2019 of $312,000 and deferred director compensation expense totaling $612,000 in Q4 2020, compared to $325,000 in Q3 2020 and $281,000 in Q4 2019.

Balance Sheet

At December 31, 2020, total assets were $3.11 billion, an increase of $702.9 million, or 29.2 percent since December 31, 2019. Total loans, net of unearned fees and allowance for loan losses, were $2.38 billion at December 31, 2020, up $479.5 million, or 25.2 percent, from the $1.90 billion reported at year-end 2019. Loans, excluding mortgage warehouse lines of credit and acquired WFC loans, increased $29.8 million during the quarter, or 5.9 percent (annualized). Loans, excluding mortgage warehouse lines of credit, PPP loans and acquired Cornerstone, MVB and WFC loans, have increased $100.4 million, or 5.6 percent since year-end 2019.

At December 31, 2020, core deposits were $2.46 billion, an increase of $774.5 million, or 46.0 percent, since year end 2019. During 2020, checking deposits increased $484.1 million or 54.3 percent, core time deposits grew by $87.3 million or 23.4 percent and savings deposits increased $203.1 million or 48.6 percent. Excluding acquired deposits (of Cornerstone, MVB branches and WFC), core deposits have increased $302.9 million, or 18.0 percent, since year end 2019.

Shareholders’ equity was $281.6 million as of December 31, 2020 compared to $247.8 million at December 31, 2019. In conjunction with the acquisition of Cornerstone on January 1, 2020, Summit issued 570,000 shares of common stock valued at $15.4 million to the former Cornerstone shareholders.

Tangible book value per common share increased to $17.50 as of December 31, 2020 compared to $17.31 at September 30, 2020, although it decreased from $18.11 at December 31, 2019 as result of the somewhat dilutive impacts of the Cornerstone, MVB Branches and WinFirst acquisitions. Summit had 12,942,004 outstanding common shares at Q4 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 Q4 2020, no shares of our common stock were repurchased under the Plan.

Asset Quality

We incurred net loan charge-offs of $239,000 in fourth quarter 2020 (0.04 percent of average loans annualized), compared to third quarter 2020 net loan charge-offs of $1.01 million, which included an $880,000 charge-off of a commercial real estate relationship which had previously been fully reserved and exhibited weakness prior to the COVID-19 pandemic while $2.34 million and $3.20 million were added to the allowance for loan credit losses through the provision for credit losses during Q4 2020 and Q3 2020, respectively. The allowance for loan credit losses stood at 1.34 percent of total loans as of December 31, 2020, compared to 0.68 percent at year-end 2019.

Similarly, during Q4 2020 and Q3 2020, we also added $665,000 and $48,000, respectively, to the allowance for credit losses on unfunded loan commitments through the provision for credit losses.

As of December 31, 2020, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $35.9 million, or 1.16 percent of assets primarily due to a loan relationship detrimentally impacted by the COVID-19 pandemic totaling $9.68 million that was placed on nonaccrual status. This compares to NPAs of $27.8 million, or 0.94 percent of assets at the linked quarter-end and $30.8 million, or 1.28 percent of assets at the end of 2019.

The following tables summarize the aggregate balances of loans the Company has modified as result of the COVID-19 pandemic as of December 31, 2020 and September 30, 2020 classified by types of loans and impacted borrowers.

				Loan Balances Modified Due to COVID-19 as of 12/31/2020
Dollars in thousands	Total Loan Balance as of 12/31/2020			Loans Modified to Interest Only Payments			Loans Modified to Payment Deferral			Total Loans Modified			Percentage of Loans Modified
Hospitality Industry	$	121,502		$	40,513		$	12,930		$	53,443		44.0	%
Non-Owner Occupied Retail Stores		135,405			7,223			447			7,670		5.7	%
Owner-Occupied Retail Stores		126,451			2,317			1,246			3,563		2.8	%
Restaurants		7,481			-			-			-		0.0	%
Oil & Gas Industry		17,152			-			-			-		0.0	%
Other Commercial Loans		1,134,759			12,006			286			12,292		1.1	%
Total Commercial Loans		1,542,750			62,059			14,909			76,968		5.0	%
Residential 1-4 Family Personal		305,093			159			1,754			1,913		0.6	%
Residential 1-4 Family Rentals		194,612			148			73			221		0.1	%
Home Equity Loans		81,588			-			-			-		0.0	%
Total Residential Real Estate Loans		581,293			307			1,827			2,134		0.4	%
Consumer Loans		33,906			48			143			191		0.6	%
Mortgage Warehouse Loans		251,810			-			-			-		0.0	%
Credit Cards and Overdrafts		2,394			-			-			-		0.0	%
Total Loans	$	2,412,153		$	62,414		$	16,879		$	79,293		3.3	%

				Loan Balances Modified Due to COVID-19 as of 9/30/2020
Dollars in thousands	Total Loan Balance as of 9/30/2020			Loans Modified to Interest Only Payments			Loans Modified to Payment Deferral			Total Loans Modified			Percentage of Loans Modified
Hospitality Industry	$	120,324		$	36,803		$	11,466		$	48,269		40.1	%
Non-Owner Occupied Retail Stores		108,326			19,497			-			19,497		18.0	%
Owner-Occupied Retail Stores		100,926			1,601			1,409			3,010		3.0	%
Restaurants		7,968			-			-			-		0.0	%
Oil & Gas Industry		24,404			914			-			914		3.7	%
Other Commercial Loans		1,084,385			40,846			-			40,846		3.8	%
Total Commercial Loans		1,446,333			99,661			12,875			112,536		7.8	%
Residential 1-4 Family Personal		263,315			195			991			1,186		0.5	%
Residential 1-4 Family Rentals		178,529			3,567			336			3,903		2.2	%
Home Equity Loans		82,991			-			-			-		0.0	%
Total Residential Real Estate Loans		524,835			3,762			1,327			5,089		1.0	%
Consumer Loans		34,655			34			22			56		0.2	%
Mortgage Warehouse Loans		243,730			-			-			-		0.0	%
Credit Cards and Overdrafts		2,251			-			-			-		0.0	%
Total Loans	$	2,251,804		$	103,457		$	14,224		$	117,681		5.2	%

About the Company

Summit Financial Group, Inc. is a $3.11 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle, Southern and North Central regions of West Virginia, the Northern, Shenandoah Valley and Southwestern regions of Virginia and the central region of Kentucky, through its bank subsidiary, Summit Community Bank, Inc., which operates 43 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 pandemic, 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)
Q4 2020 vs Q4 2019
		For the Quarter Ended						Percent
Dollars in thousands		12/31/2020			12/31/2019			Change
Statements of Income
	Interest income
	Loans, including fees	$	27,897		$	24,772		12.6	%
	Securities		2,228			2,195		1.5	%
	Other		51			105		-51.4	%
	Total interest income		30,176			27,072		11.5	%
	Interest expense
	Deposits		2,956			5,952		-50.3	%
	Borrowings		1,014			1,292		-21.5	%
	Total interest expense		3,970			7,244		-45.2	%
	Net interest income		26,206			19,828		32.2	%
	Provision for credit losses		3,000			500		n/m
	Net interest income after provision
	for credit losses		23,206			19,328		20.1	%
	Noninterest income
	Insurance commissions		127			90		41.1	%
	Trust and wealth management fees		626			734		-14.7	%
	Mortgage origination revenue		1,163			379		206.9	%
	Service charges on deposit accounts		1,305			1,377		-5.2	%
	Bank card revenue		1,237			906		36.5	%
	Realized securities gains		912			403		126.3	%
	Bank owned life insurance and annuity income		233			310		-24.8	%
	Other income		174			205		-15.1	%
	Total noninterest income		5,777			4,404		31.2	%
	Noninterest expense
	Salaries and employee benefits		8,501			7,099		19.7	%
	Net occupancy expense		1,046			815		28.3	%
	Equipment expense		1,502			1,278		17.5	%
	Professional fees		370			412		-10.2	%
	Advertising and public relations		207			214		-3.3	%
	Amortization of intangibles		409			401		2.0	%
	FDIC premiums		261			-		n/a
	Bank card expense		573			454		26.2	%
	Foreclosed properties expense, net		676			262		158.0	%
	Merger-related expense		218			98		122.4	%
	Other expenses		2,843			2,126		33.7	%
	Total noninterest expense		16,606			13,159		26.2	%
	Income before income taxes		12,377			10,573		17.1	%
	Income taxes		2,126			2,424		-12.3	%
	Net income	$	10,251		$	8,149		25.8	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q4 2020 vs Q4 2019
		For the Quarter Ended						Percent
		12/31/2020			12/31/2019			Change
Per Share Data
	Earnings per common share
	Basic	$	0.79		$	0.66		19.7%
	Diluted	$	0.79		$	0.65		21.5%
	Cash dividends	$	0.17		$	0.15		13.3%
	Dividend payout ratio		21.5%			22.3%		-3.6%
	Average common shares outstanding
	Basic		12,932,768			12,400,932		4.3%
	Diluted		12,980,041			12,458,702		4.2%
	Common shares outstanding at period end		12,942,004			12,408,542		4.3%
Performance Ratios
	Return on average equity		14.90%			13.32%		11.9%
	Return on average tangible equity		18.70%			15.25%		22.6%
	Return on average assets		1.37%			1.39%		-1.4%
	Net interest margin (A)		3.76%			3.63%		3.6%
	Efficiency ratio (B)		49.38%			52.25%		-5.5%

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)
Annual Performance Summary (unaudited)
2020 vs 2019
		For the Year Ended						Percent
Dollars in thousands		12/31/2020			12/31/2019			Change
Statements of Income
	Interest income
	Loans, including fees	$	105,564		$	97,115		8.7	%
	Securities		9,173			9,361		-2.0	%
	Other		266			595		-55.3	%
	Total interest income		115,003			107,071		7.4	%
	Interest expense
	Deposits		16,044			23,697		-32.3	%
	Borrowings		3,477			6,290		-44.7	%
	Total interest expense		19,521			29,987		-34.9	%
	Net interest income		95,482			77,084		23.9	%
	Provision for credit losses		14,500			1,550		n/m
	Net interest income after provision
	for credit losses		80,982			75,534		7.2	%
	Noninterest income
	Insurance commissions		202			1,911		-89.4	%
	Trust and wealth management fees		2,495			2,564		-2.7	%
	Mortgage origination revenue		2,799			770		263.5	%
	Service charges on deposit accounts		4,588			5,094		-9.9	%
	Bank card revenue		4,494			3,536		27.1	%
	Realized securities gains		3,472			1,938		79.2	%
	Gain on sale of Summit Insurance Services, LLC		-			1,906		n/a
	Bank owned life insurance and annuity income		1,567			1,044		50.1	%
	Other income		466			440		5.9	%
	Total noninterest income		20,083			19,203		4.6	%
	Noninterest expense
	Salaries and employee benefits		32,211			29,066		10.8	%
	Net occupancy expense		3,963			3,417		16.0	%
	Equipment expense		5,765			4,972		15.9	%
	Professional fees		1,538			1,678		-8.3	%
	Advertising and public relations		596			698		-14.6	%
	Amortization of intangibles		1,659			1,701		-2.5	%
	FDIC premiums		856			88		872.7	%
	Bank card expense		2,225			1,820		22.3	%
	Foreclosed properties expense, net		2,490			2,498		-0.3	%
	Merger-related expense		1,671			617		170.8	%
	Other expenses		9,337			8,599		8.6	%
	Total noninterest expense		62,311			55,154		13.0	%
	Income before income taxes		38,754			39,583		-2.1	%
	Income taxes		7,428			7,717		-3.7	%
	Net income	$	31,326		$	31,866		-1.7	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Annual Performance Summary (unaudited)
2020 vs 2019
		For the Year Ended						Percent
		12/31/20020			12/31/2019			Change
Per Share Data
	Earnings per common share
	Basic	$	2.42		$	2.55		-5.1%
	Diluted	$	2.41		$	2.53		-4.7%
	Cash dividends	$	0.68		$	0.59		15.3%
	Dividend payout ratio		28.2%			23.1%		22.1%
	Average common shares outstanding
	Basic		12,935,430			12,516,474		3.3%
	Diluted		12,975,385			12,575,145		3.2%
	Common shares outstanding at period end		12,942,004			12,408,542		4.3%
Performance Ratios
	Return on average equity		11.80%			13.43%		-12.1%
	Return on average tangible equity		14.73%			15.65%		-5.9%
	Return on average assets		1.13%			1.40%		-19.3%
	Net interest margin (A)		3.71%			3.66%		1.4%
	Efficiency ratio (B)		50.34%			54.55%		-7.7%

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		12/31/2020			9/30/2020			6/30/2020			3/31/2020			12/31/2019
Statements of Income
	Interest income
	Loans, including fees	$	27,897		$	26,807		$	25,624		$	25,235		$	24,772
	Securities		2,228			2,382			2,253			2,310			2,195
	Other		51			57			60			98			105
	Total interest income		30,176			29,246			27,937			27,643			27,072
	Interest expense
	Deposits		2,956			3,552			4,186			5,351			5,952
	Borrowings		1,014			928			685			849			1,292
	Total interest expense		3,970			4,480			4,871			6,200			7,244
	Net interest income		26,206			24,766			23,066			21,443			19,828
	Provision for credit losses		3,000			3,250			3,000			5,250			500
	Net interest income after provision
	for credit losses		23,206			21,516			20,066			16,193			19,328
	Noninterest income
	Insurance commissions		127			44			24			7			90
	Trust and wealth management fees		626			622			582			665			734
	Mortgage origination revenue		1,163			780			641			214			379
	Service charges on deposit accounts		1,305			1,138			882			1,263			1,377
	Bank card revenue		1,237			1,237			1,087			933			906
	Realized securities gains		912			1,522			-			1,038			403
	Bank owned life insurance and annuity income		233			795			275			264			310
	Other income		174			69			107			118			205
	Total noninterest income		5,777			6,207			3,598			4,502			4,404
	Noninterest expense
	Salaries and employee benefits		8,501			8,108			7,930			7,672			7,099
	Net occupancy expense		1,046			1,057			977			883			815
	Equipment expense		1,502			1,474			1,360			1,429			1,278
	Professional fees		370			364			417			387			412
	Advertising and public relations		207			145			93			152			214
	Amortization of intangibles		409			412			410			429			401
	FDIC premiums		261			320			110			165			-
	Bank card expense		573			589			560			503			454
	Foreclosed properties expense, net		676			607			240			966			262
	Merger-related expenses		218			28			637			788			98
	Other expenses		2,843			2,405			2,463			1,625			2,126
	Total noninterest expense		16,606			15,509			15,197			14,999			13,159
	Income before income taxes		12,377			12,214			8,467			5,696			10,573
	Income tax expense		2,126			2,594			1,518			1,190			2,424
	Net income	$	10,251		$	9,620		$	6,949		$	4,506		$	8,149

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
		12/31/2020			9/30/2020			6/30/2020			3/31/2020			12/31/2019
Per Share Data
	Earnings per common share
	Basic	$	0.79		$	0.74		$	0.54		$	0.35		$	0.66
	Diluted	$	0.79		$	0.74		$	0.54		$	0.35		$	0.65
	Cash dividends	$	0.17		$	0.17		$	0.17		$	0.17		$	0.15
	Dividend payout ratio		21.5%			22.9%			31.7%			49.1%			22.3%
	Average common shares outstanding
	Basic		12,932,768			12,922,158			12,911,979			12,975,429			12,400,932
	Diluted		12,980,041			12,949,584			12,943,804			13,028,409			12,458,702
	Common shares outstanding at period end		12,942,004			12,932,415			12,922,045			12,920,244			12,408,542
Performance Ratios
	Return on average equity		14.90%			14.38%			10.75%			6.92%			13.32%
	Return on average tangible equity		18.70%			18.12%			13.57%			8.55%			15.25%
	Return on average assets		1.37%			1.31%			1.02%			0.73%			1.39%
	Net interest margin (A)		3.76%			3.64%			3.68%			3.76%			3.63%
	Efficiency ratio (B)		49.38%			48.95%			51.97%			51.41%			52.25%

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		12/31/2020			9/30/2020			6/30/2020			3/31/2020			12/31/2019
Assets
	Cash and due from banks	$	19,522		$	16,257		$	16,572		$	18,633		$	28,137
	Interest bearing deposits other banks		80,265			92,729			26,218			22,821			33,751
	Securities, available for sale		286,127			297,989			322,539			305,045			276,355
	Securities, held to maturity		99,914			91,600			80,497			-			-
	Loans, net		2,379,907			2,222,450			2,192,541			1,982,661			1,900,425
	Property held for sale		15,588			17,831			17,954			18,287			19,276
	Premises and equipment, net		52,537			52,880			51,847			47,078			44,168
	Goodwill and other intangible assets		55,123			48,101			48,513			34,132			23,022
	Cash surrender value of life insurance policies and annuities		59,438			57,029			55,315			46,497			43,603
	Other assets		57,963			49,996			49,355			38,168			34,755
	Total assets	$	3,106,384		$	2,946,862		$	2,861,351		$	2,513,322		$	2,403,492
Liabilities and Shareholders' Equity
	Deposits	$	2,595,651		$	2,451,891		$	2,451,769		$	2,044,914		$	1,913,237
	Short-term borrowings		140,146			140,145			90,945			161,745			199,345
	Long-term borrowings and
	subordinated debentures		49,652			50,292			20,297			20,301			20,306
	Other liabilities		39,355			32,571			34,909			30,337			22,840
	Shareholders' equity		281,580			271,963			263,431			256,025			247,764
	Total liabilities and shareholders' equity	$	3,106,384		$	2,946,862		$	2,861,351		$	2,513,322		$	2,403,492
	Book value per common share	$	21.76		$	21.03		$	20.39		$	19.82		$	19.97
	Tangible book value per common share	$	17.50		$	17.31		$	16.63		$	17.17		$	18.11
	Tangible common equity to tangible assets		7.4%			7.7%			7.6%			9.0%			9.4%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (unaudited)
		12/31/2020		9/30/2020		6/30/2020		3/31/2020		12/31/2019
Summit Financial Group, Inc.
	CET1 Risk-based Capital	9.3	%	9.9	%	9.7	%	10.8	%	11.1	%
	Tier 1 Risk-based Capital	10.0	%	10.7	%	10.5	%	11.7	%	12.1	%
	Total Risk-based Capital	12.1	%	12.9	%	11.3	%	12.5	%	12.7	%
	Tier 1 Leverage	8.6	%	8.7	%	9.0	%	10.2	%	10.5	%
Summit Community Bank, Inc.
	CET1 Risk-based Capital	11.1	%	11.8	%	10.5	%	11.7	%	12.1	%
	Tier 1 Risk-based Capital	11.1	%	11.8	%	10.5	%	11.7	%	12.1	%
	Total Risk-based Capital	12.0	%	12.7	%	11.4	%	12.5	%	12.7	%
	Tier 1 Leverage	9.5	%	9.6	%	9.0	%	10.2	%	10.6	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition (unaudited)
Dollars in thousands	12/31/2020			9/30/2020			6/30/2020			3/31/2020			12/31/2019
Commercial	$	296,832		$	338,685		$	311,755		$	224,659		$	207,138
Mortgage warehouse lines		251,815			243,730			252,472			166,826			126,237
Commercial real estate
Owner occupied		351,859			312,502			336,143			331,486			276,218
Non-owner occupied		685,563			618,624			593,168			580,619			629,206
Construction and development
Land and development		107,342			97,343			92,706			92,332			84,112
Construction		91,100			66,878			48,115			43,121			37,523
Residential real estate
Conventional		425,520			368,008			371,225			378,540			354,963
Jumbo		74,185			73,836			76,360			64,944			70,947
Home equity		81,588			82,991			88,929			75,170			76,568
Consumer		35,269			35,905			35,781			36,611			36,470
Other		11,080			13,302			13,053			12,961			14,117
Total loans, net of unearned fees		2,412,153			2,251,804			2,219,707			2,007,269			1,913,499
Less allowance for credit losses		32,246			29,354			27,166			24,608			13,074
Loans, net	$	2,379,907		$	2,222,450		$	2,192,541		$	1,982,661		$	1,900,425

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands	12/31/2020			9/30/2020			6/30/2020			3/31/2020			12/31/2019
Core deposits
Non-interest bearing checking	$	440,819		$	420,070		$	443,190		$	337,446		$	260,553
Interest bearing checking		934,185			867,442			830,258			648,214			630,352
Savings		621,168			598,564			561,029			457,010			418,096
Time deposits		460,443			414,542			422,286			384,062			373,125
Total core deposits		2,456,615			2,300,618			2,256,763			1,826,732			1,682,126
Brokered time deposits		55,454			64,120			90,279			111,156			150,554
Other non-core time deposits		83,582			87,153			104,727			107,026			80,557
Total deposits	$	2,595,651		$	2,451,891		$	2,451,769		$	2,044,914		$	1,913,237

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
		For the Quarter Ended
Dollars in thousands		12/31/2020			9/30/2020			6/30/2020			3/31/2020			12/31/2019
	Gross loan charge-offs	$	434		$	1,259		$	218		$	698		$	455
	Gross loan recoveries		(195	)		(245	)		(269	)		(197	)		(88	)
	Net loan charge-offs/(recoveries)	$	239		$	1,014		$	(51	)	$	501		$	367
	Net loan charge-offs to average loans (annualized)		0.04%			0.18%			-0.01	%		0.10%			0.08%
	Allowance for loan credit losses	$	32,246		$	29,354		$	27,166		$	24,608		$	13,074
	Allowance for loan credit losses as a percentage
	of period end loans		1.34%			1.30%			1.22%			1.23%			0.68%
	Allowance for credit losses on
	unfunded loan commitments	$	4,190		$	3,525		$	3,477		$	2,984		$	-
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	525		$	553		$	754		$	560		$	764
	Commercial real estate		14,237			4,313			5,822			5,644			5,800
	Residential construction and development		235			2			14			11			326
	Residential real estate		5,264			5,104			5,873			4,343			4,404
	Consumer		74			31			29			65			116
	Other		-			-			35			100			100
	Total nonperforming loans		20,335			10,003			12,527			10,723			11,510
	Foreclosed properties
	Commercial real estate		2,581			2,500			1,774			1,866			1,930
	Commercial construction and development		4,154			4,154			4,511			4,511			4,601
	Residential construction and development		7,791			10,330			10,645			10,774			11,169
	Residential real estate		1,062			847			1,024			1,136			1,576
	Total foreclosed properties		15,588			17,831			17,954			18,287			19,276
	Other repossessed assets		-			-			-			49			17
	Total nonperforming assets	$	35,923		$	27,834		$	30,481		$	29,059		$	30,803
	Nonperforming loans to period end loans		0.84%			0.44%			0.56%			0.53%			0.60%
	Nonperforming assets to period end assets		1.16%			0.94%			1.07%			1.16%			1.28%
	Troubled debt restructurings
	Performing	$	21,375		$	22,232		$	22,117		$	22,966		$	23,339
	Nonperforming		3,127			2,988			3,003			2,831			2,337
	Total troubled debt restructurings	$	24,502		$	25,220		$	25,120		$	25,797		$	25,676

Loans Past Due 30-89 Days (unaudited)
		For the Quarter Ended
Dollars in thousands		12/31/2020			9/30/2020			6/30/2020			3/31/2020			12/31/2019
	Commercial	$	1		$	147		$	196		$	160		$	111
	Commercial real estate		274			1,740			1,231			2,106			1,196
	Construction and development		47			422			8			53			236
	Residential real estate		4,405			4,464			2,763			5,178			4,775
	Consumer		233			160			164			222			269
	Other		5			2			3			7			25
	Total	$	4,965		$	6,935		$	4,365		$	7,726		$	6,612

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q4 2020 vs Q3 2020 vs Q4 2019 (unaudited)
	Q4 2020									Q3 2020									Q4 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	$	2,292,797		$	27,774		4.82	%		$	2,251,722		$	26,656		4.71	%		$	1,853,197		$	24,622		5.27	%
Tax-exempt (2)		13,062			156		4.75	%			16,245			191		4.68	%			15,738			189		4.76	%
Securities
Taxable		258,594			1,341		2.06	%			261,231			1,445		2.20	%			218,375			1,654		3.00	%
Tax-exempt (2)		147,979			1,122		3.02	%			150,350			1,186		3.14	%			69,276			686		3.93	%
Interest bearing deposits other banks
and Federal funds sold		87,151			51		0.23	%			60,639			57		0.37	%			32,779			105		1.27	%
Total interest earning assets		2,799,583			30,444		4.33	%			2,740,187			29,535		4.29	%			2,189,365			27,256		4.94	%
Noninterest earning assets
Cash & due from banks		16,846									16,603									12,932
Premises & equipment		52,688									52,329									44,136
Other assets		157,436									154,578									103,481
Allowance for credit losses		(30,778	)								(28,144	)								(13,055	)
Total assets	$	2,995,775								$	2,935,553								$	2,336,859
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	895,325		$	357		0.16	%		$	850,281		$	380		0.18	%		$	619,939		$	1,378		0.88	%
Savings deposits		607,481			716		0.47	%			588,085			925		0.63	%			351,653			1,201		1.35	%
Time deposits		566,917			1,883		1.32	%			585,092			2,247		1.53	%			641,160			3,373		2.09	%
Short-term borrowings		140,243			467		1.32	%			165,555			734		1.76	%			188,007			1,062		2.24	%
Long-term borrowings and
subordinated debentures		49,637			547		4.38	%			23,230			194		3.32	%			20,308			230		4.49	%
Total interest bearing liabilities		2,259,603			3,970		0.70	%			2,212,243			4,480		0.81	%			1,821,067			7,244		1.58	%
Noninterest bearing liabilities
Demand deposits		426,441									421,741									248,159
Other liabilities		34,558									33,978									22,856
Total liabilities		2,720,602									2,667,962									2,092,082
Shareholders' equity		275,173									267,591									244,777
Total liabilities and
shareholders' equity	$	2,995,775								$	2,935,553								$	2,336,859
NET INTEREST EARNINGS				$	26,474								$	25,055								$	20,012
NET INTEREST MARGIN							3.76	%								3.64	%								3.63	%
(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 $268,000, $289,000, and $184,000 for Q4 2020,
Q3 2020 and Q4 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	$	2,150,294		$	104,986		4.88	%		$	1,782,477		$	96,499		5.41	%
Tax-exempt (2)		15,352			732		4.77	%			15,315			780		5.09	%
Securities
Taxable		256,893			5,996		2.33	%			205,340			6,511		3.17	%
Tax-exempt (2)		122,386			4,020		3.28	%			90,823			3,608		3.97	%
Interest bearing deposits other banks
and Federal funds sold		56,399			266		0.47	%			39,408			595		1.51	%
Total interest earning assets		2,601,324			116,000		4.46	%			2,133,363			107,993		5.06	%
Noninterest earning assets
Cash & due from banks		16,139									12,939
Premises & equipment		50,418									41,778
Other assets		143,284									107,456
Allowance for loan losses		(26,915	)								(13,225	)
Total assets	$	2,784,250								$	2,282,311
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	789,064		$	2,187		0.28	%		$	586,938		$	6,394		1.09	%
Savings deposits		539,625			4,178		0.77	%			317,569			3,969		1.25	%
Time deposits		598,085			9,680		1.62	%			660,910			13,334		2.02	%
Short-term borrowings		130,411			2,330		1.79	%			194,450			5,303		2.73	%
Long-term borrowings and
subordinated debentures		28,396			1,147		4.04	%			20,315			987		4.86	%
		2,085,581			19,522		0.94	%			1,780,182			29,987		1.68	%
Noninterest bearing liabilities
Demand deposits		401,502									244,559
Other liabilities		31,712									20,341
Total liabilities		2,518,795									2,045,082
Shareholders' equity		265,455									237,229
Total liabilities and
shareholders' equity	$	2,784,250								$	2,282,311
NET INTEREST EARNINGS				$	96,478								$	78,006
NET INTEREST MARGIN							3.71	%								3.66	%
(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21%.
The tax equivalent adjustment resulted in an increase in interest income of $998,000 and $922,000 for the
YTD 2020 and YTD 2019 periods, respectively.

Contact: Telephone: Email:

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

FAQ

What was Summit Financial Group's diluted EPS for Q4 2020?

Summit Financial Group reported a diluted EPS of $0.79 for Q4 2020.

How did Summit Financial Group's net income change in 2020?

Summit Financial Group's net income for 2020 decreased to $31.3 million from $31.9 million in 2019.

What were the key drivers of revenue growth for Summit Financial Group?

Key drivers included a 23.3% increase in net interest income and the acquisition of WinFirst Financial Corp.

What impact did the COVID-19 pandemic have on Summit Financial Group?

The COVID-19 pandemic led to increased provisions for credit losses totaling $13 million.

What is the current asset quality of Summit Financial Group?

As of Q4 2020, nonperforming assets were 1.16% of total assets, up from 0.94% in Q3 2020.