SMMF Summit Financial Group Inc

Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported third quarter 2020 net income of $9.62 million, or $0.74 per diluted share. In comparison, earnings for second quarter 2020 were $6.95 million, or $0.54 per diluted share, and for third quarter 2019 were $8.06 million, or $0.65 per diluted share.

For the nine months ended September 30, 2020, Summit recorded net income of $21.1 million, or $1.62 per diluted share, compared with $23.7 million, or $1.88 per diluted share, for the comparable 2019 nine-month period, representing a decrease of 11.1 percent or 13.8 percent per diluted share.

“I am very pleased to report Summit continues to rise to meet the unique challenges posed by 2020 and deliver well for our stakeholders,” commented H. Charles Maddy, III, President and Chief Executive Officer. “We posted another quarter of strong core operating performance, highlighted by record levels of net revenue resulting from continuing good growth in net interest income, a relatively stable net interest margin and well-controlled noninterest expenses. These results validate not only our core strategies but also our ability to remain disciplined in trying times. This is a tribute to our management and employees as they continue to put forth consistent, high levels of client service assisting our clients and communities.”

Highlights for Q3 2020

• Net interest income increased 29.5 percent (annualized) compared to Q2 2020 and increased 27.5 percent versus the same period in 2019, primarily due to loan growth and lower funding costs.
• Net interest margin in Q3 2020 decreased 4 basis points to 3.64 percent as compared to the linked quarter, as yield on interest earning assets and cost of deposits and other funding each declined 16 basis points.
• Excluding mortgage warehouse lines of credit, loan balances increased $40.8 million during the quarter.
• Provision for credit losses of $3.25 million in Q3 2020 compared to $3.00 million in Q2 2020 and $500,000 in Q3 2019; our increased credit provisions in 2020 are principally due to the estimated potential future economic impact of the COVID-19 crisis. Since year end 2019, Summit’s allowances for credit losses on loans and unfunded loan commitments have increased a combined 151 percent.
• Efficiency ratio improved to 48.95 percent compared to 51.97 percent in the linked quarter and 52.91 percent for Q3 2019.
• Net foreclosed properties expenses increased to $607,000 in Q3 2020 compared to $240,000 in Q2 2020 and $305,000 in Q3 2019; this is primarily the result of write downs of foreclosed properties to estimated fair values totaling $555,000 in Q3 2020 compared to $218,000 in Q2 2020 and $133,000 in Q3 2019, while realized net gains on sales of foreclosed properties were $44,000 and $61,000 during Q3 and Q2 2020, respectively and realized net losses of $66,000 during Q3 2019.
• Realized $1.52 million securities gains in Q3 2020 compared to no realized securities gains or losses in the linked quarter and realized securities gains of $453,000 in Q3 2019.
• Merger expenses were $28,000 in Q3 2020 compared to $637,000 in the linked quarter, and $74,000 in Q3 2019.
• Nonperforming assets as a percentage of total assets improved to 0.94 percent compared to 1.07 percent for the linked quarter and 1.28 percent at year end 2019.
• We announced our entering into a definitive merger agreement to acquire WinFirst Financial Corp. (“WinFirst”) and its wholly-owned subsidiary, WinFirst Bank, headquartered in Winchester, Kentucky.

Merger & Acquisition Activity

On September 28, 2020, Summit announced the signing of a definitive merger agreement between Summit Community Bank, Inc., a wholly-owned subsidiary of Summit, and WinFirst Corp., pursuant to which Summit Community Bank will acquire all of the outstanding shares of common stock of WinFirst in exchange for cash.   This transaction is expected to close by year end 2020. WinFirst, a savings and loan holding company reported approximately $146 million in assets as of September 30, 2020 and operates two community banking offices in Winchester, Kentucky through its subsidiary, WinFirst Bank. Following the consummation of the merger, Summit Community Bank expects to consolidate WinFirst Bank with Summit Community Bank.

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 Cornerstone and acquired MVB Bank branches are included in Summit’s consolidated results of operations from the dates of acquisition, and therefore Summit’s third quarter and first nine months of 2020 results reflect increased levels of average balances, income and expenses compared to comparable prior year periods.

Results from Operations

Total revenue for third quarter 2020, consisting of net interest income and noninterest income, increased 33.6 percent to $31.0 million, which included $1.52 million realized securities gains, compared to $23.2 million for third quarter 2019. For the year-to-date period ended September 30, 2020, total revenue was $83.6 million compared to $72.1 million for the same period of 2019, representing a 16.0 percent increase primarily as a result of higher net interest income.

For the third quarter of 2020, net interest income was $24.8 million, an increase of 27.5 percent from the $19.4 million reported in the prior-year third quarter and a 7.4 percent increase compared to the linked quarter. The net interest margin for third quarter 2020 was 3.64 percent compared to 3.68 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 3.59 percent for Q3 2020, 3.61 percent for Q2 2020 and 3.59 percent for Q3 2019.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for third quarter 2020 was $6.21 million compared to $3.60 million for the linked quarter and $3.76 million for the comparable period of 2019, which included $1.52 million realized securities gains. Excluding realized securities gains, noninterest income was $4.69 million for third quarter 2020 and $3.3 million for third quarter 2019. Mortgage origination revenue increased to $780,000 for Q3 2020 compared to $77,000 in Q3 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 $3.25 million provision for credit losses during third quarter 2020 compared to $3.0 million for the linked quarter and $500,000 in Q3 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.

Q3 2020 total noninterest expense increased 21.1 percent to $15.5 million compared to $12.8 million for the prior-year third quarter. This year-over-year increase resulted primarily due to the acquisition of Cornerstone and MVB Bank branches during 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, increased write downs of foreclosed properties to estimated fair values totaling $555,000 in Q3 2020 compared to $218,000 in Q2 2020 and $133,000 in Q3 2019 and deferred director compensation expense totaling $325,000 in Q3 2020, compared to $6,000 in Q2 2020 and $432,000 in Q3 2019. Also, merger expenses have declined to $28,000 in Q3 2020 compared to $637,000 in Q2 2020 and $74,000 in Q3 2019.

Balance Sheet

At September 30, 2020, total assets were $2.95 billion, an increase of $543.4 million, or 22.6 percent since December 31, 2019. Total loans, net of unearned fees and allowance for loan losses, were $2.22 billion at September 30, 2020, up $322.0 million, or 16.9 percent, from the $1.90 billion reported at year-end 2019. Loans, excluding mortgage warehouse lines of credit, increased $40.8 million during the quarter, or 8.3 percent (annualized). Loans, excluding mortgage warehouse lines of credit, PPP loans and acquired Cornerstone and MVB loans, have increased $44.4 million, or 3.3 percent (on an annualized basis) since year-end 2019.

At September 30, 2020, core deposits were $2.30 billion, an increase of $618.5 million, or 36.8 percent, since year end 2019. During the first nine months of 2020, checking deposits increased $396.6 million or 44.5 percent, core time deposits grew by $41.4 million or 11.1 percent and savings deposits increased $180.5 million or 43.2 percent. Excluding acquired deposits (of both Cornerstone and MVB branches), core deposits have increased $250.5 million, or 14.9 percent, since year end 2019.  

Shareholders’ equity was $272.0 million as of September 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 increased to $17.31 at September 30, 2020 compared to $16.63 at June 30, 2020, although it decreased from $18.11 at December 31, 2019 as result of the somewhat dilutive impacts of the Cornerstone and MVB Branches acquisitions. Summit had 12,932,415 outstanding common shares at Q3 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 Q3 2020, no shares of our common stock were repurchased under the Plan.

Asset Quality

We incurred net loan charge-offs of $1,014,000 in third quarter 2020 (0.18 percent of average loans annualized), 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, compared to second quarter 2020 net loan recoveries of $51,000 while $3.20 million and $2.51 million were added to the allowance for loan credit losses through the provision for credit losses during Q3 2020 and Q2 2020, respectively. The allowance for loan credit losses stood at 1.30 percent of total loans as of September 30, 2020, compared to 0.68 percent at year-end 2019.

Similarly, during Q3 2020 and Q2 2020, we also added $48,000 and $493,000, respectively, to the allowance for credit losses on unfunded loan commitments through the provision for credit losses.

As of September 30, 2020, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $27.8 million, or 0.94 percent of assets. This compares to $30.5 million, or 1.07 percent of assets at the linked quarter-end and $33.7 million, or 1.45 percent of assets at the end of Q3 2019.

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

			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	%

			Loan Balances Modified Due to COVID-19 as of 6/30/2020
Dollars in thousands	Total Loan Balance as of 6/30/2020		Loans Modified to Interest Only Payments		Loans Modified to Payment Deferral		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	%

About the Company

Summit Financial Group, Inc. is a $2.95 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle, Southern and North Central regions of West Virginia and the Northern, Shenandoah Valley and Southwestern regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates 41 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)
Q3 2020 vs Q3 2019
	For the Quarter Ended					Percent
Dollars in thousands	9/30/2020			9/30/2019		Change
Statements of Income
Interest income
Loans, including fees	$	26,807		$	24,940	7.5	%
Securities		2,382			2,184	9.1	%
Other		57			125	-54.4	%
Total interest income		29,246			27,249	7.3	%
Interest expense
Deposits		3,552			6,214	-42.8	%
Borrowings		928			1,615	-42.5	%
Total interest expense		4,480			7,829	-42.8	%
Net interest income		24,766			19,420	27.5	%
Provision for credit losses		3,250			500	n/m
Net interest income after provision for credit losses		21,516			18,920	13.7	%
Noninterest income
Insurance commissions		44			40	10.0	%
Trust and wealth management fees		622			632	-1.6	%
Mortgage origination revenue		780			77	n/m
Service charges on deposit accounts		1,138			1,312	-13.3	%
Bank card revenue		1,237			924	33.9	%
Realized securities gains		1,522			453	236.0	%
Bank owned life insurance and annuity income		795			247	221.9	%
Other income		69			74	-6.8	%
Total noninterest income		6,207			3,759	65.1	%
Noninterest expense
Salaries and employee benefits		8,108			7,044	15.1	%
Net occupancy expense		1,057			799	32.3	%
Equipment expense		1,474			1,296	13.7	%
Professional fees		364			388	-6.2	%
Advertising and public relations		145			177	-18.1	%
Amortization of intangibles		412			404	2.0	%
FDIC premiums		320			-	n/a
Bank card expense		589			455	29.5	%
Foreclosed properties expense, net		607			305	99.0	%
Merger-related expense		28			74	-62.2	%
Other expenses		2,405			1,864	29.0	%
Total noninterest expense		15,509			12,806	21.1	%
Income before income taxes		12,214			9,873	23.7	%
Income taxes		2,594			1,812	43.2	%
Net income	$	9,620		$	8,061	19.3	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q3 2020 vs Q3 2019
	For the Quarter Ended						Percent
	9/30/2020			9/30/2019			Change
Per Share Data
Earnings per common share
Basic	$	0.74		$	0.65		13.8	%
Diluted	$	0.74		$	0.65		13.8	%
Cash dividends	$	0.17		$	0.15		13.3	%
Dividend payout ratio		22.9	%		23.0	%	-0.4	%
Average common shares outstanding
Basic		12,922,158			12,412,982		4.1	%
Diluted		12,949,584			12,467,777		3.9	%
Common shares outstanding at period end		12,932,415			12,400,804		4.3	%
Performance Ratios
Return on average equity		14.38	%		13.51	%	6.4	%
Return on average tangible equity		18.12	%		15.55	%	16.5	%
Return on average assets		1.31	%		1.41	%	-7.1	%
Net interest margin (A)		3.64	%		3.63	%	0.3	%
Efficiency ratio (B)		48.95	%		52.91	%	-7.5	%

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)
2020 vs 2019
	For the Nine Months Ended					Percent
Dollars in thousands	9/30/2020			9/30/2019		Change
Statements of Income
Interest income
Loans, including fees	$	77,666		$	72,344	7.4	%
Securities		6,944			7,166	-3.1	%
Other		216			490	-55.9	%
Total interest income		84,826			80,000	6.0	%
Interest expense
Deposits		13,088			17,745	-26.2	%
Borrowings		2,463			4,998	-50.7	%
Total interest expense		15,551			22,743	-31.6	%
Net interest income		69,275			57,257	21.0	%
Provision for credit losses		11,500			1,050	n/m
Net interest income after provision for credit losses		57,775			56,207	2.8	%
Noninterest income
Insurance commissions		75			1,821	-95.9	%
Trust and wealth management fees		1,870			1,830	2.2	%
Mortgage origination revenue		1,636			392	n/m
Service charges on deposit accounts		3,283			3,716	-11.7	%
Bank card revenue		3,257			2,631	23.8	%
Realized securities gains		2,560			1,535	66.8	%
Gain on sale of Summit Insurance Services, LLC		-			1,906	n/a
Bank owned life insurance and annuity income		1,334			733	82.0	%
Other income		292			235	24.3	%
Total noninterest income		14,307			14,799	-3.3	%
Noninterest expense
Salaries and employee benefits		23,709			21,966	7.9	%
Net occupancy expense		2,917			2,602	12.1	%
Equipment expense		4,263			3,694	15.4	%
Professional fees		1,168			1,266	-7.7	%
Advertising and public relations		389			484	-19.6	%
Amortization of intangibles		1,251			1,300	-3.8	%
FDIC premiums		595			88	576.1	%
Bank card expense		1,652			1,367	20.8	%
Foreclosed properties expense, net		1,815			2,236	-18.8	%
Merger-related expense		1,453			519	180.0	%
Other expenses		6,493			6,473	0.3	%
Total noninterest expense		45,705			41,995	8.8	%
Income before income taxes		26,377			29,011	-9.1	%
Income taxes		5,302			5,293	0.2	%
Net income	$	21,075		$	23,718	-11.1	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Nine Month Performance Summary (unaudited)
2020 vs 2019
	For the Nine Months Ended						Percent
	9/30/2020			9/30/2019			Change
Per Share Data
Earnings per common share
Basic	$	1.63		$	1.89		-13.8	%
Diluted	$	1.62		$	1.88		-13.8	%
Cash dividends	$	0.51		$	0.44		15.9	%
Dividend payout ratio		31.4	%		23.2	%	35.3	%
Average common shares outstanding
Basic		12,934,401			12,555,411		3.0	%
Diluted		12,971,792			12,614,382		2.8	%
Common shares outstanding at period end		12,932,415			12,400,804		4.3	%
Performance Ratios
Return on average equity		10.72	%		13.48	%	-20.5	%
Return on average tangible equity		13.36	%		15.80	%	-15.4	%
Return on average assets		1.04	%		1.40	%	-25.7	%
Net interest margin (A)		3.69	%		3.67	%	0.5	%
Efficiency ratio (B)		50.70	%		55.34	%	-8.4	%

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	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Statements of Income
Interest income
Loans, including fees	$	26,807		$	25,624		$	25,235		$	24,772		$	24,940
Securities		2,382			2,253			2,310			2,195			2,184
Other		57			60			98			105			125
Total interest income		29,246			27,937			27,643			27,072			27,249
Interest expense
Deposits		3,552			4,186			5,351			5,952			6,214
Borrowings		928			685			849			1,292			1,615
Total interest expense		4,480			4,871			6,200			7,244			7,829
Net interest income		24,766			23,066			21,443			19,828			19,420
Provision for credit losses		3,250			3,000			5,250			500			500
Net interest income after provision for credit losses		21,516			20,066			16,193			19,328			18,920
Noninterest income
Insurance commissions		44			24			7			90			40
Mortgage origination revenue		780			641			214			379			77
Trust and wealth management fees		622			582			665			734			632
Service charges on deposit accounts		1,138			882			1,263			1,377			1,312
Bank card revenue		1,237			1,087			933			906			924
Realized securities gains (losses)		1,522			-			1,038			403			453
Bank owned life insurance and annuity income		795			275			264			310			247
Other income		69			107			118			205			74
Total noninterest income		6,207			3,598			4,502			4,404			3,759
Noninterest expense
Salaries and employee benefits		8,108			7,930			7,672			7,099			7,044
Net occupancy expense		1,057			977			883			815			799
Equipment expense		1,474			1,360			1,429			1,278			1,296
Professional fees		364			417			387			412			388
Advertising and public relations		145			93			152			214			177
Amortization of intangibles		412			410			429			401			404
FDIC premiums		320			110			165			-			-
Bank card expense		589			560			503			454			455
Foreclosed properties expense, net		607			240			966			262			305
Merger-related expenses		28			637			788			98			74
Other expenses		2,405			2,463			1,625			2,126			1,864
Total noninterest expense		15,509			15,197			14,999			13,159			12,806
Income before income taxes		12,214			8,467			5,696			10,573			9,873
Income tax expense		2,594			1,518			1,190			2,424			1,812
Net income	$	9,620		$	6,949		$	4,506		$	8,149		$	8,061

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
	For the Quarter Ended
	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Per Share Data
Earnings per common share
Basic	$	0.74		$	0.54		$	0.35		$	0.66		$	0.65
Diluted	$	0.74		$	0.54		$	0.35		$	0.65		$	0.65
Cash dividends	$	0.17		$	0.17		$	0.17		$	0.15		$	0.15
Dividend payout ratio		22.9	%		31.7	%		49.1	%		22.3	%		23.0	%
Average common shares outstanding
Basic		12,922,158			12,911,979			12,975,429			12,400,932			12,412,982
Diluted		12,949,584			12,943,804			13,028,409			12,458,702			12,467,777
Common shares outstanding at period end		12,932,415			12,922,045			12,920,244			12,408,542			12,400,804
Performance Ratios
Return on average equity		14.38	%		10.75	%		6.92	%		13.32	%		13.51	%
Return on average tangible equity		18.12	%		13.57	%		8.55	%		15.25	%		15.55	%
Return on average assets		1.31	%		1.02	%		0.73	%		1.39	%		1.41	%
Net interest margin (A)		3.64	%		3.68	%		3.76	%		3.63	%		3.63	%
Efficiency ratio (B)		48.95	%		51.97	%		51.41	%		52.25	%		52.91	%

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	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Assets
Cash and due from banks	$	16,257			$	16,572			$	18,633			$	28,137			$	12,374
Interest bearing deposits other banks		92,729				26,218				22,821				33,751				40,296
Securities, available for sale		297,989				322,539				305,045				276,355				265,347
Securities, held to maturity		91,600				80,497				-				-				-
Loans, net		2,222,450				2,192,541				1,982,661				1,900,425				1,838,891
Property held for sale		17,831				17,954				18,287				19,276				20,979
Premises and equipment, net		52,880				51,847				47,078				44,168				43,592
Goodwill and other intangible assets		48,101				48,513				34,132				23,022				23,182
Cash surrender value of life insurance policies and annuities		57,029				55,315				46,497				43,603				43,216
Other assets		49,996				49,355				38,168				34,755				35,732
Total assets	$	2,946,862			$	2,861,351			$	2,513,322			$	2,403,492			$	2,323,609
Liabilities and Shareholders' Equity
Deposits	$	2,451,891			$	2,451,769			$	2,044,914			$	1,913,237			$	1,832,285
Short-term borrowings		140,145				90,945				161,745				199,345				206,694
Long-term borrowings and subordinated debentures		50,292				20,297				20,301				20,306				20,311
Other liabilities		32,571				34,909				30,337				22,840				21,897
Shareholders' equity		271,963				263,431				256,025				247,764				242,422
Total liabilities and shareholders' equity	$	2,946,862			$	2,861,351			$	2,513,322			$	2,403,492			$	2,323,609
Book value per common share	$	21.03			$	20.39			$	19.82			$	19.97			$	19.55
Tangible book value per common share	$	17.31			$	16.63			$	17.17			$	18.11			$	17.68
Tangible common equity to tangible assets		7.7	%			7.6	%			9.0	%			9.4	%			9.5	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (unaudited)
	9/30/2020		6/30/2020		3/31/2020		12/31/2019		9/30/2019
Summit Financial Group, Inc.
CET1 Risk-based Capital	9.9	%	9.7	%	10.8	%	11.1	%	11.2	%
Tier 1 Risk-based Capital	10.7	%	10.5	%	11.7	%	12.1	%	12.2	%
Total Risk-based Capital	12.9	%	11.3	%	12.5	%	12.7	%	12.8	%
Tier 1 Leverage	8.7	%	9.0	%	10.2	%	10.5	%	10.4	%
Summit Community Bank, Inc.
CET1 Risk-based Capital	11.8	%	10.5	%	11.7	%	12.1	%	12.2	%
Tier 1 Risk-based Capital	11.8	%	10.5	%	11.7	%	12.1	%	12.2	%
Total Risk-based Capital	12.7	%	11.4	%	12.5	%	12.7	%	12.9	%
Tier 1 Leverage	9.6	%	9.0	%	10.2	%	10.6	%	10.4	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition (unaudited)
Dollars in thousands	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Commercial	$	338,685		$	311,755		$	224,659		$	207,138		$	199,391
Mortgage warehouse lines		243,730			252,472			166,826			126,237			145,039
Commercial real estate
Owner occupied		312,502			336,143			331,486			276,218			255,828
Non-owner occupied		618,624			593,168			580,619			629,206			567,670
Construction and development
Land and development		97,343			92,706			92,332			84,112			69,589
Construction		66,878			48,115			43,121			37,523			56,255
Residential real estate
Conventional		368,008			371,225			378,540			354,963			359,399
Jumbo		73,836			76,360			64,944			70,947			69,815
Home equity		82,991			88,929			75,170			76,568			78,493
Consumer		35,905			35,781			36,611			36,470			36,982
Other		13,302			13,053			12,961			14,117			13,371
Total loans, net of unearned fees		2,251,804			2,219,707			2,007,269			1,913,499			1,851,832
Less allowance for credit losses		29,354			27,166			24,608			13,074			12,941
Loans, net	$	2,222,450		$	2,192,541		$	1,982,661		$	1,900,425		$	1,838,891

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Core deposits
Non-interest bearing checking	$	420,070		$	443,190		$	337,446		$	260,553		$	241,999
Interest bearing checking		867,442			830,258			648,214			630,352			602,059
Savings		598,564			561,029			457,010			418,096			305,891
Time deposits		414,542			422,286			384,062			373,125			371,178
Total core deposits		2,300,618			2,256,763			1,826,732			1,682,126			1,521,127
Brokered time deposits		64,120			90,279			111,156			150,554			227,369
Other non-core time deposits		87,153			104,727			107,026			80,557			83,789
Total deposits	$	2,451,891		$	2,451,769		$	2,044,914		$	1,913,237		$	1,832,285

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
	For the Quarter Ended
Dollars in thousands	9/30/2020				6/30/2020				3/31/2020				12/31/2019				9/30/2019
Gross loan charge-offs	$	1,259			$	218			$	698			$	455			$	843
Gross loan recoveries		(245	)			(269	)			(197	)			(88	)			(132	)
Net loan charge-offs/(recoveries)	$	1,014			$	(51	)		$	501			$	367			$	711
Net loan charge-offs to average loans (annualized)		0.18	%			-0.01	%			0.10	%			0.08	%			0.16	%
Allowance for loan credit losses	$	29,354			$	27,166			$	24,608			$	13,074			$	12,941
Allowance for loan credit losses as a percentage of period end loans		1.30	%			1.22	%			1.23	%			0.68	%			0.70	%
Allowance for credit losses on unfunded loan commitments	$	3,525			$	3,477			$	2,984			$	-			$	-
Nonperforming assets:
Nonperforming loans
Commercial	$	553			$	754			$	560			$	764			$	835
Commercial real estate		4,313				5,822				5,644				5,800				7,037
Residential construction and development		2				14				11				326				191
Residential real estate		5,104				5,873				4,343				4,404				4,461
Consumer		31				29				65				116				115
Other		-				35				100				100				100
Total nonperforming loans		10,003				12,527				10,723				11,510				12,739
Foreclosed properties
Commercial real estate		2,500				1,774				1,866				1,930				1,514
Commercial construction and development		4,154				4,511				4,511				4,601				4,909
Residential construction and development		10,330				10,645				10,774				11,169				12,847
Residential real estate		847				1,024				1,136				1,576				1,709
Total foreclosed properties		17,831				17,954				18,287				19,276				20,979
Other repossessed assets		-				-				49				17				16
Total nonperforming assets	$	27,834			$	30,481			$	29,059			$	30,803			$	33,734
Nonperforming loans to period end loans		0.44	%			0.56	%			0.53	%			0.60	%			0.69	%
Nonperforming assets to period end assets		0.94	%			1.07	%			1.16	%			1.28	%			1.45	%
Troubled debt restructurings
Performing	$	22,232			$	22,117			$	22,966			$	23,339			$	23,420
Nonperforming		2,988				3,003				2,831				2,337				2,443
Total troubled debt restructurings	$	25,220			$	25,120			$	25,797			$	25,676			$	25,863

Loans Past Due 30-89 Days (unaudited)
	For the Quarter Ended
Dollars in thousands	9/30/2020			6/30/2020			3/31/2020			12/31/2019			9/30/2019
Commercial	$	147		$	196		$	160		$	111		$	390
Commercial real estate		1,740			1,231			2,106			1,196			312
Construction and development		422			8			53			236			65
Residential real estate		4,464			2,763			5,178			4,775			5,573
Consumer		160			164			222			269			365
Other		2			3			7			25			63
Total	$	6,935		$	4,365		$	7,726		$	6,612		$	6,768

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q3 2020 vs Q2 2020 vs Q3 2019 (unaudited)
	Q3 2020										Q2 2020										Q3 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	$	2,251,722			$	26,656		4.71	%		$	2,118,158			$	25,466		4.84	%		$	1,813,555			$	24,786		5.42	%
Tax-exempt (2)		16,245				191		4.68	%			17,244				200		4.66	%			15,903				195		4.86	%
Securities
Taxable		261,231				1,445		2.20	%			248,792				1,453		2.35	%			203,288				1,566		3.06	%
Tax-exempt (2)		150,350				1,186		3.17	%			120,385				1,012		3.38	%			79,387				782		3.91	%
Interest bearing deposits other banks and Federal funds sold		60,639				57		0.37	%			41,776				60		0.58	%			35,214				125		1.41	%
Total interest earning assets		2,740,187				29,535		4.29	%			2,546,355				28,191		4.45	%			2,147,347				27,454		5.07	%
Noninterest earning assets
Cash & due from banks		16,603										16,672										12,815
Premises & equipment		52,329										50,457										43,160
Other assets		154,578										140,355										104,789
Allowance for credit losses		(28,144	)									(25,799	)									(13,276	)
Total assets	$	2,935,553									$	2,728,040									$	2,294,835
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits	$	850,281			$	380		0.18	%		$	764,852			$	369		0.19	%		$	594,772			$	1,621		1.08	%
Savings deposits		588,085				925		0.63	%			512,634				1,200		0.94	%			302,331				949		1.25	%
Time deposits		585,092				2,247		1.53	%			625,717				2,617		1.68	%			674,869				3,644		2.14	%
Short-term borrowings		165,555				734		1.76	%			95,744				499		2.10	%			202,425				1,372		2.69	%
Long-term borrowings and subordinated debentures		23,230				194		3.32	%			20,299				186		3.69	%			20,312				243		4.75	%
Total interest bearing liabilities		2,212,243				4,480		0.81	%			2,019,246				4,871		0.97	%			1,794,709				7,829		1.73	%
Noninterest bearing liabilities
Demand deposits		421,741										417,992										240,193
Other liabilities		33,978										32,238										21,320
Total liabilities		2,667,962										2,469,476										2,056,222
Shareholders' equity		267,591										258,564										238,613
Total liabilities and shareholders' equity	$	2,935,553									$	2,728,040									$	2,294,835
NET INTEREST EARNINGS					$	25,055									$	23,320									$	19,625
NET INTEREST MARGIN								3.64	%									3.68	%									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 $289,000, $254,000, and $205,000 for Q3 2020, Q2 2020 and Q3 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	$	2,102,331			$	77,211		4.91	%		$	1,758,645			$	71,877		5.46	%
Tax-exempt (2)		16,121				576		4.77	%			15,172				591		5.21	%
Securities
Taxable		256,322				4,657		2.43	%			200,947				4,858		3.23	%
Tax-exempt (2)		113,793				2,897		3.40	%			98,084				2,920		3.98	%
Interest bearing deposits other banks and Federal funds sold		46,074				215		0.62	%			41,642				490		1.57	%
Total interest earning assets		2,534,641				85,556		4.51	%			2,114,490				80,736		5.10	%
Noninterest earning assets
Cash & due from banks		15,901										12,941
Premises & equipment		49,655										40,983
Other assets		138,651										108,984
Allowance for loan losses		(25,618	)									(13,283	)
Total assets	$	2,713,230									$	2,264,115
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits	$	753,384			$	1,830		0.32	%		$	575,817			$	5,016		1.16	%
Savings deposits		516,841				3,462		0.89	%			306,083				2,768		1.21	%
Time deposits		608,551				7,796		1.71	%			667,565				9,960		1.99	%
Short-term borrowings		127,109				1,863		1.96	%			196,622				4,241		2.88	%
Long-term borrowings and subordinated debentures		21,284				600		3.77	%			20,317				757		4.98	%
		2,027,169				15,551		1.02	%			1,766,404				22,742		1.72	%
Noninterest bearing liabilities
Demand deposits		393,128										243,356
Other liabilities		30,741										19,669
Total liabilities		2,451,038										2,029,429
Shareholders' equity		262,192										234,686
Total liabilities and shareholders' equity	$	2,713,230									$	2,264,115
NET INTEREST EARNINGS					$	70,005									$	57,994
NET INTEREST MARGIN								3.69	%									3.67	%
(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 $730,000 and $737,000 for the YTD 2020 and YTD 2019 periods, respectively.

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