Summit Financial Group Reports Record Quarterly EPS and Net Income

Q1 2021 Diluted EPS $0.80 compared to $0.79 for Q4 2020 and $0.35 for Q1 2020

MOOREFIELD, W.Va., April 22, 2021 (GLOBE NEWSWIRE) — Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported first quarter 2021 net income of $10.4 million, or $0.80 per diluted share, both representing a quarterly record. In comparison, earnings for fourth quarter 2020 were $10.3 million, or $0.79 per diluted share, and for first quarter 2020 were $4.51 million, or $0.35 per diluted share.

H. Charles Maddy, III, President and Chief Executive Officer commented, “For the second consecutive quarter, Summit achieved both record quarterly earnings per share and net income in Q1 2021. I am particularly pleased by our continued strong core operating performance, highlighted by our strong year-over-year growth in revenue, all while maintaining a relatively stable net interest margin and well-controlled noninterest expenses. Such results serve to validate not only our core growth strategies, but our ability to remain disciplined despite somewhat challenging economic conditions. I am inspired by our gaining momentum towards our goal to be a consistently growing, high-performing community banking institution.”

Highlights for Q1 2021

• Net interest income was nearly unchanged compared to Q4 2020, despite Q1 2021 having two less days than Q4 2020, and increased 22.4 percent year over year, primarily due to loan growth and lower funding costs.
• Net interest margin in Q1 2021 decreased 11 basis points to 3.65 percent as compared to the linked quarter, as yield on interest earning assets decreased 20 basis points while the cost of deposits and other funding declined 10 basis points.
• Excluding mortgage warehouse lines of credit and PPP loans, loan balances increased a net $135.8 million during the quarter.
• Recorded provision for credit losses of $1.50 million in Q1 2021 compared to $3.00 million in Q4 2020 and $5.25 million in Q1 2020; our increased credit provisions in 2020 were principally due to the estimated potential future economic impact of the COVID-19 crisis.
• Efficiency ratio was 49.79 percent compared to 49.38 percent in the linked quarter and 51.41 percent for Q1 2020.
• Net foreclosed properties expenses decreased to $227,000 in Q1 2021 compared to $676,000 in Q4 2020, as net losses on sales of foreclosed properties in Q1 2021 totaled $113,000 compared to $489,000 in Q4 2020, and write downs of foreclosed properties to estimated fair values totaled $23,000 in Q1 2021 compared to $64,000 in Q4 2020. During Q1 2020, such write downs totaled $946,000 and realized net gains were $61,000.
• Realized $476,000 securities gains in Q1 2021 compared to $912,000 in the linked quarter and $1.04 million in Q1 2020.
• Nonperforming assets as a percentage of total assets increased slightly to 1.21 percent compared to 1.16 percent for the linked quarter and 1.16 percent at first quarter end 2020.

Results from Operations

Total revenue for first quarter 2021, consisting of net interest income and noninterest income, increased 20.4 percent to $31.2 million, which included $476,000 in realized securities gains, compared to $25.9 million for first quarter 2020.

For the first quarter of 2021, net interest income was $26.3 million, an increase of 22.4 percent from the $21.4 million reported in the prior-year first quarter and remained nearly unchanged compared to the linked quarter. The net interest margin for first quarter 2021 was 3.65 percent compared to 3.76 percent for both the linked quarter and 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 3.60 percent for Q1 2021, 3.70 percent for Q4 2020 and 3.70 percent for Q1 2020.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for first quarter 2021 was $4.97 million compared to $5.78 million for the linked quarter and $4.50 million for the comparable period of 2020, which included realized securities gains of $476,000 in Q1 2021, $912,000 in the linked quarter and $1.04 million in Q1 2020. Excluding realized securities gains, noninterest income was $4.50 million for first quarter 2021 and $3.46 million for first quarter 2020. Mortgage origination revenue was $998,000 in Q1 2021 compared to $1.16 million for Q4 2020 and $214,000 in Q1 2020 due to higher volumes of secondary market loans driven primarily by historically low interest rates.

We recorded a $1.50 million provision for credit losses during first quarter 2021 compared to $3.00 million for the linked quarter and $5.25 million in Q1 2020.

Q1 2021 total noninterest expense decreased 1.0 percent to $16.4 million compared to the linked quarter and increased 9.6 percent compared to $15.0 million for the prior-year first quarter. This year-over-year increase resulted primarily due to the acquisition of Cornerstone, MVB Bank branches and WinFirst during 2020. Additionally, other significant factors contributing to the changes in total noninterest expense period over period are as follows: decreased write downs of foreclosed properties to estimated fair values totaling $23,000 in Q1 2021 compared to $64,000 in Q4 2020 and $946,000 in Q1 2020, net losses on sales of foreclosed properties in Q1 2021 of $113,000 compared to $489,000 in Q4 2020 and net gains of $61,000 during Q1 2020 and deferred director compensation expense totaling $236,000 in Q1 2021, compared to $571,000 in Q4 2020 and income of $483,000 in Q1 2020.

Balance Sheet

At March 31, 2021, total assets were $3.25 billion, an increase of $141.8 million, or 4.6 percent since December 31, 2020. Total loans, net of unearned fees and allowance for loan losses, were $2.42 billion at March 31, 2021, up $38.1 million, or 1.6 percent, from the $2.38 billion reported at year-end 2020. Loans, excluding mortgage warehouse lines of credit and PPP loans, increased $135.8 million during the quarter, or 26.0 percent (annualized), while net mortgage warehouse lines and PPP loans decreased $83.2 million and $12.6 million, respectively.

At March 31, 2021, core deposits were $2.61 billion, an increase of $149.8 million, or 6.1 percent, since year end 2020. During Q1 2021, checking deposits increased $118.5 million or 8.6 percent, core time deposits declined by $4.0 million or 0.9 percent and savings deposits increased $35.3 million or 5.7 percent.

Shareholders’ equity was $293.4 million as of March 31, 2021 compared to $281.6 million at December 31, 2020.

Tangible book value per common share increased to $18.47 as of March 31, 2021 compared to $17.50 at December 31, 2020 and $17.17 at March 31, 2020. Summit had 12,950,714 outstanding common shares at Q1 2021 quarter end compared to 12,942,004 at year end 2020.

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 Q1 2021, no shares of our common stock were repurchased under the Plan.

Asset Quality

We incurred net loan charge-offs of $189,000 in first quarter 2021 (0.03 percent of average loans annualized), compared to fourth quarter 2020 net loan charge-offs of $239,000 while $1.99 million and $2.34 million were added to the allowance for loan credit losses through the provision for credit losses during Q1 2021 and Q4 2020, respectively. The allowance for loan credit losses stood at 1.39 percent of total loans as of March 31, 2021, compared to 1.34 percent at year-end 2020.

During Q1 2021, we decreased our allowance for credit losses on unfunded loan commitments $485,000 primarily due to an improved economic forecast and during Q4 2020, we added $665,000 through the provision for credit losses.

As of March 31, 2021, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $39.3 million, or 1.21 percent of assets, which included a $3.3 million downgraded client relationship in the hospitality industry, compared to NPAs of $35.9 million, or 1.16 percent of assets at the linked quarter-end and $29.1 million, or 1.16 percent of assets at the end first quarter 2020. The Q1 2021 increase was partially offset by sales of $1.67 million of foreclosed properties during the quarter.

The following tables summarize the aggregate balances of loans the Company has modified as result of the COVID-19 pandemic as of March 31, 2021 and December 31, 2020 classified by types of loans and impacted borrowers.

About the Company

Summit Financial Group, Inc. is a $3.25 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.

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.

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.