Summit Financial Group Reports First Quarter 2020 Results

Q1 2020 Diluted EPS $0.35 compared to $0.65 for Q4 2019 and $0.56 for Q1 2019

MOOREFIELD, W.V., April 30, 2020 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported first quarter 2020 net income of $4.51 million, or $0.35 per diluted share. In comparison, earnings for fourth quarter 2019 were $8.15 million, or $0.65 per diluted share, and for first quarter 2019, $7.09 million, or $0.56 per diluted share. Summit achieved returns on average assets and average tangible equity in first quarter 2020 of 0.73 percent and 8.55 percent, respectively, compared to 1.27 percent and 14.80 percent, respectively, in the same period of 2019.

“Despite the unprecedented challenges posed by the COVID-19 crisis and its resulting business conditions, Summit produced solid core earnings this past quarter,” commented H. Charles Maddy, III, President and Chief Executive Officer of Summit. “As we navigate the COVID-19 crisis, we believe our Company is well-prepared to endure its impacts. The Company has strong levels of capital and liquidity, diversified revenue streams, a sound credit record and an experienced management team. I am extremely proud of the diligent efforts and steadfast commitment put forth by our management and employees to maintain operational continuity and a high level of client service during this crisis. We are very concerned about the health and welfare of our employees, clients, shareholders and communities, and are supporting all our stakeholders throughout this crisis in a thoughtful, disciplined and compassionate manner. We especially appreciate our employees’ efforts in this uncertain time, and we will continue to persevere.”

Highlights for Q1 2020

• Provision for credit losses of $5.25 million in Q1 2020 compared to $500,000 in Q4 2019 and $250,000 in Q1 2019; the increase in this quarter’s provision resulted principally due to the estimated potential future economic impact of the COVID-19 crisis.
• Net interest income increased 32.6 percent (annualized) compared to Q4 2019 and increased 15.5 percent versus the same period in 2019, primarily due to loan growth and lower funding costs.
• Despite volatile markets, net interest margin in Q1 2020 increased 13 basis points to 3.76 percent as compared to the linked quarter, as yields on interest earning assets declined 11 basis points while deposit and other funding costs declined 23 basis points.
• Loan balances, excluding mortgage warehouse lines of credit, increased $53.2 million during the quarter, including $39.8 million in loans acquired from Cornerstone; excluding mortgage warehouse lines of credit and acquired Cornerstone loans, loans increased $13.4 million during the quarter, or 3.0 percent (annualized).
• Mortgage warehouse lines of credit increased $40.6 million during the quarter.
• Efficiency ratio improved to 51.41 percent compared to 52.25 percent in the linked quarter and 56.63 percent for Q1 2019.
• Realized securities gains of $1.04 million in Q1 2020 compared to $403,000 in the linked quarter.
• Merger expenses were $788,000 in Q1 2020 compared to $98,000 in the linked quarter.
• Net foreclosed properties expenses increased to $966,000 in Q1 2020 compared to $262,000 in Q4 2019; this is primarily the result of write downs of foreclosed properties to fair values totaling $946,000 in Q1 2020 compared to $497,000 in Q4 2019, while realized net gains on sales of foreclosed properties were $61,000 during Q1 2020 compared to $312,000 in Q4 2019.
• Nonperforming assets as a percentage of total assets improved to 1.16 percent from 1.28 percent for the linked quarter and 1.53 percent at the end of Q1 2019.

COVID-19 Impacts

Operations

As the COVID-19 related events unfolded throughout Q1 2020, Summit implemented various plans, strategies and protocols to protect our employees, maintain services for clients, assure the functional continuity of our operating systems, controls and processes, and mitigate financial risks posed by changing market conditions. In order to protect employees and assure workforce continuity and operational redundancy, we imposed business travel restrictions, enhanced our sanitizing protocols within our facilities and physically separated, to the extent possible, our critical operations workforce that cannot work remotely. To limit the risk of virus spread, the Company implemented drive-thru only and by appointment operating protocols throughout its bank branch network. We also maintained active communications with our critical vendors to assure all mission-critical activities and functions are being performed in line with our client-service standards.

Capital and Liquidity

Although there is a high degree of uncertainty around the magnitude and duration of the economic impact of the COVID-19 pandemic, management believes that our financial position, including high levels of capital and liquidity, will allow us to successfully endure the negative economic impacts of the crisis. Our capital management activities, coupled with our historically strong earnings performance and prudent dividend practices, have allowed us to build and maintain strong capital reserves. At March 31, 2020, all of Summit’s regulatory capital ratios significantly exceeded well-capitalized standards. More specifically, the Company bank subsidiary’s Tier 1 Leverage Ratio, a common measure to evaluate a financial institutions capital strength, was 10.2% at March 31, 2020, which represents over two times its well-capitalized regulatory minimum of 5.0%.

In addition, management believes the Company’s liquidity position is strong. The Company’s bank subsidiary maintains a funding base largely comprised of core noninterest bearing demand deposit accounts and low cost interest-bearing transactional deposit accounts with clients that operate or reside within the footprint of its branch bank network. At March 31, 2020, the Company’s cash and cash equivalent balances were $41.5 million. In addition, Summit maintains an available-for-sale securities portfolio, comprised primarily of highly liquid U.S. agency securities, highly-rated municipal securities and U.S. agency-backed mortgage backed securities, which serves as a ready source of liquidity. At March 31, 2020, the Company’s available-for-sale securities portfolio totaled $305.0 million, $205.8 million of which was unpledged as collateral. The Company bank subsidiary’s unused borrowing capacity at the Federal Home Loan Bank of Pittsburgh at March 31, 2020 was $689.2 million, and it maintained $177.1 million of borrowing availability at the Federal Reserve Bank of Richmond’s discount window. The Company has not experienced significant draws on clients’ available commercial lines of credit and home equity lines of credit due to the COVID-19 crisis, nor has it observed any significant or unusual client activity that portends unmanageable levels of stress on the our liquidity profile.

Summit is participating in the Paycheck Protection Program (“PPP”), a $660 billion low-interest business loan program funded by the U.S. Treasury Department and administered by the U.S. Small Business Administration. The PPP Loan Program provides U.S. government guarantees for lenders, as well as loan forgiveness incentives for borrowers that predominately utilize the loan proceeds to cover employee compensation-related business costs. Through April 28, 2020, Summit had approved 468 PPP loans totaling $83.8 million. While we anticipate high levels of client utilization of the PPP loan program, our liquidity resources are adequate to meet the funding requirements of these loans.

Lending

We have taken actions to identify and assess our COVID-19 related credit exposures by asset classes and borrower types. We implemented a loan modification program to assist both consumer and business borrowers that are experiencing or expect to experience financial hardships due to COVID-19 related challenges. Accordingly, the following table summarizes the aggregate balances of loans the Company has modified as result of COVID-19 through April 24, 2020 classified by types of loans and impacted borrowers.

			Loan Balances Modified Due to COVID-19 through 4/24/2020
Dollars in thousands	Total Loan Balance as of  3/31/2020		Loans Modified  to Interest Only Payments (6 Months or Less)		Loans Modified to Payment Deferral (3 Months)		Total Loans Modified		Percentage of  Loans Modified
Hospitality Industry	$	120,201	$	56,006	$	45,778	$	101,784	84.7	%
Non-Owner Occupied Retail Stores		107,420		34,774		12,518		47,292	44.0	%
Owner-Occupied Retail Stores		118,535		21,103		8,715		29,818	25.2	%
Restaurants		7,416		2,173		1,765		3,938	53.1	%
Oil & Gas Industry		32,297		914		4,425		5,339	16.5	%
Other Commercial Loans		898,310		78,836		29,061		107,897	12.0	%
Total Commercial Loans		1,284,179		193,806		102,262		296,068	23.1	%
Residential 1-4 Family Personal		276,189		3,278		13,061		16,339	5.9	%
Residential 1-4 Family Rentals		167,295		15,467		4,841		20,308	12.1	%
Home Equity Loans		75,170		-		402		402	0.5	%
Total Residential Real Estate Loans		518,654		18,745		18,304		37,049	7.1	%
Consumer Loans		35,344		365		613		978	2.8	%
Mortgage Warehouse Loans		166,826		-		-		-	0.0	%
Credit Cards and Overdrafts		2,266		-		-		-	0.0	%
Total Loans	$	2,007,269	$	212,916	$	121,179	$	334,095	16.6	%

Modified loans with deferred payments will continue to accrue interest during the deferral period unless otherwise classified as nonperforming. Consistent with bank regulatory guidance, borrowers that were otherwise current on loan payments that were granted COVID-19 related financial hardship payment deferrals will continue to be reported as current loans throughout the agreed upon deferral periods.  COVID-19 related loan modifications are also deemed to be insignificant borrower concessions, and therefore, such modified loans were not classified as troubled-debt restructured loans as of March 31, 2020. We anticipate that the amounts of COVID-19 related loan modifications will continue to increase during Q2 2020.

The COVID-19 crisis is expected to continue to impact our financial results, as well as demand for our services and products during the second quarter of 2020 and potentially beyond. The short and long-term implications of the COVID-19 crisis, and related monetary and fiscal stimulus measures, on our future revenues, earnings results, allowance for credit losses, capital reserves and liquidity are unknown at present.

CECL Adoption and Asset Quality

Effective January 1, 2020, we adopted ASU No. 2016-13, Financial Instruments – Credit Losses, also known as Current Expected Credit Losses (“CECL”). Upon the adoption of CECL, the Company recorded a net cumulative-effect adjustment that decreased retained earnings by $6.76 million. This adjustment was the result of a $6.93 million net increase in the allowance for credit losses (“ACL”), from $13.07 million at December 31, 2019 to $20.00 million upon adoption (including a $470,000 reclassification from loans to the ACL for purchased credit deteriorated (“PCD”) loans now accounted for in the ACL), a $2.43 million increase in other liabilities to provide an allowance for off-balance sheet credit exposures, offset by an increase to deferred income tax assets of $2.13 million.

The table below summarizes the changes in the ACL prior to CECL adoption through March 31, 2020.

Dollars in thousands	Allowance for Loan Losses at December 31, 2019		Impact of CECL Adoption			Allowance for Loan Credit Losses at January 1, 2020		Provision for Loan Credit Losses for Q1 2020			Cornerstone Day 1 PCD Loan Credit Marks			Loan Net Charge-offs for Q1 2020			Allowance for Loan Credit Losses at March 31, 2020
Balance	$	13,074	$	6,927		$	20,001	$	4,699		$	409		$	(501	)	$	24,608
% Changes	NA			53.0	%	NA			35.9	%		3.1	%		-3.8	%		88.2	%

We have recorded no allowance for credit losses relative to the Company’s available-for-sale debt securities or its other instruments carried at amortized cost.

First quarter 2020 net loan charge-offs were $501,000, or 0.10 percent of average loans annualized, while $4.7 million was added to the allowance for loan credit losses through the provision for loan credit losses. The allowance for loan credit losses stood at 1.23 percent of total loans at March 31, 2020, compared to 0.68 percent at year-end 2019.

As of March 31, 2020, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, improved to $29.1 million, or 1.16 percent of assets. This compares to $30.8 million, or 1.28 percent of assets at the linked quarter-end and $34.4 million, or 1.53 percent of assets at the end of Q1 2019.

Merger & Acquisition Activity

Summit completed its acquisition of Cornerstone Financial Services, Inc. (“Cornerstone”) and its subsidiary, Cornerstone Bank, headquartered in West Union, West Virginia on January 1, 2020 and converted substantially all of its data processing systems to that of Summit’s on March 21, 2020; accordingly, Cornerstone’s results of operations are included in Summit’s consolidated results of operations from the date of acquisition, and therefore Summit’s first quarter 2020 results reflect increased levels of average balances, income and expenses compared to its first quarter 2019 and fourth quarter 2019 results.  At consummation, Cornerstone had total assets of $195.0 million, loans of $39.8 million, and deposits of $173.0 million.

On April 24, 2020, Summit’s bank subsidiary, Summit Community Bank completed its acquisition of four branch banking offices located in the Eastern Panhandle of West Virginia from MVB Bank, Inc., a bank subsidiary of MVB Financial Corp. (NASDAQ: MVBF). Summit assumed approximately $195.0 million in deposits and acquired approximately $35.3 million in loans in conjunction with this purchase.

Results of Operations

Total revenue for first quarter 2020, consisting of net interest income and noninterest income, increased 13.8 percent to $25.9 million, principally as a result of higher net interest income compared to $22.8 million for the first quarter 2019.

For the first quarter of 2020, net interest income was $21.4 million, an increase of 15.5 percent from the $18.6 million reported in the prior-year first quarter and an 8.1 percent increase compared to the linked quarter. The net interest margin for first quarter 2020 increased to 3.76 percent compared to 3.63 percent for the linked quarter and 3.66 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 Q1 2020, 3.60 percent for Q4 2019 and 3.64 percent for Q1 2019.  

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for first quarter 2020 was $4.50 million compared to $4.23 million for the comparable period of 2019. Excluding realized securities gains, noninterest income was $3.46 million for first quarter 2020, compared to $4.23 million reported for first quarter 2019 and was $4.00 million for the linked quarter. The lower levels of 2020 noninterest income compared to 2019 periods are primarily due to the elimination of insurance commission revenue as result of SIS’ sale in Q2 2019.

We recorded a $5.25 million provision for credit losses during first quarter 2020 compared to $500,000 for the linked quarter and $250,000 for the comparable period of 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. Our Q1 2020 provision for credit losses reflects a change in our CECL computational model’s forecasted economic conditions over the next four quarters from “major improvement” as of January 1, 2020 to “major risk” as of March 31, 2020 due to the COVID-19 crisis.

Q1 2020 total noninterest expense increased 8.2 percent to $15.0 million compared to $13.9 million for the prior-year first quarter and increased 14.0 percent compared to the linked quarter.  Our increased noninterest expense is principally due to expenses associated with the acquired Cornerstone operations, higher writedowns of foreclosed properties and increased merger expenses.  This increase is partially offset by income related to our deferred director compensation plan of $483,000 recognized in Q1 2020 compared to deferred director compensation plan expense of $484,000 and $239,000 recorded in Q1 2019 and Q4 2019, respectively.  Under our director deferred compensation plans, directors optionally elect to defer their director fees into a "phantom" investment plan whereby the Company recognizes expense or benefit relative to the phantom returns or losses of such investments. As result of the stock market’s deterioration during Q1 2020, we recognized income related to deferred director compensation this quarter.

Balance Sheet

At March 31, 2020, total assets were $2.51 billion, an increase of $109.8 million, or 4.6 percent since December 31, 2019. Total loans, net of unearned fees and allowance for loan credit losses, were $1.98 billion at March 31, 2020, up $82.2 million, or 4.3 percent, from the $1.90 billion reported at year-end 2019.  Loans, excluding mortgage warehouse lines of credit and acquired Cornerstone loans, increased $13.4 million during the quarter, or 3.0 percent (on an annualized basis).

At March 31, 2020, core deposits were $1.83 billion, an increase of $144.6 million or 8.6 percent during first quarter 2020 -- as checking deposits increased $94.8 million or 10.6 percent, core time deposits increased by $10.9 million or 2.9 percent and savings deposits increased $38.9 million or 9.3 percent.  Excluding acquired deposits, Q1 2020 core deposit growth was $3.44 million or 2.0 percent.

Shareholders’ equity was $256.0 million as of March 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 decreased to $17.17 at March 31, 2020 compared to $18.11 at December 31, 2019. Summit had 12,920,244 outstanding common shares at March 31, 2020 compared to 12,408,542 at year end 2019.

As announced this quarter, 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 2020, 66,611 shares of our common stock were repurchased under the Plan at an average price of 19.21 per share.

About the Company

Summit Financial Group, Inc. is a $2.51 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 thirty-nine 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)
Q1 2020 vs Q1 2019

	For the Quarter Ended						Percent
Dollars in thousands	3/31/2020		3/31/2019				Change
Statements of Income
Interest income
Loans, including fees	$	25,235		$	23,051		9.5	%
Securities		2,310			2,586		-10.7	%
Other		98			231		-57.6	%
Total interest income		27,643			25,868		6.9	%
Interest expense
Deposits		5,351			5,564		-3.8	%
Borrowings		849			1,731		-51.0	%
Total interest expense		6,200			7,295		-15.0	%
Net interest income		21,443			18,573		15.5	%
Provision for credit losses		5,250			250		2000.0	%
Net interest income after provision for credit losses		16,193			18,323		-11.6	%
Noninterest income
Insurance commissions		7			1,174		-99.4	%
Trust and wealth management fees		665			586		13.5	%
Service charges on deposit accounts		1,263			1,180		7.0	%
Bank card revenue		933			814		14.6	%
Realized securities gains (losses)		1,038			(3	)	n/m
Bank owned life insurance income		264			238		10.9	%
Other income		332			241		37.8	%
Total noninterest income		4,502			4,230		6.4	%
Noninterest expense
Salaries and employee benefits		7,672			7,347		4.4	%
Net occupancy expense		883			924		-4.4	%
Equipment expense		1,429			1,179		21.2	%
Professional fees		387			403		-4.0	%
Advertising and public relations		152			153		-0.7	%
Amortization of intangibles		429			476		-9.9	%
FDIC premiums		165			-		n/m
Bank card expense		503			439		14.6	%
Foreclosed properties expense, net		966			384		151.6	%
Merger-related expenses		788			63		1150.8	%
Other expenses		1,625			2,492		-34.8	%
Total noninterest expense		14,999			13,860		8.2	%
Income before income taxes		5,696			8,693		-34.5	%
Income taxes		1,190			1,601		-25.7	%
Net income	$	4,506		$	7,092		-36.5	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Quarterly Performance Summary (unaudited)
Q1 2020 vs Q1 2019
	For the Quarter Ended						Percent
	3/31/2020			3/31/2019			Change
Per Share Data
Earnings per common share
Basic	$	0.35		$	0.56		-37.5	%
Diluted	$	0.35		$	0.56		-37.5	%
Cash dividends	$	0.17		$	0.14		21.4	%
Dividend payout ratio		49.1	%		25.0	%	96.4	%
Average common shares outstanding
Basic		12,975,429			12,717,501		2.0	%
Diluted		13,028,409			12,778,644		2.0	%
Common shares outstanding at period end		12,920,244			12,661,528		2.0	%
Performance Ratios
Return on average equity		6.92	%		12.28	%	-43.6	%
Return on average tangible equity		8.55	%		14.80	%	-42.2	%
Return on average assets		0.73	%		1.27	%	-42.5	%
Net interest margin (A)		3.76	%		3.66	%	2.7	%
Efficiency ratio (B)		51.41	%		56.63	%	9.2	%

NOTE (A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

NOTE (B) – Computed on a tax equivalent basis excluding merger-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Five Quarter Performance Summary (unaudited)
	For the Quarter Ended
Dollars in thousands	3/31/2020		12/31/2019			9/30/2019			6/30/2019			3/31/2019
Statements of Income
Interest income
Loans, including fees	$	25,235		$	24,772		$	24,940		$	24,352		$	23,051
Securities		2,310			2,195			2,184			2,396			2,586
Other		98			105			125			134			231
Total interest income		27,643			27,072			27,249			26,882			25,868
Interest expense
Deposits		5,351			5,952			6,214			5,967			5,564
Borrowings		849			1,292			1,615			1,652			1,731
Total interest expense		6,200			7,244			7,829			7,619			7,295
Net interest income		21,443			19,828			19,420			19,263			18,573
Provision for credit losses		5,250			500			500			300			250
Net interest income after provision for credit losses		16,193			19,328			18,920			18,963			18,323
Noninterest income
Insurance commissions		7			90			40			606			1,174
Trust and wealth management fees		665			734			632			612			586
Service charges on deposit accounts		1,263			1,377			1,312			1,224			1,180
Bank card revenue		933			906			924			893			814
Realized securities gains (losses)		1,038			403			453			1,086			(3	)
Gain on sale of Summit Insurance Services, LLC		-			-			-			1,906			-
Bank owned life insurance income		264			310			247			248			238
Other income		332			584			151			235			241
Total noninterest income		4,502			4,404			3,759			6,810			4,230
Noninterest expense
Salaries and employee benefits		7,672			7,099			7,044			7,576			7,347
Net occupancy expense		883			815			799			880			924
Equipment expense		1,429			1,278			1,296			1,219			1,179
Professional fees		387			412			388			475			403
Advertising and public relations		152			214			177			155			153
Amortization of intangibles		429			401			404			420			476
FDIC premiums		165			-			-			88			-
Bank card expense		503			454			455			473			439
Foreclosed properties expense, net		966			262			305			1,545			384
Merger-related expenses		788			98			74			382			63
Other expenses		1,625			2,126			1,864			2,116			2,492
Total noninterest expense		14,999			13,159			12,806			15,329			13,860
Income before income taxes		5,696			10,573			9,873			10,444			8,693
Income tax expense		1,190			2,424			1,812			1,880			1,601
Net income	$	4,506		$	8,149		$	8,061		$	8,564		$	7,092

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Five Quarter Performance Summary (unaudited)
	For the Quarter Ended
	3/31/2020			12/31/2019			9/30/2019			6/30/2019			3/31/2019
Per Share Data
Earnings per common share
Basic	$	0.35		$	0.66		$	0.65		$	0.68		$	0.56
Diluted	$	0.35		$	0.65		$	0.65		$	0.68		$	0.56
Cash dividends	$	0.17		$	0.15		$	0.15		$	0.15		$	0.14
Dividend payout ratio		49.1	%		22.3	%		23.0	%		21.9	%		25.0	%
Average common shares outstanding
Basic		12,975,429			12,400,932			12,412,982			12,539,095			12,717,501
Diluted		13,028,409			12,458,702			12,467,777			12,600,071			12,778,644
Common shares outstanding at period end		12,920,244			12,408,542			12,400,804			12,449,986			12,661,528
Performance Ratios
Return on average equity		6.92	%		13.32	%		13.51	%		14.62	%		12.28	%
Return on average tangible equity		8.55	%		15.25	%		15.55	%		17.02	%		14.80	%
Return on average assets		0.73	%		1.39	%		1.41	%		1.52	%		1.27	%
Net interest margin (A)		3.76	%		3.63	%		3.63	%		3.72	%		3.66	%
Efficiency ratio (B)		51.41	%		52.25	%		52.91	%		56.45	%		56.63	%

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	3/31/2020			12/31/2019				9/30/2019				6/30/2019				3/31/2019
Assets
Cash and due from banks	$	18,633			$	28,137			$	12,374			$	13,481			$	14,265
Interest bearing deposits other banks		22,821				33,751				40,296				42,994				43,689
Securities		305,045				276,355				265,347				269,920				297,126
Loans, net		1,982,661				1,900,425				1,838,891				1,805,850				1,725,064
Property held for sale		18,287				19,276				20,979				21,390				24,393
Premises and equipment, net		47,078				44,168				43,592				42,896				39,345
Goodwill and other intangible assets		34,132				23,022				23,182				23,585				29,349
Cash surrender value of life insurance policies		46,497				43,603				43,216				42,976				42,714
Other assets		38,168				34,755				35,732				36,022				33,696
Total assets	$	2,513,322			$	2,403,492			$	2,323,609			$	2,299,114			$	2,249,641
Liabilities and Shareholders' Equity
Deposits	$	2,044,914			$	1,913,237			$	1,832,285			$	1,797,493			$	1,789,032
Short-term borrowings		161,745				199,345				206,694				225,343				186,292
Long-term borrowings and subordinated debentures		20,301				20,306				20,311				20,315				20,319
Other liabilities		30,337				22,840				21,897				20,262				20,368
Shareholders' equity		256,025				247,764				242,422				235,701				233,630
Total liabilities and shareholders' equity	$	2,513,322			$	2,403,492			$	2,323,609			$	2,299,114			$	2,249,641
Book value per common share	$	19.82			$	19.97			$	19.55			$	18.93			$	18.45
Tangible book value per common share	$	17.17			$	18.11			$	17.68			$	17.04			$	16.13
Tangible common equity to tangible assets		9.0	%			9.4	%			9.5	%			9.3	%			9.2	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)
Regulatory Capital Ratios (unaudited)
	3/31/2020		12/31/2019		9/30/2019		6/30/2019		3/31/2019
Summit Financial Group, Inc.
CET1 Risk-based Capital	10.8	%	11.1	%	11.2	%	11.1	%	11.4	%
Tier 1 Risk-based Capital	11.7	%	12.1	%	12.2	%	12.1	%	12.5	%
Total Risk-based Capital	12.5	%	12.7	%	12.8	%	12.8	%	13.2	%
Tier 1 Leverage	10.2	%	10.5	%	10.4	%	10.4	%	10.2	%
Summit Community Bank, Inc.
CET1 Risk-based Capital	11.7	%	12.1	%	12.2	%	11.9	%	12.3	%
Tier 1 Risk-based Capital	11.7	%	12.1	%	12.2	%	11.9	%	12.3	%
Total Risk-based Capital	12.5	%	12.7	%	12.9	%	12.6	%	13.0	%
Tier 1 Leverage	10.2	%	10.6	%	10.4	%	10.2	%	10.0	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)
Loan Composition (unaudited)
Dollars in thousands	3/31/2020		12/31/2019			9/30/2019			6/30/2019			3/31/2019
Commercial	$	224,659		$	207,138		$	199,391		$	204,138		$	189,248
Mortgage warehouse lines		166,826			126,237			145,039			101,607			49,355
Commercial real estate
Owner occupied		331,486			276,218			255,828			262,901			256,671
Non-owner occupied		580,619			629,206			567,670			574,677			585,809
Construction and development
Land and development		92,332			84,112			69,589			67,769			64,192
Construction		43,121			37,523			56,255			46,975			36,040
Residential real estate
Non-jumbo		378,540			354,963			359,399			360,752			359,107
Jumbo		64,944			70,947			69,815			70,171			69,313
Home equity		75,170			76,568			78,493			81,373			80,370
Consumer		36,611			36,470			36,982			36,715			36,046
Other		12,961			14,117			13,371			11,924			12,045
Total loans, net of unearned fees		2,007,269			1,913,499			1,851,832			1,819,002			1,738,196
Less allowance for credit losses		24,608			13,074			12,941			13,152			13,132
Loans, net	$	1,982,661		$	1,900,425		$	1,838,891		$	1,805,850		$	1,725,064

SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)
Deposit Composition (unaudited)
Dollars in thousands	3/31/2020		12/31/2019			9/30/2019			6/30/2019			3/31/2019
Core deposits
Non-interest bearing checking	$	337,446		$	260,553		$	241,999		$	234,397		$	258,679
Interest bearing checking		648,214			630,352			602,059			588,948			560,800
Savings		457,010			418,096			305,891			301,403			310,646
Time deposits		384,062			373,125			371,178			365,275			359,141
Total core deposits		1,826,732			1,682,126			1,521,127			1,490,023			1,489,266
Brokered time deposits		111,156			150,554			227,369			222,901			218,913
Other non-core time deposits		107,026			80,557			83,789			84,569			80,853
Total deposits	$	2,044,914		$	1,913,237		$	1,832,285		$	1,797,493		$	1,789,032

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Asset Quality Information (unaudited)
	For the Quarter Ended
Dollars in thousands	3/31/2020			12/31/2019				9/30/2019				6/30/2019				3/31/2019
Gross loan charge-offs	$	698			$	455			$	843			$	391			$	414
Gross loan recoveries		(197	)			(88	)			(132	)			(111	)			(249	)
Net loan charge-offs	$	501			$	367			$	711			$	280			$	165
Net loan charge-offs to average loans (annualized)		0.10	%			0.08	%			0.16	%			0.06	%			0.04	%
Allowance for loan credit losses	$	24,608			$	13,074			$	12,941			$	13,152			$	13,132
Allowance for loan credit losses as a percentage of period end loans		1.23	%			0.68	%			0.70	%			0.72	%			0.76	%
Nonperforming assets:
Nonperforming loans
Commercial	$	560			$	764			$	835			$	948			$	729
Commercial real estate		5,644				5,800				7,037				6,544				2,981
Residential construction and development		11				326				191				66				24
Residential real estate		4,343				4,404				4,461				5,657				5,928
Consumer		65				116				115				160				182
Other		100				100				100				100				130
Total nonperforming loans		10,723				11,510				12,739				13,475				9,974
Foreclosed properties
Commercial real estate		1,866				1,930				1,514				1,544				1,841
Commercial construction and development		4,511				4,601				4,909				4,910				6,326
Residential construction and development		10,774				11,169				12,847				13,132				14,347
Residential real estate		1,136				1,576				1,709				1,804				1,879
Total foreclosed properties		18,287				19,276				20,979				21,390				24,393
Other repossessed assets		49				17				16				12				34
Total nonperforming assets	$	29,059			$	30,803			$	33,734			$	34,877			$	34,401
Nonperforming loans to period end loans		0.53	%			0.60	%			0.69	%			0.74	%			0.57	%
Nonperforming assets to period end assets		1.16	%			1.28	%			1.45	%			1.52	%			1.53	%
Troubled debt restructurings
Performing	$	22,966			$	23,339			$	23,420			$	23,266			$	27,845
Nonperforming		2,831				2,337				2,443				2,915				-
Total troubled debt restructurings	$	25,797			$	25,676			$	25,863			$	26,181			$	27,845

Loans Past Due 30-89 Days (unaudited)
	For the Quarter Ended
Dollars in thousands	3/31/2020		12/31/2019			9/30/2019			6/30/2019			3/31/2019
Commercial	$	160		$	111		$	390		$	375		$	264
Commercial real estate		2,106			1,196			312			1,719			4,128
Construction and development		53			236			65			235			179
Residential real estate		5,178			4,775			5,573			5,670			2,944
Consumer		222			269			365			234			432
Other		7			25			63			9			52
Total	$	7,726		$	6,612		$	6,768		$	8,242		$	7,999

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q1 2020 vs Q4 2019 vs Q1 2019 (unaudited)
	Q1 2020										Q4 2019										Q1 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	$	1,935,473			$	25,089		5.21	%		$	1,853,197			$	24,622		5.27	%		$	1,712,286			$	22,907		5.43	%
Tax-exempt (2)		14,873				185		5.00	%			15,738				189		4.76	%			14,907				184		5.01	%
Securities
Taxable		258,889				1,757		2.73	%			218,375				1,654		3.00	%			195,932				1,687		3.49	%
Tax-exempt (2)		70,239				699		4.00	%			69,276				686		3.93	%			114,831				1,139		4.02	%
Interest bearing deposits other banks and Federal funds sold		35,648				98		1.11	%			32,779				105		1.27	%			51,187				230		1.82	%
Total interest earning assets		2,315,122				27,828		4.83	%			2,189,365				27,256		4.94	%			2,089,143				26,147		5.08	%
Noninterest earning assets
Cash & due from banks		14,422										12,932										12,825
Premises & equipment		46,151										44,136										38,404
Other assets		120,846										103,481										113,340
Allowance for credit losses		(20,452	)									(13,055	)									(13,309	)
Total assets	$	2,476,089									$	2,336,859									$	2,240,403
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits	$	643,955			$	1,081		0.68	%		$	619,939			$	1,378		0.88	%		$	556,766			$	1,663		1.21	%
Savings deposits		449,021				1,337		1.20	%			351,653				1,201		1.35	%			310,848				898		1.17	%
Time deposits		615,102				2,933		1.92	%			641,160				3,373		2.09	%			654,404				3,003		1.86	%
Short-term borrowings		119,607				630		2.12	%			188,007				1,062		2.24	%			200,297				1,472		2.98	%
Long-term borrowings and subordinated debentures		20,304				219		4.34	%			20,308				230		4.49	%			20,321				259		5.17	%
Total interest bearing liabilities		1,847,989				6,200		1.35	%			1,821,067				7,244		1.58	%			1,742,636				7,295		1.70	%
Noninterest bearing liabilities
Demand deposits		339,340										248,159										248,354
Other liabilities		28,400										22,856										18,322
Total liabilities		2,215,729										2,092,082										2,009,312
Shareholders' equity		260,360										244,777										231,091
Total liabilities and shareholders' equity	$	2,476,089									$	2,336,859									$	2,240,403
NET INTEREST EARNINGS					$	21,628									$	20,012									$	18,852
NET INTEREST MARGIN								3.76	%									3.63	%									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% for all periods presented. The tax equivalent adjustment resulted in an increase in interest income of $185,000, $184,000, and $279,000 for Q1 2020, Q4 2019 and Q1 2019, respectively.

Contact: Telephone: Email:		Robert S. Tissue, Executive Vice President & CFO [phone] [e-mail]