GlobeNewswire Inc | Jul 30, 2020 06:00AM EDT

July 30, 2020

MOOREFIELD, W.V., July 30, 2020 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (Company or Summit) (NASDAQ: SMMF) today reported second quarter 2020 net income of $6.95 million, or $0.54 per diluted share. In comparison, earnings for first quarter 2020 were $4.51 million, or $0.35 per diluted share, and for second quarter 2019 were $8.56 million, or $0.68 per diluted share.

For the six months ended June 30, 2020, Summit recorded net income of $11.5 million, or $0.88 per diluted share, compared with $15.7 million, or $1.23 per diluted share, for the comparable 2019 six-month period, representing a decrease of 26.8 percent or 28.5 percent per diluted share.

H. Charles Maddy, III, President and Chief Executive Officer of Summit commented, I am very gratified to report Summit achieved another quarter of strong core operating performance, highlighted by exceptional growth in net interest income, a relatively stable net interest margin and well-controlled noninterest expenses, despite the many economic and operational challenges posed by the COVID-19 crisis. I am especially proud of our management and employees as they continue to put forth consistent, high levels of client service during this uncertain time.

Highlights for Q2 2020

-- Provision for credit losses of $3.00 million in Q2 2020 compared to $5.25 million in Q1 2020 and $300,000 in Q2 2019; while the increased credit provisions in 2020 resulted principally due to the estimated potential future economic impact of the COVID-19 crisis, $908,000 of the Q2 2020 provision for credit losses was attributable to loans acquired in conjunction with the purchase of the MVB Bank branches. -- Net interest income increased 30.3 percent (annualized) compared to Q1 2020 and increased 19.7 percent versus the same period in 2019, primarily due to loan growth and lower funding costs. -- Net interest margin in Q2 2020 decreased 8 basis points to 3.68 percent as compared to the linked quarter, as both yields on interest earning assets and deposit and other funding costs declined 38 basis points. -- Completed acquisition of four branch banking offices located in the economically vibrant Eastern Panhandle of West Virginia from MVB Bank, Inc. -- Mortgage warehouse lines of credit increased $85.6 million during Q2 2020. -- 760 SBA PPP loans were originated during the quarter totaling $99.1 million. -- Excluding mortgage warehouse lines of credit, SBA PPP loans and loans acquired in conjunction with the purchase of the MVB Bank branches, loan balances decreased $7.39 million during the quarter. -- Efficiency ratio was 51.97 percent compared to 51.41 percent in the linked quarter and 56.45 percent for Q2 2019. -- Realized no securities gains or losses in Q2 2020 compared to realized net securities gains of $1.04 million in the linked quarter. -- Merger expenses were $637,000 in Q2 2020 compared to $788,000 in the linked quarter. -- Net foreclosed properties expenses decreased to $240,000 in Q2 2020 compared to $966,000 in Q1 2020; this is primarily the result of write downs of foreclosed properties to fair values totaling $946,000 in Q1 2020 compared to $218,000 in Q2 2020, while realized net gains on sales of foreclosed properties were $61,000 during both Q1 and Q2 2020. -- Nonperforming assets as a percentage of total assets improved to 1.07 percent compared to 1.16 percent for the linked quarter and 1.52 percent at the end of Q2 2019.

COVID-19 Impacts

Operations

As the COVID-19 related events unfolded throughout first half 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. 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 remains 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 June 30, 2020, all of Summits regulatory capital ratios significantly exceeded well-capitalized standards. More specifically, the Company bank subsidiarys Tier 1 Leverage Ratio, a common measure to evaluate a financial institutions capital strength, was 9.0% at June 30, 2020, which is well in excess of the well-capitalized regulatory minimum of 5.0%.

In addition, management believes the Companys liquidity position remains strong. The Companys 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 June 30, 2020, the Companys cash and cash equivalent balances were $42.8 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 June 30, 2020, the Companys available-for-sale securities portfolio totaled $322.5 million, $175.1 million of which was unpledged as collateral. The Company bank subsidiarys unused borrowing capacity at the Federal Home Loan Bank of Pittsburgh at June 30, 2020 was $758.3 million, and it maintained $171.6 million of borrowing availability at the Federal Reserve Bank of Richmonds 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 our liquidity profile.

Lending

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

Loan Balances Modified Due to COVID-19 through 6/30/2020 Loans Loans Total Loan Modified to Modified Total PercentageDollars in Balance as Interest Only to Payment Loans of Loansthousands of 6/30/2020 Payments (6 Deferral Modified Modified Months or (3 Months) Less)Hospitality $ 119,204 $ 55,849 $ 43,030 $ 98,879 82.9 %IndustryNon-OwnerOccupied 109,078 38,354 13,802 52,156 47.8 %Retail StoresOwner-Occupied 119,794 21,956 9,372 31,328 26.2 %Retail StoresRestaurants 8,126 2,392 1,877 4,269 52.5 %Oil & Gas 31,977 914 4,378 5,292 16.5 %IndustryOtherCommercial 1,005,740 88,285 34,634 122,919 12.2 %LoansTotalCommercial 1,393,919 207,750 107,093 314,843 22.6 %LoansResidential1-4 Family 267,170 3,933 13,404 17,337 6.5 %PersonalResidential1-4 Family 180,415 20,348 6,032 26,380 14.6 %RentalsHome Equity 88,929 - 569 569 0.6 %LoansTotalResidential 536,514 24,281 20,005 44,286 8.3 %Real EstateLoansConsumer Loans 34,640 595 605 1,200 3.5 %MortgageWarehouse 252,472 - - - 0.0 %LoansCredit Cards 2,162 - - - 0.0 %and OverdraftsTotal Loans $ $ 232,626 $ $ 16.2 % 2,219,707 127,703 360,329

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 June 30, 2020. We anticipate that COVID-19 related loan modifications will continue throughout 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 half 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 remain unknown at present.

Merger & Acquisition Activity

On April 24, 2020, Summits 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. Summit assumed approximately $195.0 million in deposits and acquired approximately $35.3 million in loans in conjunction with this purchase. Further, 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 Summits on March 21, 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 Summits consolidated results of operations from the dates of acquisition, and therefore Summits first half 2020 results reflect increased levels of average balances, income and expenses compared to its first quarter 2019 and fourth quarter 2019 results.

Asset Quality

We realized net loan recoveries of $51,000 in second quarter 2020 compared to first quarter 2020 net loan charge-offs of $501,000 (0.10 percent of average loans annualized) while $2.51 million and $4.73 million were added to the allowance for loan credit losses through the provision for credit losses during Q2 2020 and Q1 2020, respectively. The allowance for loan credit losses stood at 1.22 percent of total loans at June 30, 2020, compared to 0.68 percent at year-end 2019.

Similarly, during Q2 2020 and Q1 2020, we also added $493,000 and $551,000, respectively, to the allowance for credit losses on unfunded loan commitments through the provision for credit losses.

As of June 30, 2020, nonperforming assets (NPAs), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $30.5 million, or 1.07 percent of assets. This compares to $29.1 million, or 1.16 percent of assets at the linked quarter-end and $34.9 million, or 1.52 percent of assets at the end of Q2 2019.

Results from Operations

Total revenue for second quarter 2020, consisting of net interest income and noninterest income, increased 2.3 percent to $26.7 million compared to $26.1 million for second quarter 2019, which included $1.1 million realized securities gains and $1.9 million gain on sale of Summit Insurance Services, LLC. For the year-to-date period ended June 30, 2020, total revenue was $52.6 million compared to $48.9 million for the same period of 2019, representing a 7.6 percent increase primarily as a result of higher net interest income.

For the second quarter of 2020, net interest income was $23.1 million, an increase of 19.7 percent from the $19.3 million reported in the prior-year second quarter and a 7.6 percent increase compared to the linked quarter. The net interest margin for second quarter 2020 was 3.68 percent compared to 3.76 percent for the linked quarter and 3.72 percent for the year-ago quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summits net interest margin would have been 3.61 percent for Q2 2020, 3.70 percent for Q1 2020 and 3.62 percent for Q2 2019.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for second quarter 2020 was $3.60 million compared to $4.50 million for the linked quarter and $6.81 million for the comparable period of 2019, which included $1.09 million realized securities gains and $1.91 million gain on sale of Summit Insurance Services, LLC. Excluding realized securities gains and the gain on the sale of Summit Insurance Services, LLC, noninterest income was $3.82 million for second quarter 2019.

We recorded a $3.0 million provision for credit losses during second quarter 2020 compared to $5.25 million for the linked quarter and $300,000 in Q2 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.

Q2 2020 total noninterest expense decreased 0.9 percent to $15.2 million compared to $15.3 million for the prior-year second quarter and increased 1.3 percent compared to the linked quarter.

Noninterest expense for the first half of 2020 increased 3.4 percent compared to the first half of 2019. Our well-controlled noninterest expense includes increased expenses associated with the acquired Cornerstone and MVB branch operations (including merger-related expenses), decreased write-downs of foreclosed properties and income related to deferred director compensation plan expense of $100,000 for the first six months of 2020 compared to expense of $594,000 for the same period of 2019. 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 markets deterioration during 2020, we recognized income related to deferred director compensation this quarter.

Balance Sheet

At June 30, 2020, total assets were $2.86 billion, an increase of $457.9 million, or 19.0 percent since December 31, 2019. Total loans, net of unearned fees and allowance for loan losses, were $2.19 billion at June 30, 2020, up $292.1 million, or 15.4 percent, from the $1.90 billion reported at year-end 2019. Loans, excluding mortgage warehouse lines of credit and acquired MVB loans, increased $91.7 million during the quarter, or 19.9 percent (annualized), and have increased $144.9 million, or 16.2 percent (on an annualized basis) since year-end 2019.

At June 30, 2020, core deposits were $2.26 billion, an increase of $574.6 million, or 34.2 percent, since year end 2019. During first half 2020, checking deposits increased $382.5 million or 42.9 percent, core time deposits grew by $49.2 million or 13.2 percent and savings deposits increased $142.9 million or 34.2 percent. Excluding acquired deposits (of both Cornerstone and MVB branches), core deposits have increased $206.6 million, or 12.3 percent, since year end 2019.

Shareholders equity was $263.4 million as of June 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 decreased to $16.63 at June 30, 2020 compared to $18.11 at December 31, 2019. Summit had 12,922,045 outstanding common shares at Q2 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 Q2 2020, 8,722 shares of our common stock were repurchased under the Plan at an average price of $18.69 per share.

Asset Quality

As of June 30, 2020, nonperforming assets (NPAs), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $30.5 million, or 1.07 percent of assets. This compares to $29.1 million, or 1.16 percent of assets at the linked quarter-end, and $30.8 million, or 1.28 percent of assets at year end 2019.

Second quarter 2020 net loan recoveries were $51,000, or 0.01 percent of average loans annualized; while adding $3.0 million to the allowance for loan losses through the provision for loan credit losses. The allowance for loan credit losses stood at 1.22 percent of total loans at June 30, 2020, compared to 0.68 percent at year-end 2019.

About the Company

Summit Financial Group, Inc. is a $2.86 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle and Southern regions of West Virginia and the Northern, Shenandoah Valley and Southwestern regions of Virginia, through its bank subsidiary, Summit Community Bank, Inc., which operates 40 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) Q2 2020 vs Q2 2019 For the Quarter Percent EndedDollars in thousands 6/30/2020 6/30/2019 ChangeStatements of Income Interest income Loans, including fees $ 25,624 $ 24,352 5.2 %Securities 2,253 2,396 -6.0 %Other 60 134 -55.2 %Total interest income 27,937 26,882 3.9 %Interest expense Deposits 4,186 5,967 -29.8 %Borrowings 685 1,652 -58.5 %Total interest expense 4,871 7,619 -36.1 %Net interest income 23,066 19,263 19.7 %Provision for credit losses 3,000 300 n/m Net interest income after provision for credit 20,066 18,963 5.8 %losses Noninterest income Insurance commissions 24 606 -96.0 %Trust and wealth management fees 582 612 -4.9 %Service charges on deposit accounts 882 1,224 -27.9 %Bank card revenue 1,087 893 21.7 %Realized securities gains - 1,086 n/a Gain on sale of Summit Insurance Services, LLC - 1,906 n/a Bank owned life insurance income 275 248 10.9 %Other income 748 235 218.3 %Total noninterest income 3,598 6,810 -47.2 %Noninterest expense Salaries and employee benefits 7,930 7,576 4.7 %Net occupancy expense 977 880 11.0 %Equipment expense 1,360 1,219 11.6 %Professional fees 417 475 -12.2 %Advertising and public relations 93 155 -40.0 %Amortization of intangibles 410 420 -2.4 %FDIC premiums 110 88 25.0 %Bank card expense 560 473 18.4 %Foreclosed properties expense, net of losses 240 1,545 -84.5 %Merger-related expense 637 382 66.8 %Other expenses 2,463 2,116 16.4 %Total noninterest expense 15,197 15,329 -0.9 %Income before income taxes 8,467 10,444 -18.9 %Income taxes 1,518 1,880 -19.3 %Net income $ 6,949 $ 8,564 -18.9 %

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Quarterly Performance Summary (unaudited)Q2 2020 vs Q2 2019 For the Quarter Ended Percent 6/30/2020 6/30/2019 ChangePer Share Data Earnings per common share Basic $ 0.54 $ 0.68 -20.6 %Diluted $ 0.54 $ 0.68 -20.6 % Cash dividends $ 0.17 $ 0.15 13.3 %Dividend payout ratio 31.7 % 21.9 % 44.7 % Average common shares outstanding Basic 12,911,979 12,539,095 3.0 %Diluted 12,943,804 12,600,071 2.7 % Common shares outstanding at period 12,922,045 12,449,986 3.8 %end Performance Ratios Return on average equity 10.75 % 14.62 % -26.5 %Return on average tangible equity 13.57 % 17.02 % -20.3 %Return on average assets 1.02 % 1.52 % -32.9 %Net interest margin (A) 3.68 % 3.72 % -1.1 %Efficiency ratio (B) 51.97 % 56.45 % -7.9 %

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) Six Month Performance Summary (unaudited) 2020 vs 2019 For the Six Months Percent EndedDollars in thousands 6/30/2020 6/30/2019 ChangeStatements of Income Interest income Loans, including fees $ 50,859 $ 47,404 7.3 %Securities 4,563 4,981 -8.4 %Other 158 365 -56.7 %Total interest income 5.4 % 55,580 52,750Interest expense Deposits 9,537 11,531 -17.3 %Borrowings -54.7 % 1,534 3,383Total interest expense -25.8 % 11,071 14,914Net interest income 44,509 37,836 17.6 %Provision for credit losses 550 n/m 8,250Net interest income after provision for -2.8 %credit losses 36,259 37,286 Noninterest income Insurance commissions 31 1,780 -98.3 %Trust and wealth management fees 1,247 1,198 4.1 %Service charges on deposit accounts 2,145 2,405 -10.8 %Bank card revenue 2,020 1,707 18.3 %Realized securities gains 1,038 1,082 -4.1 %Gain on sale of Summit Insurance Services, - 1,906 n/a LLCBank owned life insurance income 539 486 10.9 %Other income 476 126.7 % 1,079Total noninterest income -26.6 % 8,099 11,040Noninterest expense Salaries and employee benefits 15,601 14,923 4.5 %Net occupancy expense 1,860 1,803 3.2 %Equipment expense 2,789 2,398 16.3 %Professional fees 804 878 -8.4 %Advertising and public relations 244 308 -20.8 %Amortization of intangibles 839 897 -6.5 %FDIC premiums 275 88 212.5 %Bank card expense 1,063 911 16.7 %Foreclosed properties expense, net of losses 1,207 1,930 -37.5 %Merger-related expense 1,425 445 220.2 %Other expenses -11.3 % 4,088 4,608Total noninterest expense 3.4 % 30,195 29,189Income before income taxes 14,163 19,137 -26.0 %Income taxes -22.2 % 2,708 3,481Net income $ $ -26.8 % 11,455 15,656

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Six Month Performance Summary (unaudited)2020 vs 2019 For the Six Months Ended Percent 6/30/2020 6/30/2019 ChangePer Share Data Earnings per common share Basic $ 0.89 $ 1.24 -28.2 %Diluted $ 0.88 $ 1.23 -28.5 % Cash dividends $ 0.34 $ 0.29 17.2 %Dividend payout ratio 38.6 % 23.3 % 65.7 % Average common shares outstanding Basic 12,940,590 12,627,806 2.5 %Diluted 12,983,146 12,688,865 2.3 % Common shares outstanding at period 12,922,045 12,449,986 3.8 %end Performance Ratios Return on average equity 8.83 % 13.46 % -34.4 %Return on average tangible equity 10.99 % 15.93 % -31.0 %Return on average assets 0.78 % 1.39 % -43.9 %Net interest margin (A) 3.72 % 3.69 % 0.8 %Efficiency ratio (B) 51.70 % 56.35 % -8.3 %

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 QuarterPerformance Summary(unaudited) For the Quarter EndedDollars in 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019thousandsStatements of IncomeInterest income Loans, including $ 25,624 $ 25,235 $ 24,772 $ 24,940 $ 24,352feesSecurities 2,253 2,310 2,195 2,184 2,396Other 60 98 105 125 134Total interest 27,937 27,643 27,072 27,249 26,882incomeInterest expense Deposits 4,186 5,351 5,952 6,214 5,967Borrowings 685 849 1,292 1,615 1,652Total interest 4,871 6,200 7,244 7,829 7,619expenseNet interest 23,066 21,443 19,828 19,420 19,263incomeProvision for 3,000 5,250 500 500 300credit lossesNet interestincome after 20,066 16,193 19,328 18,920 18,963provision forcredit lossesNoninterest incomeInsurance 24 7 90 40 606commissionsTrust and wealth 582 665 734 632 612management feesService chargeson deposit 882 1,263 1,377 1,312 1,224accountsBank card revenue 1,087 933 906 924 893Realizedsecurities gains - 1,038 403 453 1,086(losses)Gain on sale ofSummit Insurance - - - - 1,906Services, LLCBank owned life 275 264 310 247 248insurance incomeOther income 748 332 584 151 235Total noninterest 3,598 4,502 4,404 3,759 6,810incomeNoninterest expenseSalaries and 7,930 7,672 7,099 7,044 7,576employee benefitsNet occupancy 977 883 815 799 880expenseEquipment expense 1,360 1,429 1,278 1,296 1,219Professional fees 417 387 412 388 475Advertising and 93 152 214 177 155public relationsAmortization of 410 429 401 404 420intangiblesFDIC premiums 110 165 - - 88Bank card expense 560 503 454 455 473Foreclosedproperties 240 966 262 305 1,545expense, netMerger-related 637 788 98 74 382expensesOther expenses 2,463 1,625 2,126 1,864 2,116Total noninterest 15,197 14,999 13,159 12,806 15,329expenseIncome before 8,467 5,696 10,573 9,873 10,444income taxesIncome tax 1,518 1,190 2,424 1,812 1,880expenseNet income $ 6,949 $ 4,506 $ 8,149 $ 8,061 $ 8,564

SUMMITFINANCIALGROUP, INC. (NASDAQ:SMMF)Five QuarterPerformance Summary(unaudited) For the Quarter Ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019Per Share DataEarnings per common shareBasic $ 0.54 $ 0.35 $ 0.66 $ 0.65 $ 0.68 Diluted $ 0.54 $ 0.35 $ 0.65 $ 0.65 $ 0.68 Cash $ 0.17 $ 0.17 $ 0.15 $ 0.15 $ 0.15 dividendsDividend 31.7 % 49.1 % 22.3 % 23.0 % 21.9 %payout ratio Averagecommon shares outstandingBasic 12,911,979 12,975,429 12,400,932 12,412,982 12,539,095 Diluted 12,943,804 13,028,409 12,458,702 12,467,777 12,600,071 Common sharesoutstanding 12,922,045 12,920,244 12,408,542 12,400,804 12,449,986 at period end Performance RatiosReturn onaverage 10.75 % 6.92 % 13.32 % 13.51 % 14.62 %equityReturn onaverage 13.57 % 8.55 % 15.25 % 15.55 % 17.02 %tangibleequityReturn onaverage 1.02 % 0.73 % 1.39 % 1.41 % 1.52 %assetsNet interest 3.68 % 3.76 % 3.63 % 3.63 % 3.72 %margin (A)Efficiency 51.97 % 51.41 % 52.25 % 52.91 % 56.45 %ratio (B)

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)SelectedBalance Sheet Data(unaudited) Dollars inthousands, 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019except pershare amounts Assets Cash and due $ 16,572 $ 18,633 $ 28,137 $ 12,374 $ 13,481 from banksInterestbearing 26,218 22,821 33,751 40,296 42,994 depositsother banksSecurities,available for 322,539 305,045 276,355 265,347 269,920 saleSecurities,held to 80,497 - - - - maturityLoans, net 2,192,541 1,982,661 1,900,425 1,838,891 1,805,850 Property held 17,954 18,287 19,276 20,979 21,390 for salePremises andequipment, 51,847 47,078 44,168 43,592 42,896 netGoodwill andother 48,513 34,132 23,022 23,182 23,585 intangibleassetsCashsurrendervalue of life 55,315 46,497 43,603 43,216 42,976 insurancepoliciesOther assets 49,355 38,168 34,755 35,732 36,022 Total assets $ $ $ $ $ 2,861,351 2,513,322 2,403,492 2,323,609 2,299,114 Liabilitiesand Shareholders'EquityDeposits $ 2,451,769 $ 2,044,914 $ 1,913,237 $ 1,832,285 $ 1,797,493 Short-term 90,945 161,745 199,345 206,694 225,343 borrowingsLong-termborrowingsand 20,297 20,301 20,306 20,311 20,315 subordinateddebenturesOther 34,909 30,337 22,840 21,897 20,262 liabilitiesShareholders' equity 263,431 256,025 247,764 242,422 235,701Totalliabilities and $ 2,861,351 $ 2,513,322 $ 2,403,492 $ 2,323,609 $ 2,299,114 shareholders'equity Book valueper common $ 20.39 $ 19.82 $ 19.97 $ 19.55 $ 18.93 shareTangible bookvalue per $ 16.63 $ 17.17 $ 18.11 $ 17.68 $ 17.04 common shareTangiblecommon equity 7.6 % 9.0 % 9.4 % 9.5 % 9.3 %to tangibleassets

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)Regulatory Capital Ratios (unaudited) 6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 2020 2020 2019 2019 2019Summit Financial Group, Inc.CET1 Risk-based Capital 10.5 % 10.8 % 11.1 % 11.2 % 11.1 %Tier 1 Risk-based Capital 9.7 % 11.7 % 12.1 % 12.2 % 12.1 %Total Risk-based Capital 11.3 % 12.5 % 12.7 % 12.8 % 12.8 %Tier 1 Leverage 9.0 % 10.2 % 10.5 % 10.4 % 10.4 % Summit Community Bank, Inc. CET1 Risk-based Capital 10.5 % 11.7 % 12.1 % 12.2 % 11.9 %Tier 1 Risk-based Capital 10.5 % 11.7 % 12.1 % 12.2 % 11.9 %Total Risk-based Capital 11.4 % 12.5 % 12.7 % 12.9 % 12.6 %Tier 1 Leverage 9.0 % 10.2 % 10.6 % 10.4 % 10.2 %

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)LoanComposition (unaudited) Dollars in 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019thousands Commercial $ 311,755 $ 224,659 $ 207,138 $ 199,391 $ 204,138Mortgagewarehouse 252,472 166,826 126,237 145,039 101,607linesCommercial real estateOwner 336,143 331,486 276,218 255,828 262,901occupiedNon-owner 593,168 580,619 629,206 567,670 574,677occupiedConstructionand developmentLand and 92,706 92,332 84,112 69,589 67,769developmentConstruction 48,115 43,121 37,523 56,255 46,975Residential real estateConventional 371,225 378,540 354,963 359,399 360,752Jumbo 76,360 64,944 70,947 69,815 70,171Home equity 88,929 75,170 76,568 78,493 81,373Consumer 35,781 36,611 36,470 36,982 36,715Other 13,053 12,961 14,117 13,371 11,924Total loans,net of 2,219,707 2,007,269 1,913,499 1,851,832 1,819,002unearnedfeesLessallowance 27,166 24,608 13,074 12,941 13,152for creditlossesLoans, net $ $ $ $ $ 2,192,541 1,982,661 1,900,425 1,838,891 1,805,850

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)DepositComposition (unaudited) Dollars in 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019thousandsCore depositsNon-interestbearing $ 443,190 $ 337,446 $ 260,553 $ 241,999 $ 234,397checkingInterestbearing 830,258 648,214 630,352 602,059 588,948checkingSavings 561,029 457,010 418,096 305,891 301,403Time deposits 422,286 384,062 373,125 371,178 365,275Total core 2,256,763 1,826,732 1,682,126 1,521,127 1,490,023deposits Brokeredtime 90,279 111,156 150,554 227,369 222,901depositsOthernon-core 80,557 83,789 84,569time 104,727 107,026depositsTotal $ $ $ $ $ deposits 2,451,769 2,044,914 1,913,237 1,832,285 1,797,493

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)Asset QualityInformation (unaudited) For the Quarter EndedDollars in 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019thousands Gross loan $ 218 $ 698 $ 455 $ 843 $ 391 charge-offsGross loan ) ) (88 ) ) )recoveries (269 (197 (132 (111Net loancharge-offs/ $ (51 ) $ 501 $ 367 $ 711 $ 280 (recoveries) Net loancharge-offs to -0.01 % 0.10 % 0.08 % 0.16 % 0.06 %average loans(annualized)Allowance forloan credit $ 27,166 $ 24,608 $ 13,074 $ 12,941 $ 13,152 lossesAllowance forloan creditlosses as a 1.22 % 1.23 % 0.68 % 0.70 % 0.72 %percentage ofperiod endloansAllowance forcredit losseson unfunded $ 3,477 $ 2,984 $ - $ - $ - loancommitmentsNonperforming assets:Nonperforming loansCommercial $ 754 $ 560 $ 764 $ 835 $ 948 Commercial 5,822 5,644 5,800 7,037 6,544 real estateResidentialconstruction 14 11 326 191 66 anddevelopmentResidential 5,873 4,343 4,404 4,461 5,657 real estateConsumer 29 65 116 115 160 Other 35 100 100 100 100 Total nonperforming 12,527 10,723 11,510 12,739 13,475 loansForeclosed propertiesCommercial 1,774 1,866 1,930 1,514 1,544 real estateCommercialconstruction 4,511 4,511 4,601 4,909 4,910 anddevelopmentResidentialconstruction 10,645 10,774 11,169 12,847 13,132 anddevelopmentResidential real estate 1,024 1,136 1,576 1,709 1,804Total foreclosed 17,954 18,287 19,276 20,979 21,390 propertiesOtherrepossessed - 49 17 16 12 assetsTotal nonperforming $ 30,481 $ 29,059 $ 30,803 $ 33,734 $ 34,877 assets Nonperformingloans to 0.56 % 0.53 % 0.60 % 0.69 % 0.74 %period endloansNonperformingassets to 1.07 % 1.16 % 1.28 % 1.45 % 1.52 %period endassets Troubled debt restructuringsPerforming $ 22,117 $ 22,966 $ 23,339 $ 23,420 $ 23,266 Nonperforming 3,003 2,831 2,337 2,443 2,915Total troubled debt $ 25,120 $ 25,797 $ 25,676 $ 25,863 $ 26,181 restructurings

Loans Past Due 30-89 Days (unaudited) For the Quarter Ended Dollars in thousands 6/30/ 3/31/2020 12/31/2019 9/30/2019 6/30/2019 2020 Commercial $ 196 $ 160 $ 111 $ 390 $ 375Commercial real estate 1,231 2,106 1,196 312 1,719Construction and 8 53 236 65 235developmentResidential real estate 2,763 5,178 4,775 5,573 5,670Consumer 164 222 269 365 234Other 3 7 25 63 9Total $ $ $ $ $ 4,365 7,726 6,612 6,768 8,242

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)Average Balance Sheet, Interest Earnings & Expenses and Average Rates Q2 2020 vs Q1 2020 vs Q2 2019 (unaudited) Q2 2020 Q1 2020 Q2 2019 Average Earnings / Yield / Average Earnings / Yield / Average Earnings / Yield /Dollars in Balances Expense Rate Balances Expense Rate Balances Expense Ratethousands ASSETS Interestearning assetsLoans, net of unearned interest (1)Taxable $ 2,118,158 $ 25,466 4.84 % $ 1,935,473 $ 25,089 5.21 % $ 1,749,032 $ 24,184 5.55 %Tax-exempt 17,244 200 4.66 % 14,873 185 5.00 % 14,695 213 5.81 %(2)Securities Taxable 248,792 1,453 2.35 % 258,889 1,757 2.73 % 203,049 1,607 3.17 %Tax-exempt 120,385 1,012 3.38 % 70,239 699 4.00 % 100,307 999 3.99 %(2)Interestbearingdeposits 41,776 60 0.58 % 35,648 98 1.11 % 38,214 134 1.41 %other banksand Federalfunds soldTotalinterest 2,546,355 28,191 4.45 % 2,315,122 27,828 4.83 % 2,105,297 27,137 5.17 %earningassets Noninterestearning assetsCash & due 16,672 14,422 14,124 from banksPremises & 50,457 46,151 41,318 equipmentOther assets 140,355 120,846 109,642 Allowance for ) ) ) credit losses (25,799 (20,452 (13,260Total assets $ $ $ 2,728,040 2,476,089 2,257,121 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interestbearing liabilitiesInterestbearing $ 764,852 $ 369 0.19 % $ 643,955 $ 1,081 0.68 % $ 575,240 $ 1,731 1.21 %demanddepositsSavings 512,634 1,200 0.94 % 449,021 1,337 1.20 % 305,342 921 1.21 %depositsTime deposits 625,717 2,617 1.68 % 615,102 2,933 1.92 % 673,272 3,315 1.97 %Short-term 95,744 499 2.10 % 119,607 630 2.12 % 187,120 1,397 2.99 %borrowingsLong-termborrowingsand 20,299 186 3.69 % 20,304 219 4.34 % 20,317 255 5.03 %subordinateddebenturesTotalinterest 2,019,246 4,871 0.97 % 1,847,989 6,200 1.35 % 1,761,291 7,619 1.74 %bearingliabilities Noninterestbearing liabilitiesDemand 417,992 339,340 241,811 depositsOther 32,238 28,400 19,750 liabilitiesTotal 2,469,476 2,215,729 2,022,852 liabilities Shareholders' equity 258,564 260,360 234,269Totalliabilities and $ 2,728,040 $ 2,476,089 $ 2,257,121 shareholders'equity NET INTEREST $ 23,320 $ 21,628 $ 19,518 EARNINGS NET INTEREST 3.68 % 3.76 % 3.72 %MARGIN (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 adjustedassuming a Federal tax rate of 21% for all periods presented.The taxequivalent adjustment resulted in an increase in interest income of $254,000,$185,000, and $256,000 for Q2 2020,Q1 2020 and Q2 2019, respectively.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)Average Balance Sheet, Interest Earnings & Expenses and Average RatesYTD 2020 vsYTD 2019 (unaudited) YTD 2020 YTD 2019 Average Earnings / Yield / Average Earnings / Yield /Dollars in Balances Expense Rate Balances Expense Ratethousands ASSETS Interestearning assetsLoans, net ofunearned interest (1)Taxable $ 2,026,814 $ 50,555 5.02 % $ 1,730,801 $ 47,090 5.49 %Tax-exempt 16,059 385 4.82 % 14,801 397 5.41 %(2)Securities Taxable 253,840 3,211 2.54 % 199,759 3,292 3.32 %Tax-exempt 95,313 1,710 3.61 % 107,586 2,138 4.01 %(2)Interestbearingdeposits 38,712 159 0.83 % 44,910 365 1.64 %other banksand Federalfunds soldTotalinterest 2,430,738 56,020 4.63 % 2,097,857 53,282 5.12 %earningassets Noninterestearning assetsCash & due 15,548 13,005 from banksPremises & 48,303 39,877 equipmentOther assets 130,604 111,334 Allowance for ) ) loan losses (24,342 (13,287Total assets $ $ 2,600,851 2,248,786 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interestbearing liabilitiesInterestbearing $ 704,404 $ 1,449 0.41 % $ 566,183 $ 3,395 1.21 %demanddepositsSavings 480,827 2,537 1.06 % 307,990 1,819 1.19 %depositsTime deposits 620,409 5,550 1.80 % 663,853 6,317 1.92 %Short-term 107,675 1,129 2.11 % 193,672 2,869 2.99 %borrowingsLong-termborrowingsand 20,301 405 4.01 % 20,319 514 5.10 %subordinateddebentures 1,933,616 11,070 1.15 % 1,752,017 14,914 1.72 %Noninterestbearing liabilitiesDemand 378,667 244,984 depositsOther 29,106 19,096 liabilitiesTotal 2,341,389 2,016,097 liabilities Shareholders' equity 259,462 232,689Totalliabilities and $ 2,600,851 $ 2,248,786 shareholders'equity NET INTEREST $ $ EARNINGS 44,950 38,368 NET INTEREST 3.72 % 3.69 %MARGIN (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 adjustedassuming a Federal tax rate of 21%.The tax equivalent adjustment resulted inan increase in interest income of $440,000 and $532,000 for theYTD 2020 andYTD 2019 periods, respectively.

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