GlobeNewswire Inc | Feb 1, 2021 06:00AM EST

February 01, 2021

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

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

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

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

Highlights for Q4 2020

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

Merger & Acquisition Activity

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

Further, on April 24, 2020, Summit Community Bank completed its acquisition of four branch banking offices located in the Eastern Panhandle of West Virginia from MVB Bank, Inc., a bank subsidiary of MVB Financial Corp. Summit assumed approximately $195.0 million in deposits and acquired approximately $35.3 million in loans in conjunction with this purchase. Also, Summit completed its acquisition of Cornerstone Financial Services, Inc. (Cornerstone) and its subsidiary, Cornerstone Bank, headquartered in West Union, West Virginia on January 1, 2020. At consummation, Cornerstone had total assets of $195.0 million, loans of $39.8 million, and deposits of $173.0 million.

Accordingly, the results of operations of WinFirst, Cornerstone and acquired MVB Bank branches are included in Summits consolidated results of operations from the dates of acquisition, and therefore Summits 2020 results reflect increased levels of average balances, income and expenses compared to comparable prior year periods.

Results from Operations

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

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

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

We recorded a $3.0 million provision for credit losses during fourth quarter 2020 compared to $3.25 million for the linked quarter and $500,000 in Q4 2019. As result of the adoption of CECL, the provision for credit losses now represents an estimate of the full amount of expected credit losses relative to loans, whereas under the pre-CECL incurred loss accounting method, the provision was only an estimate of probable existing loan losses.

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

Balance Sheet

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

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

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

Tangible book value per common share increased to $17.50 as of December 31, 2020 compared to $17.31 at September 30, 2020, although it decreased from $18.11 at December 31, 2019 as result of the somewhat dilutive impacts of the Cornerstone, MVB Branches and WinFirst acquisitions. Summit had 12,942,004 outstanding common shares at Q4 2020 quarter end compared to 12,408,542 at year end 2019.

As announced in Q1 2020, the Board of Directors authorized the open market repurchase of up to 750,000 shares of the issued and outstanding shares of Summit's common stock. The timing and quantity of stock purchases under this repurchase plan are at the discretion of management. During Q4 2020, no shares of our common stock were repurchased under the Plan.

Asset Quality

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

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

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

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

Loan Balances Modified Due to COVID-19 as of 12/ 31/2020 Loans LoansDollars in Total Loan Modified Modified Total Loans Percentagethousands Balance as of to Interest to Payment Modified of Loans 12/31/2020 Only Deferral Modified PaymentsHospitality $ 121,502 $ 40,513 $ 12,930 $ 53,443 44.0 %IndustryNon-OwnerOccupied 135,405 7,223 447 7,670 5.7 %Retail StoresOwner-Occupied 126,451 2,317 1,246 3,563 2.8 %Retail StoresRestaurants 7,481 - - - 0.0 %Oil & Gas 17,152 - - - 0.0 %IndustryOtherCommercial 1,134,759 12,006 286 12,292 1.1 %Loans Total 1,542,750 62,059 14,909 76,968 5.0 %CommercialLoansResidential1-4 Family 305,093 159 1,754 1,913 0.6 %PersonalResidential1-4 Family 194,612 148 73 221 0.1 %RentalsHome Equity 81,588 - - - 0.0 %Loans TotalResidential 581,293 307 1,827 2,134 0.4 %Real EstateLoansConsumer Loans 33,906 48 143 191 0.6 %MortgageWarehouse 251,810 - - - 0.0 %LoansCredit Cards 2,394 - - - 0.0 %and Overdrafts $ 2,412,153 $ 62,414 $ 16,879 $ 79,293 3.3 %TotalLoans

Loan Balances Modified Due to COVID-19 as of 9/30/ 2020 Loans LoansDollars in Total Loan Modified Modified Total Loans Percentagethousands Balance as of to Interest to Payment Modified of Loans 9/30/2020 Only Deferral Modified PaymentsHospitality $ 120,324 $ 36,803 $ 11,466 $ 48,269 40.1 %IndustryNon-OwnerOccupied 108,326 19,497 - 19,497 18.0 %Retail StoresOwner-Occupied 100,926 1,601 1,409 3,010 3.0 %Retail StoresRestaurants 7,968 - - - 0.0 %Oil & Gas 24,404 914 - 914 3.7 %IndustryOtherCommercial 1,084,385 40,846 - 40,846 3.8 %Loans Total 1,446,333 99,661 12,875 112,536 7.8 %CommercialLoansResidential1-4 Family 263,315 195 991 1,186 0.5 %PersonalResidential1-4 Family 178,529 3,567 336 3,903 2.2 %RentalsHome Equity 82,991 - - - 0.0 %Loans TotalResidential 524,835 3,762 1,327 5,089 1.0 %Real EstateLoansConsumer Loans 34,655 34 22 56 0.2 %MortgageWarehouse 243,730 - - - 0.0 %LoansCredit Cards 2,251 - - - 0.0 %and Overdrafts $ 2,251,804 $ 103,457 $ 14,224 $ 117,681 5.2 % Total Loans

About the Company

Summit Financial Group, Inc. is a $3.11 billion financial holding company headquartered in Moorefield, West Virginia. Summit provides community banking services primarily in the Eastern Panhandle, Southern and North Central regions of West Virginia, the Northern, Shenandoah Valley and Southwestern regions of Virginia and the central region of Kentucky, through its bank subsidiary, Summit Community Bank, Inc., which operates 43 banking locations.

FORWARD-LOOKING STATEMENTS

This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as expects, anticipates, believes, estimates and other similar expressions or future or conditional verbs such as will, should, would and could are intended to identify such forward-looking statements.

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include: the effect of the COVID-19 pandemic, including the negative impacts and disruptions on the communities we serve, and the domestic and global economy, which may have an adverse effect on our business; current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; fiscal and monetary policies of the Federal Reserve; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; the successful integration of operations of our acquisitions; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies. We undertake no obligation to revise these statements following the date of this press release.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Quarterly Performance Summary (unaudited) Q4 2020 vs Q4 2019 For the Quarter Ended PercentDollars in thousands 12/31/2020 12/31/2019 ChangeStatements of Income Interest income Loans, including fees $ 27,897 $ 24,772 12.6 % Securities 2,228 2,195 1.5 % Other 51 105 -51.4 % Total 30,176 27,072 11.5 % interest income Interest expense Deposits 2,956 5,952 -50.3 % Borrowings 1,014 1,292 -21.5 % Total 3,970 7,244 -45.2 % interest expense Net interest income 26,206 19,828 32.2 % Provision for credit losses 3,000 500 n/m Net interest income after provision for credit losses 23,206 19,328 20.1 % Noninterest income Insurance commissions 127 90 41.1 % Trust and wealth management fees 626 734 -14.7 % Mortgage origination revenue 1,163 379 206.9 % Service charges on deposit accounts 1,305 1,377 -5.2 % Bank card revenue 1,237 906 36.5 % Realized securities gains 912 403 126.3 % Bank owned life insurance and 233 310 -24.8 % annuity income Other income 174 205 -15.1 % Total 5,777 4,404 31.2 % noninterest income Noninterest expense Salaries and employee benefits 8,501 7,099 19.7 % Net occupancy expense 1,046 815 28.3 % Equipment expense 1,502 1,278 17.5 % Professional fees 370 412 -10.2 % Advertising and public relations 207 214 -3.3 % Amortization of intangibles 409 401 2.0 % FDIC premiums 261 - n/a Bank card expense 573 454 26.2 % Foreclosed properties expense, 676 262 158.0 % net Merger-related expense 218 98 122.4 % Other expenses 2,843 2,126 33.7 % Total 16,606 13,159 26.2 % noninterest expense Income before income taxes 12,377 10,573 17.1 % Income taxes 2,126 2,424 -12.3 % $ 10,251 $ 8,149 25.8 % Net income

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

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

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

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

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

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

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)Five QuarterPerformance Summary(unaudited) For the Quarter Ended 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019Per Share Data Earnings per common share Basic $ 0.79 $ 0.74 $ 0.54 $ 0.35 $ 0.66 Diluted $ 0.79 $ 0.74 $ 0.54 $ 0.35 $ 0.65 Cash dividends $ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.15 Dividend 21.5% 22.9% 31.7% 49.1% 22.3% payout ratio Average common shares outstanding Basic 12,932,768 12,922,158 12,911,979 12,975,429 12,400,932 Diluted 12,980,041 12,949,584 12,943,804 13,028,409 12,458,702 Common shares outstanding at 12,942,004 12,932,415 12,922,045 12,920,244 12,408,542 period end Performance Ratios Return on 14.90% 14.38% 10.75% 6.92% 13.32% average equity Return on average 18.70% 18.12% 13.57% 8.55% 15.25% tangible equity Return on 1.37% 1.31% 1.02% 0.73% 1.39% average assets Net interest 3.76% 3.64% 3.68% 3.76% 3.63% margin (A) Efficiency 49.38% 48.95% 51.97% 51.41% 52.25% 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)Selected Balance Sheet Data (unaudited) Dollars in thousands, 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019except per share amounts Assets Cash and due from $ 19,522 $ 16,257 $ 16,572 $ 18,633 $ 28,137 banks Interest bearing 80,265 92,729 26,218 22,821 33,751 deposits other banks Securities, available 286,127 297,989 322,539 305,045 276,355 for sale Securities, held to 99,914 91,600 80,497 - - maturity Loans, net 2,379,907 2,222,450 2,192,541 1,982,661 1,900,425 Property held for sale 15,588 17,831 17,954 18,287 19,276 Premises and 52,537 52,880 51,847 47,078 44,168 equipment, net Goodwill and other 55,123 48,101 48,513 34,132 23,022 intangible assets Cash surrender value of life insurance 59,438 57,029 55,315 46,497 43,603 policies and annuities Other assets 57,963 49,996 49,355 38,168 34,755 $ 3,106,384 $ 2,946,862 $ 2,861,351 $ 2,513,322 $ 2,403,492 Total assets Liabilities and Shareholders' Equity Deposits $ 2,595,651 $ 2,451,891 $ 2,451,769 $ 2,044,914 $ 1,913,237 Short-term borrowings 140,146 140,145 90,945 161,745 199,345 Long-term borrowings and subordinated 49,652 50,292 20,297 20,301 20,306 debentures Other liabilities 39,355 32,571 34,909 30,337 22,840 Shareholders' equity 281,580 271,963 263,431 256,025 247,764 Total $ 3,106,384 $ 2,946,862 $ 2,861,351 $ 2,513,322 $ 2,403,492 liabilities and shareholders' equity Book value per common $ 21.76 $ 21.03 $ 20.39 $ 19.82 $ 19.97 share Tangible book value $ 17.50 $ 17.31 $ 16.63 $ 17.17 $ 18.11 per common share Tangible common equity 7.4% 7.7% 7.6% 9.0% 9.4% to tangible assets

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

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

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

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

Loans Past Due30-89 Days (unaudited) For the Quarter EndedDollars in 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019thousands Commercial $ 1 $ 147 $ 196 $ 160 $ 111 Commercial real 274 1,740 1,231 2,106 1,196 estate Construction and 47 422 8 53 236 development Residential real 4,405 4,464 2,763 5,178 4,775 estate Consumer 233 160 164 222 269 Other 5 2 3 7 25 Total $ 4,965 $ 6,935 $ 4,365 $ 7,726 $ 6,612

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)

Average Balance Sheet, Interest Earnings & Expenses and Average Rates

Q4 2020 vs Q3 2020 vs Q4 2019 (unaudited)

Q4 2020 Q3 2020 Q4 2019 Average Earnings Yield Average Earnings Yield Average Earnings Yield / / / / / /Dollars in thousands Balances Expense Rate Balances Expense Rate Balances Expense Rate ASSETS Interest earning assetsLoans, net of unearned interest (1)Taxable $ 2,292,797 $ 27,774 4.82 % $ 2,251,722 $ 26,656 4.71 % $ 1,853,197 $ 24,622 5.27 %Tax-exempt (2) 13,062 156 4.75 % 16,245 191 4.68 % 15,738 189 4.76 %Securities Taxable 258,594 1,341 2.06 % 261,231 1,445 2.20 % 218,375 1,654 3.00 %Tax-exempt (2) 147,979 1,122 3.02 % 150,350 1,186 3.14 % 69,276 686 3.93 %Interest bearing deposits other banksand 87,151 51 0.23 % 60,639 57 0.37 % 32,779 105 1.27 %Federal funds soldTotal interest earning 2,799,583 30,444 4.33 % 2,740,187 29,535 4.29 % 2,189,365 27,256 4.94 %assets Noninterest earning assetsCash & due from 16,846 16,603 12,932 banksPremises & 52,688 52,329 44,136 equipmentOther assets 157,436 154,578 103,481 Allowance for (30,778 ) (28,144 ) (13,055 ) credit lossesTotal assets $ 2,995,775 $ 2,935,553 $ 2,336,859 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilitiesInterest bearing demand $ 895,325 $ 357 0.16 % $ 850,281 $ 380 0.18 % $ 619,939 $ 1,378 0.88 %depositsSavings deposits 607,481 716 0.47 % 588,085 925 0.63 % 351,653 1,201 1.35 %Time deposits 566,917 1,883 1.32 % 585,092 2,247 1.53 % 641,160 3,373 2.09 %Short-term 140,243 467 1.32 % 165,555 734 1.76 % 188,007 1,062 2.24 %borrowingsLong-term borrowings andsubordinated 49,637 547 4.38 % 23,230 194 3.32 % 20,308 230 4.49 %debenturesTotal interest bearing 2,259,603 3,970 0.70 % 2,212,243 4,480 0.81 % 1,821,067 7,244 1.58 %liabilities Noninterest bearing liabilitiesDemand deposits 426,441 421,741 248,159 Other liabilities 34,558 33,978 22,856 Total 2,720,602 2,667,962 2,092,082 liabilities Shareholders' equity 275,173 267,591 244,777 Total liabilities andshareholders' $ 2,995,775 $ 2,935,553 $ 2,336,859 equity NET INTEREST EARNINGS $ 26,474 $ 25,055 $ 20,012 NET INTEREST MARGIN 3.76 % 3.64 % 3.63 % (1) - For purposes of this table, nonaccrual loans are included in average loan balances.(2) - Interest income on tax-exempt securities and loans has been adjustedassuming a Federal tax rate of 21% for all periods presented.The tax equivalent adjustment resulted in an increase in interestincome of $268,000, $289,000, and $184,000 for Q4 2020,Q3 2020 and Q4 2019, respectively.

SUMMIT FINANCIALGROUP, INC. (NASDAQ: SMMF)Average Balance Sheet,Interest Earnings & Expenses and AverageRatesYTD 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 assetsLoans, net of unearned interest (1)Taxable $ 2,150,294 $ 104,986 4.88 % $ 1,782,477 $ 96,499 5.41 %Tax-exempt (2) 15,352 732 4.77 % 15,315 780 5.09 %Securities Taxable 256,893 5,996 2.33 % 205,340 6,511 3.17 %Tax-exempt (2) 122,386 4,020 3.28 % 90,823 3,608 3.97 %Interest bearing deposits other banksand 56,399 266 0.47 % 39,408 595 1.51 %Federal funds soldTotal interest earning 2,601,324 116,000 4.46 % 2,133,363 107,993 5.06 %assets Noninterest earning assetsCash & due from 16,139 12,939 banksPremises & 50,418 41,778 equipmentOther assets 143,284 107,456 Allowance for loan (26,915 ) (13,225 ) lossesTotal assets $ 2,784,250 $ 2,282,311 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilitiesInterest bearing demand $ 789,064 $ 2,187 0.28 % $ 586,938 $ 6,394 1.09 %depositsSavings deposits 539,625 4,178 0.77 % 317,569 3,969 1.25 %Time deposits 598,085 9,680 1.62 % 660,910 13,334 2.02 %Short-term 130,411 2,330 1.79 % 194,450 5,303 2.73 %borrowingsLong-term borrowings andsubordinated 28,396 1,147 4.04 % 20,315 987 4.86 %debentures 2,085,581 19,522 0.94 % 1,780,182 29,987 1.68 %Noninterest bearing liabilitiesDemand deposits 401,502 244,559 Other liabilities 31,712 20,341 Total 2,518,795 2,045,082 liabilities Shareholders' equity 265,455 237,229 Total liabilities andshareholders' $ 2,784,250 $ 2,282,311 equity NET INTEREST EARNINGS $ 96,478 $ 78,006 NET INTEREST MARGIN 3.71 % 3.66 % (1) - For purposes of this table, nonaccrual loans are included in average loan balances.(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21%.The tax equivalent adjustment resulted in an increase in interest income of $998,000 and $922,000 for theYTD 2020 and YTD 2019 periods, respectively.

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