MOOREFIELD, W.Va., Oct. 24, 2019 (GLOBE NEWSWIRE) — Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported third quarter 2019 net income of $8.06 million, or $0.65 per diluted share. In comparison, earnings for second quarter 2019 were $8.56 million, or $0.68 per diluted share, and for third quarter 2018 were $6.90 million, or $0.55 per diluted share. In the second quarter 2019, we recognized a $1.91 million pre-tax gain on the sale of our former insurance agency, Summit Insurance Services, LLC (“SIS”). Summit achieved returns on average assets and average tangible equity in third quarter 2019 of 1.41 percent and 15.55 percent, respectively, compared to 1.31 percent and 15.53 percent, respectively, in the same period of 2018.
Third quarter 2019 earnings compared to both the linked quarter and third quarter 2018 were positively impacted by increased net interest income resulting primarily from loan growth and higher realized securities gains. Also positively impacting third quarter 2019 results, write-downs on foreclosed properties were $133,000 in Q3 2019 compared to $1.2 million in Q2 2019. For the nine months ended September 30, 2019, Summit recorded net income of $23.7 million, or $1.88 per diluted share, compared with $20.6 million, or $1.66 per diluted share, for the comparable 2018 nine-month period, representing an increase of 15.0 percent or 13.3 percent per diluted share. Our returns on average assets and average tangible equity for the nine months ended September 30, 2019 were 1.40 percent and 15.80 percent, respectively, compared to 1.30 percent and 15.97 percent, respectively, for the same period of 2018.Earnings for the nine months ended September 30, 2019 were positively impacted by increased net interest income resulting primarily from loan growth as well as a higher net interest margin, increased realized securities gains and the SIS gain. These results were partially offset by larger write-downs on foreclosed properties in Q2 2019 with the goal of selling such properties more rapidly, lower insurance commission revenue during 2019 and increased merger-related expenses.Summit completed its acquisition of Peoples Bankshares, Inc. (“PBI”) and its subsidiary, First Peoples Bank, headquartered in Mullens, West Virginia on January 1, 2019 and converted its business processes and accounts to that of Summit’s during Q2 2019; accordingly, PBI’s results of operations are included in Summit’s consolidated results of operations from the date of acquisition. Therefore, Summit’s third quarter and nine months ended September 30, 2019 period results reflect increased levels of average balances, income and expenses compared to the same periods of 2018. At consummation, PBI had total assets of $133.1 million, loans of $42.4 million, and deposits of $112.9 million.Highlights for Q3 2019Mortgage warehouse lines of credit increased $43.4 million during the quarter as we expanded our existing line participations and established several new participations in light of strong mortgage refinance and home purchase activity nationally;Loan balances, excluding mortgage warehouse lines of credit, declined $10.6 million during the quarter, despite having increased $50.9 million year-to-date. The Q3 2019 decline in such loan balances is principally the result of payoffs of a couple significant commercial real estate loan participations;Net interest income increased 3.26 percent (annualized) compared to Q2 2019 and increased 10.7 percent year-to-date 2019 versus the same period in 2018, primarily due to our loan growth;Net interest margin in Q3 2019 declined 9 basis points to 3.63 percent as compared to Q2 2019 as yields on loans declined, while deposit and other funding costs remained stable;Efficiency ratio improved to 52.91 percent compared to 56.45 percent in the linked quarter and 54.25 percent for Q3 2018, primarily as result of our sale of SIS which traditionally had a low operating margin;Realized securities gains of $453,000 in Q3 2019 compared to $1.09 million in Q2;Write-downs of foreclosed properties were $133,000 in Q3 2019 compared to $1.20 million in Q2 2019, while the net gain on sales of foreclosed properties decreased from $156,000 in Q2 2019 to $66,000 in Q3 2019;Nonperforming assets as a percentage of total assets declined to 1.45 percent compared to 1.52 percent for the linked quarter and 1.82 percent for the year ago quarter; andAnnounced our entering into a definitive merger agreement to acquire Cornerstone Financial Services, Inc. and its wholly-owned subsidiary, Cornerstone Bank, Inc., headquartered in West Union, West Virginia.H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “I am very pleased to report that Summit achieved another quarter of solid core operating performance highlighted by core revenue growth, an improved efficiency ratio and continued improvement in asset quality. Further, I am encouraged that while the balances of our commercial and commercial real estate loan portfolios exhibited some modest contraction over the past quarter, we currently also have a robust pipeline of new loans located within our core footprint which have been approved and scheduled to close over the next few months. I am also particularly pleased by the opportunities represented by our pending acquisition of Cornerstone Financial Services, Inc., announced recently and expected to close at beginning of 2020. This deal will serve to combine Summit with a financially strong bank that has a similar culture, core values and guiding principles as ours, and shares the same commitment to build long-term client relationships by providing ‘Service Beyond Expectations’.”Results from OperationsTotal revenue for third quarter 2019, consisting of net interest income and noninterest income, increased 8.2 percent to $23.2 million, principally as a result of higher net interest income compared to $21.4 million for the third quarter 2018. For the year-to-date period ended September 30, 2019, total revenue was $72.1 million compared to $65.0 million for the same period of 2018, representing a 10.9 percent increase primarily as a result of higher net interest income, increased realized securities gains and the gain on the sale of SIS.For the third quarter of 2019, net interest income was $19.4 million, an increase of 12.8 percent from the $17.2 million reported in the prior-year third quarter and a 0.8 percent increase compared to the linked quarter. The net interest margin for third quarter 2019 was 3.63 percent compared to 3.72 percent for the linked quarter and 3.53 percent for the year-ago quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summit’s net interest margin would have been 3.59 percent for Q3 2019, 3.62 percent for Q2 2019 and 3.51 percent for Q3 2018. Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for third quarter 2019 was $3.76 million compared to $4.21 million for the comparable period of 2018. Excluding realized securities gains, noninterest income was $3.31 million for third quarter 2019, compared to $4.20 million reported for third quarter 2018 and was $3.82 million for the linked quarter, excluding realized securities gains and the gain on the sale of SIS. Q3 2019 noninterest income declined compared to prior periods primarily due to the elimination of insurance commission revenue as result of SIS’ sale in Q2 2019.We recorded a $500,000 provision for loan losses during third quarter 2019 and 2018. Our provision continues to be directionally consistent with changes in the credit quality in our loan portfolio.Q3 2019 total noninterest expense increased 3.6 percent to $12.8 million compared to $12.4 million for the prior-year third quarter and decreased 16.5 percent compared to the linked quarter. Our decreased noninterest expense compared to the linked quarter is principally due to reductions in personnel costs resulting from the sale of SIS and due to increased write-downs on foreclosed properties during Q2 2019. In addition, our merger-related expenses totaled $74,000 in Q3 2019 compared to $382,000 in Q2 2019 and $86,000 in Q3 2018.Noninterest expense for the first nine months of 2019 increased 12.3 percent compared to the first nine months of 2018. Our increased noninterest expense is principally due to expenses associated with the acquired PBI operations (including merger-related expenses), increased write-downs of foreclosed properties and to deferred director compensation plan expense of $560,000 for the first nine months of 2019 compared to $104,000 for the same period of 2018.Balance SheetAt September 30, 2019, total assets were $2.32 billion, an increase of $123.0 million, or 5.6 percent since December 31, 2018. Total loans, net of unearned fees and allowance for loan losses, were $1.84 billion at September 30, 2019, up $156.9 million, or 9.3 percent, from the $1.68 billion reported at year-end 2018. Loans, excluding mortgage warehouse lines of credit, decreased $10.6 million during the quarter, or 2.5 percent (on an annualized basis), and have increased $50.9 million, or 4.1 percent (on an annualized basis) since year-end 2018.At September 30, 2019, deposits were $1.83 billion, an increase of $197.5 million, or 12.1 percent, since year end 2018. During the first nine months of 2019, checking deposits increased $98.7 million or 13.2 percent, time deposits grew by $77.1 million or 12.7 percent and savings deposits increased $21.7 million or 7.6 percent.Shareholders’ equity was $242.4 million as of September 30, 2019 compared to $219.8 million at December 31, 2018. In conjunction with the acquisition of PBI on January 1, 2019, Summit issued 465,931 shares of common stock valued at $9.0 million to the former PBI shareholders.Tangible book value per common share increased to $17.68 at September 30, 2019 compared to $15.75 at December 31, 2018. Summit had 12,400,804 outstanding common shares at Q3 2019 quarter end compared to 12,312,933 at year end 2018.As announced in Q3 2018, the Board of Directors authorized the open market repurchase of up to 500,000 shares of the issued and outstanding shares of Summit’s common stock. The timing and quantity of stock purchases under this repurchase plan were at the discretion of management. During Q3 2019, the repurchase of all shares authorized under the Plan was completed, whereby 52,460 shares were repurchased at an average price of $25.59 per share. The average price of all shares repurchased under the Plan since its inception was $24.15 per share.Asset QualityAs of September 30, 2019, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $33.7 million, or 1.45 percent of assets. This compares to $34.9 million, or 1.52 percent of assets at the linked quarter-end, and $36.5 million, or 1.66 percent of assets at year end 2018.Third quarter 2019 net loan charge-offs were $711,000, or 0.16 percent of average loans annualized, while adding $500,000 to the allowance for loan losses through the provision for loan losses. The allowance for loan losses stood at 0.70 percent of total loans at September 30, 2019, compared to 0.77 percent at year-end 2018. About the CompanySummit Financial Group, Inc. is a $2.32 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 thirty-two banking locations.FORWARD-LOOKING STATEMENTSThis 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 changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; 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.ADDITIONAL INFORMATION ABOUT THE MERGER WITH CORNERSTONE FINANCIAL SERVICES, INC. (“CORNERSTONE”) AND WHERE TO FIND ITThis press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. In connection with the proposed merger, Summit has filed with the Securities and Exchange Commission (“SEC”) a Preliminary Registration Statement on Form S-4 with respect to the offering of Summit common stock as the merger consideration under the Securities Act of 1933, which includes include a proxy statement of Cornerstone seeking approval of the merger by Cornerstone’s shareholders and a prospectus of Summit. Summit will request effectiveness of its Registration Statement on Form S-4 with the SEC and Cornerstone will deliver the proxy statement/prospectus to its shareholders. In addition, Summit has filed other relevant documents concerning the proposed merger with the SEC. Investors and security holders are urged to read the Registration Statement and proxy statement/prospectus and other relevant documents, because they will contain important information about the proposed merger.Investors and security holders may obtain free copies of these documents through the website maintained by the SEC at http://www.sec.gov. Security holders of Summit and Cornerstone may also obtain free copies of these documents by directing a request to Ms. Teresa Ely, Summit’s Director of Shareholder Relations, by telephone at (304) 530-0526 or by email at tely@summitfgi.com or by accessing these documents at Summit’s website: www.summitfgi.com.
NOTE (A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.NOTE (B) – Computed on a tax equivalent basis excluding merger-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.
NOTE (A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.
NOTE (B) – Computed on a tax equivalent basis excluding merger-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.
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.
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