U.S. Markets closed

Summit Financial Group Reports Fourth Quarter and Full Year 2018 Results

Q4 2018 Diluted EPS $0.60, equaling a Quarterly Record; Full Year 2018 Diluted EPS $2.26, an Annual Record

MOOREFIELD, W.Va., Jan. 29, 2019 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (SMMF) today reported quarterly net income of $7.45 million for fourth quarter 2018, or $0.60 per diluted share -- equaling our previous quarterly record, compared to $2.32 million, or $0.19 per diluted share, for the fourth quarter of 2017. Earnings per diluted share for fourth quarter 2017 were negatively impacted (on an after-tax basis) by the one-time charge of $0.28 to re-measure the Company’s net deferred tax assets as result of enactment of the Tax Cuts and Jobs Act (“TCJA”).

For the full year 2018, Summit achieved record net income of $28.07 million, and record earnings per diluted share of $2.26, compared with $11.92 million, or $1.00 per diluted share, for 2017.  Full year 2018 results were positively impacted (on a diluted earnings per share basis) $0.29 as result of higher net interest income, $0.06 due to growth in trust and wealth management fees, $0.08 from increased deposit account-related fees and $0.25 in lower income tax expense as result of TCJA’s lower income tax rates. Higher total noninterest expense of $0.16 per diluted share partially offset these positive impacts. Lower earnings in 2017 were principally attributable to the following non-core or one-time items (on an after-tax, diluted earnings per share basis):  $0.52 as result of a litigation settlement, $0.29 due to the enactment of the TCJA, and $0.08 as result of merger-related expenses. 

Highlights for Q4 2018

  • Loan balances, excluding mortgage warehouse lines of credit, increased $46.1 million during the quarter, or 11.5 percent (on an annualized basis); excluding mortgage warehouse lines of credit, loans grew $80.4 million or 5.1 percent since year-end 2017;
  • Net interest margin for the quarter increased 8 basis points to 3.61 percent compared to Q3 2018;
  • Efficiency ratio improved to 51.02 percent compared to 54.25 percent for the linked-quarter as result of the improved net interest margin and well-controlled overhead;
  • Provision for loan losses remained unchanged at $500,000 compared to the prior quarter;
  • Realized securities losses of $205,000 in Q4 2018 compared to realized securities gains of $8,000 in Q3 2018; and
  • Write-downs of foreclosed properties were $318,000 in Q4 2018 compared to $39,000 in Q3 2018, while the net loss on sales of foreclosed properties increased to $70,000 in Q4 2018 from $18,000 in Q3 2018.

H. Charles Maddy, III, President and Chief Executive Officer of Summit, commented, “I am very gratified to report that for fourth quarter 2018, Summit had record quarterly net income and tied its previous record for quarterly earnings per share; and for the full year 2018, we achieved a new annual earnings record both in net income and on a per share basis. In addition, I am particularly pleased by our continued solid lending activity and strong core operating performance in this past quarter. Our acquisition of Peoples Bankshares, Inc. closed at the beginning of 2019, and it serves to combine Summit with a financially strong bank that shares the same commitment to build long-term client relationships by providing ‘Service Beyond Expectations’. The financial synergies relative to this transaction are already evident. I optimistically look forward to 2019 and beyond as we are laser-focused on our goal to be a consistent growing, high-performing community banking institution."

Results from Operations

Total revenue for fourth quarter 2018, consisting of net interest income and noninterest income, increased 4.1 percent to $22.2 million compared to $21.4 million for the fourth quarter 2017. For the full year 2018, total revenue was $87.2 million compared to $80.6 million for 2017, representing an 8.2 percent increase primarily due to the acquisition of First Century Bankshares, Inc. (“FCB”) in Q2 2017.

For the fourth quarter of 2018, net interest income increased 3.5 percent to $18.1 million compared to $17.4 million for the prior-year fourth quarter and grew 4.9 percent compared to the linked quarter principally as result of $44.2 million in growth in average loans and 19 basis point improvement in average loan yields during the quarter. The net interest margin for fourth quarter 2018 was 3.61 percent compared to 3.65 percent for the same year-ago quarter, and 3.53 percent for the linked quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments related to the acquired interest earning assets and interest bearing liabilities, Summit’s net interest margin was 3.57 percent for Q4 2018 and 3.54 percent for full year 2018. 

Noninterest income, consisting primarily of insurance commissions from Summit's insurance agency subsidiary, trust and wealth management fees and service fee income from community banking activities, for fourth quarter 2018 was $4.19 million compared to $3.93 million for the comparable period of 2017. Excluding realized securities gains and losses, noninterest income was $4.39 million for fourth quarter 2018, compared to $4.00 million reported for fourth quarter 2017 and $4.20 million for the linked quarter.

We recorded a $500,000 provision for loan losses during fourth quarter 2018 and $375,000 in Q4 2017.  The need for increased loan loss provisioning during 2018 is directionally consistent with changes in the credit quality in our loan portfolio and our loan growth.

Q4 2018 total noninterest expense increased 1.0 percent to $12.47 million compared to $12.35 million for the prior-year fourth quarter. Noninterest expense for full year 2018 decreased 13.6 percent compared to 2017 principally due to: 1) $144,000 in merger expenses being incurred in 2018 compared to $1.59 million in 2017; and 2) a $9.9 million charge to resolve fully all litigation with Residential Funding Company, LLC and ResCap Liquidating Trust (collectively “ResCap”) recorded during 2017. Excluding the impact of the ResCap litigation settlement charge and merger-related expenses, noninterest expense for 2018 increased 7.5 percent to $49.9 million compared to $46.3 million for 2017, principally as result of the FCB acquisition.

Balance Sheet

At December 31, 2018, total assets were $2.20 billion, an increase of $66.3 million, or 3.1 percent since December 31, 2017. Total loans, net of unearned fees and allowance for loan losses, were $1.68 billion at December 31, 2018, up $88.3 million, or 5.5 percent, from the $1.59 billion reported at year-end 2017.  Loans, excluding mortgage warehouse lines of credit, increased $46.1 million during the quarter, or 11.5 percent (on an annualized basis), and have grown $80.4 million or 5.1 percent since year-end 2017.

At December 31, 2018, deposits were $1.63 billion, an increase of $34.2 million, or 2.1 percent, since year end 2017. During 2018, checking deposits increased $117.3 million or 18.7 percent, time deposits declined by $9.1 million or 1.5 percent and savings deposits declined $74.0 million or 20.7 percent.

Shareholders’ equity was $219.8 million as of December 31, 2018 compared to $213.6 million at September 30, 2018 and $201.5 million at December 31, 2017. Tangible book value per common share increased to $15.75 at December 31, 2018 compared to $15.13 at the end of third quarter 2018 and $14.08 at year end 2017. Summit had 12,312,933 outstanding common shares at year end 2018 compared to 12,358,562 at year end 2017.

As previously 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 purchases under this stock repurchase plan are at the discretion of management.  The plan will expire December 31, 2019, but may be discontinued, suspended, or restarted at any time at the Company's discretion.  During Q4 2018, 82,423 shares of our common stock were repurchased under the Plan at an average price of $20.46 per share.

Asset Quality

As of December 31, 2018, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, were $36.5 million, or 1.66 percent of assets. This compares to $39.0 million, or 1.82 percent of assets at the linked quarter-end, and $36.9 million, or 1.73 percent of assets, at year-end 2017 as result of our continuing emphasis on improving our overall asset quality.

Fourth quarter 2018 net loan charge-offs were $398,000, or 0.10 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 0.77 percent of total loans at December 31, 2018, compared to 0.78 percent at year-end 2017.  If the acquired FCB and HCB loans, which were recorded at fair value on the acquisition dates were excluded, the allowance for loan losses to total loans ratio at December 31, 2018 and December 31, 2017 would have been 0.84 percent and 0.91 percent, respectively.

About the Company

Summit Financial Group, Inc. is a $2.20 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-three banking locations. Summit also operates Summit Insurance Services, LLC in Moorefield, West Virginia and Leesburg, Virginia.

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 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.

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

 

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)    
Quarterly Performance Summary (unaudited)      
Q4 2018 vs Q4 2017      
       
     For the Quarter Ended   Percent 
 Dollars in thousands  12/31/2018 12/31/2017  Change 
 Statements of Income       
   Interest income       
  Loans, including fees  $   22,659   $   20,031   13.1 %
  Securities      2,527       2,412   4.8 %
  Other      127       144   -11.8 %
  Total interest income      25,313       22,587   12.1 %
                   
  Interest expense       
  Deposits      5,103       3,224   58.3 %
  Borrowings      2,158       1,925   12.1 %
  Total interest expense      7,261       5,149   41.0 %
  Net interest income      18,052       17,438   3.5 %
  Provision for loan losses      500       375   33.3 %
  Net interest income after provision for loan losses      17,552       17,063   2.9 %
                   
         
  Noninterest income       
  Insurance commissions      1,132       1,005   12.6 %
  Trust and wealth management fees      627       578   8.5 %
  Service charges on deposit accounts      1,209       1,200   0.8 %
  Bank card revenue      809       743   8.9 %
  Realized securities (losses) gains      (205 )     (71 ) 188.7 %
  Bank owned life insurance income      249       258   -3.5 %
  Other income      366       218   67.9 %
  Total noninterest income     4,187       3,931   6.5 %
  Noninterest expense       
  Salaries and employee benefits     6,928       6,520   6.3 %
  Net occupancy expense     836       772   8.3 %
  Equipment expense     1,139       1,095   4.0 %
  Professional fees     385       355   8.5 %
  Advertising and public relations     193       185   4.3 %
  Amortization of intangibles     410       435   -5.7 %
  FDIC premiums     140       250   -44.0 %
  Bank card expense     395       319   23.8 %
  Foreclosed properties expense, net of losses     507       516   -1.7 %
  Merger-related expense     59       14   321.4 %
  Other expenses     1,474       1,885   -21.8 %
  Total noninterest expense     12,466       12,346   1.0 %
  Income before income taxes      9,273       8,648   7.2 %
  Income taxes      1,823       6,325   -71.2 %
  Net income  $   7,450   $   2,323   220.7 %

 

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)    
Quarterly Performance Summary (unaudited)      
Q4 2018 vs Q4 2017    
     For the Quarter Ended   Percent 
    12/31/2018 12/31/2017  Change 
 Per Share Data       
  Earnings per common share       
  Basic  $   0.60   $   0.19   215.8 %
  Diluted  $   0.60   $   0.19   215.8 %
         
  Cash dividends  $   0.14   $   0.11   27.3 %
         
  Average common shares outstanding       
  Basic      12,358,104       12,325,067   0.3 %
  Diluted      12,407,678       12,371,507   0.3 %
         
  Common shares outstanding at period end      12,312,933       12,358,562   -0.4 %
         
 Performance Ratios       
  Return on average equity    13.85 %   4.62 % 199.8 %
  Return on average tangible equity    16.41 %   6.12 % 168.1 %
  Return on average assets    1.38 %   0.44 % 213.6 %
  Net interest margin (A)    3.61 %   3.65 % -1.1 %
  Efficiency ratio (B)    51.02 %   51.47 % -0.9 %
         
  NOTE (A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21% for 2018 and 35% for 2017.
     
  NOTE (B) – Computed on a tax equivalent basis excluding 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)      
2018 vs 2017      
         
     For the Year Ended   Percent 
 Dollars in thousands  12/31/2018 12/31/2017  Change 
 Statements of Income       
  Interest income       
  Loans, including fees  $   85,283   $   74,908   13.9 %
  Securities      9,587       9,010   6.4 %
  Other      539       609   -11.5 %
  Total interest income      95,409       84,527   12.9 %
  Interest expense       
  Deposits      17,675       11,210   57.7 %
  Borrowings      7,937       7,170   10.7 %
  Total interest expense      25,612       18,380   39.3 %
  Net interest income      69,797       66,147   5.5 %
  Provision for loan losses      2,250       1,250   80.0 %
  Net interest income after provision for loan losses      67,547       64,897   4.1 %
         
  Noninterest income       
  Insurance commissions      4,320       4,005   7.9 %
  Trust and wealth management fees      2,653       1,863   42.4 %
  Service charges on deposit accounts      4,631       4,109   12.7 %
  Bank card revenue      3,152       2,697   16.9 %
  Realized securities gains (losses)      622       (14 ) n/m  
  Bank owned life insurance income      1,022       1,017   0.5 %
  Other income      1,022       750   36.3 %
  Total noninterest income     17,422       14,427   20.8 %
  Noninterest expense       
  Salaries and employee benefits     27,478       25,075   9.6 %
  Net occupancy expense     3,364       3,011   11.7 %
  Equipment expense     4,411       3,954   11.6 %
  Professional fees     1,607       1,367   17.6 %
  Advertising and public relations     654       578   13.1 %
  Amortization of intangibles     1,671       1,410   18.5 %
  FDIC premiums     830       1,065   -22.1 %
  Bank card expense     1,475       1,432   3.0 %
  Foreclosed properties expense, net of losses     1,350       1,339   0.8 %
  Litigation settlement     -       9,900   -100.0 %
  Merger-related expense     144       1,589   -90.9 %
  Other expenses     6,889       7,025   -1.9 %
  Total noninterest expense     49,873       57,745   -13.6 %
  Income before income taxes      35,096       21,579   62.6 %
  Income taxes      7,024       9,664   -27.3 %
  Net income  $   28,072   $   11,915   135.6 %

 

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)    
Annual Performance Summary (unaudited)      
2018 vs 2017    
     For the Year Ended   Percent 
    12/31/2018 12/31/2017  Change 
 Per Share Data       
  Earnings per common share       
  Basic  $   2.27   $   1.00   127.0 %
  Diluted  $   2.26   $   1.00   126.0 %
         
  Cash dividends  $   0.53   $   0.44   20.5 %
         
  Average common shares outstanding       
  Basic      12,364,468       11,918,390   3.7 %
  Diluted      12,424,573       11,949,245   4.0 %
         
  Common shares outstanding at period end      12,312,933       12,358,562   -0.4 %
         
 Performance Ratios       
  Return on average equity    13.43 %   6.40 % 109.8 %
  Return on average tangible equity    16.09 %   8.01 % 100.9 %
  Return on average assets    1.32 %   0.59 % 123.7 %
  Net interest margin (A)    3.57 %   3.67 % -2.7 %
  Efficiency ratio (B)    53.72 %   52.41 % 2.5 %
         
 NOTE (A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21% for 2018 and 35% for 2017.
     
 NOTE (B) – Computed on a tax equivalent basis excluding gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

 

 SUMMIT FINANCIAL GROUP, INC. (SMMF)  
 Five Quarter Performance Summary (unaudited)  
     For the Quarter Ended 
 Dollars in thousands  12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
 Statements of Income           
  Interest income         
  Loans, including fees  $   22,659     $   21,295   $   20,962   $   20,366   $   20,031  
  Securities      2,527         2,367       2,303       2,391       2,412  
  Other      127         138       134       140       144  
  Total interest income      25,313         23,800       23,399       22,897       22,587  
  Interest expense         
  Deposits      5,103         4,714       4,309       3,549       3,224  
  Borrowings      2,158         1,873       1,815       2,091       1,925  
  Total interest expense      7,261         6,587       6,124       5,640       5,149  
  Net interest income      18,052         17,213       17,275       17,257       17,438  
  Provision for loan losses      500         500       750       500       375  
  Net interest income after provision for loan losses      17,552         16,713       16,525       16,757       17,063  
  Noninterest income         
  Insurance commissions      1,132         1,062       1,013       1,113       1,005  
  Trust and wealth management fees      627         687       672       667       578  
  Service charges on deposit accounts      1,209         1,215       1,116       1,091       1,200  
  Bank card revenue      809         793       801       749       742  
  Realized securities (losses) gains      (205 )       8       87       732       (71 )
  Bank owned life insurance income      248         250       249       275       258  
  Other income      367         196       210       249       219  
  Total noninterest income     4,187         4,211       4,148       4,876       3,931  
  Noninterest expense         
  Salaries and employee benefits     6,928         6,806       6,922       6,821       6,520  
  Net occupancy expense     836         856       840       832       772  
  Equipment expense     1,139         1,118       1,071       1,083       1,095  
  Professional fees     385         503       385       333       355  
  Advertising and public relations     193         170       188       103       185  
  Amortization of intangibles     410         413       413       436       435  
  FDIC premiums     140         210       240       240       250  
  Bank card expense     395         384       361       335       319  
  Foreclosed properties expense, net of losses     507         169       350       325       516  
  Merger-related expense     59         86       -       -       14  
  Other expenses     1,474         1,643       1,965       1,806       1,885  
  Total noninterest expense     12,466         12,358       12,735       12,314       12,346  
  Income before income taxes      9,273         8,566       7,938       9,319       8,648  
  Income tax expense      1,823         1,667       1,658       1,876       6,325  
  Net income  $   7,450     $   6,899   $   6,280   $   7,443   $   2,323  

 

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:  SMMF)          
Five Quarter Performance Summary (unaudited)          
           
     For the Quarter Ended 
    12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Per Share Data           
  Earnings per common share           
  Basic  $   0.60   $   0.56   $   0.51   $   0.60   $   0.19  
  Diluted  $   0.60   $   0.55   $   0.51   $   0.60   $   0.19  
             
  Cash dividends  $   0.14   $   0.13   $   0.13   $   0.13   $   0.11  
             
  Average common shares outstanding           
  Basic      12,358,104       12,374,350       12,366,522       12,358,849       12,325,067  
  Diluted      12,407,678       12,439,051       12,431,984       12,383,757       12,371,507  
             
  Common shares outstanding at period end      12,312,933       12,382,450       12,373,747       12,366,360       12,358,562  
             
Performance Ratios           
  Return on average equity    13.85 %   13.00 %   12.16 %   14.73 %   4.62 %
  Return on average tangible equity    16.41 %   15.53 %   14.68 %   17.80 %   6.12 %
  Return on average assets    1.38 %   1.31 %   1.19 %   1.40 %   0.44 %
  Net interest margin (A)    3.61 %   3.53 %   3.58 %   3.58 %   3.65 %
  Efficiency ratio (B)    51.02 %   54.25 %   55.88 %   53.84 %   52.44 %
             
 NOTE (A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21% for 2018 and 35% for 2017.
             
 NOTE (B) – Computed on a tax equivalent basis excluding 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  12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
             
 Assets           
  Cash and due from banks $   23,061   $   9,382   $   8,314   $   9,042   $   9,641  
  Interest bearing deposits other banks     36,479       44,452       38,097       38,365       42,990  
  Securities     293,284       288,040       283,221       296,890       328,723  
  Loans, net     1,682,005       1,632,747       1,617,373       1,631,150       1,593,744  
  Property held for sale     21,432       22,017       21,606       21,442       21,470  
  Premises and equipment, net     37,553       36,888       36,017       35,554       34,209  
  Goodwill and other intangible assets     25,842       26,252       26,665       27,077       27,513  
  Cash surrender value of life insurance policies     42,420       42,208       41,932       41,668       41,358  
  Other assets     38,510       36,741       34,427       33,707       34,592  
    Total assets $   2,200,586   $   2,138,727   $   2,107,652   $   2,134,895   $   2,134,240  
                                 
             
 Liabilities and Shareholders' Equity           
  Deposits $   1,634,826   $   1,651,064   $   1,639,996   $   1,654,523   $   1,600,601  
  Short-term borrowings     309,084       238,403       202,429       193,513       250,499  
  Long-term borrowings and subordinated debentures     20,324       20,328       40,332       65,336       65,340  
  Other liabilities     16,522       15,376       15,016       16,514       16,295  
  Shareholders' equity     219,830       213,556       209,879       205,009       201,505  
    Total liabilities and shareholders' equity $   2,200,586   $   2,138,727   $   2,107,652   $   2,134,895   $   2,134,240  
                                 
             
  Book value per common share $   17.85   $   17.25   $   16.96   $   16.55   $   16.30  
  Tangible book value per common share $   15.75   $   15.13   $   14.81   $   14.36   $   14.08  
  Tangible common equity to tangible assets   8.9 %   8.9 %   8.8 %   8.4 %   8.3 %

 

...
SUMMIT FINANCIAL GROUP INC. (NASDAQ:  SMMF)        
Regulatory Capital Ratios (unaudited)          
             
    12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Summit Financial Group, Inc.          
  CET1 Risk-based Capital 11.1 % 11.1 % 11.0 % 10.7