Company Quick10K Filing
Summit Financial Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 13 $328
10-Q 2019-11-07 Quarter: 2019-09-30
10-Q 2019-08-02 Quarter: 2019-06-30
10-Q 2019-05-06 Quarter: 2019-03-31
10-K 2019-03-01 Annual: 2018-12-31
10-Q 2018-11-02 Quarter: 2018-09-30
10-Q 2018-08-07 Quarter: 2018-06-30
10-Q 2018-05-09 Quarter: 2018-03-31
10-K 2018-03-02 Annual: 2017-12-31
10-Q 2017-11-03 Quarter: 2017-09-30
10-Q 2017-08-09 Quarter: 2017-06-30
10-Q 2017-05-08 Quarter: 2017-03-31
10-K 2017-02-28 Annual: 2016-12-31
10-Q 2016-11-03 Quarter: 2016-09-30
10-Q 2016-08-04 Quarter: 2016-06-30
10-Q 2016-05-06 Quarter: 2016-03-31
10-K 2016-02-26 Annual: 2015-12-31
10-Q 2015-11-05 Quarter: 2015-09-30
10-Q 2015-08-07 Quarter: 2015-06-30
10-Q 2015-05-04 Quarter: 2015-03-31
10-K 2015-03-02 Annual: 2014-12-31
10-Q 2014-11-05 Quarter: 2014-09-30
10-Q 2014-08-08 Quarter: 2014-06-30
10-Q 2014-05-12 Quarter: 2014-03-31
10-K 2014-03-07 Annual: 2013-12-31
10-Q 2013-11-12 Quarter: 2013-09-30
10-Q 2013-08-07 Quarter: 2013-06-30
10-Q 2013-05-01 Quarter: 2013-03-31
10-K 2013-02-28 Annual: 2012-12-31
10-Q 2012-11-07 Quarter: 2012-09-30
10-Q 2012-08-10 Quarter: 2012-06-30
10-Q 2012-05-03 Quarter: 2012-03-31
10-K 2012-03-01 Annual: 2011-12-31
10-Q 2011-11-04 Quarter: 2011-09-30
10-Q 2011-08-15 Quarter: 2011-08-09
10-Q 2011-05-03 Quarter: 2011-05-02
10-K 2011-03-01 Annual: 2010-12-31
10-Q 2010-11-15 Quarter: 2010-09-30
10-Q 2010-08-16 Quarter: 2010-06-30
10-Q 2010-05-17 Quarter: 2010-03-31
10-K 2010-03-30 Annual: 2009-12-31
8-K 2020-01-24 Earnings, Exhibits
8-K 2020-01-01 M&A, Officers, Other Events, Exhibits
8-K 2019-12-19 Officers
8-K 2019-11-21 Enter Agreement, Other Events, Exhibits
8-K 2019-10-24 Earnings, Exhibits
8-K 2019-09-17 Enter Agreement, Other Events, Exhibits
8-K 2019-07-25 Earnings, Exhibits
8-K 2019-05-21 Shareholder Vote
8-K 2019-04-25 Earnings, Exhibits
8-K 2019-02-07 Officers, Exhibits
8-K 2019-01-29 Earnings, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-09-18 Other Events, Exhibits
8-K 2018-07-26 Earnings, Other Events, Exhibits
8-K 2018-07-24 Enter Agreement, Officers, Other Events, Exhibits
8-K 2018-05-16 Shareholder Vote
8-K 2018-04-26 Earnings, Exhibits
8-K 2018-02-08 Officers, Exhibits
8-K 2018-01-25 Earnings, Officers, Exhibits
8-K 2018-01-12 Other Events
SMMF 2019-09-30
Item 1. Financial Statements
Note 1. Basis of Presentation
Note 2. Significant New Authoritative Accounting Guidance
Note 3. Fair Value Measurements
Note 4. Earnings per Share
Note 5. Debt Securities
Note 6. Loans
Note 7. Allowance for Loan Losses
Note 8. Goodwill and Other Intangible Assets
Note 9. Deposits
Note 10. Borrowed Funds
Note 11. Share-Based Compensation
Note 12. Commitments and Contingencies
Note 13. Regulatory Matters
Note 14. Derivative Financial Instruments
Note 15. Acquisitions
Note 16. Accumulated Other Comprehensive Income (Loss)
Note 17. Income Taxes
Note 18. Revenue From Contracts with Customers
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 smmf-20190930xexh311.htm
EX-31.2 smmf-20190930xexh312.htm
EX-32.1 smmf-20190930xexh321.htm
EX-32.2 smmf-20190930xexh322.htm

Summit Financial Group Earnings 2019-09-30

SMMF 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
WTBA 357 2,363 2,161 0 0 28 66 380 5.8 1%
BFST 349 2,154 1,876 4 0 20 46 285 0% 6.2 1%
MCB 348 2,961 2,679 0 0 28 69 -85 -1.2 1%
CZNC 348 1,610 1,370 0 0 20 33 308 9.4 1%
EBTC 343 3,168 2,887 0 0 31 62 156 2.5 1%
MCBC 338 1,978 1,773 0 0 30 49 380 7.7 1%
SMMF 328 2,299 2,063 0 0 30 72 272 3.8 1%
BLMT 323 3,030 2,828 0 0 23 71 179 2.5 1%
STXB 318 1,898 1,654 0 0 15 34 236 6.8 1%
PFIS 312 2,324 2,033 0 0 27 47 335 7.1 1%

10-Q 1 smmf-20190930x10q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10 – Q

[X]         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019
or
[  ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934  For the transition period from ___________ to __________.

Commission File Number 0-16587 
sfglogousethisone.jpg
Summit Financial Group, Inc.
(Exact name of registrant as specified in its charter)
West Virginia
55-0672148
(State or other jurisdiction of
(IRS Employer
incorporation or organization)
Identification No.)
300 North Main Street
 
Moorefield, West Virginia
26836
(Address of principal executive offices)
(Zip Code)
(304) 530-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ
No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes þ
No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o               Accelerated filer þ    Non-accelerated filer o
                  Smaller reporting company o     Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o
No þ







Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common
SMMF
NASDAQ Capital Market


Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date.
Common Stock, $2.50 par value
12,472,277 shares outstanding as of November 7, 2019



Table of Contents


 
 
 
Page
PART  I.
FINANCIAL INFORMATION
 
 
 
 
 
 
Item 1.
Financial Statements
 
 
 
 
 
 
 
Consolidated balance sheets September 30, 2019 (unaudited) and
December 31, 2018
 
 
 
 
 
 
Consolidated statements of income
for the three months and nine months ended September 30, 2019 and 2018 (unaudited)
 
 
 
 
 
 
Consolidated statements of comprehensive income
for the three months and nine months ended September 30, 2019 and 2018 (unaudited)
 
 
 
 
 
 
Consolidated statements of shareholders’ equity
for the three months and nine months ended
September 30, 2019 and 2018 (unaudited)
 
 
 
 
 
 
Consolidated statements of cash flows
for the nine months ended
September 30, 2019 and 2018 (unaudited)
 
 
 
 
 
 
Notes to consolidated financial statements (unaudited)
 
 
 
 
 
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
 
 
 
 
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
 
 
 
 
 
Item 4.
Controls and Procedures
PART II.
OTHER INFORMATION
 
 
Item 1.
Legal Proceedings
 
 
 
 
 
Item 1A.
Risk Factors
 
 
 
 
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
 
 
 
Item 3.
Defaults upon Senior Securities
None
 
 
 
 
 
Item 4.
Mine Safety Disclosures
None
 
 
 
 
 
Item 5.
Other Information
None
 
 
 
 
 
Item 6.
Exhibits
 
 
 
 
EXHIBIT INDEX
 
 
 
 
 
SIGNATURES
 

3


Item 1. Financial Statements



Consolidated Balance Sheets (unaudited)

 
September 30,
2019
 
December 31,
2018
Dollars in thousands, except per share amounts
(unaudited)
 
(*)
ASSETS
 
 
 

Cash and due from banks
$
12,374

 
$
23,061

Interest bearing deposits with other banks
40,296

 
36,479

Cash and cash equivalents
52,670

 
59,540

Debt securities available for sale
265,347

 
293,147

Other investments
14,022

 
16,635

Loans held for sale
1,087

 
400

Loans, net of unearned income
1,851,832

 
1,695,052

    Less: allowance for loan losses
(12,941
)
 
(13,047
)
         Loans, net
1,838,891

 
1,682,005

Property held for sale
20,979

 
21,432

Premises and equipment, net
43,592

 
37,553

Accrued interest receivable
8,704

 
8,708

Goodwill and other intangible assets
23,182

 
25,842

Cash surrender value of life insurance policies
43,216

 
42,386

Other assets
11,919

 
12,938

Total assets
$
2,323,609

 
$
2,200,586

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 

 
 

Liabilities
 

 
 

Deposits
 

 
 

Non interest bearing
$
241,999

 
$
222,120

Interest bearing
1,590,286

 
1,412,706

Total deposits
1,832,285

 
1,634,826

Short-term borrowings
206,694

 
309,084

Long-term borrowings
722

 
735

Subordinated debentures owed to unconsolidated subsidiary trusts
19,589

 
19,589

Other liabilities
21,897

 
16,522

Total liabilities
2,081,187

 
1,980,756

 
 
 
 
Commitments and Contingencies


 


 
 
 
 
Shareholders' Equity
 

 
 

Preferred stock, $1.00 par value, authorized 250,000 shares

 

Common stock and related surplus, $2.50 par value; authorized 20,000,000 shares; issued: 2019 - 12,472,277 shares and 2018 - 12,399,887 shares; outstanding: 2019 - 12,400,804 shares and 2018 - 12,312,933
79,780

 
80,431

Unallocated common stock held by Employee Stock Ownership Plan - 2019 - 71,473 shares and 2018 - 86,954 shares
(772
)
 
(939
)
Retained earnings
159,568

 
141,354

Accumulated other comprehensive income (loss)
3,846

 
(1,016
)
Total shareholders' equity
242,422

 
219,830

 
 
 
 
Total liabilities and shareholders' equity
$
2,323,609

 
$
2,200,586


(*) - Derived from audited consolidated financial statements


See Notes to Consolidated Financial Statements



Consolidated Statements of Income (unaudited)


 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
Dollars in thousands, except per share amounts
 
2019
 
2018
 
2019
 
2018
Interest income
 
 
 
 
 
 
 
 
Interest and fees on loans
 
 
 
 
 
 
 
 
Taxable
 
$
24,786

 
$
21,154

 
$
71,877

 
$
62,196

Tax-exempt
 
154

 
141

 
467

 
428

Interest and dividends on securities
 
 

 
 

 
 

 
 

Taxable
 
1,566

 
1,227

 
4,859

 
3,838

Tax-exempt
 
618

 
1,140

 
2,307

 
3,222

Interest on interest bearing deposits with other banks
 
125

 
138

 
490

 
412

Total interest income
 
27,249

 
23,800

 
80,000

 
70,096

Interest expense
 
 

 
 

 
 

 
 

Interest on deposits
 
6,214

 
4,714

 
17,745

 
12,572

Interest on short-term borrowings
 
1,371

 
1,437

 
4,240

 
4,084

Interest on long-term borrowings and subordinated debentures
 
244

 
436

 
758

 
1,695

Total interest expense
 
7,829

 
6,587

 
22,743

 
18,351

Net interest income
 
19,420

 
17,213

 
57,257

 
51,745

Provision for loan losses
 
500

 
500

 
1,050

 
1,750

Net interest income after provision for loan losses
 
18,920

 
16,713

 
56,207

 
49,995

Noninterest income
 
 

 
 

 
 

 
 

Insurance commissions
 
40

 
1,062

 
1,821

 
3,188

Trust and wealth management fees
 
632

 
687

 
1,830

 
2,026

Service charges on deposit accounts
 
1,312

 
1,215

 
3,716

 
3,421

Bank card revenue
 
924

 
793

 
2,631

 
2,343

Realized securities gains, net
 
453

 
8

 
1,535

 
828

Gain on sale of Summit Insurance Services, LLC
 

 

 
1,906

 

Bank owned life insurance income
 
247

 
250

 
733

 
773

Other
 
151

 
196

 
627

 
656

Total noninterest income
 
3,759

 
4,211

 
14,799

 
13,235

Noninterest expenses
 
 

 
 

 
 

 
 

Salaries, commissions and employee benefits
 
7,044

 
6,806

 
21,966

 
20,550

Net occupancy expense
 
799

 
856

 
2,602

 
2,528

Equipment expense
 
1,296

 
1,118

 
3,694

 
3,271

Professional fees
 
388

 
503

 
1,266

 
1,222

Advertising and public relations
 
177

 
170

 
484

 
461

Amortization of intangibles
 
404

 
413

 
1,300

 
1,261

FDIC premiums
 

 
210

 
88

 
690

Bank card expense
 
455

 
384

 
1,367

 
1,080

Foreclosed properties expense, net of losses
 
305

 
169

 
2,236

 
843

Merger-related expenses
 
74

 
86

 
519

 
86

Other
 
1,864

 
1,643

 
6,473

 
5,415

Total noninterest expenses
 
12,806

 
12,358

 
41,995

 
37,407

Income before income tax expense
 
9,873

 
8,566

 
29,011

 
25,823

Income tax expense
 
1,812

 
1,667

 
5,293

 
5,201

Net income
 
$
8,061

 
$
6,899

 
$
23,718

 
$
20,622

 
 
 
 
 
 
 
 
 
Basic earnings per common share
 
$
0.65

 
$
0.56

 
$
1.89

 
$
1.67

Diluted earnings per common share
 
$
0.65

 
$
0.55

 
$
1.88

 
$
1.66


See Notes to Consolidated Financial Statements 



Consolidated Statements of Comprehensive Income (unaudited)


 
For the Three Months Ended 
 September 30,
Dollars in thousands
2019
 
2018
Net income
$
8,061

 
$
6,899

Other comprehensive income (loss):
 

 
 

Net unrealized gain on cashflow hedge of:
2019 - $70, net of deferred taxes of $17; 2018 - $336, net of deferred taxes of $81
53

 
255

Net unrealized gain (loss) on securities available for sale of:
2019 - $2,068, net of deferred taxes of $496 and reclassification adjustment for net realized gains included in net income of $453, net of tax of $109; 2018 - ($2,861), net of deferred taxes of ($687) and reclassification adjustment for net realized gains included in net income of $8, net of tax of $2
1,572

 
(2,174
)
Total other comprehensive income (loss)
1,625

 
(1,919
)
Total comprehensive income
$
9,686

 
$
4,980


 
For the Nine Months Ended 
 September 30,
Dollars in thousands
2019
 
2018
Net income
$
23,718

 
$
20,622

Other comprehensive income (loss):
 

 
 

Net unrealized (loss) gain on cashflow hedge of:
2019 - ($487), net of deferred taxes of ($117); 2018 - $1,772, net of deferred taxes of $425
(370
)
 
1,347

Net unrealized gain (loss) on securities available for sale of:
2019 - $7,315, net of deferred taxes of $1,755 and reclassification adjustment for net realized gains included in net income of $1,535, net of tax of $368; 2018 - ($7,873), net of deferred taxes of ($1,889) and reclassification adjustment for net realized gains included in net income of $828, net of tax of $199
5,560

 
(5,984
)
Net unrealized loss on pension plan of:
2019 - ($432), net of deferred taxes of ($104)
(328
)
 

Total other comprehensive income (loss)
4,862

 
(4,637
)
Total comprehensive income
$
28,580

 
$
15,985






















See Notes to Consolidated Financial Statements



Consolidated Statements of Shareholders’ Equity (unaudited)


Dollars in thousands, except per share amounts
Common
Stock and
Related
Surplus
 
Unallocated Common Stock Held by ESOP
 
Retained
Earnings
 
Accumulated
Other
Compre-
hensive
Income
(Loss)
 
Total
Share-
holders'
Equity
 
 
 
 
 
 
 
 
 
 
Balance June 30, 2019
$
80,946

 
$
(828
)
 
$
153,362

 
$
2,221

 
$
235,701

 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2019
 

 
 
 
 

 
 

 
 

Net income

 

 
8,061

 

 
8,061

Other comprehensive income

 

 

 
1,625

 
1,625

Share-based compensation expense
149

 

 

 

 
149

Unallocated ESOP shares committed to be released - 5,251 shares
80

 
56

 

 

 
136

Retirement of 52,460 shares of common stock
(1,453
)
 

 

 

 
(1,453
)
Common stock issuances from reinvested dividends - 2,227 shares
58

 

 

 

 
58

Common stock cash dividends declared ($0.15 per share)

 

 
(1,855
)
 

 
(1,855
)
Balance, September 30, 2019
$
79,780

 
$
(772
)
 
$
159,568

 
$
3,846

 
$
242,422

 
 
 
 
 
 
 
 
 
 
Balance June 30, 2018
$
81,572

 
$
(1,043
)
 
$
130,336

 
$
(986
)
 
$
209,879

 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 

 
 
 
 

 
 

 
 

Net income

 

 
6,899

 

 
6,899

Other comprehensive loss

 

 

 
(1,919
)
 
(1,919
)
Exercise of stock options - 1,400 shares
25

 

 

 

 
25

Share-based compensation expense
99

 

 

 

 
99

Unallocated ESOP shares committed to be released - 4,975 shares
73

 
54

 

 

 
127

Common stock issuances from reinvested dividends - 2,328 shares
53

 

 

 

 
53

Common stock cash dividends declared ($0.13 per share)

 

 
(1,607
)
 

 
(1,607
)
Balance, September 30, 2018
$
81,822

 
$
(989
)
 
$
135,628

 
$
(2,905
)
 
$
213,556




















See Notes to Consolidated Financial Statements



Consolidated Statements of Shareholders’ Equity (unaudited)



Dollars in thousands, except per share amounts
Common
Stock and
Related
Surplus
 
Unallocated Common Stock Held by ESOP
 
Retained
Earnings
 
Accumulated
Other
Compre-
hensive
Income
(Loss)
 
Total
Share-
holders'
Equity
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2018
$
80,431

 
$
(939
)
 
$
141,354

 
$
(1,016
)
 
$
219,830

 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2019
 

 
 
 
 

 
 

 
 

Net income

 

 
23,718

 

 
23,718

Other comprehensive income

 

 

 
4,862

 
4,862

Exercise of stock options and SARs - 17,255 shares
7

 

 

 

 
7

Share-based compensation expense
430

 

 

 

 
430

Unallocated ESOP shares committed to be released - 15,481 shares
222

 
167

 

 

 
389

Retirement of 417,577 shares of common stock
(10,405
)
 

 

 

 
(10,405
)
Acquisition of Peoples Bankshares, Inc. - 465,931 shares, net of issuance costs
8,918

 

 

 

 
8,918

Common stock issuances from reinvested dividends - 6,781 shares
177

 

 

 

 
177

Common stock cash dividends declared ($0.44 per share)

 

 
(5,504
)
 

 
(5,504
)
Balance, September 30, 2019
$
79,780

 
$
(772
)
 
$
159,568

 
$
3,846

 
$
242,422

 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2017
$
81,098

 
$
(1,152
)
 
$
119,827

 
$
1,732

 
$
201,505

 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 

 
 
 
 

 
 

 
 

Net income

 

 
20,622

 

 
20,622

Other comprehensive loss

 

 

 
(4,637
)
 
(4,637
)
Exercise of stock options - 1,600 shares
29

 

 

 

 
29

Share-based compensation expense
292

 

 

 

 
292

Unallocated ESOP shares committed to be released - 15,122 shares
224

 
163

 

 

 
387

Common stock issuances from reinvested dividends - 7,166 shares
179

 

 

 

 
179

Common stock cash dividends declared ($0.39 per share)

 

 
(4,821
)
 

 
(4,821
)
Balance, September 30, 2018
$
81,822

 
$
(989
)
 
$
135,628

 
$
(2,905
)
 
$
213,556















See Notes to Consolidated Financial Statements



Consolidated Statements of Cash Flows (unaudited)


 
 
Nine Months Ended
Dollars in thousands
 
September 30,
2019
 
September 30,
2018
Cash Flows from Operating Activities
 
 
 
 
Net income
 
$
23,718

 
$
20,622

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

 
 

Depreciation
 
1,921

 
1,609

Provision for loan losses
 
1,050

 
1,750

Share-based compensation expense
 
430

 
292

Deferred income tax benefit
 
(336
)
 
(164
)
Loans originated for sale
 
(13,710
)
 
(11,197
)
Proceeds from sale of loans
 
13,292

 
11,057

Gains on loans held for sale
 
(270
)
 
(208
)
Realized securities gains, net
 
(1,535
)
 
(828
)
Loss on disposal of assets
 
213

 
2

Gain on sale of Summit Insurance Services, LLC
 
(1,906
)
 

Write-downs of foreclosed properties
 
1,578

 
458

Amortization of securities premiums, net
 
1,826

 
2,698

Accretion related to acquisitions, net
 
(842
)
 
(393
)
Amortization of intangibles
 
1,300

 
1,261

Earnings on bank owned life insurance
 
(830
)
 
(850
)
Decrease (increase) in accrued interest receivable
 
434

 
(301
)
Decrease in other assets
 
221

 
115

Increase in other liabilities
 
2,935

 
2,172

Net cash provided by operating activities
 
29,489

 
28,095

Cash Flows from Investing Activities
 
 

 
 

Proceeds from maturities and calls of securities available for sale
 
1,766

 
1,050

Proceeds from sales of securities available for sale
 
133,174

 
92,048

Principal payments received on securities available for sale
 
18,501

 
19,770

Purchases of securities available for sale
 
(63,504
)
 
(81,929
)
Purchases of other investments
 
(12,035
)
 
(9,922
)
Proceeds from redemptions of other investments
 
14,332

 
9,665

Net loan originations
 
(118,893
)
 
(42,807
)
Purchases of premises and equipment
 
(7,238
)
 
(4,288
)
Proceeds from disposal of premises and equipment
 
11

 
12

Improvements to property held for sale
 
(88
)
 
(1,118
)
Proceeds from sales of repossessed assets & property held for sale
 
2,789

 
1,723

Proceeds from sale of Summit Insurance Services, LLC
 
7,117

 

Cash and cash equivalents from acquisition, net of $12,740 cash consideration paid
 
20,589

 

Net cash used in investing activities
 
(3,479
)
 
(15,796
)
Cash Flows from Financing Activities
 
 

 
 

Net increase in demand deposit, NOW and savings accounts
 
45,706

 
53,110

Net increase (decrease) in time deposits
 
39,621

 
(2,485
)
Net decrease in short-term borrowings
 
(102,390
)
 
(12,096
)
Repayment of long-term borrowings
 
(13
)
 
(45,012
)
Proceeds from issuance of common stock, net of issuance costs
 
98

 
179

Purchase and retirement of common stock
 
(10,405
)
 

Exercise of stock options
 
7

 
29

Dividends paid on common stock
 
(5,504
)
 
(4,821
)
Net cash used in financing activities
 
(32,880
)
 
(11,096
)
(Decrease) increase in cash and cash equivalents
 
(6,870
)
 
1,203

Cash and cash equivalents:
 
 

 
 

Beginning
 
59,540

 
52,631

Ending
 
$
52,670

 
$
53,834

(Continued)
 
 
 
 
 
See Notes to Consolidated Financial Statements
 
 
 
 



Consolidated Statements of Cash Flows (unaudited) - continued


 
 
Nine Months Ended
Dollars in thousands
 
September 30,
2019
 
September 30,
2018
Supplemental Disclosures of Cash Flow Information
 
 
 
 
Cash payments for:
 
 
 
 
Interest
 
$
22,548

 
$
18,199

Income taxes
 
$
6,080

 
$
5,674

 
 
 
 
 
Supplemental Disclosures of Noncash Investing and Financing Activities
 
 
 
 

Real property and other assets acquired in settlement of loans
 
$
4,060

 
$
1,542

Supplemental Disclosures of Noncash Transactions Included in Acquisition
 
 
 
 
Assets acquired
 
$
100,377

 
$

Liabilities assumed
 
$
114,151

 
$























































See Notes to Consolidated Financial Statements




NOTE 1.  BASIS OF PRESENTATION

We, Summit Financial Group, Inc. and subsidiaries, prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Regulation S-X.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual year end financial statements.  In our opinion, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature.

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ materially from these estimates.

The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year.  The consolidated financial statements and notes included herein should be read in conjunction with our 2018 audited financial statements and Annual Report on Form 10-K. 

NOTE 2.  SIGNIFICANT NEW AUTHORITATIVE ACCOUNTING GUIDANCE

Recently Adopted
We adopted ASU No. 2016-02, Leases (Topic 842) and its related amendments on its required effective date of January 1, 2019 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary. The impact was insignificant to our consolidated financial position. Our current minimum commitments under long-term operating leases are disclosed in Note 12, Commitments and Contingencies.
We adopted ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities on its required effective date of January 1, 2019. This guidance shortens the amortization period for premiums on certain callable debt securities to the earliest call date (with an explicit, noncontingent call feature that is callable at a fixed price and on a preset date), rather than contractual maturity date as currently required under GAAP. The ASU does not impact instruments without preset call dates such as mortgage-backed securities. The adoption of the new pronouncement did not have a significant impact on our consolidated financial statements.
 
Pending Adoption

During June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments. This ASU, as amended, among other things, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. This ASU, as amended, is effective for SEC filers which are not Smaller Reporting Companies for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. We will adopt the guidance in the first quarter of 2020 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. In this regard, we have a cross-functional implementation team comprised of personnel from risk management, operations and information technology, loan administration and finance and engaged a third-party vendor to assist us. The team is working through the late stages of its implementation plan, including refining and validating the third-party vendor’s model solution as well as analyzing qualitative factors which may modify the model’s quantitative outputs. While we are currently unable to estimate the approximate impact of the adoption of this ASU, as amended, it is expected to materially increase our allowance for loan losses. The ultimate impact of adoption will be significantly influenced by the loan portfolio's composition and credit quality, as well as the prevailing economic conditions and forecasts as of the adoption date.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The amendments modify the disclosure requirements in Topic 820 to add disclosures regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty. Certain disclosure



requirements in Topic 820 are also removed or modified. The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Certain of the amendments are to be applied prospectively while others are to be applied retrospectively. Early adoption is permitted. We do not expect the adoption of ASU 2018-13 to have a material impact on our consolidated financial statements.

NOTE 3.  FAIR VALUE MEASUREMENTS

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.
 
Balance at
 
Fair Value Measurements Using:
Dollars in thousands
September 30, 2019
 
Level 1
 
Level 2
 
Level 3
Securities available for sale
 
 
 
 
 
 
 
U.S. Government sponsored agencies
$
22,067

 
$

 
$
22,067

 
$

Mortgage backed securities:
 

 
 

 
 

 
 

Government sponsored agencies
71,887

 

 
71,887

 

Nongovernment sponsored entities
8,038

 

 
8,038

 

State and political subdivisions
33,664

 

 
33,664

 

Corporate debt securities
16,439

 

 
16,439

 

Asset-backed securities
33,419

 

 
33,419

 

Tax-exempt state and political subdivisions
79,833

 

 
79,833

 

Total securities available for sale
$
265,347

 
$

 
$
265,347

 
$

 
 
 
 
 
 
 
 
Derivative financial liabilities
 

 
 

 
 

 
 

Interest rate swaps
$
1,444

 
$

 
$
1,444

 
$



 
Balance at
 
Fair Value Measurements Using:
Dollars in thousands
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
Securities available for sale
 
 
 
 
 
 
 
U.S. Government sponsored agencies
$
26,140

 
$

 
$
26,140

 
$

Mortgage backed securities:
 

 
 

 
 

 
 

Government sponsored agencies
80,309

 

 
80,309

 

Nongovernment sponsored entities
614

 

 
614

 

State and political subdivisions
19,243

 

 
19,243

 

Corporate debt securities
14,512

 

 
14,512

 

Asset-backed securities
25,175

 

 
25,175

 

Tax-exempt state and political subdivisions
127,154

 

 
127,154

 

Total securities available for sale
$
293,147

 
$

 
$
293,147

 
$

 
 
 
 
 
 
 
 
Derivative financial assets
 
 
 
 
 
 
 
Interest rate swaps
$
555

 
$

 
$
555

 
$

 
 
 
 
 
 
 
 
Derivative financial liabilities
 

 
 

 
 

 
 

Interest rate swaps
$
411

 
$

 
$
411

 
$



We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles.  These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period.  Assets measured at fair value on a nonrecurring basis are included in the table below.

12


 
Balance at
 
Fair Value Measurements Using:
Dollars in thousands
September 30, 2019
 
Level 1
 
Level 2
 
Level 3
Residential mortgage loans held for sale
$
1,087

 
$

 
$
1,087

 
$

 
 
 
 
 
 
 
 
Collateral-dependent impaired loans
 

 
 

 
 

 
 

Commercial
$
104

 
$

 
$
8

 
$
96

Commercial real estate
1,436

 
$

 
1,436

 

Construction and development
430

 
$

 
430

 

Residential real estate
657

 

 
657

 

Total collateral-dependent impaired loans
$
2,627

 
$

 
$
2,531

 
$
96

 
 
 
 
 
 
 
 
Property held for sale
 

 
 

 
 

 
 

Commercial real estate
$
1,384

 
$

 
$
1,304

 
$
80

Construction and development
14,168

 

 
14,168

 

Residential real estate
730

 

 
730

 

Total property held for sale
$
16,282

 
$

 
$
16,202

 
$
80



 
Balance at
 
Fair Value Measurements Using:
Dollars in thousands
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
Residential mortgage loans held for sale
$
400

 
$

 
$
400

 
$

 
 
 
 
 
 
 
 
Collateral-dependent impaired loans
 

 
 

 
 

 
 

Commercial
$
2,660

 
$

 
$
2,611

 
$
49

Commercial real estate
420

 

 
420

 

Construction and development
759

 

 
759

 

Residential real estate
763

 

 
763

 

Total collateral-dependent impaired loans
$
4,602

 
$

 
$
4,553

 
$
49

 
 
 
 
 
 
 
 
Property held for sale
 

 
 

 
 

 
 

Commercial real estate
$
1,677

 
$

 
$
1,677

 
$

Construction and development
16,363

 

 
16,363

 

Residential real estate
403

 

 
403

 

Total property held for sale
$
18,443

 
$

 
$
18,443

 
$






The carrying values and estimated fair values of our financial instruments are summarized below:
 
 
September 30, 2019
 
Fair Value Measurements Using:
Dollars in thousands
 
Carrying
Value
 
Estimated
Fair
Value
 
Level 1
Level 2
Level 3
Financial assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
52,670

 
$
52,670

 
$

$
52,670

$

Securities available for sale
 
265,347

 
265,347

 

265,347


Other investments
 
14,022

 
14,022

 

14,022


Loans held for sale, net
 
1,087

 
1,087

 

1,087


Loans, net
 
1,838,891

 
1,837,454

 

2,531

1,834,923

Accrued interest receivable
 
8,704

 
8,704

 

8,704


Derivative financial assets
 

 

 



 
 
$
2,180,721

 
$
2,179,284

 
$

$
344,361

$
1,834,923

Financial liabilities
 
 

 
 

 
 

 

 
Deposits
 
$
1,832,285

 
$
1,837,024

 
$

$
1,837,024

$

Short-term borrowings
 
206,694

 
206,694

 

206,694


Long-term borrowings
 
722

 
868

 

868


Subordinated debentures owed to unconsolidated subsidiary trusts
 
19,589

 
19,589

 

19,589


Accrued interest payable
 
1,297

 
1,297

 

1,297


Derivative financial liabilities
 
1,444

 
1,444

 

1,444


 
 
$
2,062,031

 
$
2,066,916

 
$

$
2,066,916

$


 
 
December 31, 2018
 
Fair Value Measurements Using:
Dollars in thousands
 
Carrying
Value
 
Estimated
Fair
Value
 
Level 1
Level 2
Level 3
Financial assets
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
59,540

 
$
59,540

 
$

$
59,540

$

Securities available for sale
 
293,147

 
293,147

 

293,147


Other investments
 
16,635

 
16,635

 

16,635


Loans held for sale, net
 
400

 
400

 

400


Loans, net
 
1,682,005

 
1,666,834

 

4,553

1,662,281

Accrued interest receivable
 
8,708

 
8,708

 

8,708


Derivative financial assets
 
555

 
555

 

555


 
 
$
2,060,990

 
$
2,045,819

 
$

$
383,538

$
1,662,281

Financial liabilities
 
 

 
 

 
 

 

 
Deposits
 
$
1,634,826

 
$
1,631,456

 
$

$
1,631,456

$

Short-term borrowings
 
309,084

 
309,084

 

309,084


Long-term borrowings
 
735

 
843

 

843


Subordinated debentures owed to unconsolidated subsidiary trusts
 
19,589

 
19,589

 

19,589


Accrued interest payable
 
1,102

 
1,102

 

1,102


Derivative financial liabilities
 
411

 
411

 

411


 
 
$
1,965,747

 
$
1,962,485

 
$

$
1,962,485

$






NOTE 4.  EARNINGS PER SHARE

The computations of basic and diluted earnings per share follow:
 
 
For the Three Months Ended September 30,
 
 
2019
 
2018
Dollars in thousands,except per share amounts
 
Net Income
(Numerator)
 
Common
Shares
(Denominator)
 
Per
Share
 
Net Income
(Numerator)
 
Common
Shares
(Denominator)
 
Per
Share
Net income
 
$
8,061

 
 
 
 
 
$
6,899

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
 
$
8,061

 
12,412,982

 
$
0.65

 
$
6,899

 
12,374,350

 
$
0.56

 
 
 
 
 
 
 
 
 
 
 
 
 
Effect of dilutive securities:
 
 
 
 
 
 

 
 
 
 
 
 

Stock options
 
 
 
4,654

 
 

 
 
 
7,349

 
 

Stock appreciation rights (SARs)
 
 
 
50,142

 
 
 
 
 
57,352

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share
 
$
8,061

 
12,467,777

 
$
0.65

 
$
6,899

 
12,439,051