Summit Financial Group Reports Higher Third Quarter 2021 Diluted Eps of $0.92 on Growth in Commercial and Total Loans, Increased Revenue, Further Asset Quality Improvement and Expense Discipline

Oct 28th, 2021 5:00 EST

MOOREFIELD, W.Va., Oct. 28, 2021 (GLOBE NEWSWIRE) --  Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported strong financial results for the third quarter of 2021, including growth in earnings, net interest income, revenue, and commercial and total loans, as well as further asset quality improvement and expense discipline.

The Company, which serves commercial and individual clients across West Virginia, the Washington, D.C. metropolitan area, Virginia, and Kentucky through Summit Community Bank, Inc., grew third quarter 2021 net income applicable to common shares to $12.0 million, or $0.92 per diluted share. Earnings increased 15.3 percent from $10.4 million, or $0.80 per diluted share, in the second quarter of 2021 and 24.9 percent from $9.6 million, or $0.74 per share, in the third quarter of 2020. For the nine months ended September 30, 2021, Summit grew earnings by 55.6 percent to $32.8 million, or $2.52 per share, from $21.1 million, or $1.62 per share, for the comparable 2020 nine-month period.

“With the significant increases in commercial and total loans achieved in the third quarter, a vibrant business pipeline, and Summit’s ability to retain and attract some of the top business bankers and other producers across all our markets, we are poised to continue generating sustainable loan growth in the recovering economy,” said H. Charles Maddy, III, President and Chief Executive Officer. “Third quarter results also reflected continued progress on key asset quality metrics, as well as how we’re well positioned to consistently leverage our low-cost operating model to profitably grow our balance sheet, as well as the top line.”

Highlights for Q3 2021

  • Total loans, excluding mortgage warehouse lines of credit and Paycheck Protection Program (“PPP”) lending, increased 3.7 percent (14.8 percent annualized) during the quarter, which included $54 million acquired loans, 13.6 percent (18.2 percent annualized) year-to-date and 24.0 percent since September 30, 2020.
  • Commercial loans excluding PPP lending increased 7.2 percent (28.9 percent annualized) during the quarter, 23.7 percent (31.5 percent annualized) year-to-date and 32.5 percent since September 30, 2020.
  • Net interest income increased 4.6 percent from the linked quarter and 13.2 percent from the year-ago period, primarily due to loan growth and lower funding costs.
  • Net interest margin (“NIM”) decreased 8 basis points to 3.47 percent from the linked quarter, as yield on interest earning assets decreased 15 basis points while the cost of deposits and other funding declined 8 basis points. Summit remains well positioned for a rising rate environment.
  • Revenue from net interest income and noninterest income, excluding securities gains and losses, grew 4.1 percent from the linked quarter and 10.9 percent from the year-ago quarter.
  • Achieved an efficiency ratio of 49.73 percent and lowered annualized non-interest expense to 2.01 percent of average assets.
  • Reduced property held for sale by 5.5 percent during the quarter and 30.2 percent from September 30, 2020.
  • Reduced nonperforming assets (“NPAs”) to 0.67 percent of total assets, excluding restructured assets, down 43 basis points during the quarter and 27 basis points from September 30, 2020.
  • Summit’s asset quality and mix of new loans required no provision for credit losses in the quarter; period-end allowance for loan credit losses equaled $32.4 million, or 1.27 percent of total loans and 291.6 percent of nonperforming loans.
  • As previously announced in July, completed the acquisition of substantially all of MVB Bank’s southern West Virginia community banking operations, including four full-service branches and two drive-up locations in and around the state’s largest cities of Charleston and Huntington.

Results from Operations

Net interest income grew to $28.0 million in the third quarter of 2021, an increase of 4.6 percent from the linked quarter and 13.2 percent from the prior-year third quarter. NIM for third quarter of 2021 was 3.47 percent compared to 3.55 percent for the linked quarter and 3.64 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 3.41 percent for the third quarter of 2021, 3.50 percent for the linked quarter and 3.59 percent for the year-ago period.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for third quarter 2021 was $4.6 million compared to $4.7 million for the linked quarter and $6.2 million for the comparable period of 2020. The Company recorded securities losses of $68,000 in the third quarter of 2021 and gains of $127,000 and $1.5 million in the linked and year-ago quarters, respectively. Excluding securities gains and losses, noninterest income was $4.6 million in each of the third and second quarters of 2021 and $4.7 million in the year-ago quarter.

Mortgage origination revenue was $742,000 in the third quarter of 2021 compared to $898,000 for the linked quarter and $780,000 for the year-ago period. Year to date, mortgage origination revenue grew to $2.6 million, increasing 61.2 percent from the first nine months of 2020.

Revenue from net interest income and noninterest income, excluding securities gains and losses, grew to $32.7 million, up 4.1 percent from $31.4 million in the linked quarter and 10.9 percent from $29.5 million in the year-ago quarter. Revenue, excluding securities gains, for the first nine months of 2021, grew to $94.8 million, up 17.0 percent from the first nine months of 2020 and outpacing the 11.2 percent noninterest expense increase recorded for the comparable nine-month periods.

Total noninterest expense increased to $17.3 million in the third quarter of 2021, up 1.8 percent from $17.0 million in the linked quarter and 11.8 percent from $15.5 million for the prior-year third quarter, reflecting acquisition-related expenses primarily from Summit’s recently completed branch acquisitions, as well as ongoing operating costs for its December 2020 purchase of Kentucky’s WinFirst Bank.

Salary and benefit expenses of $8.7 million in the third quarter of 2021 increased from $8.2 million in the linked quarter, while acquisitions closed in December 2020 and July 2021 contributed to an increase from $7.9 million in the year-ago period.

Additionally, other significant factors contributing to the changes in total noninterest expense in the third quarter of 2021 were: equipment expense of $1.9 million compared to $1.6 million for the linked quarter and $1.5 million for the year-ago period, FDIC assessments of $354,000 compared to $488,000 for the linked quarter and $320,000 for the year-ago period, as well as foreclosed properties expense of $370,000 compared to $746,000 in the linked quarter and $607,000 in the year-ago period.

Summit’s efficiency ratio was 49.73 percent in the third quarter of 2021 compared to 49.09 percent in the linked quarter and 48.95 percent for the year-ago period. Non-interest expense improved to 2.01 percent of average assets in the third quarter of 2021, compared to 2.09 percent during the linked quarter and 2.11 percent in the year-ago period.

Balance Sheet

At September 30, 2021, total assets were $3.51 billion, an increase of $402.6 million, or 13.0 percent since December 31, 2020.

Total loans net of unearned fees grew to $2.55 billion on September 30, 2021, increasing 5.1 percent during the third quarter, which included $54.4 million of loans in our branch acquisitions, 5.9 percent year-to-date and 13.4 percent since September 30, 2020. Excluding PPP and mortgage warehouse lending, total loans grew to $2.37 billion on September 30, 2021, increasing 3.7 percent during the third quarter, 13.6 percent year-to-date and 24.0 percent since September 30, 2020.

Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE) and excluding PPP lending, grew to $1.6 billion on September 30, 2021, increasing 7.2 percent during the third quarter, 23.7 percent year-to-date and 32.5 percent since September 30, 2020. Residential real estate and consumer lending totaled $570.6 million on September 30, 2021, down 0.9 percent during the third quarter and 7.2 percent year-to-date, while increasing 2.0 percent from September 30, 2020.

PPP balances paid down to $23.8 million on September 30, 2021 from a peak of $98.5 million on September 30, 2020. Mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, have paid down to $161.6 million on September 30, 2021 from a peak of $252.5 million on June 30, 2020.

Total deposits grew to $2.96 billion on September 30, 2021, increasing 8.3 percent during the third quarter, which included $164.0 million in deposits assumed in the acquisition of branches, 13.9 percent year-to-date and 20.6 percent since September 30, 2020. Core deposits grew to $2.86 billion on September 30, 2021, increasing 8.8 percent during the third quarter, 16.3 percent year-to-date and 24.2 percent since September 30, 2020.

Total shareholders’ equity was $323.3 million as of September 30, 2021 compared to $281.6 million at December 31, 2020. During the second quarter of 2021, Summit raised $15.0 million in growth capital through a previously disclosed private placement of 6% Fixed-Rate Non-Cumulative Perpetual Preferred Stock.

Tangible book value per common share increased to $18.83 as of September 30, 2021 compared to $17.50 at December 31, 2020 and $17.31 at September 30, 2020. Summit had 12,976,693 outstanding common shares at the end of the third quarter of 2021 compared to 12,942,004 at year-end 2020.

As announced in the first quarter of 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 the third quarter of 2021, no shares of our common stock were repurchased under the Plan.

Asset Quality

Net loan charge-offs (“NCOs”) were $370,000, or 0.06 percent of average loans annualized, in the third quarter of 2021. NCOs of $202,000 represented 0.03 percent of average loans annualized in the linked quarter, and $1.0 million or 0.18 percent of average loans annualized for third quarter 2020.

Summit’s asset quality and mix of new loans required no provision for credit losses in the third quarter of 2021, while its allowance for loan credit losses was $32.4 million, representing 1.27 percent of total loans and 291.6 percent of nonperforming loans, as of September 30, 2021. The provision for credit losses was $1.0 million and $3.25 million for the linked and year-ago quarters, respectively. The allowance for loan credit losses stood at $33.9 million or 1.39 percent of total loans on June 30, 2021 and $29.4 million or 1.30 percent at September 30, 2020. In support of continued anticipated loan growth, Summit currently expects provision expense of approximately $500,000 to $750,000 for reserve build in the fourth quarter of 2021.

As of September 30, 2021, NPAs consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $23.6 million, or 0.67 percent of assets, compared to $36.0 million, or 1.10 percent of assets at the linked quarter-end and $27.8 million, or 0.94 percent of assets at the end of third quarter 2020. A loan relationship totaling $9.5 million impacted by the COVID-19 pandemic and on nonaccrual at June 30, 2021 was restored to full accrual status during the current quarter.

The aggregate balances of loans the Company has modified as result of the COVID-19 pandemic continued to decline to $7.2 million or 0.3 percent of total loans on September 30, 2021, down from $8.7 million, or 0.4 percent on June 30, 2021, as summarized in the following table.

  Loan Balances Modified Due to COVID-19 as of 9/30/2021
Dollars in thousandsTotal Loan
Balance as of
9/30/2021
 Loans Modified
to Interest Only
Payments
Loans Modified
to Payment
Deferral
Total Loans
Modified
Percentage
of Loans
Modified
Hospitality Industry$121,765$-$-$-0.0%
Non-Owner Occupied Retail Stores 154,120 7,223 - 7,2234.7%
Owner-Occupied Retail Stores 163,350 - - -0.0%
Restaurants 12,200 - - -0.0%
Oil & Gas Industry 18,657 - - -0.0%
Other Commercial Loans 1,349,187 - - -0.0%
Total Commercial Loans 1,819,279 7,223 - 7,2230.4%
Residential 1-4 Family Personal 270,951 - - -0.0%
Residential 1-4 Family Rentals 195,914 - - -0.0%
Home Equity Loans 71,496 - - -0.0%
Total Residential Real Estate Loans 538,361 - - -0.0%
Consumer Loans 32,285 - - -0.0%
Mortgage Warehouse Loans 161,627 - - -0.0%
Credit Cards and Overdrafts 2,558 - - -0.0%
Total Loans$ 2,554,110$ 7,223$ -$ 7,2230.3%

About the Company

Summit Financial Group, Inc. is the $3.51 billion financial holding company for Summit Community Bank, Inc. Its talented bankers serve commercial and individual clients throughout West Virginia, the Washington, D.C. metropolitan area, Virginia, and Kentucky. Summit’s focus on in-market commercial lending and providing other business banking services in dynamic markets is designed to leverage its highly efficient operations and core deposits in strong legacy locations. Residential and consumer lending, trust and wealth management, and other retail financial services are offered through convenient digital and mobile banking platforms, including MySummit.bank, and 45 full-service branch locations. More information on Summit Financial Group, Inc. (NASDAQ: SMMF), headquartered in West Virginia’s Eastern Panhandle in Moorefield, is available at SummitFGI.com.

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)   
Q3 2021 vs Q3 2020   
    
  For the Quarter EndedPercent
Dollars in thousands9/30/20219/30/2020Change
Statements of Income   
 Interest income   
    Loans, including fees$28,416 $26,8076.0%
    Securities 2,348  2,382-1.4%
    Other 118  57107.0%
 Total interest income 30,882  29,2465.6%
 Interest expense   
    Deposits 1,832  3,552-48.4%
    Borrowings 1,013  9289.2%
 Total interest expense 2,845  4,480-36.5%
 Net interest income 28,037  24,76613.2%
 Provision for credit losses -  3,250n/m 
 Net interest income after provision   
     for credit losses 28,037  21,51630.3%
     
 Noninterest income   
    Trust and wealth management fees 718  62215.4%
    Mortgage origination revenue 742  780-4.9%
    Service charges on deposit accounts 1,338  1,13817.6%
    Bank card revenue 1,509  1,23722.0%
    Realized securities gains (losses) (68) 1,522-104.5%
    Bank owned life insurance and annuity income 160  795-79.9%
    Other income 168  11348.7%
 Total noninterest income 4,567  6,207-26.4%
 Noninterest expense   
     Salaries and employee benefits 8,745  7,86911.1%
     Net occupancy expense 1,254  1,05718.6%
     Equipment expense 1,908  1,47429.4%
     Professional fees 374  3642.7%
     Advertising and public relations 254  14575.2%
     Amortization of intangibles 390  412-5.3%
     FDIC premiums 354  32010.6%
     Bank card expense 705  58919.7%
     Foreclosed properties expense, net 370  607-39.0%
     Acquisition-related expense 273  28875.0%
     Other expenses 2,716  2,6442.7%
 Total noninterest expense 17,343  15,50911.8%
 Income before income taxes 15,261  12,21424.9%
 Income taxes 3,023  2,59416.5%
 Net income 12,238  9,62027.2%
 Preferred stock dividends 225  -n/a 
     
 Net income applicable to common shares$ 12,013 $ 9,62024.9%


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)  
Quarterly Performance Summary (unaudited)   
Q3 2021 vs Q3 2020  
     
  For the Quarter EndedPercent
  9/30/20219/30/2020Change
Per Share Data   
 Earnings per common share   
    Basic$0.93 $0.74 25.7%
    Diluted$0.92 $0.74 24.3%
     
 Cash dividends per common share$0.18 $0.17 5.9%
 Common stock dividend payout ratio 19.1% 22.9%-16.6%
     
 Average common shares outstanding   
    Basic 12,964,575  12,922,158 0.3%
    Diluted 13,018,672  12,949,584 0.5%
     
 Common shares outstanding at period end 12,976,693  12,932,415 0.3%
     
Performance Ratios   
 Return on average equity 15.30% 14.38%6.4%
 Return on average tangible equity (C) 19.51% 18.12%7.7%
 Return on average tangible common equity (D) 20.71% 18.12%14.3%
 Return on average assets 1.42% 1.31%8.4%
 Net interest margin (A) 3.47% 3.64%-4.7%
 Efficiency ratio (B) 49.73% 48.95%1.6%
     

NOTES

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

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

(C) – Return on average tangible equity = (Net income – Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).

(D) – Return on average tangible common equity = (Net income – Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)  
Nine Month Performance Summary (unaudited)   
2021 vs 2020   
     
  For the Nine Months EndedPercent
Dollars in thousands9/30/20219/30/2020Change
Statements of Income   
 Interest income   
    Loans, including fees$83,651 $77,666 7.7%
    Securities 6,707  6,944 -3.4%
    Other 240  216 11.1%
 Total interest income 90,598  84,826 6.8%
 Interest expense   
    Deposits 6,464  13,088 -50.6%
    Borrowings 3,035  2,463 23.2%
 Total interest expense 9,499  15,551 -38.9%
 Net interest income 81,099  69,275 17.1%
 Provision for credit losses 2,500  11,500 n/m 
 Net interest income after provision   
     for credit losses 78,599  57,775 36.0%
     
 Noninterest income   
    Trust and wealth management fees 2,039  1,870 9.0%
    Mortgage origination revenue 2,638  1,636 61.2%
    Service charges on deposit accounts 3,530  3,283 7.5%
    Bank card revenue 4,369  3,257 34.1%
    Realized securities gains 534  2,560 -79.1%
    Bank owned life insurance and annuity income 733  1,334 -45.1%
    Other income 413  367 12.5%
 Total noninterest income 14,256  14,307 -0.4%
 Noninterest expense   
     Salaries and employee benefits 25,410  23,709 7.2%
     Net occupancy expense 3,559  2,917 22.0%
     Equipment expense 5,088  4,263 19.4%
     Professional fees 1,140  1,168 -2.4%
     Advertising and public relations 482  389 23.9%
     Amortization of intangibles 1,176  1,251 -6.0%
     FDIC premiums 1,119  595 88.1%
     Bank card expense 1,964  1,652 18.9%
     Foreclosed properties expense, net 1,342  1,815 -26.1%
     Acquisition-related expense 1,167  1,453 -19.7%
     Other expenses 8,365  6,493 28.8%
 Total noninterest expense 50,812  45,705 11.2%
 Income before income taxes 42,043  26,377 59.4%
 Income taxes 8,886  5,302 67.6%
 Net income 33,157  21,075 57.3%
 Preferred stock dividends 364  - n/a 
     
 Net income applicable to common shares$ 32,793 $ 21,075 55.6%


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)  
Nine Month Performance Summary (unaudited)   
2021 vs 2020  
     
  For the Nine Months EndedPercent
  9/30/20219/30/2020Change
Per Share Data   
 Earnings per common share   
    Basic$2.53 $1.63 55.2%
    Diluted$2.52 $1.62 55.6%
     
 Cash dividends per common share$0.52 $0.51 2.0%
 Common stock dividend payout ratio 20.4% 31.4%-35.1%
     
 Average common shares outstanding   
    Basic 12,953,053  12,934,401 0.1%
    Diluted 13,011,526  12,971,792 0.3%
     
 Common shares outstanding at period end 12,976,693  12,932,415 0.3%
     
Performance Ratios   
 Return on average equity 14.51% 10.72%35.4%
 Return on average tangible equity (C) 18.35% 13.36%37.4%
 Return on average tangible common equity (D) 19.03% 13.36%42.4%
 Return on average assets 1.34% 1.04%28.8%
 Net interest margin (A) 3.56% 3.69%-3.5%
 Efficiency ratio (B) 49.54% 50.70%-2.3%
     

NOTES

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

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

(C) – Return on average tangible equity = (Net income – Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).

(D) – Return on average tangible common equity = (Net income – Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Five Quarter Performance Summary (unaudited)     
      
  For the Quarter Ended
Dollars in thousands9/30/20216/30/20213/31/202112/31/20209/30/2020
Statements of Income     
 Interest income     
    Loans, including fees$28,416 $27,697 $27,538 $27,897 $26,807
    Securities 2,348  2,202  2,157  2,228  2,382
    Other 118  56  67  51  57
 Total interest income 30,882  29,955  29,762  30,176  29,246
 Interest expense     
    Deposits 1,832  2,136  2,496  2,956  3,552
    Borrowings 1,013  1,008  1,014  1,014  928
 Total interest expense 2,845  3,144  3,510  3,970  4,480
 Net interest income 28,037  26,811  26,252  26,206  24,766
 Provision for credit losses -  1,000  1,500  3,000  3,250
 Net interest income after provision     
     for credit losses 28,037  25,811  24,752  23,206  21,516
 Noninterest income     
    Trust and wealth management fees 718  683  638  626  622
    Mortgage origination revenue 742  898  998  1,163  780
    Service charges on deposit accounts 1,338  1,093  1,100  1,305  1,138
    Bank card revenue 1,509  1,519  1,341  1,237  1,237
    Realized securities gains (losses) (68) 127  476  912  1,522
    Bank owned life insurance and annuity income 160  275  298  233  795
    Other income 168  120  123  301  113
 Total noninterest income 4,567  4,715  4,974  5,777  6,207
 Noninterest expense     
    Salaries and employee benefits 8,745  8,230  8,435  8,250  7,869
    Net occupancy expense 1,254  1,131  1,174  1,046  1,057
    Equipment expense 1,908  1,598  1,581  1,502  1,474
    Professional fees 374  428  338  370  364
    Advertising and public relations 254  138  90  207  145
    Amortization of intangibles 390  382  405  409  412
    FDIC premiums 354  488  277  261  320
    Bank card expense 705  685  573  573  589
    Foreclosed properties expense, net 370  746  227  676  607
    Acquisition-related expenses 273  454  440  218  28
    Other expenses 2,716  2,756  2,893  3,094  2,644
 Total noninterest expense 17,343  17,036  16,433  16,606  15,509
 Income before income taxes 15,261  13,490  13,293  12,377  12,214
 Income tax expense 3,023  2,930  2,933  2,126  2,594
 Net income 12,238  10,560  10,360  10,251  9,620
 Preferred stock dividends 225  139  -  -  -
       
 Net income applicable to common shares$ 12,013 $ 10,421 $ 10,360 $ 10,251 $ 9,620


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Five Quarter Performance Summary (unaudited)     
      
  For the Quarter Ended
  9/30/20216/30/20213/31/202112/31/20209/30/2020
Per Share Data     
 Earnings per common share     
    Basic$0.93 $0.80 $0.80 $0.79 $0.74 
    Diluted$0.92 $0.80 $0.80 $0.79 $0.74 
       
 Cash dividends per common share$0.18 $0.17 $0.17 $0.17 $0.17 
 Common stock dividend payout ratio 19.1% 21.2% 20.6% 21.5% 22.9%
       
 Average common shares outstanding     
    Basic 12,964,575  12,952,357  12,942,099  12,932,768  12,922,158 
    Diluted 13,018,672  13,013,714  13,002,062  12,980,041  12,949,584 
       
 Common shares outstanding at period end 12,976,693  12,963,057  12,950,714  12,942,004  12,932,415 
       
Performance Ratios     
 Return on average equity 15.30% 13.67% 14.51% 14.90% 14.38%
 Return on average tangible equity (C) 19.51% 17.03% 18.49% 18.70% 18.12%
 Return on average tangible common equity (D) 20.71% 17.59% 18.49% 18.70% 18.12%
 Return on average assets 1.42% 1.29% 1.31% 1.37% 1.31%
 Net interest margin (A) 3.47% 3.55% 3.65% 3.76% 3.64%
 Efficiency ratio (B) 49.73% 49.09% 49.79% 49.38% 48.95%

NOTES

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

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

(C) – Return on average tangible equity = (Net income – Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).

(D) – Return on average tangible common equity = (Net income – Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)     
Selected Balance Sheet Data (unaudited)     
Dollars in thousands, except per share amounts9/30/20216/30/20213/31/202112/31/20209/30/2020
Assets     
 Cash and due from banks$21,247  $18,707  $20,732  $19,522  $16,257 
 Interest bearing deposits other banks 189,862   176,282   155,865   80,265   92,729 
 Debt securities, available for sale 424,741   345,742   311,384   286,127   297,989 
 Debt securities, held to maturity 98,528   98,995   99,457   99,914   91,600 
 Loans, net 2,521,704   2,395,885   2,418,029   2,379,907   2,222,450 
 Property held for sale 12,450   13,170   13,918   15,588   17,831 
 Premises and equipment, net 56,818   53,104   53,289   52,537   52,880 
 Goodwill and other intangible assets 63,977   53,858   54,239   55,123   48,101 
 Cash surrender value of life insurance policies and annuities 60,241   60,087   59,740   59,438   57,029 
 Other assets 59,383   56,703   61,482   57,963   49,996 
 Total assets$ 3,508,951  $ 3,272,533  $ 3,248,135  $ 3,106,384  $ 2,946,862 
Liabilities and Shareholders' Equity     
 Deposits$2,955,940  $2,729,205  $2,725,010  $2,595,651  $2,451,891 
 Short-term borrowings 140,146   140,146   140,145   140,146   140,145 
 Long-term borrowings and     
      subordinated debentures 49,739   49,710   49,681   49,652   50,292 
 Other liabilities 39,837   38,265   39,854   39,355   32,571 
 Shareholders' equity - preferred 14,920   14,920   -   -   - 
 Shareholders' equity - common 308,369   300,287   293,445   281,580   271,963 
 Total liabilities and shareholders' equity$ 3,508,951  $ 3,272,533  $ 3,248,135  $ 3,106,384  $ 2,946,862 
       
 Book value per common share$23.76  $23.16  $22.66  $21.76  $21.03 
 Tangible book value per common share (A)$18.83  $19.01  $18.47  $17.50  $17.31 
 Tangible common equity to tangible assets (B) 7.1%  7.7%  7.5%  7.4%  7.7%

NOTES
(A) – Tangible book value per share = (Common shareholders’ equity – Intangible assets) / Common shares outstanding.
(B) – Tangible common equity to tangible assets = (Common shareholders’ equity – Intangible assets) / (Total assets – Intangible assets).

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)   
Regulatory Capital Ratios (unaudited)     
       
  9/30/20216/30/20213/31/202112/31/20209/30/2020
Summit Financial Group, Inc.     
 CET1 Risk-based Capital9.0%9.6%9.3%9.3%9.9%
 Tier 1 Risk-based Capital10.2%10.9%10.1%10.0%10.7%
 Total Risk-based Capital12.1%13.0%12.1%12.1%12.9%
 Tier 1 Leverage8.4%8.9%8.5%8.6%8.7%
       
Summit Community Bank, Inc.     
 CET1 Risk-based Capital11.2%11.9%11.1%11.1%11.8%
 Tier 1 Risk-based Capital11.2%11.9%11.1%11.1%11.8%
 Total Risk-based Capital12.1%12.9%12.0%12.0%12.7%
 Tier 1 Leverage9.2%9.7%9.3%9.5%9.6%
       


SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)   
Loan Composition (unaudited)     
       
Dollars in thousands9/30/20216/30/20213/31/202112/31/20209/30/2020
       
Commercial $317,855 $326,468 $348,022 $306,885 $350,985
Mortgage warehouse lines 161,628  105,288  187,995  251,810  243,730
Commercial real estate     
     Owner occupied 439,202  392,164  358,200  351,860  312,502
     Non-owner occupied 835,071  784,415  735,594  685,565  618,624
Construction and development     
     Land and development 99,718  102,670  106,312  107,342  97,343
     Construction 127,432  140,788  126,011  91,100  66,878
Residential real estate     
     Conventional 394,889  398,239  411,103  425,519  368,009
     Jumbo  71,977  71,694  65,851  74,185  73,836
     Home equity 71,496  72,956  77,684  81,588  82,991
Consumer  32,284  32,732  32,924  33,906  34,655
Other  2,558  2,356  2,375  2,393  2,251
Total loans, net of unearned fees 2,554,110  2,429,770  2,452,071  2,412,153  2,251,804
Less allowance for credit losses 32,406  33,885  34,042  32,246  29,354
Loans, net$ 2,521,704 $ 2,395,885 $ 2,418,029 $ 2,379,907 $ 2,222,450
       


SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)   
Deposit Composition (unaudited)    
       
Dollars in thousands 9/30/20216/30/20213/31/202112/31/20209/30/2020
Core deposits      
   Non-interest bearing checking$575,542 $503,097 $505,264 $440,819 $420,070
   Interest bearing checking 1,121,028  1,005,725  988,204  934,185  867,442
   Savings  693,686  677,000  656,514  621,168  598,564
   Time deposits  467,024  441,139  456,431  460,443  414,542
Total core deposits 2,857,280  2,626,961  2,606,413  2,456,615  2,300,618
       
Brokered time deposits 14,671  23,521  39,125  55,454  64,120
Other non-core time deposits 83,989  78,723  79,472  83,582  87,153
Total deposits$ 2,955,940 $ 2,729,205 $ 2,725,010 $ 2,595,651 $ 2,451,891


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Asset Quality Information (unaudited)     
       
  For the Quarter Ended
Dollars in thousands9/30/20216/30/20213/31/202112/31/20209/30/2020
       
 Gross loan charge-offs$528  $343  $354  $434  $1,259 
 Gross loan recoveries (158)  (141)  (165)  (195)  (245)
    Net loan charge-offs/(recoveries)$ 370  $ 202  $ 189  $ 239  $ 1,014 
       
 Net loan charge-offs to average loans (annualized) 0.06%  0.03%  0.03%  0.04%  0.18%
 Allowance for loan credit losses$32,406  $33,885  $34,042  $32,246  $29,354 
 Allowance for loan credit losses as a percentage     
     of period end loans 1.27%  1.39%  1.39%  1.34%  1.30%
 Allowance for credit losses on     
     unfunded loan commitments$5,860  $4,660  $3,705  $4,190  $3,525 
 Nonperforming assets:     
    Nonperforming loans     
        Commercial$459  $968  $848  $525  $553 
        Commercial real estate 4,643   14,430   17,137   14,237   4,313 
        Residential construction and development 448   621   626   235   2 
        Residential real estate 5,514   6,800   6,667   5,264   5,104 
        Consumer 48   38   54   74   31 
        Other -   -   -   -   - 
 Total nonperforming loans 11,112   22,857   25,332   20,335   10,003 
    Foreclosed properties     
        Commercial real estate 2,192   2,281   2,281   2,581   2,500 
        Commercial construction and development 2,925   3,146   3,884   4,154   4,154 
        Residential construction and development 6,712   6,859   7,129   7,791   10,330 
        Residential real estate 621   884   624   1,062   847 
 Total foreclosed properties 12,450   13,170   13,918   15,588   17,831 
   Other repossessed assets -   -   -   -   - 
 Total nonperforming assets$ 23,562  $ 36,027  $ 39,250  $ 35,923  $ 27,834 
       
 Nonperforming loans to period end loans 0.44%  0.94%  1.03%  0.84%  0.44%
 Nonperforming assets to period end assets 0.67%  1.10%  1.21%  1.16%  0.94%
       
 Troubled debt restructurings     
      Performing$20,535  $20,799  $20,462  $21,375  $22,232 
      Nonperforming 1,141   1,235   3,828   3,127   2,988 
 Total troubled debt restructurings$ 21,676  $ 22,034  $ 24,290  $ 24,502  $ 25,220 


Loans Past Due 30-89 Days (unaudited)     
   
Dollars in thousands9/30/20216/30/20213/31/202112/31/20209/30/2020
       
 Commercial$304 $414 $335 $1 $147
 Commercial real estate 281  733  508  274  1,740
 Construction and development 1,215  1,911  330  47  422
 Residential real estate 2,643  3,594  2,146  4,405  4,464
 Consumer 193  404  96  233  160
 Other 1  -  3  5  2
    Total$ 4,637 $ 7,056 $ 3,418 $ 4,965 $ 6,935
       


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)         
Average Balance Sheet, Interest Earnings & Expenses and Average Rates      
Q3 2021 vs Q2 2021 vs Q3 2020 (unaudited)         
            
 Q3 2021 Q2 2021 Q3 2020
 AverageEarnings /Yield / AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate BalancesExpenseRate
            
ASSETS           
Interest earning assets           
  Loans, net of unearned interest (1)          
    Taxable$2,495,880  $28,340 4.50% $2,455,757  $27,593 4.51% $2,251,722  $26,656  4.71%
    Tax-exempt (2) 7,871   96 4.84%  11,370   132 4.66%  16,245   191  4.68%
  Securities           
    Taxable 315,082   1,432 1.80%  285,092   1,351 1.90%  261,231   1,445  2.20%
    Tax-exempt (2) 166,285   1,159 2.77%  147,703   1,078 2.93%  150,350   1,186  3.17%
   Interest bearing deposits other banks          
        and Federal funds sold 248,315   118 0.19%  154,677   56 0.15%  60,639   57  0.37%
Total interest earning assets 3,233,433   31,145 3.82%  3,054,599   30,210 3.97%  2,740,187   29,535  4.29%
            
Noninterest earning assets           
  Cash & due from banks 20,077     19,095     16,603   
  Premises & equipment 55,908     53,210     52,329   
  Other assets 175,975     170,470     154,578   
  Allowance for credit losses (33,911)    (34,674)    (28,144)  
    Total assets$ 3,451,482    $ 3,262,700    $ 2,935,553   
            
 LIABILITIES AND SHAREHOLDERS' EQUITY         
            
Liabilities           
Interest bearing liabilities           
  Interest bearing           
    demand deposits$1,092,392  $325 0.12% $995,673  $371 0.15% $850,281  $380  0.18%
  Savings deposits 691,411   602 0.35%  665,735   634 0.38%  588,085   925  0.63%
  Time deposits 571,445   905 0.63%  562,605   1,131 0.81%  585,092   2,247  1.53%
  Short-term borrowings 140,146   470 1.33%  140,146   464 1.33%  165,555   734  1.76%
  Long-term borrowings and           
     subordinated debentures 49,724   543 4.33%  49,694   544 4.39%  23,230   194  3.32%
Total interest bearing liabilities 2,545,118   2,845 0.44%  2,413,853   3,144 0.52%  2,212,243   4,480  0.81%
            
Noninterest bearing liabilities           
  Demand deposits 547,627     503,116     421,741   
  Other liabilities 38,789     36,842     33,978   
    Total liabilities 3,131,534     2,953,811     2,667,962   
            
Shareholders' equity - preferred 14,920     11,254     -   
Shareholders' equity - common 305,028     297,635     267,591   
  Total liabilities and           
    shareholders' equity$ 3,451,482    $ 3,262,700    $ 2,935,553   
            
NET INTEREST EARNINGS  $ 28,300    $ 27,066    $ 25,055 
            
NET INTEREST MARGIN   3.47%    3.55%     3.64%
            
(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% for all periods presented.
       The tax equivalent adjustment resulted in an increase in interest income of $263,000, $255,000, and $289,000 for Q3 2021,
       Q2 2021 and Q3 2020, respectively.         


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)     
Average Balance Sheet, Interest Earnings & Expenses and Average Rates    
YTD 2021 vs YTD 2020 (unaudited)       
  
 YTD 2021 YTD 2020
 AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate
        
ASSETS       
Interest earning assets       
  Loans, net of unearned interest (1)       
    Taxable$2,436,295  $83,352 4.57% $2,102,331  $77,211 4.91%
    Tax-exempt (2) 10,622   377 4.75%  16,121   576 4.77%
  Securities       
    Taxable 288,999   4,079 1.89%  256,322   4,657 2.43%
    Tax-exempt (2) 153,035   3,328 2.91%  113,793   2,897 3.40%
   Interest bearing deposits other banks      
        and Federal funds sold 190,154   241 0.17%  46,074   215 0.62%
Total interest earning assets 3,079,105   91,377 3.97%  2,534,641   85,556 4.51%
        
Noninterest earning assets       
  Cash & due from banks 19,093     15,901   
  Premises & equipment 54,154     49,655   
  Other assets 170,868     138,651   
  Allowance for loan losses (33,765)    (25,618)  
    Total assets$ 3,289,455    $ 2,713,230   
        
 LIABILITIES AND SHAREHOLDERS' EQUITY      
        
Liabilities       
Interest bearing liabilities       
  Interest bearing       
    demand deposits$1,016,569  $1,090 0.14% $753,384  $1,830 0.32%
  Savings deposits 666,642   1,881 0.38%  516,841   3,462 0.89%
  Time deposits 572,547   3,493 0.82%  608,551   7,796 1.71%
  Short-term borrowings 140,146   1,403 1.34%  127,109   1,863 1.96%
  Long-term borrowings and       
     subordinated debentures 49,694   1,632 4.39%  21,284   600 3.77%
  2,445,598   9,499 0.52%  2,027,169   15,551 1.02%
Noninterest bearing liabilities       
  Demand deposits 501,309     393,128   
  Other liabilities 37,856     30,741   
    Total liabilities 2,984,763     2,451,038   
        
Shareholders' equity - preferred 8,780     -   
Shareholders' equity - common 295,912     262,192   
  Total liabilities and       
    shareholders' equity$ 3,289,455    $ 2,713,230   
        
NET INTEREST EARNINGS  $ 81,878    $ 70,005 
        
NET INTEREST MARGIN   3.56%    3.69%
        
(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 $779,000 and $730,000 for the
       YTD 2021 and YTD 2020 periods, respectively.     


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