Summit Financial Group Reports Second Quarter 2022 EPS of $0.92 on Revenue and Loan Growth

Moorefield, West Virginia, UNITED STATES


MOOREFIELD, W. Va., July 28, 2022 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported financial results for the second quarter of 2022, including continued strong earnings on growth in total revenue and loans.

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., reported net income applicable to common shares of $11.8 million, or $0.92 per diluted share, for the second quarter of 2022, as compared to $11.5 million, or $0.90 per diluted share, for the first quarter of 2022 and $10.4 million, or $0.80 per diluted share, for the second quarter of 2021.

“We are pleased to report another quarter of solid operating performance with improvements in both net interest margin and our efficiency ratio,” said H. Charles Maddy, III, President and Chief Executive Officer. “The continued growth in commercial and total loans, along with sustained strength in asset quality metrics, highlight our ongoing focus on meeting the credit needs of our customers while employing sound underwriting practices. Our solid financial performance during the first half of the year and projected loan growth give us confidence of continued strong operating results for the remainder of the year.”

Highlights for Q2 2022

  • Total loans of $2.80 billion, excluding mortgage warehouse lines of credit and Paycheck Protection Program (“PPP”) lending, increased 4.6 percent, or 18.5 percent annualized, during the quarter and 22.7 percent since June 30, 2021.
  • Net interest income increased 4.8 percent compared to the linked quarter, and increased 15.5 percent from the year-ago period, primarily due to loan growth.
  • Net interest margin (“NIM”) increased 5 basis points to 3.66 percent from the linked quarter and 11 basis points from the year-ago quarter, as increased yields on interest earning assets were partially offset by increased cost of deposits and other funding.
  • Total noninterest expense increased to $17.6 million in the quarter, up 2.4 percent from the linked quarter and up 3.4 percent from the year-ago quarter, as salary and benefits increases were largely offset by disciplined management of other operating costs.
  • Annualized non-interest expense was unchanged from the linked quarter at 1.91 percent of average assets, and down 18 basis points from the year-ago period.
  • Achieved an improved efficiency ratio of 47.45 percent compared to 49.44 percent in Q1 2022 and 48.82 percent in the year-ago quarter.
  • Incurred $2.00 million provision for credit losses in the quarter increasing period-end allowance for loan credit losses to $35.1 million, or 1.18 percent of total loans and 320.6 percent of nonperforming loans.
  • Foreclosed property held for sale declined by 22.9 percent during the quarter and 59.6 percent from the year-ago quarter to $5.32 million or 0.14 percent of assets at period end.
  • Nonperforming assets (“NPAs”) improved to 0.43 percent of total assets at period end, excluding restructured assets, down 8 basis points during the quarter and 67 basis points from June 30, 2021.
  • Tangible book value per common share (“TBVPS”) increased $0.28 to $20.07 during the quarter, despite unrealized net losses on debt securities available for sale (“AFS”) of $0.91 per common share (net of deferred income taxes) recorded in Other Comprehensive Income (“OCI”), partially offset by increases in the fair values of derivative financial instruments hedging against higher interest rates totaling $0.41 per common share (net of deferred income taxes) also recorded in OCI.

Results from Operations

Net interest income grew to $31.0 million in the second quarter of 2022, an increase of 4.8 percent from the linked quarter and 15.5 percent from the prior-year second quarter. NIM for second quarter 2022 was 3.66 percent compared to 3.61 percent for the linked quarter and 3.55 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 3.62 percent for the second quarter of 2022, 3.60 percent for the linked quarter and 3.45 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 second quarter 2022 was $3.86 million compared to $4.55 million for the linked quarter and $4.72 million for the comparable period of 2021. The Company recorded realized securities losses on debt securities of $289,000 in the second quarter of 2022 and $152,000 in the linked quarter. In addition, the Company recognized a loss on equity investments of $669,000 in second quarter 2022 compared to a gain of $372,000 in the linked quarter.

Mortgage origination revenue was $317,000 in the second quarter of 2022 compared to $339,000 in the linked quarter and $898,000 for the year-ago period.

Excluding gains and losses on debt securities and equity investments, noninterest income was $4.81 million for second quarter 2022 compared to $4.33 million for Q1 2022 and $4.59 million in the year-ago quarter primarily as result of higher deposit service charges and bank card fees.

Revenue from net interest income and noninterest income, excluding gains and losses on debt securities and equity investments, grew to $35.8 million, up 5.6 percent from $33.9 million in the linked quarter and 13.9 percent from $31.4 million in the year-ago quarter. Revenue, excluding gains and losses on debt securities and equity investments, for the first half of 2022, grew to $69.7 million, up 12.1 percent from the first half of 2021, outpacing the 4.0 percent noninterest expense increase recorded for the comparable six-month periods.

Total noninterest expense increased to $17.6 million in the second quarter of 2022, up 2.4 percent from $17.2 million in the linked quarter and 3.4 percent from $17.0 million for the prior-year second quarter. The sequential-quarter increase in total noninterest expense, primarily on higher salary and benefits expenses, reflected modest fluctuations in most other categories of operating costs.

Salary and benefit expenses of $10.0 million in the second quarter of 2022 increased from $9.70 million for the linked quarter and $8.23 million during the year-ago period. Higher group health insurance premiums and increased accruals for anticipated 2022 performance bonuses account for the primary reasons for the increases.

Net losses and expenses on foreclosed properties totaled $141,000 during second quarter 2022 compared to net gains in excess of expenses on foreclosed properties of $90,000 in the linked quarter and net losses and expenses on foreclosed properties of $746,000 in the year-ago period.

Other expenses were $2.36 million for Q2 2022 compared to $2.46 million for the linked quarter and $2.76 million in the year-ago period. The changes in these other expenses include:

  • Fraud and robbery losses of $143,000 during the second quarter of 2022 compared to $90,000 and $16,000 in the linked and year-ago quarters, respectively.
  • Virginia franchise tax of $170,000 during the second quarter of 2022 compared to $149,000 and $108,000 in the linked and year-ago quarters, respectively.
  • Deferred director compensation plan-related income of $726,000 during the second quarter of 2022 compared to $400,000 during the linked quarter and plan-related expense of $190,000 in the year-ago quarter.

Summit’s efficiency ratio improved to 47.45 percent in the second quarter of 2022 from 49.44 percent in the linked quarter and 48.82 percent for the year-ago period. Non-interest expense to average assets improved to 1.91 percent in both the second quarter of 2022 and the linked quarter compared to 2.09 percent in the year-ago period.

Balance Sheet

As of June 30, 2022, total assets were $3.8 billion, an increase of $186.1 million, or 5.2 percent, since December 31, 2021 and an increase of $490.3 million, or 15.0 percent, since June 30, 2021.

Total loans net of unearned fees grew to $2.98 billion on June 30, 2022, up 4.4 percent during the quarter and 22.5 percent from June 30, 2021. Excluding PPP and mortgage warehouse lending, total loans grew to $2.80 billion on June 30, 2022, up 4.6 percent during the second quarter, 11.2 percent year-to-date and 22.7 percent since June 30, 2021.

Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE) but excluding PPP lending, grew to $1.9 billion on June 30, 2022, up 4.2 percent during the second quarter, 12.6 percent year-to-date and 31.1 percent since June 30, 2021.

Residential real estate and consumer lending totaled $562.7 million on June 30, 2022, up 0.6 percent during the second quarter and down 0.9 percent year-to-date and 2.2 percent from June 30, 2021.

PPP balances were paid down to $3.54 million on June 30, 2022 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 $171.4 million on June 30, 2022 from a peak of $252.5 million on June 30, 2020.

Deposits totaled $3.0 billion on June 30, 2022, a 1.1 percent decrease during the second quarter, a 1.1 percent increase year-to-date and a 9.0 percent increase since June 30, 2021. Core deposits declined 0.8 percent during the second quarter to $2.9 billion at June 30, 2022, and increased 0.9 percent year-to-date and 9.3 percent since June 30, 2021.   Changes in core deposits by category are as follows:

  • Non-interest bearing deposit accounts decreased $28.2 million or 4.5 percent in the second quarter of 2022 and increased $97.7 million or 19.4 percent since June 30, 2021.
  • Interest bearing checking accounts grew $103.4 million or 9.1 percent in the second quarter of 2022 and $232.6 million or 23.1 percent since June 30, 2021.
  • Savings accounts declined $57.0 million or 8.1 percent in the second quarter of 2022 and $31.9 million or 4.7 percent since June 30, 2021.
  • Core time deposits declined $40.5 million or 9.5 percent in the second quarter of 2022 and $54.6 million or 12.4 percent since June 30, 2021.

Total shareholders’ equity was $333.9 million as of June 30, 2022 compared to $327.5 million at December 31, 2021 and $315.2 million at June 30, 2021.

Year-to-date 2022, TBVPS has increased $0.53. TBVPS was negatively impacted during the first six months of 2002 by unrealized net losses on debt securities AFS of $2.26 per common share (net of deferred income taxes) recorded in OCI during the first six months of 2022. However, these losses were partially offset by increased fair values of interest rate caps and swaps (also recorded in OCI) held as hedges against higher interest rates totaling $1.24 per common share (net of deferred income taxes), in the same period.

Summit had 12,763,422 outstanding common shares at the end of the second quarter of 2022 compared to 12,743,125 at year-end 2021.

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, of which 323,577 shares have been repurchased to date. The timing and quantity of stock purchases under this repurchase plan are at the discretion of management. During the second quarter of 2022, no shares of Summit’s common stock were repurchased under the Plan.

Asset Quality

Net loan charge-offs (“NCOs”) declined to $159,000, or 0.02 percent of average loans annualized, in the second quarter of 2022. NCOs of $509,000 represented 0.07 percent of average loan annualized in the linked quarter and $202,000 or 0.03 percent of average loan annualized in the year-ago period.

Summit recorded a $2.00 million provision for credit losses in the second quarter of 2022, reflecting reserve build to support the Company’s substantial growth in both loans and unfunded loan commitments and increasing forecasted economic uncertainty. The provision for credit losses was $1.95 million for the linked quarter and $1.00 million for the year-ago quarter.

Summit’s allowance for loan credit losses was $35.1 million on June 30, 2022, $32.6 million at the end of the linked quarter and $33.9 million on June 30, 2021.

The allowance for loan credit losses stood at 1.18 percent of total loans at June 30, 2022 compared to 1.17 percent at year-end 2021 and 1.39 percent at June 30, 2021. The allowance was 320.6 percent of nonperforming loans at June 30, 2022, compared to 254.4 percent at year-end 2021 and 148.2 percent at June 30, 2021.

Summit’s allowance for credit losses on unfunded loan commitments was $7.79 million on June 30, 2022, $8.39 million at the end of the linked quarter and $4.66 million on June 30, 2021. The allowance for credit losses on unfunded loan commitments decreased $600,000 during the most recent quarter, principally as result of a change in mix of unfunded commitments, whereas construction loan commitments, which have a higher historical loss ratio than do other loans as a whole, decreased while commercial unfunded lines of credit, which carry a lower loss factor and lower utilization rates, increased.

As of June 30, 2022, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $16.3 million, or 0.43 percent of assets, compared to NPAs of $18.6 million, or 0.51 percent of assets at the linked quarter-end, $22.6 million or 0.63 percent of assets at year-end 2021 and $36.0 million, or 1.10 percent of assets at the end of second quarter 2021. A loan relationship of $9.5 million impacted by the COVID-19 pandemic and on nonaccrual at June 30, 2021 was restored to full accrual status in July 2021.

About the Company

Summit Financial Group, Inc. is the $3.76 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 MySummitBank.com 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)   
Q2 2022 vs Q2 2021   
    
  For the Quarter EndedPercent
Dollars in thousands6/30/20226/30/2021Change
Statements of Income   
 Interest income   
    Loans, including fees$32,766 $27,69718.3%
    Securities 2,752  2,20225.0%
    Other 45  56-19.6%
 Total interest income 35,563  29,95518.7%
 Interest expense   
    Deposits 2,622  2,13622.8%
    Borrowings 1,976  1,00896.0%
 Total interest expense 4,598  3,14446.2%
 Net interest income 30,965  26,81115.5%
 Provision for credit losses 2,000  1,000100.0%
 Net interest income after provision   
     for credit losses 28,965  25,81112.2%
     
 Noninterest income   
    Trust and wealth management fees 745  6839.1%
    Mortgage origination revenue 317  898-64.7%
    Service charges on deposit accounts 1,674  1,09353.2%
    Bank card revenue 1,618  1,5196.5%
    (Losses) on equity investments (669) -n/a 
    Realized gains/(losses) on debt securities (289) 127-327.6%
    Bank owned life insurance and annuity income 331  27520.4%
    Other income 129  1207.5%
 Total noninterest income 3,856  4,715-18.2%
 Noninterest expense   
     Salaries and employee benefits 10,030  8,23021.9%
     Net occupancy expense 1,258  1,13111.2%
     Equipment expense 1,791  1,59812.1%
     Professional fees 507  42818.5%
     Advertising and public relations 165  13819.6%
     Amortization of intangibles 355  382-7.1%
     FDIC premiums 190  488-61.1%
     Bank card expense 810  68518.2%
     Foreclosed properties expense, net of (gains)/losses 141  746-81.1%
     Acquisition-related expense 4  454-99.1%
     Other expenses 2,358  2,756-14.4%
 Total noninterest expense 17,609  17,0363.4%
 Income before income taxes 15,212  13,49012.8%
 Income taxes 3,198  2,9309.1%
 Net income 12,014  10,56013.8%
 Preferred stock dividends 225  13961.9%
     
 Net income applicable to common shares$ 11,789 $ 10,42113.1%


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)  
Quarterly Performance Summary (unaudited)  
Q2 2022 vs Q2 2021  
     
  For the Quarter EndedPercent
  6/30/20226/30/2021Change
Per Share Data   
 Earnings per common share   
    Basic$0.92 $0.80 15.0%
    Diluted$0.92 $0.80 15.0%
     
 Cash dividends per common share$0.18 $0.17 5.9%
 Common stock dividend payout ratio 19.5% 21.2%-8.0%
     
 Average common shares outstanding   
    Basic 12,754,724  12,952,357 -1.5%
    Diluted 12,810,174  13,013,714 -1.6%
     
 Common shares outstanding at period end 12,763,422  12,963,057 -1.5%
     
Performance Ratios   
 Return on average equity 14.48% 13.67%5.9%
 Return on average tangible equity (C) 18.28% 17.03%7.3%
 Return on average tangible common equity (D) 19.35% 17.59%10.0%
 Return on average assets 1.30% 1.29%0.8%
 Net interest margin (A) 3.66% 3.55%3.1%
 Efficiency ratio (B) 47.45% 48.82%-2.8%
     

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 applicable to common shares + Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)  
Six Month Performance Summary (unaudited)   
2022 vs 2021   
     
  For the Six Months EndedPercent
Dollars in thousands6/30/20226/30/2021Change
Statements of Income   
 Interest income   
    Loans, including fees$62,991 $55,23414.0%
    Securities 5,374  4,35923.3%
    Other 91  123-26.0%
 Total interest income 68,456  59,71614.6%
 Interest expense   
    Deposits 4,349  4,632-6.1%
    Borrowings 3,587  2,02277.4%
 Total interest expense 7,936  6,65419.3%
 Net interest income 60,520  53,06214.1%
 Provision for credit losses 3,950  2,50058.0%
 Net interest income after provision   
     for credit losses 56,570  50,56211.9%
     
 Noninterest income   
    Trust and wealth management fees 1,503  1,32113.8%
    Mortgage origination revenue 656  1,896-65.4%
    Service charges on deposit accounts 3,074  2,19340.2%
    Bank card revenue 3,109  2,8608.7%
    (Losses) on equity investments (297) -n/a 
    Realized gains/(losses) on debt securities, net (442) 602-173.4%
    Bank owned life insurance and annuity income 615  5737.3%
    Other income 183  244-25.0%
 Total noninterest income 8,401  9,689-13.3%
 Noninterest expense   
     Salaries and employee benefits 19,731  16,66518.4%
     Net occupancy expense 2,499  2,3058.4%
     Equipment expense 3,634  3,18014.3%
     Professional fees 869  76613.4%
     Advertising and public relations 337  22847.8%
     Amortization of intangibles 734  787-6.7%
     FDIC premiums 580  765-24.2%
     Bank card expense 1,524  1,25921.0%
     Foreclosed properties expense, net of (gains)/losses 51  972-94.8%
     Acquisition-related expense 33  893-96.3%
     Other expenses 4,817  5,649-14.7%
 Total noninterest expense 34,809  33,4694.0%
 Income before income taxes 30,162  26,78212.6%
 Income taxes 6,455  5,86310.1%
 Net income 23,707  20,91913.3%
 Preferred stock dividends 450  139223.7%
     
 Net income applicable to common shares$ 23,257 $ 20,78011.9%


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)  
Six Month Performance Summary (unaudited)   
2022 vs 2021  
     
  For the Six Months EndedPercent
  6/30/20226/30/2021Change
Per Share Data   
 Earnings per common share   
    Basic$1.82 $1.61 13.0%
    Diluted$1.82 $1.60 13.8%
     
 Cash dividends per common share$0.36 $0.34 5.9%
 Common stock dividend payout ratio 19.8% 21.3%-7.0%
     
 Average common shares outstanding   
    Basic 12,750,037  12,947,228 -1.5%
    Diluted 12,805,873  13,007,889 -1.6%
     
 Common shares outstanding at period end 12,763,422  12,963,057 -1.5%
     
Performance Ratios   
 Return on average equity 14.34% 14.09%1.8%
 Return on average tangible equity (C) 18.15% 17.75%2.3%
 Return on average tangible common equity (D) 18.87% 18.06%4.5%
 Return on average assets 1.30% 1.30%0.0%
 Net interest margin (A) 3.64% 3.60%1.1%
 Efficiency ratio (B) 48.42% 49.18%-1.5%
     

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 applicable to common shares + 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 thousands6/30/20223/31/202212/31/20219/30/20216/30/2021
Statements of Income     
 Interest income     
    Loans, including fees$32,766 $30,224 $28,979 $28,416 $27,697
    Securities 2,752  2,623  2,763  2,348  2,202
    Other 45  46  75  118  56
 Total interest income 35,563  32,893  31,817  30,882  29,955
 Interest expense     
    Deposits 2,622  1,727  1,718  1,832  2,136
    Borrowings 1,976  1,612  1,267  1,013  1,008
 Total interest expense 4,598  3,339  2,985  2,845  3,144
 Net interest income 30,965  29,554  28,832  28,037  26,811
 Provision for credit losses 2,000  1,950  1,500  -  1,000
 Net interest income after provision     
     for credit losses 28,965  27,604  27,332  28,037  25,811
 Noninterest income     
    Trust and wealth management fees 745  757  847  718  683
    Mortgage origination revenue 317  339  1,361  742  898
    Service charges on deposit accounts 1,674  1,401  1,501  1,338  1,093
    Bank card revenue 1,618  1,491  1,528  1,509  1,519
    (Losses)/gains on equity investments (669) 372  202  -  -
    Realized gains/(losses) on debt securities, net (289) (152) (109) (68) 127
    Bank owned life insurance and annuity income 331  283  293  160  275
    Other income 129  54  330  168  120
 Total noninterest income 3,856  4,545  5,953  4,567  4,715
 Noninterest expense     
    Salaries and employee benefits 10,030  9,700  8,977  8,745  8,230
    Net occupancy expense 1,258  1,242  1,265  1,254  1,131
    Equipment expense 1,791  1,843  1,902  1,908  1,598
    Professional fees 507  362  438  374  428
    Advertising and public relations 165  172  216  254  138
    Amortization of intangibles 355  378  387  390  382
    FDIC premiums 190  390  330  354  488
    Bank card expense 810  714  703  705  685
    Foreclosed properties expense, net of (gains)/losses 141  (90) 403  370  746
    Acquisition-related expenses 4  29  57  273  454
    Other expenses 2,358  2,459  3,250  2,716  2,756
 Total noninterest expense 17,609  17,199  17,928  17,343  17,036
 Income before income taxes 15,212  14,950  15,357  15,261  13,490
 Income tax expense 3,198  3,257  2,777  3,023  2,930
 Net income 12,014  11,693  12,580  12,238  10,560
 Preferred stock dividends 225  225  225  225  139
       
 Net income applicable to common shares$ 11,789 $ 11,468 $ 12,355 $ 12,013 $ 10,421


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)     
Five Quarter Performance Summary (unaudited)      
       
  For the Quarter Ended 
  6/30/20223/31/202212/31/20219/30/20216/30/2021 
Per Share Data      
 Earnings per common share      
    Basic$0.92 $0.90 $0.96 $0.93 $0.80  
    Diluted$0.92 $0.90 $0.95 $0.92 $0.80  
        
 Cash dividends per common share$0.18 $0.18 $0.18 $0.18 $0.17  
 Common stock dividend payout ratio 19.1% 19.7% 18.5% 19.1% 21.2% 
        
 Average common shares outstanding      
    Basic 12,754,724  12,745,297  12,916,555  12,964,575  12,952,357  
    Diluted 12,810,174  12,801,903  12,976,181  13,018,672  13,013,714  
        
 Common shares outstanding at period end 12,763,422  12,753,094  12,743,125  12,976,693  12,963,057  
        
Performance Ratios      
 Return on average equity 14.48% 14.20% 15.48% 15.30% 13.67% 
 Return on average tangible equity (C) 18.28% 18.02% 19.72% 19.51% 17.03% 
 Return on average tangible common equity (D) 19.35% 18.74% 20.55% 20.34% 17.59% 
 Return on average assets 1.30% 1.30% 1.42% 1.42% 1.29% 
 Net interest margin (A) 3.66% 3.61% 3.49% 3.47% 3.55% 
 Efficiency ratio (B) 47.45% 49.44% 48.85% 49.52% 48.82% 

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 applicable to common shares + 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 amounts6/30/20223/31/202212/31/20219/30/20216/30/2021
Assets     
 Cash and due from banks$17,921 $18,404 $21,006 $21,247 $18,707 
 Interest bearing deposits other banks 31,680  42,853  57,452  189,862  176,282 
 Debt securities, available for sale 368,049  374,855  401,103  424,741  345,742 
 Debt securities, held to maturity 97,116  97,589  98,060  98,528  98,995 
 Equity investments 19,905  20,574  20,202  -  - 
 Other investments 18,329  10,974  11,304  10,649  10,661 
 Loans, net 2,941,813  2,817,998  2,729,093  2,521,704  2,395,885 
 Property held for sale 5,319  6,900  9,858  12,450  13,170 
 Premises and equipment, net 55,034  55,713  56,371  56,818  53,104 
 Goodwill and other intangible assets, net 62,856  63,212  63,590  63,977  53,858 
 Cash surrender value of life insurance policies and annuities 71,073  70,825  60,613  60,241  60,087 
 Derivative financial instruments 31,452  24,455  11,187  10,380  9,885 
 Other assets 42,252  39,339  36,880  38,354  36,157 
    Total assets$ 3,762,799 $ 3,643,691 $ 3,576,719 $ 3,508,951 $ 3,272,533 
Liabilities and Shareholders' Equity     
 Deposits$2,975,304 $3,008,063 $2,943,089 $2,955,940 $2,729,205 
 Short-term borrowings 291,447  140,146  140,146  140,146  140,146 
 Long-term borrowings and     
      subordinated debentures, net 123,311  123,260  123,159  49,739  49,710 
 Other liabilities 38,846  41,756  42,852  39,837  38,265 
 Shareholders' equity - preferred 14,920  14,920  14,920  14,920  14,920 
 Shareholders' equity - common 318,971  315,546  312,553  308,369  300,287 
    Total liabilities and shareholders' equity$ 3,762,799 $ 3,643,691 $ 3,576,719 $ 3,508,951 $ 3,272,533 
       
 Book value per common share$24.99 $24.74 $24.53 $23.76 $23.16 
 Tangible book value per common share (A)$20.07 $19.79 $19.54 $18.83 $19.01 
 Tangible common equity to tangible assets (B) 6.9% 7.0% 7.1% 7.1% 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)      
  6/30/20223/31/202212/31/20219/30/20216/30/2021 
Summit Financial Group, Inc.      
 CET1 Risk-based Capital8.2%8.3%8.4%9.0%9.6% 
 Tier 1 Risk-based Capital9.2%9.3%9.5%10.2%10.9% 
 Total Risk-based Capital13.3%13.5%13.8%12.1%13.0% 
 Tier 1 Leverage8.4%8.4%8.3%8.4%8.9% 
        
Summit Community Bank, Inc.      
 CET1 Risk-based Capital11.4%11.6%11.9%11.2%11.9% 
 Tier 1 Risk-based Capital11.4%11.6%11.9%11.2%11.9% 
 Total Risk-based Capital12.4%12.5%12.8%12.1%12.9% 
 Tier 1 Leverage10.4%10.5%10.4%9.2%9.7% 
        


SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)    
Loan Composition (unaudited)      
        
Dollars in thousands6/30/20223/31/202212/31/20219/30/20216/30/2021 
        
Commercial $455,202$447,482$365,301$317,855$326,468 
Mortgage warehouse lines 171,399 164,895 227,869 161,628 105,288 
Commercial real estate      
     Owner occupied 502,152 491,059 484,708 439,202 392,164 
     Non-owner occupied 963,646 910,174 866,031 835,071 784,415 
Construction and development      
     Land and development 106,840 103,203 100,805 99,718 102,670 
     Construction  211,955 171,383 146,038 127,432 140,788 
Residential real estate      
     Conventional  377,980 375,240 384,794 394,889 398,239 
     Jumbo  79,803 81,443 79,108 71,977 71,694 
     Home equity  71,136 70,770 72,112 71,496 72,956 
Consumer  33,816 32,095 31,923 32,284 32,732 
Other  2,947 2,877 2,702 2,558 2,356 
Total loans, net of unearned fees 2,976,876 2,850,621 2,761,391 2,554,110 2,429,770 
Less allowance for loan credit losses  35,063 32,623 32,298 32,406 33,885 
Loans, net$ 2,941,813$ 2,817,998$ 2,729,093$ 2,521,704$ 2,395,885 
        
Unfunded loan commitments$ 876,157$ 840,705$ 688,493$ 627,461$ 535,587 
        


SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)    
Deposit Composition (unaudited)     
        
Dollars in thousands 6/30/20223/31/202212/31/20219/30/20216/30/2021 
Core deposits       
   Non-interest bearing checking$600,791$629,002$568,986$575,542$503,097 
   Interest bearing checking 1,238,368 1,134,964 1,127,298 1,121,028 1,005,725 
   Savings  645,099 702,069 698,156 693,686 677,000 
   Time deposits  386,562 427,076 451,713 467,024 441,139 
Total core deposits 2,870,820 2,893,111 2,846,153 2,857,280 2,626,961 
        
Brokered time deposits 32,767 32,755 14,677 14,671 23,521 
Other non-core time deposits 71,717 82,197 82,259 83,989 78,723 
Total deposits$ 2,975,304$ 3,008,063$ 2,943,089$ 2,955,940$ 2,729,205 
        


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Asset Quality Information (unaudited)     
  For the Quarter Ended
Dollars in thousands6/30/20223/31/202212/31/20219/30/20216/30/2021
 Gross loan charge-offs$306 $618 $282 $528 $343 
 Gross loan recoveries (147) (109) (89) (158) (141)
    Net loan charge-offs$ 159 $ 509 $ 193 $ 370 $ 202 
       
 Net loan charge-offs to average loans (annualized) 0.02% 0.07% 0.03% 0.06% 0.03%
       
 Allowance for loan credit losses$35,063 $32,623 $32,298 $32,406 $33,885 
 Allowance for loan credit losses as a percentage     
     of period end loans 1.18% 1.14% 1.17% 1.27% 1.39%
       
 Allowance for credit losses on     
     unfunded loan commitments ("ULC")$7,792 $8,392 $7,275 $5,860 $4,660 
 Allowance for credit losses on ULC     
     as a percentage of period end ULC 0.89% 1.00% 1.06% 0.93% 0.87%
       
 Nonperforming assets:     
    Nonperforming loans     
        Commercial$345 $433 $740 $459 $968 
        Commercial real estate 2,703  4,765  4,603  4,643  14,430 
        Residential construction and development 1,053  968  1,560  448  621 
        Residential real estate 6,799  5,549  5,772  5,514  6,800 
        Consumer 37  20  21  48  38 
 Total nonperforming loans 10,937  11,735  12,696  11,112  22,857 
    Foreclosed properties     
        Commercial real estate 440  1,251  1,389  2,192  2,281 
        Commercial construction and development 2,332  2,332  2,332  2,925  3,146 
        Residential construction and development 2,293  3,018  5,561  6,712  6,859 
        Residential real estate 254  299  576  621  884 
 Total foreclosed properties 5,319  6,900  9,858  12,450  13,170 
   Other repossessed assets -  -  -  -  - 
 Total nonperforming assets$ 16,256 $ 18,635 $ 22,554 $ 23,562 $ 36,027 
       
 Nonperforming loans to period end loans 0.37% 0.41% 0.46% 0.44% 0.94%
 Nonperforming assets to period end assets 0.43% 0.51% 0.63% 0.67% 1.10%
       
 Troubled debt restructurings     
      Performing$18,657 $18,971 $18,887 $20,535 $20,799 
      Nonperforming 2,236  1,822  2,039  1,141  1,235 
 Total troubled debt restructurings$ 20,893 $ 20,793 $ 20,926 $ 21,676 $ 22,034 


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)    
Loans Past Due 30-89 Days (unaudited)     
       
Dollars in thousands6/30/20223/31/202212/31/20219/30/20216/30/2021
       
 Commercial$989$388$751$304$414
 Commercial real estate 4,084 1,446 683 281 733
 Construction and development 821 645 45 1,215 1,911
 Residential real estate 3,452 3,407 3,552 2,643 3,594
 Consumer 196 69 190 193 404
 Other 14 28 22 1 -
    Total$ 9,556$ 5,983$ 5,243$ 4,637$ 7,056
       


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)           
Average Balance Sheet, Interest Earnings & Expenses and Average Rates        
Q2 2022 vs Q1 2022 vs Q2 2021 (unaudited)           
              
 Q2 2022 Q1 2022 Q2 2021  
 AverageEarnings /Yield / AverageEarnings /Yield / AverageEarnings /Yield /  
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate BalancesExpenseRate  
              
ASSETS             
Interest earning assets             
  Loans, net of unearned interest (1)            
    Taxable$2,902,370 $32,7214.52% $2,771,842 $30,1784.42% $2,455,757 $27,5934.51%  
    Tax-exempt (2) 5,127  574.46%  5,369  584.38%  11,370  1324.66%  
  Securities             
    Taxable 297,701  1,7652.38%  320,170  1,6572.10%  285,092  1,3511.90%  
    Tax-exempt (2) 178,043  1,2492.81%  180,473  1,2232.75%  147,703  1,0782.93%  
   Interest bearing deposits other banks            
        and Federal funds sold 37,757  450.48%  72,883  460.26%  154,677  560.15%  
Total interest earning assets 3,420,998  35,8374.20%  3,350,737  33,1624.01%  3,054,599  30,2103.97%  
              
Noninterest earning assets             
  Cash & due from banks 16,351     19,226     19,095     
  Premises & equipment 55,449     56,043     53,210     
  Intangible assets 63,058     63,429     54,072     
  Other assets 165,788     142,719     116,398     
  Allowance for credit losses (33,232)    (32,462)    (34,674)    
    Total assets$ 3,688,412    $ 3,599,692    $ 3,262,700     
              
 LIABILITIES AND SHAREHOLDERS' EQUITY           
              
Liabilities             
Interest bearing liabilities             
  Interest bearing             
    demand deposits$1,189,324 $1,2740.43% $1,135,068 $4650.17% $995,673 $3710.15%  
  Savings deposits 672,353  6890.41%  700,115  5730.33%  665,735  6340.38%  
  Time deposits 517,360  6590.51%  542,360  6890.52%  562,605  1,1310.81%  
  Short-term borrowings 207,227  6961.35%  140,230  3731.08%  140,146  4641.33%  
  Long-term borrowings and             
     subordinated debentures 123,263  1,2804.17%  123,203  1,2394.08%  49,694  5444.39%  
Total interest bearing liabilities 2,709,527  4,5980.68%  2,640,976  3,3390.51%  2,413,853  3,1440.52%  
              
Noninterest bearing liabilities             
  Demand deposits 605,724     586,903     503,116     
  Other liabilities 41,307     42,493     36,842     
    Total liabilities 3,356,558     3,270,372     2,953,811     
              
Shareholders' equity - preferred 14,920     14,921     11,254     
Shareholders' equity - common 316,934     314,399     297,635     
  Total liabilities and             
    shareholders' equity$ 3,688,412    $ 3,599,692    $ 3,262,700     
              
NET INTEREST EARNINGS $ 31,239   $ 29,823   $ 27,066   
              
NET INTEREST MARGIN  3.66%   3.61%   3.55%  
              
(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 $274,000, $269,000, and $255,000 for Q2 2022, Q1 2022 and Q2 2021, respectively. 
              


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)      
Average Balance Sheet, Interest Earnings & Expenses and Average Rates     
YTD 2022 vs YTD 2021 (unaudited)        
   
 YTD 2022 YTD 2021 
 AverageEarnings /Yield / AverageEarnings /Yield / 
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate 
         
ASSETS        
Interest earning assets        
  Loans, net of unearned interest (1)        
    Taxable$2,837,467 $62,9004.47% $2,406,007 $55,0124.61% 
    Tax-exempt (2) 5,248  1154.42%  12,021  2814.71% 
  Securities        
    Taxable 308,872  3,4202.23%  275,742  2,6461.94% 
    Tax-exempt (2) 179,252  2,4732.78%  146,300  2,1682.99% 
   Interest bearing deposits other banks       
        and Federal funds sold 55,222  910.33%  160,592  1230.15% 
Total interest earning assets 3,386,061  68,9994.11%  3,000,662  60,2304.05% 
         
Noninterest earning assets        
  Cash & due from banks 17,781     18,592    
  Premises & equipment 55,746     53,263    
  Intangible assets 63,242     54,496    
  Other assets 154,200     114,014    
  Allowance for loan losses (32,849)    (33,696)   
    Total assets$ 3,644,181    $ 3,207,331    
         
 LIABILITIES AND SHAREHOLDERS' EQUITY       
         
Liabilities        
Interest bearing liabilities        
  Interest bearing        
    demand deposits$1,162,346 $1,7390.30% $978,029 $7650.16% 
  Savings deposits 686,157  1,2620.37%  654,053  1,2790.39% 
  Time deposits 529,791  1,3480.51%  573,107  2,5880.91% 
  Short-term borrowings 173,914  1,0681.24%  140,146  9331.34% 
  Long-term borrowings and        
     subordinated debentures 123,234  2,5194.12%  49,679  1,0894.42% 
  2,675,442  7,9360.60%  2,395,014  6,6540.56% 
Noninterest bearing liabilities        
  Demand deposits 596,365     477,766    
  Other liabilities 41,779     37,614    
    Total liabilities 3,313,586     2,910,394    
         
Shareholders' equity - preferred 14,920     5,658    
Shareholders' equity - common 315,675     291,279    
  Total liabilities and        
    shareholders' equity$ 3,644,181    $ 3,207,331    
         
NET INTEREST EARNINGS $ 61,063   $ 53,576  
         
NET INTEREST MARGIN  3.64%   3.60% 
         
(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 $543,000 and $514,000 for the   
       YTD 2022 and YTD 2021 periods, respectively.       
         



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