Summit Financial Group Reports First Quarter 2022 EPS of $0.90 on Annualized Double-Digit Loan Growth and Record Net Interest Income

Rhea-AI Summary

Summit Financial Group reported robust Q1 2022 results, highlighting net income of $11.5 million, or $0.90 per diluted share, marking a year-over-year increase. Total loans reached $2.68 billion, a 21.6% rise from the previous year. The net interest margin improved to 3.61%, with net interest income at a record $29.6 million. Operating expenses declined to $17.2 million, showcasing disciplined cost management. Asset quality also improved, with nonperforming assets down to 0.51% of total assets. Meanwhile, the company’s tangible book value per share grew to $19.79.

Positive

• Net income for Q1 2022 was $11.5 million, or $0.90 per diluted share, up from $10.4 million year-over-year.
• Total loans reached $2.68 billion, increasing 21.6% since March 31, 2021.
• Net interest margin expanded to 3.61%, reflecting effective management in a rising rate environment.
• Operating expenses decreased to $17.2 million, down 4.1% from the linked quarter.
• Nonperforming assets were reduced to 0.51% of total assets, improving asset quality.

Negative

• Noninterest income fell to $4.5 million from $6.0 million in the linked quarter.
• Mortgage origination revenue decreased to $339,000 from $482,000 in the linked quarter.
• Total noninterest expense increased compared to the year-ago quarter, primarily due to higher salary and benefits expenses.

MOOREFIELD, W.Va., April 28, 2022 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported continued strong financial results for the first quarter of 2022, including double-digit annualized growth in loans, record net interest income, sequential net interest margin (“NIM”) expansion, improving asset quality and low operating expenses.

The Company, which serves commercial and individual clients across West Virginia, the Washington metropolitan area, Virginia and Kentucky through Summit Community Bank, Inc., reported net income applicable to common shares of $11.5 million, or $0.90 per diluted share, for the first quarter of 2022, $12.4 million, or $0.95 per diluted share, for the fourth quarter of 2021 and $10.4 million, or $0.80 per share, for the first quarter of 2021.

“Summit’s growth markets and talented producers allowed us to efficiently deploy the bank’s ample liquidity, with sequential quarter net interest margin expansion and continued double-digit annual growth in commercial and total loans,” said H. Charles Maddy, III, President and Chief Executive Officer. “We remain confident in our ability to continue Summit’s record of execution with proven operating expense discipline, continued credit quality improvement, excellent in-market loan growth opportunities and a very strong commercial pipeline.”

Highlights for Q1 2022

• Total loans of $2.68 billion, excluding mortgage warehouse lines of credit and Paycheck Protection Program (“PPP”) lending, increased 6.2 percent, or 24.9 percent annualized, during the quarter and 21.6 percent since March 31, 2021.
• Commercial loans excluding PPP lending increased 8.1 percent, or 32.3 percent annualized, during the quarter.
• Net interest margin (“NIM”) increased 12 basis points to 3.61 percent from the linked quarter, as Summit remains strategically well positioned for a rising rate environment.
• Net interest income increased 2.5 percent from the linked quarter and 12.6 percent from the year-ago period, primarily due to loan growth and lower funding costs.
• Total noninterest expense decreased to $17.2 million in the quarter, down 4.1 percent from the linked quarter and up 4.7 percent from the year-ago quarter, as salary and benefits increases were largely offset by disciplined management of other operating costs.
• Reduced annualized non-interest expense to 1.91 percent of average assets, down 11 basis points from the linked quarter and 18 basis points from the year-ago period.
• Incurred $1.95 million provision for credit losses in the quarter increasing period-end allowance for loan credit losses to $32.6 million, or 1.14 percent of total loans and 278.0 percent of nonperforming loans.
• Reduced foreclosed property held for sale by 30.0 percent during the quarter and 50.4 percent from the year-ago quarter to $6.9 million or 0.19 percent of assets at period end.
• Reduced nonperforming assets (“NPAs”) to 0.51 percent of total assets at period end, excluding restructured assets, down 12 basis points during the quarter and 70 basis points from March 31, 2021.
• Increased tangible book value per common share $0.25 during the quarter, despite unrealized net losses on debt securities available for sale (“AFS”) of $1.34 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 $0.83 per common share (net of deferred income taxes) also recorded in OCI.

Results from Operations

Net interest income grew to a record $29.6 million in the first quarter of 2022, an increase of 2.5 percent from the linked quarter and 12.6 percent from the prior-year first quarter. NIM for first quarter of 2022 was 3.61 percent compared to 3.49 percent for the linked quarter and 3.65 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 3.57 percent for the first quarter of 2022, 3.45 percent for the linked quarter and 3.60 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 first quarter 2022 was $4.5 million compared to $6.0 million for the linked quarter and $5.0 million for the comparable period of 2021. The Company recorded realized securities losses on debt securities of $152,000 and $109,000 in the first quarter of 2022 and linked quarter, respectively, and gains of $476,000 in the year-ago quarter. In addition, the Company recognized a gain on equity investments of $372,000 in first quarter 2022 compared to $202,000 in the linked quarter.

Mortgage origination revenue was $339,000 in the first quarter of 2022 compared to $482,000, excluding an $879,000 increase in the fair value of mortgage servicing rights, in the linked quarter. Mortgage origination revenue was $998,000 for the year-ago period.

Excluding gains and losses on debt securities and equity investments and mortgage servicing rights fair value adjustments, noninterest income was $4.33 million in first quarter 2022 compared to $4.98 million in the linked quarter and $4.50 million in the year-ago quarter.

Revenue from net interest income and noninterest income, excluding gains and losses on debt securities and equity investments and mortgage servicing rights fair value adjustments, grew 0.2 percent to $33.9 million for first quarter 2022 compared to $33.8 million for the linked quarter and increased 10.2 percent from $30.8 million in the year-ago quarter.

Total noninterest expense decreased to $17.4 million in the first quarter of 2022, down 2.8 percent from $17.9 million in the linked quarter and up 6.0 percent from $16.4 million for the prior-year first quarter.

Salary and benefit expenses of $9.7 million in the first quarter of 2022 increased from $9.0 million for the linked quarter and $8.4 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.

The sequential-quarter reduction in total noninterest expense, on higher salary and benefits expenses, reflected reductions in most other categories of operating costs. Equipment expense of $1.84 million compared to $1.90 million for the linked quarter and $1.58 million for the year-ago period. Net occupancy expense of $1.24 million compared to $1.27 million for the linked quarter and $1.17 million for the year-ago period. Net gains in excess of expenses on foreclosed properties were $90,000 compared to net losses and expenses on foreclosed properties of $403,000 in the linked quarter and $227,000 in the year-ago period. Other expenses of $2.46 million compared to $3.25 million for the linked quarter and $2.89 million in the year-ago period. The changes in these other expenses include:

• Fraud and robbery losses of $90,000 during the first quarter of 2022 compared to $190,000 and $117,000 in the linked and year-ago quarters, respectively;
• Virginia franchise tax of $148,000 during the first quarter of 2022 compared to $228,000 and $90,000 in the linked and year-ago quarters, respectively;
• Internet banking expenses of $342,000 during the first quarter of 2022 compared to $322,000 and $278,000 in the linked and year-ago quarters, respectively; and
• Deferred director compensation plan-related income of $400,000 during the first quarter of 2022 compared to plan-related expense of $227,000 and $236,000 in the linked and year-ago quarters, respectively.

Summit’s efficiency ratio was 49.44 percent in the first quarter of 2022 compared to 48.85 percent in the linked quarter and 49.54 percent for the year-ago period. Non-interest expense was 1.91 percent of average assets in the first quarter of 2022, compared to 2.02 percent during the linked quarter and 2.09 percent in the year-ago period.

Balance Sheet

At March 31, 2022, total assets were $3.64 billion, an increase of $67.0 million, or 1.9 percent, during the first quarter and $395.6 million, or 12.2 percent from March 31, 2021.

Total loans net of unearned fees grew to $2.85 billion on March 31, 2022, increasing 3.2 percent during the quarter and 16.3 percent from March 31, 2021. Excluding PPP and mortgage warehouse lending, total loans grew to $2.68 billion on March 31, 2022, increasing 6.2 percent during the first quarter and 21.6 percent from March 31, 2021.

Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE) and excluding PPP lending, grew to $1.8 billion on March 31, 2022, increasing 8.1 percent during the first quarter and 33.3 percent from March 31, 2021.

Residential real estate and consumer lending totaled $559.5 million on March 31, 2022, down 1.5 percent during the first quarter and 4.8 percent from March 31, 2021.

PPP balances paid down to $7.9 million on March 31, 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, were $164.9 million on March 31, 2022 compared to a peak of $252.5 million on June 30, 2020.

Total deposits increased to $3.01 billion on March 31, 2022, up 2.2 percent during the first quarter and 10.4 percent from March 31, 2021. Core deposits increased to $2.89 billion on March 31, 2022, up 1.6 percent during the first quarter and 11.0 percent from March 31, 2021. Non-interest bearing deposit accounts grew $60.0 million or 10.5 percent in the first quarter of 2022 and $123.7 million or 24.5 percent since March 31, 2021. Interest bearing checking accounts grew $7.67 million or 0.7 percent in the first quarter of 2022 and $146.8 million or 14.9 percent since March 31, 2021. Savings accounts grew $3.91 million or 0.6 percent in the first quarter of 2022 and $45.6 million or 6.9 percent since March 31, 2021. Core time deposits declined $24.6 million or 5.5 percent in the first quarter of 2022 and $29.4 million or 6.4 percent since March 31, 2021.

Total shareholders’ equity was $330.3 million as of March 31, 2022 compared to $293.4 million at March 31, 2021 and $327.5 million at December 31, 2021.

Tangible book value per common share (“TBVPS”) increased to $19.79 as of March 31, 2022 from $19.54 at December 31, 2021. Unrealized net losses on debt securities AFS of $1.34 per common share (net of deferred income taxes) recorded in OCI during the quarter resulting from increased market interest rates negatively impacted TBVPS, but were partially offset by increased fair values of interest rate caps and swaps held as hedges against higher interest rates totaling $0.83 per common share (net of deferred income taxes), also recorded in OCI.

Summit had 12,753,094 outstanding common shares at the end of the first 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 first quarter of 2022, no shares of Summit’s common stock were repurchased under the Plan.

Asset Quality

Net loan charge-offs (“NCOs”) were $509,000, or 0.07 percent of average loans annualized, in the first quarter of 2022. NCOs of $193,000 represented 0.03 percent of average loans annualized in the linked quarter, and $189,000 or 0.03 percent of average loans annualized for first quarter 2021.

Summit recorded a $1.95 million provision for credit losses in the first quarter of 2022, reflecting reserve build to support our substantial growth in both loans and unfunded loan commitments, partially offset by reserve reductions due to improving forecasted economic factors. The provision for credit losses was $1.50 million for both the linked and year-ago quarters.

Summit’s allowance for loan credit losses was $32.6 million on March 31, 2022, $32.3 million at the end of the linked quarter and $34.0 million on March 31, 2021. The allowance increased $325,000 as the impact of improving forecasted economic factors and improved loss experience served to substantially offset the additional provisions for credit losses resulting from the significant volumes of new loans.

Summit’s allowance for credit losses on unfunded loan commitments was $8.39 million on March 31, 2022, $7.28 million at the end of the linked quarter, and $3.71 million on March 31, 2021. The allowance for credit losses on unfunded loan commitments increased $1.12 million during the most recent quarter, principally as result of the recent strong volumes of construction loan commitments having a higher historical loss ratio than do our other loans as a whole.

The allowance for loan credit losses stood at 1.14 percent of total loans at March 31, 2022 compared to 1.17 percent at year-end 2021 and 1.39 percent at March 31, 2021. The allowance was 278.0 percent of nonperforming loans at March 31, 2022, compared to 254.4 percent at year-end 2021 and 134.4 percent at March 31, 2021.

As of March 31, 2022, NPAs consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $18.6 million, or 0.51 percent of assets, compared to $22.6 million, or 0.63 percent of assets at the end 2021 and $39.3 million or 1.21 percent of assets on March 31, 2021.

About the Company

Summit Financial Group, Inc. is the $3.64 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)
Q1 2022 vs Q1 2021
		For the Quarter Ended					Percent
Dollars in thousands		3/31/2022			3/31/2021		Change
Statements of Income
	Interest income
	Loans, including fees	$	30,224		$	27,538	9.8	%
	Securities		2,623			2,157	21.6	%
	Other		46			67	-31.3	%
	Total interest income		32,893			29,762	10.5	%
	Interest expense
	Deposits		1,727			2,496	-30.8	%
	Borrowings		1,612			1,014	59.0	%
	Total interest expense		3,339			3,510	-4.9	%
	Net interest income		29,554			26,252	12.6	%
	Provision for credit losses		1,950			1,500	30.0	%
	Net interest income after provision for credit losses		27,604			24,752	11.5	%
	Noninterest income
	Trust and wealth management fees		757			638	18.7	%
	Mortgage origination revenue		339			998	-66.0	%
	Service charges on deposit accounts		1,401			1,100	27.4	%
	Bank card revenue		1,491			1,341	11.2	%
	Gains on equity investments		372			-	n/a
	Realized gains/(losses) on debt securities		(152	)		476	-131.9	%
	Bank owned life insurance and annuity income		283			298	-5.0	%
	Other income		54			123	-56.1	%
	Total noninterest income		4,545			4,974	-8.6	%
	Noninterest expense
	Salaries and employee benefits		9,700			8,435	15.0	%
	Net occupancy expense		1,242			1,174	5.8	%
	Equipment expense		1,843			1,581	16.6	%
	Professional fees		362			338	7.1	%
	Advertising and public relations		172			90	91.1	%
	Amortization of intangibles		378			405	-6.7	%
	FDIC premiums		390			277	40.8	%
	Bank card expense		714			573	24.6	%
	Foreclosed properties expense, net of (gains)/losses		(90	)		227	-139.6	%
	Acquisition-related expense		29			440	-93.4	%
	Other expenses		2,459			2,893	-15.0	%
	Total noninterest expense		17,199			16,433	4.7	%
	Income before income taxes		14,950			13,293	12.5	%
	Income taxes		3,257			2,933	11.0	%
	Net income		11,693			10,360	12.9	%
	Preferred stock dividends		225			-	n/a
	Net income applicable to common shares	$	11,468		$	10,360	10.7	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q1 2022 vs Q1 2021
		For the Quarter Ended						Percent
		3/31/2022			3/31/2021			Change
Per Share Data
	Earnings per common share
	Basic	$	0.90		$	0.80		12.5	%
	Diluted	$	0.90		$	0.80		12.5	%
	Cash dividends per common share	$	0.18		$	0.17		5.9	%
	Common stock dividend payout ratio		19.7	%		20.6	%	-4.8	%
	Average common shares outstanding
	Basic		12,745,297			12,942,099		-1.5	%
	Diluted		12,801,903			13,002,062		-1.5	%
	Common shares outstanding at period end		12,753,094			12,950,714		-1.5	%
Performance Ratios
	Return on average equity		14.20	%		14.51	%	-2.1	%
	Return on average tangible equity (C)		18.02	%		18.49	%	-2.5	%
	Return on average tangible common equity (D)		18.74	%		18.49	%	1.4	%
	Return on average assets		1.30	%		1.31	%	-0.8	%
	Net interest margin (A)		3.61	%		3.65	%	-1.1	%
	Efficiency ratio (B)		49.44	%		49.54	%	-0.2	%

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 thousands		3/31/2022			12/31/2021			9/30/2021			6/30/2021		3/31/2021
Statements of Income
	Interest income
	Loans, including fees	$	30,224		$	28,979		$	28,416		$	27,697		$	27,538
	Securities		2,623			2,763			2,348			2,202			2,157
	Other		46			75			118			56			67
	Total interest income		32,893			31,817			30,882			29,955			29,762
	Interest expense
	Deposits		1,727			1,718			1,832			2,136			2,496
	Borrowings		1,612			1,267			1,013			1,008			1,014
	Total interest expense		3,339			2,985			2,845			3,144			3,510
	Net interest income		29,554			28,832			28,037			26,811			26,252
	Provision for credit losses		1,950			1,500			-			1,000			1,500
	Net interest income after provision for credit losses		27,604			27,332			28,037			25,811			24,752
	Noninterest income
	Trust and wealth management fees		757			847			718			683			638
	Mortgage origination revenue		339			1,361			742			898			998
	Service charges on deposit accounts		1,401			1,501			1,338			1,093			1,100
	Bank card revenue		1,491			1,528			1,509			1,519			1,341
	Gains on equity investments		372			202			-			-			-
	Realized gains/(losses) on debt securities, net		(152	)		(109	)		(68	)		127			476
	Bank owned life insurance and annuity income		283			293			160			275			298
	Other income		54			330			168			120			123
	Total noninterest income		4,545			5,953			4,567			4,715			4,974
	Noninterest expense
	Salaries and employee benefits		9,700			8,977			8,745			8,230			8,435
	Net occupancy expense		1,242			1,265			1,254			1,131			1,174
	Equipment expense		1,843			1,902			1,908			1,598			1,581
	Professional fees		362			438			374			428			338
	Advertising and public relations		172			216			254			138			90
	Amortization of intangibles		378			387			390			382			405
	FDIC premiums		390			330			354			488			277
	Bank card expense		714			703			705			685			573
	Foreclosed properties expense, net of (gains)/losses		(90	)		403			370			746			227
	Acquisition-related expenses		29			57			273			454			440
	Other expenses		2,459			3,250			2,716			2,756			2,893
	Total noninterest expense		17,199			17,928			17,343			17,036			16,433
	Income before income taxes		14,950			15,357			15,261			13,490			13,293
	Income tax expense		3,257			2,777			3,023			2,930			2,933
	Net income		11,693			12,580			12,238			10,560			10,360
	Preferred stock dividends		225			225			225			139			-
	Net income applicable to common shares	$	11,468		$	12,355		$	12,013		$	10,421		$	10,360

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
		3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
Per Share Data
	Earnings per common share
	Basic	$	0.90		$	0.96		$	0.93		$	0.80		$	0.80
	Diluted	$	0.90		$	0.95		$	0.92		$	0.80		$	0.80
	Cash dividends per common share	$	0.18		$	0.18		$	0.18		$	0.17		$	0.17
	Common stock dividend payout ratio		19.7	%		18.5	%		19.1	%		21.2	%		20.6	%
	Average common shares outstanding
	Basic		12,745,297			12,916,555			12,964,575			12,952,357			12,942,099
	Diluted		12,801,903			12,976,181			13,018,672			13,013,714			13,002,062
	Common shares outstanding at period end		12,753,094			12,743,125			12,976,693			12,963,057			12,950,714
Performance Ratios
	Return on average equity		14.20	%		15.48	%		15.30	%		13.67	%		14.51	%
	Return on average tangible equity (C)		18.02	%		19.72	%		19.51	%		17.03	%		18.49	%
	Return on average tangible common equity (D)		18.74	%		20.55	%		20.34	%		17.59	%		18.49	%
	Return on average assets		1.30	%		1.42	%		1.42	%		1.29	%		1.31	%
	Net interest margin (A)		3.61	%		3.49	%		3.47	%		3.55	%		3.65	%
	Efficiency ratio (B)		49.44	%		48.85	%		49.52	%		48.82	%		49.54	%

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 amounts		3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
Assets
	Cash and due from banks	$	18,404		$	21,006		$	21,247		$	18,707		$	20,732
	Interest bearing deposits other banks		42,853			57,452			189,862			176,282			155,865
	Debt securities, available for sale		374,855			401,103			424,741			345,742			311,384
	Debt securities, held to maturity		97,589			98,060			98,528			98,995			99,457
	Equity investments		20,574			20,202			-			-			-
	Other investments		10,974			11,304			10,649			10,661			10,776
	Loans, net		2,817,998			2,729,093			2,521,704			2,395,885			2,418,029
	Property held for sale		6,900			9,858			12,450			13,170			13,918
	Premises and equipment, net		55,713			56,371			56,818			53,104			53,289
	Goodwill and other intangible assets		63,212			63,590			63,977			53,858			54,239
	Cash surrender value of life insurance policies and annuities		70,825			60,613			60,241			60,087			59,740
	Derivative financial instruments		24,455			11,187			10,380			9,885			13,923
	Other assets		39,339			36,880			38,354			36,157			36,783
	Total assets	$	3,643,691		$	3,576,719		$	3,508,951		$	3,272,533		$	3,248,135
Liabilities and Shareholders' Equity
	Deposits	$	3,008,063		$	2,943,089		$	2,955,940		$	2,729,205		$	2,725,010
	Short-term borrowings		140,146			140,146			140,146			140,146			140,145
	Long-term borrowings and subordinated debentures		123,260			123,159			49,739			49,710			49,681
	Other liabilities		41,756			42,852			39,837			38,265			39,854
	Shareholders' equity - preferred		14,920			14,920			14,920			14,920			-
	Shareholders' equity - common		315,546			312,553			308,369			300,287			293,445
	Total liabilities and shareholders' equity	$	3,643,691		$	3,576,719		$	3,508,951		$	3,272,533		$	3,248,135
	Book value per common share	$	24.74		$	24.53		$	23.76		$	23.16		$	22.66
	Tangible book value per common share (A)	$	19.79		$	19.54		$	18.83		$	19.01		$	18.47
	Tangible common equity to tangible assets (B)		7.0	%		7.1	%		7.1	%		7.7	%		7.5	%

 

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)
		3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
Summit Financial Group, Inc.
	CET1 Risk-based Capital		8.3	%		8.4	%		9.0	%		9.6	%		9.3	%
	Tier 1 Risk-based Capital		9.3	%		9.5	%		10.2	%		10.9	%		10.1	%
	Total Risk-based Capital		13.5	%		13.8	%		12.1	%		13.0	%		12.1	%
	Tier 1 Leverage		8.4	%		8.3	%		8.4	%		8.9	%		8.5	%
Summit Community Bank, Inc.
	CET1 Risk-based Capital		11.6	%		11.9	%		11.2	%		11.9	%		11.1	%
	Tier 1 Risk-based Capital		11.6	%		11.9	%		11.2	%		11.9	%		11.1	%
	Total Risk-based Capital		12.5	%		12.8	%		12.1	%		12.9	%		12.0	%
	Tier 1 Leverage		10.5	%		10.4	%		9.2	%		9.7	%		9.3	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition (unaudited)
Dollars in thousands	3/31/2022		12/31/2021			9/30/2021			6/30/2021			3/31/2021
Commercial	$	447,482	$		365,301	$		317,855	$		326,468	$		348,022
Mortgage warehouse lines		164,895			227,869			161,628			105,288			187,995
Commercial real estate
Owner occupied		491,059			484,708			439,202			392,164			358,200
Non-owner occupied		910,174			866,031			835,071			784,415			735,594
Construction and development
Land and development		103,203			100,805			99,718			102,670			106,312
Construction		171,383			146,038			127,432			140,788			126,011
Residential real estate
Conventional		375,240			384,794			394,889			398,239			411,103
Jumbo		81,443			79,108			71,977			71,694			65,851
Home equity		70,770			72,112			71,496			72,956			77,684
Consumer		32,095			31,923			32,284			32,732			32,924
Other		2,877			2,702			2,558			2,356			2,375
Total loans, net of unearned fees		2,850,621			2,761,391			2,554,110			2,429,770			2,452,071
Less allowance for credit losses		32,623			32,298			32,406			33,885			34,042
Loans, net	$	2,817,998		$	2,729,093		$	2,521,704		$	2,395,885		$	2,418,029
Unfunded loan commitments	$	840,705		$	688,493		$	627,461		$	535,587		$	556,910

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands	3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
Core deposits
Non-interest bearing checking		$	629,002		$	568,986		$	575,542		$	503,097		$	505,264
Interest bearing checking			1,134,964			1,127,298			1,121,028			1,005,725			988,204
Savings			702,069			698,156			693,686			677,000			656,514
Time deposits			427,076			451,713			467,024			441,139			456,431
Total core deposits			2,893,111			2,846,153			2,857,280			2,626,961			2,606,413
Brokered time deposits			32,755			14,677			14,671			23,521			39,125
Other non-core time deposits			82,197			82,259			83,989			78,723			79,472
Total deposits		$	3,008,063		$	2,943,089		$	2,955,940		$	2,729,205		$	2,725,010

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
		For the Quarter Ended
Dollars in thousands		3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
	Gross loan charge-offs	$	618		$	282		$	528		$	343		$	354
	Gross loan recoveries		(109	)		(89	)		(158	)		(141	)		(165	)
	Net loan charge-offs	$	509		$	193		$	370		$	202		$	189
	Net loan charge-offs to average loans (annualized)		0.07	%		0.03	%		0.06	%		0.03	%		0.03	%
	Allowance for loan credit losses	$	32,623		$	32,298		$	32,406		$	33,885		$	34,042
	Allowance for loan credit losses as a percentage of period end loans		1.14	%		1.17	%		1.27	%		1.39	%		1.39	%
	Allowance for credit losses on unfunded loan commitments ("ULC")	$	8,392		$	7,275		$	5,860		$	4,660		$	3,705
	Allowance for credit losses on ULC as a percentage of period end ULC		1.00	%		1.06	%		0.93	%		0.87	%		0.67	%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	433		$	740		$	459		$	968		$	848
	Commercial real estate		4,765			4,603			4,643			14,430			17,137
	Residential construction and development		968			1,560			448			621			626
	Residential real estate		5,549			5,772			5,514			6,800			6,667
	Consumer		20			21			48			38			54
	Other		-			-			-			-			-
	Total nonperforming loans		11,735			12,696			11,112			22,857			25,332
	Foreclosed properties
	Commercial real estate		1,251			1,389			2,192			2,281			2,281
	Commercial construction and development		2,332			2,332			2,925			3,146			3,884
	Residential construction and development		3,018			5,561			6,712			6,859			7,129
	Residential real estate		299			576			621			884			624
	Total foreclosed properties		6,900			9,858			12,450			13,170			13,918
	Other repossessed assets		-			-			-			-			-
	Total nonperforming assets	$	18,635		$	22,554		$	23,562		$	36,027		$	39,250
	Nonperforming loans to period end loans		0.41	%		0.46	%		0.44	%		0.94	%		1.03	%
	Nonperforming assets to period end assets		0.51	%		0.63	%		0.67	%		1.10	%		1.21	%
	Troubled debt restructurings
	Performing	$	18,971		$	18,887		$	20,535		$	20,799		$	20,462
	Nonperforming		1,822			2,039			1,141			1,235			3,828
	Total troubled debt restructurings	$	20,793		$	20,926		$	21,676		$	22,034		$	24,290

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Loans Past Due 30-89 Days (unaudited)
Dollars in thousands		3/31/2022			12/31/2021			9/30/2021			6/30/2021			3/31/2021
	Commercial		$	388		$	751		$	304		$	414		$	335
	Commercial real estate			1,446			683			281			733			508
	Construction and development			645			45			1,215			1,911			330
	Residential real estate			3,407			3,552			2,643			3,594			2,146
	Consumer			69			190			193			404			96
	Other			28			22			1			-			3
	Total		$	5,983		$	5,243		$	4,637		$	7,056		$	3,418

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q1 2022 vs Q4 2021 vs Q1 2021 (unaudited)
	Q1 2022										Q4 2021										Q1 2021
	Average			Earnings /		Yield /					Average			Earnings /		Yield /					Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate					Balances			Expense		Rate					Balances			Expense		Rate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable	$	2,771,842		$	30,178			4.42	%		$	2,640,975		$	28,916			4.34	%		$	2,355,705		$	27,419			4.72	%
Tax-exempt (2)		5,369			58			4.38	%			6,888			81			4.67	%			12,679			151			4.83	%
Securities
Taxable		320,170			1,657			2.10	%			349,541			1,806			2.05	%			266,289			1,295			1.97	%
Tax-exempt (2)		180,473			1,223			2.75	%			177,757			1,212			2.71	%			144,880			1,091			3.05	%
Interest bearing deposits other banks and Federal funds sold		72,883			46			0.26	%			132,471			75			0.22	%			166,531			67			0.16	%
Total interest earning assets		3,350,737			33,162			4.01	%			3,307,632			32,090			3.85	%			2,946,084			30,023			4.13	%
Noninterest earning assets
Cash & due from banks		19,226										21,037										17,961
Premises & equipment		56,043										56,566										53,317
Intangible assets		63,429										63,810										54,926
Other assets		142,719										126,635										112,417
Allowance for credit losses		(32,462	)									(32,691	)									(32,706	)
Total assets	$	3,599,692									$	3,542,989									$	3,151,999
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits	$	1,135,068		$	465			0.17	%			1,128,637			319			0.11	%		$	960,190		$	394			0.17	%
Savings deposits		700,115			573			0.33	%			692,893			590			0.34	%			642,241			645			0.41	%
Time deposits		542,360			689			0.52	%			560,140			809			0.57	%			583,723			1,457			1.01	%
Short-term borrowings		140,230			373			1.08	%			140,146			365			1.03	%			140,146			469			1.36	%
Long-term borrowings and subordinated debentures		123,203			1,239			4.08	%			86,509			902			4.14	%			49,664			545			4.45	%
Total interest bearing liabilities		2,640,976			3,339			0.51	%			2,608,325			2,985			0.45	%			2,375,964			3,510			0.60	%
Noninterest bearing liabilities
Demand deposits		586,903										568,764										451,957
Other liabilities		42,493										40,905										38,393
Total liabilities		3,270,372										3,217,994										2,866,314
Shareholders' equity - preferred		14,921										14,920										-
Shareholders' equity - common		314,399										310,075										285,685
Total liabilities and shareholders' equity	$	3,599,692									$	3,542,989									$	3,151,999
NET INTEREST EARNINGS				$	29,823									$	29,105									$	26,513
NET INTEREST MARGIN								3.61	%									3.49	%									3.65	%
(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 $269,000, $273,000, and $260,000 for Q1 2022, Q4 2021 and Q1 2021, respectively.

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

FAQ

What are the financial highlights for SMMF in Q1 2022?

Summit Financial Group reported a net income of $11.5 million, or $0.90 per diluted share, with total loans of $2.68 billion and a net interest margin of 3.61%.

How much did Summit Financial's total loans grow in the first quarter of 2022?

Total loans grew by 6.2% during the first quarter of 2022, reflecting a 21.6% increase year-over-year.

What was the change in net interest income for SMMF in Q1 2022?

Net interest income reached a record $29.6 million, up 12.6% compared to the same period last year.

What is the status of Summit Financial's asset quality as of Q1 2022?

Nonperforming assets decreased to 0.51% of total assets, indicating improved asset quality.

How did operating expenses change for SMMF in Q1 2022?

Total operating expenses were $17.2 million, down 4.1% from the linked quarter.