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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
Source: Nasdaq GlobeNewswire / 28 Oct 2021 06:00:01 America/New_York
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 thousands Total Loan
Balance as of
9/30/2021Loans Modified
to Interest Only
PaymentsLoans Modified
to Payment
DeferralTotal Loans
ModifiedPercentage
of Loans
ModifiedHospitality Industry $ 121,765 $ - $ - $ - 0.0 % Non-Owner Occupied Retail Stores 154,120 7,223 - 7,223 4.7 % 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 - 7,223 0.4 % 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 $ - $ 7,223 0.3 % 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.
Contact: Robert S. Tissue, Executive Vice President & CFO
Telephone: (304) 530-0552
Email: rtissue@summitfgi.comSUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Quarterly Performance Summary (unaudited) Q3 2021 vs Q3 2020 For the Quarter Ended Percent Dollars in thousands 9/30/2021 9/30/2020 Change Statements of Income Interest income Loans, including fees $ 28,416 $ 26,807 6.0 % Securities 2,348 2,382 -1.4 % Other 118 57 107.0 % Total interest income 30,882 29,246 5.6 % Interest expense Deposits 1,832 3,552 -48.4 % Borrowings 1,013 928 9.2 % Total interest expense 2,845 4,480 -36.5 % Net interest income 28,037 24,766 13.2 % Provision for credit losses - 3,250 n/m Net interest income after provision for credit losses 28,037 21,516 30.3 % Noninterest income Trust and wealth management fees 718 622 15.4 % Mortgage origination revenue 742 780 -4.9 % Service charges on deposit accounts 1,338 1,138 17.6 % Bank card revenue 1,509 1,237 22.0 % Realized securities gains (losses) (68 ) 1,522 -104.5 % Bank owned life insurance and annuity income 160 795 -79.9 % Other income 168 113 48.7 % Total noninterest income 4,567 6,207 -26.4 % Noninterest expense Salaries and employee benefits 8,745 7,869 11.1 % Net occupancy expense 1,254 1,057 18.6 % Equipment expense 1,908 1,474 29.4 % Professional fees 374 364 2.7 % Advertising and public relations 254 145 75.2 % Amortization of intangibles 390 412 -5.3 % FDIC premiums 354 320 10.6 % Bank card expense 705 589 19.7 % Foreclosed properties expense, net 370 607 -39.0 % Acquisition-related expense 273 28 875.0 % Other expenses 2,716 2,644 2.7 % Total noninterest expense 17,343 15,509 11.8 % Income before income taxes 15,261 12,214 24.9 % Income taxes 3,023 2,594 16.5 % Net income 12,238 9,620 27.2 % Preferred stock dividends 225 - n/a Net income applicable to common shares $ 12,013 $ 9,620 24.9 % SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Quarterly Performance Summary (unaudited) Q3 2021 vs Q3 2020 For the Quarter Ended Percent 9/30/2021 9/30/2020 Change 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 Ended Percent Dollars in thousands 9/30/2021 9/30/2020 Change 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 Ended Percent 9/30/2021 9/30/2020 Change 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 thousands 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 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 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 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 amounts 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 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) 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Summit Financial Group, Inc. CET1 Risk-based Capital 9.0 % 9.6 % 9.3 % 9.3 % 9.9 % Tier 1 Risk-based Capital 10.2 % 10.9 % 10.1 % 10.0 % 10.7 % Total Risk-based Capital 12.1 % 13.0 % 12.1 % 12.1 % 12.9 % Tier 1 Leverage 8.4 % 8.9 % 8.5 % 8.6 % 8.7 % Summit Community Bank, Inc. CET1 Risk-based Capital 11.2 % 11.9 % 11.1 % 11.1 % 11.8 % Tier 1 Risk-based Capital 11.2 % 11.9 % 11.1 % 11.1 % 11.8 % Total Risk-based Capital 12.1 % 12.9 % 12.0 % 12.0 % 12.7 % Tier 1 Leverage 9.2 % 9.7 % 9.3 % 9.5 % 9.6 % SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Loan Composition (unaudited) Dollars in thousands 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 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 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 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 thousands 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 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 thousands 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 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 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 $ 2,495,880 $ 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 Average Earnings / Yield / Average Earnings / Yield / Dollars in thousands Balances Expense Rate Balances Expense Rate 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. 
