SMMF Summit Financial Group Inc

 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 LoanBalance as of9/30/2021		Loans Modifiedto Interest OnlyPayments		Loans Modifiedto PaymentDeferral		Total LoansModified		Percentageof LoansModified
Hospitality 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 & CFOTelephone: (304) 530-0552Email: rtissue@summitfgi.com

SUMMIT 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.