SMMF Summit Financial Group Inc

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

The Company, which serves commercial and individual clients across West Virginia, the Washington D.C. metropolitan area, Virginia and Kentucky through Summit Community Bank, Inc., reported net income applicable to common shares of $11.8 million, or $0.92 per diluted share, for the second quarter of 2022, as compared to $11.5 million, or $0.90 per diluted share, for the first quarter of 2022 and $10.4 million, or $0.80 per diluted share, for the second quarter of 2021.

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

Highlights for Q2 2022

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

Results from Operations

Net interest income grew to $31.0 million in the second quarter of 2022, an increase of 4.8 percent from the linked quarter and 15.5 percent from the prior-year second quarter. NIM for second quarter 2022 was 3.66 percent compared to 3.61 percent for the linked quarter and 3.55 percent for the year-ago quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summit’s net interest margin would have been 3.62 percent for the second quarter of 2022, 3.60 percent for the linked quarter and 3.45 percent for the year-ago period.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for second quarter 2022 was $3.86 million compared to $4.55 million for the linked quarter and $4.72 million for the comparable period of 2021. The Company recorded realized securities losses on debt securities of $289,000 in the second quarter of 2022 and $152,000 in the linked quarter. In addition, the Company recognized a loss on equity investments of $669,000 in second quarter 2022 compared to a gain of $372,000 in the linked quarter.

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

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

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

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

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

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

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

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

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

Balance Sheet

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

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

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

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

PPP balances were paid down to $3.54 million on June 30, 2022 from a peak of $98.5 million on September 30, 2020. Mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, have paid down to $171.4 million on June 30, 2022 from a peak of $252.5 million on June 30, 2020.

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

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

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

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

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

As announced in the first quarter of 2020, the Board of Directors authorized the open market repurchase of up to 750,000 shares of the issued and outstanding shares of Summit's common stock, of which 323,577 shares have been repurchased to date. The timing and quantity of stock purchases under this repurchase plan are at the discretion of management. During the second quarter of 2022, no shares of Summit’s common stock were repurchased under the Plan.

Asset Quality

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

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

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

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

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

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

About the Company

Summit Financial Group, Inc. is the $3.76 billion financial holding company for Summit Community Bank, Inc. Its talented bankers serve commercial and individual clients throughout West Virginia, the Washington, D.C. metropolitan area, Virginia, and Kentucky. Summit’s focus on in-market commercial lending and providing other business banking services in dynamic markets is designed to leverage its highly efficient operations and core deposits in strong legacy locations. Residential and consumer lending, trust and wealth management, and other retail financial services are offered through convenient digital and mobile banking platforms, including MySummitBank.com and 45 full-service branch locations. More information on Summit Financial Group, Inc. (NASDAQ: SMMF), headquartered in West Virginia’s Eastern Panhandle in Moorefield, is available at SummitFGI.com.

FORWARD-LOOKING STATEMENTS

This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as “expects”, “anticipates”, “believes”, “estimates” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could” are intended to identify such forward-looking statements.

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include: the effect of the COVID-19 pandemic, including the negative impacts and disruptions on the communities we serve, and the domestic and global economy, which may have an adverse effect on our business; current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; fiscal and monetary policies of the Federal Reserve; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; the successful integration of operations of our acquisitions; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies. We undertake no obligation to revise these statements following the date of this press release.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q2 2022 vs Q2 2021
		For the Quarter Ended					Percent
Dollars in thousands		6/30/2022			6/30/2021		Change
Statements of Income
	Interest income
	Loans, including fees	$	32,766		$	27,697	18.3	%
	Securities		2,752			2,202	25.0	%
	Other		45			56	-19.6	%
	Total interest income		35,563			29,955	18.7	%
	Interest expense
	Deposits		2,622			2,136	22.8	%
	Borrowings		1,976			1,008	96.0	%
	Total interest expense		4,598			3,144	46.2	%
	Net interest income		30,965			26,811	15.5	%
	Provision for credit losses		2,000			1,000	100.0	%
	Net interest income after provision
	for credit losses		28,965			25,811	12.2	%
	Noninterest income
	Trust and wealth management fees		745			683	9.1	%
	Mortgage origination revenue		317			898	-64.7	%
	Service charges on deposit accounts		1,674			1,093	53.2	%
	Bank card revenue		1,618			1,519	6.5	%
	(Losses) on equity investments		(669	)		-	n/a
	Realized gains/(losses) on debt securities		(289	)		127	-327.6	%
	Bank owned life insurance and annuity income		331			275	20.4	%
	Other income		129			120	7.5	%
	Total noninterest income		3,856			4,715	-18.2	%
	Noninterest expense
	Salaries and employee benefits		10,030			8,230	21.9	%
	Net occupancy expense		1,258			1,131	11.2	%
	Equipment expense		1,791			1,598	12.1	%
	Professional fees		507			428	18.5	%
	Advertising and public relations		165			138	19.6	%
	Amortization of intangibles		355			382	-7.1	%
	FDIC premiums		190			488	-61.1	%
	Bank card expense		810			685	18.2	%
	Foreclosed properties expense, net of (gains)/losses		141			746	-81.1	%
	Acquisition-related expense		4			454	-99.1	%
	Other expenses		2,358			2,756	-14.4	%
	Total noninterest expense		17,609			17,036	3.4	%
	Income before income taxes		15,212			13,490	12.8	%
	Income taxes		3,198			2,930	9.1	%
	Net income		12,014			10,560	13.8	%
	Preferred stock dividends		225			139	61.9	%
	Net income applicable to common shares	$	11,789		$	10,421	13.1	%

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

NOTES

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

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

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Six Month Performance Summary (unaudited)
2022 vs 2021
		For the Six Months Ended					Percent
Dollars in thousands		6/30/2022			6/30/2021		Change
Statements of Income
	Interest income
	Loans, including fees	$	62,991		$	55,234	14.0	%
	Securities		5,374			4,359	23.3	%
	Other		91			123	-26.0	%
	Total interest income		68,456			59,716	14.6	%
	Interest expense
	Deposits		4,349			4,632	-6.1	%
	Borrowings		3,587			2,022	77.4	%
	Total interest expense		7,936			6,654	19.3	%
	Net interest income		60,520			53,062	14.1	%
	Provision for credit losses		3,950			2,500	58.0	%
	Net interest income after provision
	for credit losses		56,570			50,562	11.9	%
	Noninterest income
	Trust and wealth management fees		1,503			1,321	13.8	%
	Mortgage origination revenue		656			1,896	-65.4	%
	Service charges on deposit accounts		3,074			2,193	40.2	%
	Bank card revenue		3,109			2,860	8.7	%
	(Losses) on equity investments		(297	)		-	n/a
	Realized gains/(losses) on debt securities, net		(442	)		602	-173.4	%
	Bank owned life insurance and annuity income		615			573	7.3	%
	Other income		183			244	-25.0	%
	Total noninterest income		8,401			9,689	-13.3	%
	Noninterest expense
	Salaries and employee benefits		19,731			16,665	18.4	%
	Net occupancy expense		2,499			2,305	8.4	%
	Equipment expense		3,634			3,180	14.3	%
	Professional fees		869			766	13.4	%
	Advertising and public relations		337			228	47.8	%
	Amortization of intangibles		734			787	-6.7	%
	FDIC premiums		580			765	-24.2	%
	Bank card expense		1,524			1,259	21.0	%
	Foreclosed properties expense, net of (gains)/losses		51			972	-94.8	%
	Acquisition-related expense		33			893	-96.3	%
	Other expenses		4,817			5,649	-14.7	%
	Total noninterest expense		34,809			33,469	4.0	%
	Income before income taxes		30,162			26,782	12.6	%
	Income taxes		6,455			5,863	10.1	%
	Net income		23,707			20,919	13.3	%
	Preferred stock dividends		450			139	223.7	%
	Net income applicable to common shares	$	23,257		$	20,780	11.9	%

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

NOTES

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

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

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
Dollars in thousands		6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Statements of Income
	Interest income
	Loans, including fees	$	32,766		$	30,224		$	28,979		$	28,416		$	27,697
	Securities		2,752			2,623			2,763			2,348			2,202
	Other		45			46			75			118			56
	Total interest income		35,563			32,893			31,817			30,882			29,955
	Interest expense
	Deposits		2,622			1,727			1,718			1,832			2,136
	Borrowings		1,976			1,612			1,267			1,013			1,008
	Total interest expense		4,598			3,339			2,985			2,845			3,144
	Net interest income		30,965			29,554			28,832			28,037			26,811
	Provision for credit losses		2,000			1,950			1,500			-			1,000
	Net interest income after provision
	for credit losses		28,965			27,604			27,332			28,037			25,811
	Noninterest income
	Trust and wealth management fees		745			757			847			718			683
	Mortgage origination revenue		317			339			1,361			742			898
	Service charges on deposit accounts		1,674			1,401			1,501			1,338			1,093
	Bank card revenue		1,618			1,491			1,528			1,509			1,519
	(Losses)/gains on equity investments		(669	)		372			202			-			-
	Realized gains/(losses) on debt securities, net		(289	)		(152	)		(109	)		(68	)		127
	Bank owned life insurance and annuity income		331			283			293			160			275
	Other income		129			54			330			168			120
	Total noninterest income		3,856			4,545			5,953			4,567			4,715
	Noninterest expense
	Salaries and employee benefits		10,030			9,700			8,977			8,745			8,230
	Net occupancy expense		1,258			1,242			1,265			1,254			1,131
	Equipment expense		1,791			1,843			1,902			1,908			1,598
	Professional fees		507			362			438			374			428
	Advertising and public relations		165			172			216			254			138
	Amortization of intangibles		355			378			387			390			382
	FDIC premiums		190			390			330			354			488
	Bank card expense		810			714			703			705			685
	Foreclosed properties expense, net of (gains)/losses		141			(90	)		403			370			746
	Acquisition-related expenses		4			29			57			273			454
	Other expenses		2,358			2,459			3,250			2,716			2,756
	Total noninterest expense		17,609			17,199			17,928			17,343			17,036
	Income before income taxes		15,212			14,950			15,357			15,261			13,490
	Income tax expense		3,198			3,257			2,777			3,023			2,930
	Net income		12,014			11,693			12,580			12,238			10,560
	Preferred stock dividends		225			225			225			225			139
	Net income applicable to common shares	$	11,789		$	11,468		$	12,355		$	12,013		$	10,421

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
		6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Per Share Data
	Earnings per common share
	Basic	$	0.92		$	0.90		$	0.96		$	0.93		$	0.80
	Diluted	$	0.92		$	0.90		$	0.95		$	0.92		$	0.80
	Cash dividends per common share	$	0.18		$	0.18		$	0.18		$	0.18		$	0.17
	Common stock dividend payout ratio		19.1	%		19.7	%		18.5	%		19.1	%		21.2	%
	Average common shares outstanding
	Basic		12,754,724			12,745,297			12,916,555			12,964,575			12,952,357
	Diluted		12,810,174			12,801,903			12,976,181			13,018,672			13,013,714
	Common shares outstanding at period end		12,763,422			12,753,094			12,743,125			12,976,693			12,963,057
Performance Ratios
	Return on average equity		14.48	%		14.20	%		15.48	%		15.30	%		13.67	%
	Return on average tangible equity (C)		18.28	%		18.02	%		19.72	%		19.51	%		17.03	%
	Return on average tangible common equity (D)		19.35	%		18.74	%		20.55	%		20.34	%		17.59	%
	Return on average assets		1.30	%		1.30	%		1.42	%		1.42	%		1.29	%
	Net interest margin (A)		3.66	%		3.61	%		3.49	%		3.47	%		3.55	%
	Efficiency ratio (B)		47.45	%		49.44	%		48.85	%		49.52	%		48.82	%

NOTES

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

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

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data (unaudited)
Dollars in thousands, except per share amounts		6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
Assets
	Cash and due from banks	$	17,921		$	18,404		$	21,006		$	21,247		$	18,707
	Interest bearing deposits other banks		31,680			42,853			57,452			189,862			176,282
	Debt securities, available for sale		368,049			374,855			401,103			424,741			345,742
	Debt securities, held to maturity		97,116			97,589			98,060			98,528			98,995
	Equity investments		19,905			20,574			20,202			-			-
	Other investments		18,329			10,974			11,304			10,649			10,661
	Loans, net		2,941,813			2,817,998			2,729,093			2,521,704			2,395,885
	Property held for sale		5,319			6,900			9,858			12,450			13,170
	Premises and equipment, net		55,034			55,713			56,371			56,818			53,104
	Goodwill and other intangible assets, net		62,856			63,212			63,590			63,977			53,858
	Cash surrender value of life insurance policies and annuities		71,073			70,825			60,613			60,241			60,087
	Derivative financial instruments		31,452			24,455			11,187			10,380			9,885
	Other assets		42,252			39,339			36,880			38,354			36,157
	Total assets	$	3,762,799		$	3,643,691		$	3,576,719		$	3,508,951		$	3,272,533
Liabilities and Shareholders' Equity
	Deposits	$	2,975,304		$	3,008,063		$	2,943,089		$	2,955,940		$	2,729,205
	Short-term borrowings		291,447			140,146			140,146			140,146			140,146
	Long-term borrowings and
	subordinated debentures, net		123,311			123,260			123,159			49,739			49,710
	Other liabilities		38,846			41,756			42,852			39,837			38,265
	Shareholders' equity - preferred		14,920			14,920			14,920			14,920			14,920
	Shareholders' equity - common		318,971			315,546			312,553			308,369			300,287
	Total liabilities and shareholders' equity	$	3,762,799		$	3,643,691		$	3,576,719		$	3,508,951		$	3,272,533
	Book value per common share	$	24.99		$	24.74		$	24.53		$	23.76		$	23.16
	Tangible book value per common share (A)	$	20.07		$	19.79		$	19.54		$	18.83		$	19.01
	Tangible common equity to tangible assets (B)		6.9	%		7.0	%		7.1	%		7.1	%		7.7	%

NOTES

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

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (unaudited)
		6/30/2022		3/31/2022		12/31/2021		9/30/2021		6/30/2021
Summit Financial Group, Inc.
	CET1 Risk-based Capital	8.2	%	8.3	%	8.4	%	9.0	%	9.6	%
	Tier 1 Risk-based Capital	9.2	%	9.3	%	9.5	%	10.2	%	10.9	%
	Total Risk-based Capital	13.3	%	13.5	%	13.8	%	12.1	%	13.0	%
	Tier 1 Leverage	8.4	%	8.4	%	8.3	%	8.4	%	8.9	%
Summit Community Bank, Inc.
	CET1 Risk-based Capital	11.4	%	11.6	%	11.9	%	11.2	%	11.9	%
	Tier 1 Risk-based Capital	11.4	%	11.6	%	11.9	%	11.2	%	11.9	%
	Total Risk-based Capital	12.4	%	12.5	%	12.8	%	12.1	%	12.9	%
	Tier 1 Leverage	10.4	%	10.5	%	10.4	%	9.2	%	9.7	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition (unaudited)
Dollars in thousands		6/30/2022		3/31/2022		12/31/2021		9/30/2021		6/30/2021
Commercial		$	455,202	$	447,482	$	365,301	$	317,855	$	326,468
Mortgage warehouse lines			171,399		164,895		227,869		161,628		105,288
Commercial real estate
Owner occupied			502,152		491,059		484,708		439,202		392,164
Non-owner occupied			963,646		910,174		866,031		835,071		784,415
Construction and development
Land and development			106,840		103,203		100,805		99,718		102,670
Construction			211,955		171,383		146,038		127,432		140,788
Residential real estate
Conventional			377,980		375,240		384,794		394,889		398,239
Jumbo			79,803		81,443		79,108		71,977		71,694
Home equity			71,136		70,770		72,112		71,496		72,956
Consumer			33,816		32,095		31,923		32,284		32,732
Other			2,947		2,877		2,702		2,558		2,356
Total loans, net of unearned fees			2,976,876		2,850,621		2,761,391		2,554,110		2,429,770
Less allowance for loan credit losses			35,063		32,623		32,298		32,406		33,885
Loans, net		$	2,941,813	$	2,817,998	$	2,729,093	$	2,521,704	$	2,395,885
Unfunded loan commitments		$	876,157	$	840,705	$	688,493	$	627,461	$	535,587

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands		6/30/2022		3/31/2022		12/31/2021		9/30/2021		6/30/2021
Core deposits
Non-interest bearing checking		$	600,791	$	629,002	$	568,986	$	575,542	$	503,097
Interest bearing checking			1,238,368		1,134,964		1,127,298		1,121,028		1,005,725
Savings			645,099		702,069		698,156		693,686		677,000
Time deposits			386,562		427,076		451,713		467,024		441,139
Total core deposits			2,870,820		2,893,111		2,846,153		2,857,280		2,626,961
Brokered time deposits			32,767		32,755		14,677		14,671		23,521
Other non-core time deposits			71,717		82,197		82,259		83,989		78,723
Total deposits		$	2,975,304	$	3,008,063	$	2,943,089	$	2,955,940	$	2,729,205

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
		For the Quarter Ended
Dollars in thousands		6/30/2022			3/31/2022			12/31/2021			9/30/2021			6/30/2021
	Gross loan charge-offs	$	306		$	618		$	282		$	528		$	343
	Gross loan recoveries		(147	)		(109	)		(89	)		(158	)		(141	)
	Net loan charge-offs	$	159		$	509		$	193		$	370		$	202
	Net loan charge-offs to average loans (annualized)		0.02	%		0.07	%		0.03	%		0.06	%		0.03	%
	Allowance for loan credit losses	$	35,063		$	32,623		$	32,298		$	32,406		$	33,885
	Allowance for loan credit losses as a percentage
	of period end loans		1.18	%		1.14	%		1.17	%		1.27	%		1.39	%
	Allowance for credit losses on
	unfunded loan commitments ("ULC")	$	7,792		$	8,392		$	7,275		$	5,860		$	4,660
	Allowance for credit losses on ULC
	as a percentage of period end ULC		0.89	%		1.00	%		1.06	%		0.93	%		0.87	%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	345		$	433		$	740		$	459		$	968
	Commercial real estate		2,703			4,765			4,603			4,643			14,430
	Residential construction and development		1,053			968			1,560			448			621
	Residential real estate		6,799			5,549			5,772			5,514			6,800
	Consumer		37			20			21			48			38
	Total nonperforming loans		10,937			11,735			12,696			11,112			22,857
	Foreclosed properties
	Commercial real estate		440			1,251			1,389			2,192			2,281
	Commercial construction and development		2,332			2,332			2,332			2,925			3,146
	Residential construction and development		2,293			3,018			5,561			6,712			6,859
	Residential real estate		254			299			576			621			884
	Total foreclosed properties		5,319			6,900			9,858			12,450			13,170
	Other repossessed assets		-			-			-			-			-
	Total nonperforming assets	$	16,256		$	18,635		$	22,554		$	23,562		$	36,027
	Nonperforming loans to period end loans		0.37	%		0.41	%		0.46	%		0.44	%		0.94	%
	Nonperforming assets to period end assets		0.43	%		0.51	%		0.63	%		0.67	%		1.10	%
	Troubled debt restructurings
	Performing	$	18,657		$	18,971		$	18,887		$	20,535		$	20,799
	Nonperforming		2,236			1,822			2,039			1,141			1,235
	Total troubled debt restructurings	$	20,893		$	20,793		$	20,926		$	21,676		$	22,034

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Loans Past Due 30-89 Days (unaudited)
Dollars in thousands		6/30/2022		3/31/2022		12/31/2021		9/30/2021		6/30/2021
	Commercial	$	989	$	388	$	751	$	304	$	414
	Commercial real estate		4,084		1,446		683		281		733
	Construction and development		821		645		45		1,215		1,911
	Residential real estate		3,452		3,407		3,552		2,643		3,594
	Consumer		196		69		190		193		404
	Other		14		28		22		1		-
	Total	$	9,556	$	5,983	$	5,243	$	4,637	$	7,056

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q2 2022 vs Q1 2022 vs Q2 2021 (unaudited)
	Q2 2022								Q1 2022								Q2 2021
	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	$	2,902,370		$	32,721	4.52	%		$	2,771,842		$	30,178	4.42	%		$	2,455,757		$	27,593	4.51	%
Tax-exempt (2)		5,127			57	4.46	%			5,369			58	4.38	%			11,370			132	4.66	%
Securities
Taxable		297,701			1,765	2.38	%			320,170			1,657	2.10	%			285,092			1,351	1.90	%
Tax-exempt (2)		178,043			1,249	2.81	%			180,473			1,223	2.75	%			147,703			1,078	2.93	%
Interest bearing deposits other banks
and Federal funds sold		37,757			45	0.48	%			72,883			46	0.26	%			154,677			56	0.15	%
Total interest earning assets		3,420,998			35,837	4.20	%			3,350,737			33,162	4.01	%			3,054,599			30,210	3.97	%
Noninterest earning assets
Cash & due from banks		16,351								19,226								19,095
Premises & equipment		55,449								56,043								53,210
Intangible assets		63,058								63,429								54,072
Other assets		165,788								142,719								116,398
Allowance for credit losses		(33,232	)							(32,462	)							(34,674	)
Total assets	$	3,688,412							$	3,599,692							$	3,262,700
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	1,189,324		$	1,274	0.43	%		$	1,135,068		$	465	0.17	%		$	995,673		$	371	0.15	%
Savings deposits		672,353			689	0.41	%			700,115			573	0.33	%			665,735			634	0.38	%
Time deposits		517,360			659	0.51	%			542,360			689	0.52	%			562,605			1,131	0.81	%
Short-term borrowings		207,227			696	1.35	%			140,230			373	1.08	%			140,146			464	1.33	%
Long-term borrowings and
subordinated debentures		123,263			1,280	4.17	%			123,203			1,239	4.08	%			49,694			544	4.39	%
Total interest bearing liabilities		2,709,527			4,598	0.68	%			2,640,976			3,339	0.51	%			2,413,853			3,144	0.52	%
Noninterest bearing liabilities
Demand deposits		605,724								586,903								503,116
Other liabilities		41,307								42,493								36,842
Total liabilities		3,356,558								3,270,372								2,953,811
Shareholders' equity - preferred		14,920								14,921								11,254
Shareholders' equity - common		316,934								314,399								297,635
Total liabilities and
shareholders' equity	$	3,688,412							$	3,599,692							$	3,262,700
NET INTEREST EARNINGS				$	31,239							$	29,823							$	27,066
NET INTEREST MARGIN						3.66	%							3.61	%							3.55	%
(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented.
The tax equivalent adjustment resulted in an increase in interest income of $274,000, $269,000, and $255,000 for Q2 2022, Q1 2022 and Q2 2021, respectively.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2022 vs YTD 2021 (unaudited)
	YTD 2022								YTD 2021
	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	$	2,837,467		$	62,900	4.47	%		$	2,406,007		$	55,012	4.61	%
Tax-exempt (2)		5,248			115	4.42	%			12,021			281	4.71	%
Securities
Taxable		308,872			3,420	2.23	%			275,742			2,646	1.94	%
Tax-exempt (2)		179,252			2,473	2.78	%			146,300			2,168	2.99	%
Interest bearing deposits other banks
and Federal funds sold		55,222			91	0.33	%			160,592			123	0.15	%
Total interest earning assets		3,386,061			68,999	4.11	%			3,000,662			60,230	4.05	%
Noninterest earning assets
Cash & due from banks		17,781								18,592
Premises & equipment		55,746								53,263
Intangible assets		63,242								54,496
Other assets		154,200								114,014
Allowance for loan losses		(32,849	)							(33,696	)
Total assets	$	3,644,181							$	3,207,331
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	1,162,346		$	1,739	0.30	%		$	978,029		$	765	0.16	%
Savings deposits		686,157			1,262	0.37	%			654,053			1,279	0.39	%
Time deposits		529,791			1,348	0.51	%			573,107			2,588	0.91	%
Short-term borrowings		173,914			1,068	1.24	%			140,146			933	1.34	%
Long-term borrowings and
subordinated debentures		123,234			2,519	4.12	%			49,679			1,089	4.42	%
		2,675,442			7,936	0.60	%			2,395,014			6,654	0.56	%
Noninterest bearing liabilities
Demand deposits		596,365								477,766
Other liabilities		41,779								37,614
Total liabilities		3,313,586								2,910,394
Shareholders' equity - preferred		14,920								5,658
Shareholders' equity - common		315,675								291,279
Total liabilities and
shareholders' equity	$	3,644,181							$	3,207,331
NET INTEREST EARNINGS				$	61,063							$	53,576
NET INTEREST MARGIN						3.64	%							3.60	%
(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented.
The tax equivalent adjustment resulted in an increase in interest income of $543,000 and $514,000 for the
YTD 2022 and YTD 2021 periods, respectively.

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