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Summit Financial Group Reports First Quarter 2022 EPS of $0.90 on Annualized Double-Digit Loan Growth and Record Net Interest Income
Source: Nasdaq GlobeNewswire / 28 Apr 2022 06:00:01 America/New_York
MOOREFIELD, W.Va., April 28, 2022 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported continued strong financial results for the first quarter of 2022, including double-digit annualized growth in loans, record net interest income, sequential net interest margin (“NIM”) expansion, improving asset quality and low operating expenses.
The Company, which serves commercial and individual clients across West Virginia, the Washington metropolitan area, Virginia and Kentucky through Summit Community Bank, Inc., reported net income applicable to common shares of $11.5 million, or $0.90 per diluted share, for the first quarter of 2022, $12.4 million, or $0.95 per diluted share, for the fourth quarter of 2021 and $10.4 million, or $0.80 per share, for the first quarter of 2021.
“Summit’s growth markets and talented producers allowed us to efficiently deploy the bank’s ample liquidity, with sequential quarter net interest margin expansion and continued double-digit annual growth in commercial and total loans,” said H. Charles Maddy, III, President and Chief Executive Officer. “We remain confident in our ability to continue Summit’s record of execution with proven operating expense discipline, continued credit quality improvement, excellent in-market loan growth opportunities and a very strong commercial pipeline.”
Highlights for Q1 2022
- Total loans of $2.68 billion, excluding mortgage warehouse lines of credit and Paycheck Protection Program (“PPP”) lending, increased 6.2 percent, or 24.9 percent annualized, during the quarter and 21.6 percent since March 31, 2021.
- Commercial loans excluding PPP lending increased 8.1 percent, or 32.3 percent annualized, during the quarter.
- Net interest margin (“NIM”) increased 12 basis points to 3.61 percent from the linked quarter, as Summit remains strategically well positioned for a rising rate environment.
- Net interest income increased 2.5 percent from the linked quarter and 12.6 percent from the year-ago period, primarily due to loan growth and lower funding costs.
- Total noninterest expense decreased to $17.2 million in the quarter, down 4.1 percent from the linked quarter and up 4.7 percent from the year-ago quarter, as salary and benefits increases were largely offset by disciplined management of other operating costs.
- Reduced annualized non-interest expense to 1.91 percent of average assets, down 11 basis points from the linked quarter and 18 basis points from the year-ago period.
- Incurred $1.95 million provision for credit losses in the quarter increasing period-end allowance for loan credit losses to $32.6 million, or 1.14 percent of total loans and 278.0 percent of nonperforming loans.
- Reduced foreclosed property held for sale by 30.0 percent during the quarter and 50.4 percent from the year-ago quarter to $6.9 million or 0.19 percent of assets at period end.
- Reduced nonperforming assets (“NPAs”) to 0.51 percent of total assets at period end, excluding restructured assets, down 12 basis points during the quarter and 70 basis points from March 31, 2021.
- Increased tangible book value per common share $0.25 during the quarter, despite unrealized net losses on debt securities available for sale (“AFS”) of $1.34 per common share (net of deferred income taxes) recorded in Other Comprehensive Income (“OCI”) partially offset by increases in the fair values of derivative financial instruments hedging against higher interest rates totaling $0.83 per common share (net of deferred income taxes) also recorded in OCI.
Results from Operations
Net interest income grew to a record $29.6 million in the first quarter of 2022, an increase of 2.5 percent from the linked quarter and 12.6 percent from the prior-year first quarter. NIM for first quarter of 2022 was 3.61 percent compared to 3.49 percent for the linked quarter and 3.65 percent for the year-ago quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summit’s net interest margin would have been 3.57 percent for the first quarter of 2022, 3.45 percent for the linked quarter and 3.60 percent for the year-ago period.
Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for first quarter 2022 was $4.5 million compared to $6.0 million for the linked quarter and $5.0 million for the comparable period of 2021. The Company recorded realized securities losses on debt securities of $152,000 and $109,000 in the first quarter of 2022 and linked quarter, respectively, and gains of $476,000 in the year-ago quarter. In addition, the Company recognized a gain on equity investments of $372,000 in first quarter 2022 compared to $202,000 in the linked quarter.
Mortgage origination revenue was $339,000 in the first quarter of 2022 compared to $482,000, excluding an $879,000 increase in the fair value of mortgage servicing rights, in the linked quarter. Mortgage origination revenue was $998,000 for the year-ago period.
Excluding gains and losses on debt securities and equity investments and mortgage servicing rights fair value adjustments, noninterest income was $4.33 million in first quarter 2022 compared to $4.98 million in the linked quarter and $4.50 million in the year-ago quarter.
Revenue from net interest income and noninterest income, excluding gains and losses on debt securities and equity investments and mortgage servicing rights fair value adjustments, grew 0.2 percent to $33.9 million for first quarter 2022 compared to $33.8 million for the linked quarter and increased 10.2 percent from $30.8 million in the year-ago quarter.
Total noninterest expense decreased to $17.4 million in the first quarter of 2022, down 2.8 percent from $17.9 million in the linked quarter and up 6.0 percent from $16.4 million for the prior-year first quarter.
Salary and benefit expenses of $9.7 million in the first quarter of 2022 increased from $9.0 million for the linked quarter and $8.4 million during the year-ago period. Higher group health insurance premiums and increased accruals for anticipated 2022 performance bonuses account for the primary reasons for the increases.
The sequential-quarter reduction in total noninterest expense, on higher salary and benefits expenses, reflected reductions in most other categories of operating costs. Equipment expense of $1.84 million compared to $1.90 million for the linked quarter and $1.58 million for the year-ago period. Net occupancy expense of $1.24 million compared to $1.27 million for the linked quarter and $1.17 million for the year-ago period. Net gains in excess of expenses on foreclosed properties were $90,000 compared to net losses and expenses on foreclosed properties of $403,000 in the linked quarter and $227,000 in the year-ago period. Other expenses of $2.46 million compared to $3.25 million for the linked quarter and $2.89 million in the year-ago period. The changes in these other expenses include:
- Fraud and robbery losses of $90,000 during the first quarter of 2022 compared to $190,000 and $117,000 in the linked and year-ago quarters, respectively;
- Virginia franchise tax of $148,000 during the first quarter of 2022 compared to $228,000 and $90,000 in the linked and year-ago quarters, respectively;
- Internet banking expenses of $342,000 during the first quarter of 2022 compared to $322,000 and $278,000 in the linked and year-ago quarters, respectively; and
- Deferred director compensation plan-related income of $400,000 during the first quarter of 2022 compared to plan-related expense of $227,000 and $236,000 in the linked and year-ago quarters, respectively.
Summit’s efficiency ratio was 49.44 percent in the first quarter of 2022 compared to 48.85 percent in the linked quarter and 49.54 percent for the year-ago period. Non-interest expense was 1.91 percent of average assets in the first quarter of 2022, compared to 2.02 percent during the linked quarter and 2.09 percent in the year-ago period.
Balance Sheet
At March 31, 2022, total assets were $3.64 billion, an increase of $67.0 million, or 1.9 percent, during the first quarter and $395.6 million, or 12.2 percent from March 31, 2021.
Total loans net of unearned fees grew to $2.85 billion on March 31, 2022, increasing 3.2 percent during the quarter and 16.3 percent from March 31, 2021. Excluding PPP and mortgage warehouse lending, total loans grew to $2.68 billion on March 31, 2022, increasing 6.2 percent during the first quarter and 21.6 percent from March 31, 2021.
Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE) and excluding PPP lending, grew to $1.8 billion on March 31, 2022, increasing 8.1 percent during the first quarter and 33.3 percent from March 31, 2021.
Residential real estate and consumer lending totaled $559.5 million on March 31, 2022, down 1.5 percent during the first quarter and 4.8 percent from March 31, 2021.
PPP balances paid down to $7.9 million on March 31, 2022 from a peak of $98.5 million on September 30, 2020. Mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, were $164.9 million on March 31, 2022 compared to a peak of $252.5 million on June 30, 2020.
Total deposits increased to $3.01 billion on March 31, 2022, up 2.2 percent during the first quarter and 10.4 percent from March 31, 2021. Core deposits increased to $2.89 billion on March 31, 2022, up 1.6 percent during the first quarter and 11.0 percent from March 31, 2021. Non-interest bearing deposit accounts grew $60.0 million or 10.5 percent in the first quarter of 2022 and $123.7 million or 24.5 percent since March 31, 2021. Interest bearing checking accounts grew $7.67 million or 0.7 percent in the first quarter of 2022 and $146.8 million or 14.9 percent since March 31, 2021. Savings accounts grew $3.91 million or 0.6 percent in the first quarter of 2022 and $45.6 million or 6.9 percent since March 31, 2021. Core time deposits declined $24.6 million or 5.5 percent in the first quarter of 2022 and $29.4 million or 6.4 percent since March 31, 2021.
Total shareholders’ equity was $330.3 million as of March 31, 2022 compared to $293.4 million at March 31, 2021 and $327.5 million at December 31, 2021.
Tangible book value per common share (“TBVPS”) increased to $19.79 as of March 31, 2022 from $19.54 at December 31, 2021. Unrealized net losses on debt securities AFS of $1.34 per common share (net of deferred income taxes) recorded in OCI during the quarter resulting from increased market interest rates negatively impacted TBVPS, but were partially offset by increased fair values of interest rate caps and swaps held as hedges against higher interest rates totaling $0.83 per common share (net of deferred income taxes), also recorded in OCI.
Summit had 12,753,094 outstanding common shares at the end of the first quarter of 2022 compared to 12,743,125 at year-end 2021.
As announced in the first quarter of 2020, the Board of Directors authorized the open market repurchase of up to 750,000 shares of the issued and outstanding shares of Summit's common stock, of which 323,577 shares have been repurchased to date. The timing and quantity of stock purchases under this repurchase plan are at the discretion of management. During the first quarter of 2022, no shares of Summit’s common stock were repurchased under the Plan.
Asset Quality
Net loan charge-offs (“NCOs”) were $509,000, or 0.07 percent of average loans annualized, in the first quarter of 2022. NCOs of $193,000 represented 0.03 percent of average loans annualized in the linked quarter, and $189,000 or 0.03 percent of average loans annualized for first quarter 2021.
Summit recorded a $1.95 million provision for credit losses in the first quarter of 2022, reflecting reserve build to support our substantial growth in both loans and unfunded loan commitments, partially offset by reserve reductions due to improving forecasted economic factors. The provision for credit losses was $1.50 million for both the linked and year-ago quarters.
Summit’s allowance for loan credit losses was $32.6 million on March 31, 2022, $32.3 million at the end of the linked quarter and $34.0 million on March 31, 2021. The allowance increased $325,000 as the impact of improving forecasted economic factors and improved loss experience served to substantially offset the additional provisions for credit losses resulting from the significant volumes of new loans.
Summit’s allowance for credit losses on unfunded loan commitments was $8.39 million on March 31, 2022, $7.28 million at the end of the linked quarter, and $3.71 million on March 31, 2021. The allowance for credit losses on unfunded loan commitments increased $1.12 million during the most recent quarter, principally as result of the recent strong volumes of construction loan commitments having a higher historical loss ratio than do our other loans as a whole.
The allowance for loan credit losses stood at 1.14 percent of total loans at March 31, 2022 compared to 1.17 percent at year-end 2021 and 1.39 percent at March 31, 2021. The allowance was 278.0 percent of nonperforming loans at March 31, 2022, compared to 254.4 percent at year-end 2021 and 134.4 percent at March 31, 2021.
As of March 31, 2022, NPAs consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $18.6 million, or 0.51 percent of assets, compared to $22.6 million, or 0.63 percent of assets at the end 2021 and $39.3 million or 1.21 percent of assets on March 31, 2021.
About the Company
Summit Financial Group, Inc. is the $3.64 billion financial holding company for Summit Community Bank, Inc. Its talented bankers serve commercial and individual clients throughout West Virginia, the Washington, D.C. metropolitan area, Virginia, and Kentucky. Summit’s focus on in-market commercial lending and providing other business banking services in dynamic markets is designed to leverage its highly efficient operations and core deposits in strong legacy locations. Residential and consumer lending, trust and wealth management, and other retail financial services are offered through convenient digital and mobile banking platforms, including MySummitBank.com and 45 full-service branch locations. More information on Summit Financial Group, Inc. (NASDAQ: SMMF), headquartered in West Virginia’s Eastern Panhandle in Moorefield, is available at SummitFGI.com.
FORWARD-LOOKING STATEMENTS
This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as “expects”, “anticipates”, “believes”, “estimates” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could” are intended to identify such forward-looking statements.
Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include: the effect of the COVID-19 pandemic, including the negative impacts and disruptions on the communities we serve, and the domestic and global economy, which may have an adverse effect on our business; current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; fiscal and monetary policies of the Federal Reserve; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; the successful integration of operations of our acquisitions; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies. We undertake no obligation to revise these statements following the date of this press release.
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Quarterly Performance Summary (unaudited) Q1 2022 vs Q1 2021 For the Quarter Ended Percent Dollars in thousands 3/31/2022 3/31/2021 Change Statements of Income Interest income Loans, including fees $ 30,224 $ 27,538 9.8 % Securities 2,623 2,157 21.6 % Other 46 67 -31.3 % Total interest income 32,893 29,762 10.5 % Interest expense Deposits 1,727 2,496 -30.8 % Borrowings 1,612 1,014 59.0 % Total interest expense 3,339 3,510 -4.9 % Net interest income 29,554 26,252 12.6 % Provision for credit losses 1,950 1,500 30.0 % Net interest income after provision for credit losses 27,604 24,752 11.5 % Noninterest income Trust and wealth management fees 757 638 18.7 % Mortgage origination revenue 339 998 -66.0 % Service charges on deposit accounts 1,401 1,100 27.4 % Bank card revenue 1,491 1,341 11.2 % Gains on equity investments 372 - n/a Realized gains/(losses) on debt securities (152 ) 476 -131.9 % Bank owned life insurance and annuity income 283 298 -5.0 % Other income 54 123 -56.1 % Total noninterest income 4,545 4,974 -8.6 % Noninterest expense Salaries and employee benefits 9,700 8,435 15.0 % Net occupancy expense 1,242 1,174 5.8 % Equipment expense 1,843 1,581 16.6 % Professional fees 362 338 7.1 % Advertising and public relations 172 90 91.1 % Amortization of intangibles 378 405 -6.7 % FDIC premiums 390 277 40.8 % Bank card expense 714 573 24.6 % Foreclosed properties expense, net of (gains)/losses (90 ) 227 -139.6 % Acquisition-related expense 29 440 -93.4 % Other expenses 2,459 2,893 -15.0 % Total noninterest expense 17,199 16,433 4.7 % Income before income taxes 14,950 13,293 12.5 % Income taxes 3,257 2,933 11.0 % Net income 11,693 10,360 12.9 % Preferred stock dividends 225 - n/a Net income applicable to common shares $ 11,468 $ 10,360 10.7 % SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Quarterly Performance Summary (unaudited) Q1 2022 vs Q1 2021 For the Quarter Ended Percent 3/31/2022 3/31/2021 Change Per Share Data Earnings per common share Basic $ 0.90 $ 0.80 12.5 % Diluted $ 0.90 $ 0.80 12.5 % Cash dividends per common share $ 0.18 $ 0.17 5.9 % Common stock dividend payout ratio 19.7 % 20.6 % -4.8 % Average common shares outstanding Basic 12,745,297 12,942,099 -1.5 % Diluted 12,801,903 13,002,062 -1.5 % Common shares outstanding at period end 12,753,094 12,950,714 -1.5 % Performance Ratios Return on average equity 14.20 % 14.51 % -2.1 % Return on average tangible equity (C) 18.02 % 18.49 % -2.5 % Return on average tangible common equity (D) 18.74 % 18.49 % 1.4 % Return on average assets 1.30 % 1.31 % -0.8 % Net interest margin (A) 3.61 % 3.65 % -1.1 % Efficiency ratio (B) 49.44 % 49.54 % -0.2 % NOTES
(A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.
(B) – Computed on a tax equivalent basis excluding acquisition-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.
(C) – Return on average tangible equity = (Net income + Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).
(D) – Return on average tangible common equity = (Net income applicable to common shares + Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Five Quarter Performance Summary (unaudited) For the Quarter Ended Dollars in thousands 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Statements of Income Interest income Loans, including fees $ 30,224 $ 28,979 $ 28,416 $ 27,697 $ 27,538 Securities 2,623 2,763 2,348 2,202 2,157 Other 46 75 118 56 67 Total interest income 32,893 31,817 30,882 29,955 29,762 Interest expense Deposits 1,727 1,718 1,832 2,136 2,496 Borrowings 1,612 1,267 1,013 1,008 1,014 Total interest expense 3,339 2,985 2,845 3,144 3,510 Net interest income 29,554 28,832 28,037 26,811 26,252 Provision for credit losses 1,950 1,500 - 1,000 1,500 Net interest income after provision for credit losses 27,604 27,332 28,037 25,811 24,752 Noninterest income Trust and wealth management fees 757 847 718 683 638 Mortgage origination revenue 339 1,361 742 898 998 Service charges on deposit accounts 1,401 1,501 1,338 1,093 1,100 Bank card revenue 1,491 1,528 1,509 1,519 1,341 Gains on equity investments 372 202 - - - Realized gains/(losses) on debt securities, net (152 ) (109 ) (68 ) 127 476 Bank owned life insurance and annuity income 283 293 160 275 298 Other income 54 330 168 120 123 Total noninterest income 4,545 5,953 4,567 4,715 4,974 Noninterest expense Salaries and employee benefits 9,700 8,977 8,745 8,230 8,435 Net occupancy expense 1,242 1,265 1,254 1,131 1,174 Equipment expense 1,843 1,902 1,908 1,598 1,581 Professional fees 362 438 374 428 338 Advertising and public relations 172 216 254 138 90 Amortization of intangibles 378 387 390 382 405 FDIC premiums 390 330 354 488 277 Bank card expense 714 703 705 685 573 Foreclosed properties expense, net of (gains)/losses (90 ) 403 370 746 227 Acquisition-related expenses 29 57 273 454 440 Other expenses 2,459 3,250 2,716 2,756 2,893 Total noninterest expense 17,199 17,928 17,343 17,036 16,433 Income before income taxes 14,950 15,357 15,261 13,490 13,293 Income tax expense 3,257 2,777 3,023 2,930 2,933 Net income 11,693 12,580 12,238 10,560 10,360 Preferred stock dividends 225 225 225 139 - Net income applicable to common shares $ 11,468 $ 12,355 $ 12,013 $ 10,421 $ 10,360 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Five Quarter Performance Summary (unaudited) For the Quarter Ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Per Share Data Earnings per common share Basic $ 0.90 $ 0.96 $ 0.93 $ 0.80 $ 0.80 Diluted $ 0.90 $ 0.95 $ 0.92 $ 0.80 $ 0.80 Cash dividends per common share $ 0.18 $ 0.18 $ 0.18 $ 0.17 $ 0.17 Common stock dividend payout ratio 19.7 % 18.5 % 19.1 % 21.2 % 20.6 % Average common shares outstanding Basic 12,745,297 12,916,555 12,964,575 12,952,357 12,942,099 Diluted 12,801,903 12,976,181 13,018,672 13,013,714 13,002,062 Common shares outstanding at period end 12,753,094 12,743,125 12,976,693 12,963,057 12,950,714 Performance Ratios Return on average equity 14.20 % 15.48 % 15.30 % 13.67 % 14.51 % Return on average tangible equity (C) 18.02 % 19.72 % 19.51 % 17.03 % 18.49 % Return on average tangible common equity (D) 18.74 % 20.55 % 20.34 % 17.59 % 18.49 % Return on average assets 1.30 % 1.42 % 1.42 % 1.29 % 1.31 % Net interest margin (A) 3.61 % 3.49 % 3.47 % 3.55 % 3.65 % Efficiency ratio (B) 49.44 % 48.85 % 49.52 % 48.82 % 49.54 % NOTES
(A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.
(B) – Computed on a tax equivalent basis excluding acquisition-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.
(C) – Return on average tangible equity = (Net income + Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).
(D) – Return on average tangible common equity = (Net income applicable to common shares + Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Selected Balance Sheet Data (unaudited) Dollars in thousands, except per share amounts 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Assets Cash and due from banks $ 18,404 $ 21,006 $ 21,247 $ 18,707 $ 20,732 Interest bearing deposits other banks 42,853 57,452 189,862 176,282 155,865 Debt securities, available for sale 374,855 401,103 424,741 345,742 311,384 Debt securities, held to maturity 97,589 98,060 98,528 98,995 99,457 Equity investments 20,574 20,202 - - - Other investments 10,974 11,304 10,649 10,661 10,776 Loans, net 2,817,998 2,729,093 2,521,704 2,395,885 2,418,029 Property held for sale 6,900 9,858 12,450 13,170 13,918 Premises and equipment, net 55,713 56,371 56,818 53,104 53,289 Goodwill and other intangible assets 63,212 63,590 63,977 53,858 54,239 Cash surrender value of life insurance policies and annuities 70,825 60,613 60,241 60,087 59,740 Derivative financial instruments 24,455 11,187 10,380 9,885 13,923 Other assets 39,339 36,880 38,354 36,157 36,783 Total assets $ 3,643,691 $ 3,576,719 $ 3,508,951 $ 3,272,533 $ 3,248,135 Liabilities and Shareholders' Equity Deposits $ 3,008,063 $ 2,943,089 $ 2,955,940 $ 2,729,205 $ 2,725,010 Short-term borrowings 140,146 140,146 140,146 140,146 140,145 Long-term borrowings and subordinated debentures 123,260 123,159 49,739 49,710 49,681 Other liabilities 41,756 42,852 39,837 38,265 39,854 Shareholders' equity - preferred 14,920 14,920 14,920 14,920 - Shareholders' equity - common 315,546 312,553 308,369 300,287 293,445 Total liabilities and shareholders' equity $ 3,643,691 $ 3,576,719 $ 3,508,951 $ 3,272,533 $ 3,248,135 Book value per common share $ 24.74 $ 24.53 $ 23.76 $ 23.16 $ 22.66 Tangible book value per common share (A) $ 19.79 $ 19.54 $ 18.83 $ 19.01 $ 18.47 Tangible common equity to tangible assets (B) 7.0 % 7.1 % 7.1 % 7.7 % 7.5 % NOTES
(A) – Tangible book value per share = (Common shareholders’ equity – Intangible assets) / Common shares outstanding.
(B) – Tangible common equity to tangible assets = (Common shareholders’ equity – Intangible assets) / (Total assets – Intangible assets).SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Regulatory Capital Ratios (unaudited) 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Summit Financial Group, Inc. CET1 Risk-based Capital 8.3 % 8.4 % 9.0 % 9.6 % 9.3 % Tier 1 Risk-based Capital 9.3 % 9.5 % 10.2 % 10.9 % 10.1 % Total Risk-based Capital 13.5 % 13.8 % 12.1 % 13.0 % 12.1 % Tier 1 Leverage 8.4 % 8.3 % 8.4 % 8.9 % 8.5 % Summit Community Bank, Inc. CET1 Risk-based Capital 11.6 % 11.9 % 11.2 % 11.9 % 11.1 % Tier 1 Risk-based Capital 11.6 % 11.9 % 11.2 % 11.9 % 11.1 % Total Risk-based Capital 12.5 % 12.8 % 12.1 % 12.9 % 12.0 % Tier 1 Leverage 10.5 % 10.4 % 9.2 % 9.7 % 9.3 % SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Loan Composition (unaudited) Dollars in thousands 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Commercial $ 447,482 $ 365,301 $ 317,855 $ 326,468 $ 348,022 Mortgage warehouse lines 164,895 227,869 161,628 105,288 187,995 Commercial real estate Owner occupied 491,059 484,708 439,202 392,164 358,200 Non-owner occupied 910,174 866,031 835,071 784,415 735,594 Construction and development Land and development 103,203 100,805 99,718 102,670 106,312 Construction 171,383 146,038 127,432 140,788 126,011 Residential real estate Conventional 375,240 384,794 394,889 398,239 411,103 Jumbo 81,443 79,108 71,977 71,694 65,851 Home equity 70,770 72,112 71,496 72,956 77,684 Consumer 32,095 31,923 32,284 32,732 32,924 Other 2,877 2,702 2,558 2,356 2,375 Total loans, net of unearned fees 2,850,621 2,761,391 2,554,110 2,429,770 2,452,071 Less allowance for credit losses 32,623 32,298 32,406 33,885 34,042 Loans, net $ 2,817,998 $ 2,729,093 $ 2,521,704 $ 2,395,885 $ 2,418,029 Unfunded loan commitments $ 840,705 $ 688,493 $ 627,461 $ 535,587 $ 556,910 SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Deposit Composition (unaudited) Dollars in thousands 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Core deposits Non-interest bearing checking $ 629,002 $ 568,986 $ 575,542 $ 503,097 $ 505,264 Interest bearing checking 1,134,964 1,127,298 1,121,028 1,005,725 988,204 Savings 702,069 698,156 693,686 677,000 656,514 Time deposits 427,076 451,713 467,024 441,139 456,431 Total core deposits 2,893,111 2,846,153 2,857,280 2,626,961 2,606,413 Brokered time deposits 32,755 14,677 14,671 23,521 39,125 Other non-core time deposits 82,197 82,259 83,989 78,723 79,472 Total deposits $ 3,008,063 $ 2,943,089 $ 2,955,940 $ 2,729,205 $ 2,725,010 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Asset Quality Information (unaudited) For the Quarter Ended Dollars in thousands 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Gross loan charge-offs $ 618 $ 282 $ 528 $ 343 $ 354 Gross loan recoveries (109 ) (89 ) (158 ) (141 ) (165 ) Net loan charge-offs $ 509 $ 193 $ 370 $ 202 $ 189 Net loan charge-offs to average loans (annualized) 0.07 % 0.03 % 0.06 % 0.03 % 0.03 % Allowance for loan credit losses $ 32,623 $ 32,298 $ 32,406 $ 33,885 $ 34,042 Allowance for loan credit losses as a percentage of period end loans 1.14 % 1.17 % 1.27 % 1.39 % 1.39 % Allowance for credit losses on unfunded loan commitments ("ULC") $ 8,392 $ 7,275 $ 5,860 $ 4,660 $ 3,705 Allowance for credit losses on ULC as a percentage of period end ULC 1.00 % 1.06 % 0.93 % 0.87 % 0.67 % Nonperforming assets: Nonperforming loans Commercial $ 433 $ 740 $ 459 $ 968 $ 848 Commercial real estate 4,765 4,603 4,643 14,430 17,137 Residential construction and development 968 1,560 448 621 626 Residential real estate 5,549 5,772 5,514 6,800 6,667 Consumer 20 21 48 38 54 Other - - - - - Total nonperforming loans 11,735 12,696 11,112 22,857 25,332 Foreclosed properties Commercial real estate 1,251 1,389 2,192 2,281 2,281 Commercial construction and development 2,332 2,332 2,925 3,146 3,884 Residential construction and development 3,018 5,561 6,712 6,859 7,129 Residential real estate 299 576 621 884 624 Total foreclosed properties 6,900 9,858 12,450 13,170 13,918 Other repossessed assets - - - - - Total nonperforming assets $ 18,635 $ 22,554 $ 23,562 $ 36,027 $ 39,250 Nonperforming loans to period end loans 0.41 % 0.46 % 0.44 % 0.94 % 1.03 % Nonperforming assets to period end assets 0.51 % 0.63 % 0.67 % 1.10 % 1.21 % Troubled debt restructurings Performing $ 18,971 $ 18,887 $ 20,535 $ 20,799 $ 20,462 Nonperforming 1,822 2,039 1,141 1,235 3,828 Total troubled debt restructurings $ 20,793 $ 20,926 $ 21,676 $ 22,034 $ 24,290 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Loans Past Due 30-89 Days (unaudited) Dollars in thousands 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Commercial $ 388 $ 751 $ 304 $ 414 $ 335 Commercial real estate 1,446 683 281 733 508 Construction and development 645 45 1,215 1,911 330 Residential real estate 3,407 3,552 2,643 3,594 2,146 Consumer 69 190 193 404 96 Other 28 22 1 - 3 Total $ 5,983 $ 5,243 $ 4,637 $ 7,056 $ 3,418 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Average Balance Sheet, Interest Earnings & Expenses and Average Rates Q1 2022 vs Q4 2021 vs Q1 2021 (unaudited) Q1 2022 Q4 2021 Q1 2021 Average Earnings / Yield / Average Earnings / Yield / Average Earnings / Yield / Dollars in thousands Balances Expense Rate Balances Expense Rate Balances Expense Rate ASSETS Interest earning assets Loans, net of unearned interest (1) Taxable $ 2,771,842 $ 30,178 4.42 % $ 2,640,975 $ 28,916 4.34 % $ 2,355,705 $ 27,419 4.72 % Tax-exempt (2) 5,369 58 4.38 % 6,888 81 4.67 % 12,679 151 4.83 % Securities Taxable 320,170 1,657 2.10 % 349,541 1,806 2.05 % 266,289 1,295 1.97 % Tax-exempt (2) 180,473 1,223 2.75 % 177,757 1,212 2.71 % 144,880 1,091 3.05 % Interest bearing deposits other banks and Federal funds sold 72,883 46 0.26 % 132,471 75 0.22 % 166,531 67 0.16 % Total interest earning assets 3,350,737 33,162 4.01 % 3,307,632 32,090 3.85 % 2,946,084 30,023 4.13 % Noninterest earning assets Cash & due from banks 19,226 21,037 17,961 Premises & equipment 56,043 56,566 53,317 Intangible assets 63,429 63,810 54,926 Other assets 142,719 126,635 112,417 Allowance for credit losses (32,462 ) (32,691 ) (32,706 ) Total assets $ 3,599,692 $ 3,542,989 $ 3,151,999 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilities Interest bearing demand deposits $ 1,135,068 $ 465 0.17 % 1,128,637 319 0.11 % $ 960,190 $ 394 0.17 % Savings deposits 700,115 573 0.33 % 692,893 590 0.34 % 642,241 645 0.41 % Time deposits 542,360 689 0.52 % 560,140 809 0.57 % 583,723 1,457 1.01 % Short-term borrowings 140,230 373 1.08 % 140,146 365 1.03 % 140,146 469 1.36 % Long-term borrowings and subordinated debentures 123,203 1,239 4.08 % 86,509 902 4.14 % 49,664 545 4.45 % Total interest bearing liabilities 2,640,976 3,339 0.51 % 2,608,325 2,985 0.45 % 2,375,964 3,510 0.60 % Noninterest bearing liabilities Demand deposits 586,903 568,764 451,957 Other liabilities 42,493 40,905 38,393 Total liabilities 3,270,372 3,217,994 2,866,314 Shareholders' equity - preferred 14,921 14,920 - Shareholders' equity - common 314,399 310,075 285,685 Total liabilities and shareholders' equity $ 3,599,692 $ 3,542,989 $ 3,151,999 NET INTEREST EARNINGS $ 29,823 $ 29,105 $ 26,513 NET INTEREST MARGIN 3.61 % 3.49 % 3.65 % (1) - For purposes of this table, nonaccrual loans are included in average loan balances. (2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented. The tax equivalent adjustment resulted in an increase in interest income of $269,000, $273,000, and $260,000 for Q1 2022, Q4 2021 and Q1 2021, respectively. Contact: Robert S. Tissue, Executive Vice President & CFO Telephone: (304) 530-0552 Email: rtissue@summitfgi.com