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Summit Financial Group Reports Record Q4 2022 EPS of $1.16 on Continued Strong Loan Growth Resulting in 19.5 Percent Annualized Increase in TBVPS
Source: Nasdaq GlobeNewswire / 26 Jan 2023 06:00:01 America/New_York
MOOREFIELD, W.V., Jan. 26, 2023 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported financial results for the fourth quarter of 2022, including continued strong earnings on growth in loans and total revenue.
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 $14.9 million, or $1.16 per diluted share, for the fourth quarter of 2022, as compared to $14.2 million, or $1.11 per diluted share, for the third quarter of 2022 and $12.4 million, or $0.95 per diluted share, for the fourth quarter of 2021.
“In the fourth quarter and full year of 2022, our team continued expanding existing customer relationships and cultivating new relationships from our strong commercial pipelines to continue to deliver annualized double-digit loan growth, strong deposit growth, increased revenue and earnings,” said H. Charles Maddy, III, President and Chief Executive Officer. “Our disciplined underwriting standards consistently provide stable asset quality metrics and improved in the fourth quarter and for year-end. Given the challenging interest rate environment, the sequential increase in our tangible book value per common share differentiates us from our peers. Our tremendous operating results in 2022, pending merger with PSB Holding Corp. and the strength of our balance sheet well-positions us for continued growth in 2023.”
Highlights for Q4 2022
- Total loans, excluding mortgage warehouse lines of credit and Paycheck Protection Program (“PPP”) lending, increased 2.6 percent (10.3 percent annualized) during the quarter and 17.1 percent since December 31, 2021.
- Deposits increased 2.0 percent (8.0 percent annualized) during the fourth quarter and 7.7 percent for full year 2022.
- Tangible book value per common share (“TBVPS”) increased $1.01 (4.9 percent or 19.5 percent annualized) to $21.70 during the quarter, which included unrealized net gains on debt securities available for sale (“AFS”) of $0.09 per common share (net of deferred income taxes) recorded in Other Comprehensive Income (“OCI”), partially offset by decreases in the fair values of derivative financial instruments hedging against higher interest rates totaling $0.08 per common share (net of deferred income taxes) also recorded in OCI. For full year 2022, Summit’s TBVPS increased 11.1 percent, while for the vast majority of our peers’ TBVPS declined, and in some cases significantly so, during the same period.
- Net interest margin (“NIM”) decreased 4 basis points to 3.80 percent from the linked quarter and increased 31 basis points from the year-ago quarter, as increased yields on interest earning assets were offset by increased cost of deposits and other funding.
- Total noninterest expense decreased 1.9 percent to $18.8 million in the quarter, primarily due to deferred director compensation income of $316,000 in Q4 compared to $830,000 deferred director compensation expense in the linked quarter and up 5.1 percent from the year-ago quarter primarily due to higher salary and benefits expenses.
- Annualized non-interest expense decreased to 1.92 percent of average assets compared to 2.01 percent of average assets for the linked quarter and 2.02 for the year-ago period.
- Achieved an efficiency ratio of 46.40 percent compared to 47.95 percent in Q3 2022 and 48.85 percent in the year-ago quarter.
- Incurred $1.50 million provision for credit losses in the quarter increasing period-end allowance for loan credit losses to $38.9 million, or 1.26 percent of total loans and 497.2 percent of nonperforming loans.
- Foreclosed property held for sale declined by 2.4 percent during the quarter and 48.6 percent from the year-ago quarter to $5.07 million or 0.13 percent of assets at period end.
- Nonperforming assets (“NPAs”) improved to 0.33 percent of total assets at period end, excluding restructured assets, down 4 basis points during the quarter and 30 basis points from December 31, 2021.
- Announced expansion of our footprint into Eastern Shore of Maryland and Delaware by entering into a definitive merger agreement to acquire PSB Holding Corp. and its bank subsidiary, Provident State Bank, Inc. headquartered in Preston, Maryland.
Results from Operations
Net interest income grew to $34.4 million in the fourth quarter of 2022, an increase of 0.7 percent from the linked quarter and 19.1 percent from the prior-year fourth quarter. NIM for fourth quarter 2022 was 3.80 percent compared to 3.84 percent for the linked quarter and 3.49 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 3.78 percent for the fourth quarter of 2022, 3.81 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 fourth quarter 2022 was $4.87 million compared to $4.89 million for the linked quarter and $5.95 million for the comparable period of 2021. The Company recorded realized securities losses on debt securities of $24,000 in the fourth quarter of 2022 and $242,000 in the linked quarter. In addition, the Company recognized net gains on equity investments of $280,000 in fourth quarter 2022 compared to $283,000 in the linked quarter.
Mortgage origination revenue decreased to $286,000 in the fourth quarter of 2022 compared to $538,000 in the linked quarter and $1.36 million for the year-ago period reflecting continuing negative impact of higher interest rates on demand for new mortgage loans. Mortgage origination revenue includes an increase in the fair value of mortgage servicing rights of $140,000 for fourth quarter 2022, $318,000 during the linked quarter and $879,000 for the year-ago period.
Excluding gains and losses on debt securities and equity investments, noninterest income was $4.61 million for fourth quarter 2022 compared to $4.85 million for Q3 2022 and $5.86 million in the year-ago quarter, down primarily as result of lower mortgage origination revenue.
Revenue from net interest income and noninterest income, excluding gains and losses on debt securities and equity investments, remained unchanged compared to the linked quarter at $39.0 million, and up 12.3 percent from $34.7 million in the year-ago quarter, while for the year 2022, it grew to $147.6 million, up 14.0 percent from 2021, outpacing the 6.0 percent noninterest expense increase recorded.
Total noninterest expense decreased to $18.8 million in the fourth quarter of 2022, down 1.9 percent from $19.2 million in the linked quarter and was up 5.1 percent from $17.9 million for the prior-year fourth quarter. The sequential-quarter decrease in total noninterest expense, primarily on higher salary and benefits expenses offset by deferred director compensation income, reflected modest fluctuations in most other categories of operating costs.
Salary and benefit expenses of $10.5 million in the fourth quarter of 2022 increased from $10.2 million for the linked quarter and $9.0 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 were $159,000 during fourth quarter 2022 compared to $26,000 in the linked quarter and $403,000 in the year-ago period.
Other expenses were $2.93 million for Q4 2022 compared to $3.83 million for the linked quarter and $3.25 million in the year-ago period. The decrease in other expenses was primarily from an increase in deferred director compensation plan-related income to $316,000 during the fourth quarter of 2022 compared to $850,000 plan-related expense during the third quarter of 2022 and $227,000 in the year-ago quarter. For full-year 2022, deferred director compensation plan-related income totaled $612,000 compared to plan related expense of $725,000 for full-year 2021. During Q3 2022, we purchased investments to hedge the changes in the Plan participants’ phantom investments which should serve to significantly reduce the period-to-period volatility of the Plan’s impact on the Company’s statements of income.
Summit’s efficiency ratio was 46.40 percent in the fourth quarter of 2022 compared to 47.95 percent in the linked quarter and 48.85 percent for the year-ago period. Non-interest expense to average assets was 1.92 percent in fourth quarter of 2022 compared to 2.01 percent in the linked quarter and 2.02 percent in the year-ago quarter.
Balance Sheet
As of December 31, 2022, total assets were $3.9 billion, an increase of $340.0 million, or 9.5 percent since December 31, 2021.
Total loans net of unearned fees grew to $3.1 billion on December 31, 2022, up 0.3 percent (or 1.0 percent annualized) during the quarter, and up 11.6 percent from December 31, 2021. Excluding PPP and mortgage warehouse lending, total loans grew to $3.0 billion on December 31, 2022, up 2.6 percent (or 10.3 percent annualized) during the fourth quarter and up 17.1 percent year-to-date.
Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE) but excluding PPP lending, grew to $2.0 billion on December 31, 2022, up 1.5 percent (5.9 percent annualized) during the fourth quarter and 15.9 percent year-to-date.
Residential real estate and consumer lending totaled $586.3 million on December 31, 2022, up 1.5 percent (6.1 percent annualized) during the fourth quarter and 3.2 percent year-to-date.
As of December 31, 2022, PPP balances were paid down to $8,000 and mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, totaled $130.4 million compared to $194.7 million at September 30, 2022 and $227.9 million at the year-ago period end.
Deposits totaled $3.2 billion on December 31, 2022, a 2.0 percent (or 8.0 percent annualized) increase during the fourth quarter and a 7.7 percent increase year-to-date. Core deposits increased 2.4 percent (9.5 percent annualized) during fourth quarter 2022 to $3.1 billion and increased 8.5 percent in 2022. Changes in core deposits by category are as follows:
- Non-interest bearing deposit accounts decreased $65.5 million or 10.6 percent in the fourth quarter of 2022 and $15.4 million or 2.7 percent since December 31, 2021.
- Interest bearing checking accounts grew $267.7 million or 18.1 percent in the fourth quarter of 2022 and $616.0 million or 54.6 percent since December 31, 2021.
- Savings accounts declined $86.2 million or 14.8 percent in the fourth quarter of 2022 and $201.4 million or 28.8 percent since December 31, 2021.
- Core time deposits declined $44.0 million or 13.0 percent in the fourth quarter of 2022 and $157.1 million or 34.8 percent since December 31, 2021.
Total shareholders’ equity was $354.5 million as of December 31, 2022 compared to $327.5 million at December 31, 2021. Summit paid a quarterly common dividend of $0.20 per share in Q4 2022.
For the year 2022, TBVPS increased $2.16 to $21.70. TBVPS was negatively impacted during 2022 by unrealized net losses on AFS debt securities of $3.11 per common share (net of deferred income taxes) recorded in OCI. 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 $1.78 per common share (net of deferred income taxes), in the same period.
Summit had 12,783,646 outstanding common shares at the end 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 fourth quarter of 2022, no shares of Summit’s common stock were repurchased under the Plan.
Asset Quality
Net loan charge-offs (“NCOs”) declined to $1,000 in the fourth quarter of 2022. NCOs of $193,000 represented 0.03 percent of average loans annualized in the year-ago period.
Summit recorded a $1.50 million provision for credit losses in the fourth quarter of 2022, reflecting reserve build to support the Company’s significant loan growth and increasing forecasted economic uncertainty. The provision for credit losses was $1.50 million for the linked quarter and the year-ago quarter.
Summit’s allowance for loan credit losses was $38.9 million on December 31, 2022, $36.8 million at the end of the linked quarter, and $32.3 million on December 31, 2021.
The allowance for loan credit losses stood at 1.26 percent of total loans at December 31, 2022 compared to 1.19 percent at the end of the linked quarter, and 1.17 percent at December 31, 2021. The allowance was 497.2 percent of nonperforming loans at December 31, 2022, compared to 254.4 percent at year-end 2021.
Summit’s allowance for credit losses on unfunded loan commitments was $6.95 million on December 31, 2022, $7.60 million at the end of the linked quarter and $7.28 million on December 31, 2021. The allowance for credit losses on unfunded loan commitments decreased $650,000 during the most recent quarter, principally as result of a change in mix of unfunded commitments. Construction loan commitments, which on average have a higher historical loss ratio than do other loans, decreased, while commercial unfunded lines of credit, which carry a lower loss factor and lower utilization rates, increased.
As of December 31, 2022, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $12.9 million, or 0.33 percent of assets, compared to NPAs of $14.4 million, or 0.37 percent of assets at the linked quarter-end and $22.6 million or 0.63 percent of assets at year-end 2021.
About the Company
Summit Financial Group, Inc. is the $3.9 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 44 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) Q4 2022 vs Q4 2021 For the Quarter Ended Percent Dollars in thousands 12/31/2022 12/31/2021 Change Statements of Income Interest income Loans, including fees $ 43,589 $ 28,979 50.4% Securities 4,181 2,763 51.3% Other 70 75 -6.7% Total interest income 47,840 31,817 50.4% Interest expense Deposits 10,194 1,718 493.4% Borrowings 3,293 1,267 159.9% Total interest expense 13,487 2,985 351.8% Net interest income 34,353 28,832 19.1% Provision for credit losses 1,500 1,500 0.0% Net interest income after provision for credit losses 32,853 27,332 20.2% Noninterest income Trust and wealth management fees 750 847 -11.5% Mortgage origination revenue 286 1,361 -79.0% Service charges on deposit accounts 1,526 1,501 1.7% Bank card revenue 1,513 1,528 -1.0% Net gains on equity investments 280 202 38.6% Net realized losses on debt securities (24 ) (109 ) -78.0% Bank owned life insurance and annuity income 367 293 25.3% Other income 167 330 -49.4% Total noninterest income 4,865 5,953 -18.3% Noninterest expense Salaries and employee benefits 10,532 8,977 17.3% Net occupancy expense 1,328 1,265 5.0% Equipment expense 1,769 1,902 -7.0% Professional fees 386 438 -11.9% Advertising and public relations 280 216 29.6% Amortization of intangibles 351 387 -9.3% FDIC premiums 352 330 6.7% Bank card expense 679 703 -3.4% Foreclosed properties expense, net of (gains)/losses 159 403 -60.5% Acquisition-related expense 81 57 42.1% Other expenses 2,932 3,250 -9.8% Total noninterest expense 18,849 17,928 5.1% Income before income taxes 18,869 15,357 22.9% Income taxes 3,783 2,777 36.2% Net income 15,086 12,580 19.9% Preferred stock dividends 225 225 n/a Net income applicable to common shares $ 14,861 $ 12,355 20.3% SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Quarterly Performance Summary (unaudited) Q4 2022 vs Q4 2021 For the Quarter Ended Percent 12/31/2022 12/31/2021 Change Per Share Data Earnings per common share Basic $ 1.16 $ 0.96 20.8% Diluted $ 1.16 $ 0.95 22.1% Cash dividends per common share $ 0.20 $ 0.18 11.1% Common stock dividend payout ratio 16.9% 18.3% -7.7% Average common shares outstanding Basic 12,775,703 12,916,555 -1.1% Diluted 12,837,637 12,976,181 -1.1% Common shares outstanding at period end 12,783,646 12,743,125 0.3% Performance Ratios Return on average equity 17.50% 15.48% 13.0% Return on average tangible equity (C) 21.75% 19.72% 10.3% Return on average tangible common equity (D) 22.96% 20.91% 9.8% Return on average assets 1.54% 1.42% 8.5% Net interest margin (A) 3.80% 3.49% 8.9% Efficiency ratio (B) 46.40% 48.85% -5.0% 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) Annual Performance Summary (unaudited) 2022 vs 2021 For the Year Ended Percent Dollars in thousands 12/31/2022 12/31/2021 Change Statements of Income Interest income Loans, including fees $ 145,364 $ 112,630 29.1% Securities 13,052 9,470 37.8% Other 331 316 4.7% Total interest income 158,747 122,416 29.7% Interest expense Deposits 20,683 8,182 152.8% Borrowings 9,078 4,302 111.0% Total interest expense 29,761 12,484 138.4% Net interest income 128,986 109,932 17.3% Provision for credit losses 6,950 4,000 73.8% Net interest income after provision for credit losses 122,036 105,932 15.2% Noninterest income Trust and wealth management fees 2,978 2,886 3.2% Mortgage origination revenue 1,480 3,999 -63.0% Service charges on deposit accounts 6,150 5,032 22.2% Bank card revenue 6,261 5,896 6.2% Net gains on equity investments 265 202 31.2% Net realized (losses)/gains on debt securities (708 ) 425 -266.6% Bank owned life insurance and annuity income 1,211 1,026 18.0% Other income 516 742 -30.5% Total noninterest income 18,153 20,208 -10.2% Noninterest expense Salaries and employee benefits 40,452 34,386 17.6% Net occupancy expense 5,128 4,824 6.3% Equipment expense 7,253 6,990 3.8% Professional fees 1,628 1,578 3.2% Advertising and public relations 893 697 28.1% Amortization of intangibles 1,440 1,563 -7.9% FDIC premiums 1,224 1,449 -15.5% Bank card expense 2,928 2,668 9.7% Foreclosed properties expense, net of (gains)/losses 236 1,745 -86.5% Acquisition-related expense 114 1,224 -90.7% Other expenses 11,583 11,615 -0.3% Total noninterest expense 72,879 68,739 6.0% Income before income taxes 67,310 57,401 17.3% Income taxes 14,094 11,663 20.8% Net income 53,216 45,738 16.3% Preferred stock dividends 900 589 52.8% Net income applicable to common shares $ 52,316 $ 45,149 15.9% SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Annual Performance Summary (unaudited) 2022 vs 2021 For the Year Ended Percent 12/31/2022 12/31/2021 Change Per Share Data Earnings per common share Basic $ 4.10 $ 3.49 17.5% Diluted $ 4.08 $ 3.47 17.6% Cash dividends per common share $ 0.76 $ 0.70 8.6% Common stock dividend payout ratio 18.2% 19.9% -8.5% Average common shares outstanding Basic 12,760,649 12,943,883 -1.4% Diluted 12,821,533 13,003,428 -1.4% Common shares outstanding at period end 12,783,646 12,743,125 0.3% Performance Ratios Return on average equity 15.83% 14.76% 7.2% Return on average tangible equity (C) 19.88% 18.71% 6.3% Return on average tangible common equity (D) 21.03% 19.51% 7.8% Return on average assets 1.42% 1.36% 4.4% Net interest margin (A) 3.73% 3.54% 5.4% Efficiency ratio (B) 47.76% 49.22% -3.0% 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 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Statements of Income Interest income Loans, including fees $ 43,589 $ 38,784 $ 32,766 $ 30,224 $ 28,979 Securities 4,181 3,497 2,752 2,623 2,763 Other 70 170 45 46 75 Total interest income 47,840 42,451 35,563 32,893 31,817 Interest expense Deposits 10,194 6,140 2,622 1,727 1,718 Borrowings 3,293 2,198 1,976 1,612 1,267 Total interest expense 13,487 8,338 4,598 3,339 2,985 Net interest income 34,353 34,113 30,965 29,554 28,832 Provision for credit losses 1,500 1,500 2,000 1,950 1,500 Net interest income after provision for credit losses 32,853 32,613 28,965 27,604 27,332 Noninterest income Trust and wealth management fees 750 725 745 757 847 Mortgage origination revenue 286 538 317 339 1,361 Service charges on deposit accounts 1,526 1,550 1,674 1,401 1,501 Bank card revenue 1,513 1,639 1,618 1,491 1,528 Net gains/(losses) on equity investments 280 283 (669 ) 372 202 Net realized losses on debt securities (24 ) (242 ) (289 ) (152 ) (109 ) Bank owned life insurance and annuity income 367 229 331 283 293 Other income 167 165 129 54 330 Total noninterest income 4,865 4,887 3,856 4,545 5,953 Noninterest expense Salaries and employee benefits 10,532 10,189 10,030 9,700 8,977 Net occupancy expense 1,328 1,301 1,258 1,242 1,265 Equipment expense 1,769 1,851 1,791 1,843 1,902 Professional fees 386 372 507 362 438 Advertising and public relations 280 276 165 172 216 Amortization of intangibles 351 354 355 378 387 FDIC premiums 352 292 190 390 330 Bank card expense 679 726 810 714 703 Foreclosed properties expense, net of (gains)/losses 159 26 141 (90 ) 403 Acquisition-related expenses 81 - 4 29 57 Other expenses 2,932 3,834 2,358 2,459 3,250 Total noninterest expense 18,849 19,221 17,609 17,199 17,928 Income before income taxes 18,869 18,279 15,212 14,950 15,357 Income tax expense 3,783 3,856 3,198 3,257 2,777 Net income 15,086 14,423 12,014 11,693 12,580 Preferred stock dividends 225 225 225 225 225 Net income applicable to common shares $ 14,861 $ 14,198 $ 11,789 $ 11,468 $ 12,355 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Five Quarter Performance Summary (unaudited) For the Quarter Ended 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Per Share Data Earnings per common share Basic $ 1.16 $ 1.11 $ 0.92 $ 0.90 $ 0.96 Diluted $ 1.16 $ 1.11 $ 0.92 $ 0.90 $ 0.95 Cash dividends per common share $ 0.20 $ 0.20 $ 0.18 $ 0.18 $ 0.18 Common stock dividend payout ratio 16.9% 17.7% 19.1% 19.7% 18.5% Average common shares outstanding Basic 12,775,703 12,766,473 12,754,724 12,745,297 12,916,555 Diluted 12,837,637 12,835,670 12,810,174 12,801,903 12,976,181 Common shares outstanding at period end 12,783,646 12,774,645 12,763,422 12,753,094 12,743,125 Performance Ratios Return on average equity 17.50% 17.05% 14.48% 14.20% 15.48% Return on average tangible equity (C) 21.75% 21.33% 18.28% 18.02% 19.72% Return on average tangible common equity (D) 22.96% 22.20% 19.00% 18.74% 20.55% Return on average assets 1.54% 1.51% 1.30% 1.30% 1.42% Net interest margin (A) 3.80% 3.84% 3.66% 3.61% 3.49% Efficiency ratio (B) 46.40% 47.95% 47.45% 49.44% 48.85% 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 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Assets Cash and due from banks $ 16,469 $ 16,141 $ 17,921 $ 18,404 $ 21,006 Interest bearing deposits other banks 28,248 29,510 31,680 42,853 57,452 Debt securities, available for sale 405,201 383,965 368,049 374,855 401,103 Debt securities, held to maturity 96,163 96,640 97,116 97,589 98,060 Equity investments 29,494 20,314 19,905 20,574 20,202 Other investments 16,029 18,105 18,329 10,974 11,304 Loans, net 3,043,919 3,038,377 2,941,813 2,817,998 2,729,093 Property held for sale 5,067 5,193 5,319 6,900 9,858 Premises and equipment, net 53,981 54,628 55,034 55,713 56,371 Goodwill and other intangible assets, net 62,150 62,502 62,856 63,212 63,590 Cash surrender value of life insurance policies and annuities 71,640 71,216 71,073 70,825 60,613 Derivative financial instruments 40,506 42,179 31,452 24,455 11,187 Other assets 47,825 48,529 42,252 39,339 36,880 Total assets $ 3,916,692 $ 3,887,299 $ 3,762,799 $ 3,643,691 $ 3,576,719 Liabilities and Shareholders' Equity Deposits $ 3,169,879 $ 3,108,072 $ 2,975,304 $ 3,008,063 $ 2,943,089 Short-term borrowings 225,999 273,148 291,447 140,146 140,146 Long-term borrowings and subordinated debentures, net 123,543 123,427 123,311 123,260 123,159 Other liabilities 42,741 40,978 38,846 41,756 42,852 Total liabilities 3,562,162 3,545,625 3,428,908 3,313,225 3,249,246 Preferred stock and related surplus 14,920 14,920 14,920 14,920 14,920 Common stock and related surplus 90,696 90,345 90,008 89,675 89,301 Retained earnings 260,393 248,084 236,438 226,944 217,770 Accumulated other comprehensive income (loss) (11,479 ) (11,675 ) (7,475 ) (1,073 ) 5,482 Total shareholders' equity 354,530 341,674 333,891 330,466 327,473 Total liabilities and shareholders' equity $ 3,916,692 $ 3,887,299 $ 3,762,799 $ 3,643,691 $ 3,576,719 Book value per common share $ 26.57 $ 25.58 $ 24.99 $ 24.74 $ 24.53 Tangible book value per common share (A) $ 21.70 $ 20.69 $ 20.07 $ 19.79 $ 19.54 Tangible common equity to tangible assets (B) 7.2% 6.9% 6.9% 7.0% 7.1% NOTES
(A) – Tangible book value per share = (Common stock and related surplus plus Retained earnings plus Accumulated other comprehensive income/loss – Intangible assets) / Common shares outstanding.
(B) – Tangible common equity to tangible assets = (Common stock and related surplus plus Retained earnings plus Accumulated other comprehensive income/loss – Intangible assets) / (Total assets – Intangible assets).SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Regulatory Capital Ratios (unaudited) 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Summit Financial Group, Inc. CET1 Risk-based Capital 8.6% 8.2% 8.2% 8.3% 8.4% Tier 1 Risk-based Capital 9.5% 9.2% 9.2% 9.3% 9.5% Total Risk-based Capital 13.5% 13.1% 13.3% 13.5% 13.8% Tier 1 Leverage 8.5% 8.4% 8.4% 8.4% 8.3% Summit Community Bank, Inc. CET1 Risk-based Capital 11.6% 11.3% 11.4% 11.6% 11.9% Tier 1 Risk-based Capital 11.6% 11.3% 11.4% 11.6% 11.9% Total Risk-based Capital 12.6% 12.2% 12.4% 12.5% 12.8% Tier 1 Leverage 10.4% 10.3% 10.4% 10.5% 10.4% SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Loan Composition (unaudited) Dollars in thousands 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Commercial $ 501,844 $ 512,771 $ 455,202 $ 447,482 $ 365,301 Mortgage warehouse lines 130,390 194,740 171,399 164,895 227,869 Commercial real estate Owner occupied 467,050 473,298 502,152 491,059 484,708 Non-owner occupied 1,004,368 960,627 963,646 910,174 866,031 Construction and development Land and development 106,362 104,437 106,840 103,203 100,805 Construction 282,935 248,564 211,955 171,383 146,038 Residential real estate Conventional 386,874 382,203 377,980 375,240 384,794 Jumbo 92,103 87,449 79,803 81,443 79,108 Home equity 71,986 72,756 71,136 70,770 72,112 Consumer 35,372 35,116 33,816 32,095 31,923 Other 3,534 3,166 2,947 2,877 2,702 Total loans, net of unearned fees 3,082,818 3,075,127 2,976,876 2,850,621 2,761,391 Less allowance for loan credit losses 38,899 36,750 35,063 32,623 32,298 Loans, net $ 3,043,919 $ 3,038,377 $ 2,941,813 $ 2,817,998 $ 2,729,093 Unfunded loan commitments $ 925,657 $ 889,854 $ 876,157 $ 840,705 $ 688,493 SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Deposit Composition (unaudited) Dollars in thousands 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Core deposits Non-interest bearing checking $ 553,616 $ 619,067 $ 600,791 $ 629,002 $ 568,986 Interest bearing checking 1,743,299 1,475,643 1,238,368 1,134,964 1,127,298 Savings 496,751 582,922 645,099 702,069 698,156 Time deposits 294,630 338,668 386,562 427,076 451,713 Total core deposits 3,088,296 3,016,300 2,870,820 2,893,111 2,846,153 Brokered time deposits 32,790 32,778 32,767 32,755 14,677 Other non-core time deposits 48,793 58,994 71,717 82,197 82,259 Total deposits $ 3,169,879 $ 3,108,072 $ 2,975,304 $ 3,008,063 $ 2,943,089 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Asset Quality Information (unaudited) For the Quarter Ended Dollars in thousands 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Gross loan charge-offs $ 250 $ 265 $ 306 $ 618 $ 282 Gross loan recoveries (249 ) (257 ) (147 ) (109 ) (89 ) Net loan charge-offs $ 1 $ 8 $ 159 $ 509 $ 193 Net loan charge-offs to average loans (annualized) 0.00% 0.00% 0.02% 0.07% 0.03% Allowance for loan credit losses $ 38,899 $ 36,750 $ 35,063 $ 32,623 $ 32,298 Allowance for loan credit losses as a percentage of period end loans 1.26% 1.19% 1.18% 1.14% 1.17% Allowance for credit losses on unfunded loan commitments ("ULC") $ 6,947 $ 7,597 $ 7,792 $ 8,392 $ 7,275 Allowance for credit losses on ULC as a percentage of period end ULC 0.75% 0.85% 0.89% 1.00% 1.06% Nonperforming assets: Nonperforming loans Commercial $ 93 $ 347 $ 345 $ 433 $ 740 Commercial real estate 1,750 1,860 2,703 4,765 4,603 Residential construction and development 851 902 1,053 968 1,560 Residential real estate 5,117 6,083 6,799 5,549 5,772 Consumer 12 8 37 20 21 Total nonperforming loans 7,823 9,200 10,937 11,735 12,696 Foreclosed properties Commercial real estate 297 297 440 1,251 1,389 Commercial construction and development 2,187 2,332 2,332 2,332 2,332 Residential construction and development 2,293 2,293 2,293 3,018 5,561 Residential real estate 290 271 254 299 576 Total foreclosed properties 5,067 5,193 5,319 6,900 9,858 Other repossessed assets - - - - - Total nonperforming assets $ 12,890 $ 14,393 $ 16,256 $ 18,635 $ 22,554 Nonperforming loans to period end loans 0.25% 0.30% 0.37% 0.41% 0.46% Nonperforming assets to period end assets 0.33% 0.37% 0.43% 0.51% 0.63% Troubled debt restructurings Performing $ 18,966 $ 18,206 $ 18,657 $ 18,971 $ 18,887 Nonperforming 1,648 1,920 2,236 1,822 2,039 Total troubled debt restructurings $ 20,614 $ 20,126 $ 20,893 $ 20,793 $ 20,926 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Loans Past Due 30-89 Days (unaudited) Dollars in thousands 12/31/2022 9/30/2022 6/30/2022 3/31/2022 12/31/2021 Commercial $ 3,168 $ 1,329 $ 989 $ 388 $ 751 Commercial real estate 641 1,550 4,084 1,446 683 Construction and development 317 236 821 645 45 Residential real estate 6,231 2,824 3,452 3,407 3,552 Consumer 253 216 196 69 190 Other 22 4 14 28 22 Total $ 10,632 $ 6,159 $ 9,556 $ 5,983 $ 5,243 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Average Balance Sheet, Interest Earnings & Expenses and Average Rates Q4 2022 vs Q3 2022 vs Q4 2021 (unaudited) Q4 2022 Q3 2022 Q4 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 $ 3,100,595 $ 43,549 5.57 % $ 3,018,219 $ 38,741 5.09 % $ 2,640,975 $ 28,916 4.34 % Tax-exempt (2) 4,525 52 4.56 % 4,834 54 4.43 % 6,888 81 4.67 % Securities Taxable 280,114 2,747 3.89 % 283,645 2,273 3.18 % 349,541 1,806 2.05 % Tax-exempt (2) 219,245 1,813 3.28 % 203,951 1,549 3.01 % 177,757 1,212 2.71 % Interest bearing deposits other banks and Federal funds sold 25,785 70 1.08 % 49,048 170 1.38 % 132,471 75 0.22 % Total interest earning assets 3,630,264 48,231 5.27 % 3,559,697 42,787 4.77 % 3,307,632 32,090 3.85 % Noninterest earning assets Cash & due from banks 16,892 17,455 21,037 Premises & equipment 54,431 54,976 56,566 Intangible assets 62,336 62,705 63,810 Other assets 191,926 171,409 126,635 Allowance for loan credit losses (37,377 ) (35,381 ) (32,691 ) Total assets $ 3,918,472 $ 3,830,861 $ 3,542,989 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilities Interest bearing demand deposits 1,615,275 7,848 1.93 % $ 1,454,815 $ 4,276 1.17 % 1,128,637 319 0.11 % Savings deposits 529,039 1,651 1.24 % 611,075 1,243 0.81 % 692,893 590 0.34 % Time deposits 399,101 695 0.69 % 461,134 621 0.53 % 560,140 809 0.57 % Short-term borrowings 276,823 1,868 2.68 % 191,421 850 1.76 % 140,146 365 1.03 % Long-term borrowings and subordinated debentures 123,488 1,425 4.58 % 123,368 1,348 4.34 % 86,509 902 4.14 % Total interest bearing liabilities 2,943,726 13,487 1.82 % 2,841,813 8,338 1.16 % 2,608,325 2,985 0.45 % Noninterest bearing liabilities . Demand deposits 586,617 609,424 568,764 Other liabilities 43,378 41,339 40,905 Total liabilities 3,573,721 3,492,576 3,217,994 Shareholders' equity - preferred 14,920 14,920 14,920 Shareholders' equity - common 329,831 323,365 310,075 Total liabilities and shareholders' equity $ 3,918,472 $ 3,830,861 $ 3,542,989 NET INTEREST EARNINGS $ 34,744 $ 34,449 $ 29,105 NET INTEREST MARGIN 3.80 % 3.84 % 3.49 % (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 $391,000, $336,000, and $273,000 for Q4 2022, Q3 2022 and Q4 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 $ 2,949,350 $ 145,189 4.92 % $ 2,487,885 $ 112,269 4.51 % Tax-exempt (2) 4,961 222 4.47 % 9,681 458 4.73 % Securities Taxable 295,264 8,442 2.86 % 301,446 5,883 1.95 % Tax-exempt (2) 195,558 5,836 2.98 % 159,266 4,541 2.85 % Interest bearing deposits other banks and Federal funds sold 46,248 331 0.72 % 175,615 315 0.18 % Total interest earning assets 3,491,381 160,020 4.58 % 3,133,893 123,466 3.94 % Noninterest earning assets Cash & due from banks 17,473 19,582 Premises & equipment 55,219 54,762 Intangible assets 62,878 58,973 Other assets 167,982 119,562 Allowance for loan credit losses (34,630 ) (33,491 ) Total assets $ 3,760,303 $ 3,353,281 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilities Interest bearing demand deposits $ 1,350,227 $ 13,863 1.03 % $ 1,044,817 $ 1,409 0.13 % Savings deposits 627,630 4,155 0.66 % 673,259 2,471 0.37 % Time deposits 479,545 2,665 0.56 % 569,420 4,302 0.76 % Short-term borrowings 204,265 3,786 1.85 % 140,146 1,768 1.26 % Long-term borrowings and subordinated debentures 123,331 5,292 4.29 % 58,974 2,534 4.30 % 2,784,998 29,761 1.07 % 2,486,616 12,484 0.50 % Noninterest bearing liabilities Demand deposits 597,199 518,311 Other liabilities 42,005 38,545 Total liabilities 3,424,202 3,043,472 Shareholders' equity - preferred 14,920 10,327 Shareholders' equity - common 321,181 299,482 Total liabilities and shareholders' equity $ 3,760,303 $ 3,353,281 NET INTEREST EARNINGS $ 130,259 $ 110,982 NET INTEREST MARGIN 3.73 % 3.54 % (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 $1,273,000 and $1,050,000 for the YTD 2022 and YTD 2021 periods, respectively. Contact: Robert S. Tissue, Executive Vice President & CFO Telephone: (304) 530-0552 Email: rtissue@summitfgi.com 
