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Summit Financial Group Reports Second Quarter 2022 EPS of $0.92 on Revenue and Loan Growth
Source: Nasdaq GlobeNewswire / 28 Jul 2022 06:00:01 America/New_York
MOOREFIELD, W. Va., July 28, 2022 (GLOBE NEWSWIRE) -- 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 & CFO
Telephone: (304) 530-0552
Email: rtissue@summitfgi.com
