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Summit Financial Group Reports Third Quarter 2022 EPS of $1.11 on Continued Strong Loan and Revenue Growth
Source: Nasdaq GlobeNewswire / 27 Oct 2022 06:00:01 America/New_York
MOOREFIELD, W.Va., Oct. 27, 2022 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported financial results for the third 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 $14.2 million, or $1.11 per diluted share, for the third quarter of 2022, as compared to $11.8 million, or $0.92 per diluted share, for the second quarter of 2022 and $12.0 million, or $0.92 per diluted share, for the third quarter of 2021.
“Third quarter results included annualized double-digit loan growth and our fourth consecutive quarter of record net interest income growth and margin expansion,” said H. Charles Maddy, III, President and Chief Executive Officer. “Our asset quality metrics remain very solid and continue to demonstrate the quality of the underwriting practices of our bankers while we cultivate the relationships from our robust commercial lending pipelines. I am particularly gratified by the continued increases in our tangible book value per common share, despite a challenging interest rate environment. The strength of our balance sheet, operating results and profitability positions us to continue our growth trajectory through fourth quarter 2022 and into 2023.”
Highlights for Q3 2022
- Total loans of $2.9 billion, excluding mortgage warehouse lines of credit and Paycheck Protection Program (“PPP”) lending, increased 2.7 percent, or 10.9 percent annualized, during the quarter and 21.5 percent since September 30, 2021.
- Net interest income increased 10.2 percent compared to the linked quarter principally due to higher market rates, and increased 21.7 percent from the year-ago period, primarily due to loan growth.
- Net interest margin (“NIM”) increased 18 basis points to 3.84 percent from the linked quarter and 37 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 $19.2 million in the quarter, up 9.2 percent from the linked quarter primarily due to deferred director compensation expense of $830,000 in Q3 compared to $726,000 deferred director compensation income in the linked quarter and up 10.8 percent from the year-ago quarter, as salary and benefits increases and deferred director compensation increases were largely offset by disciplined management of other operating costs.
- Annualized non-interest expense increased to 2.01 percent of average assets compared to 1.91 percent of average assets for the linked quarter, and remained unchanged from the year-ago period.
- Achieved an efficiency ratio of 47.95 percent compared to 47.45 percent in Q2 2022 and 49.52 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 $36.8 million, or 1.19 percent of total loans and 399.5 percent of nonperforming loans.
- Foreclosed property held for sale declined by 2.4 percent during the quarter and 58.3 percent from the year-ago quarter to $5.19 million or 0.13 percent of assets at period end.
- Nonperforming assets (“NPAs”) improved to 0.37 percent of total assets at period end, excluding restructured assets, down 6 basis points during the quarter and 30 basis points from September 30, 2021.
- Tangible book value per common share (“TBVPCS”) increased $0.62 to $20.69 during the quarter, despite unrealized net losses on debt securities available for sale (“AFS”) of $0.95 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 $0.62 per common share (net of deferred income taxes) also recorded in OCI. Year-to-date for 2022, Summit’s TBVPCS has increased 5.89 percent, while for the vast majority of our peers TBVPCS has declined, and in some cases significantly so, during the same period.
Results from Operations
Net interest income grew to $34.1 million in the third quarter of 2022, an increase of 10.2 percent from the linked quarter and 21.7 percent from the prior-year third quarter. NIM for third quarter 2022 was 3.84 percent compared to 3.66 percent for the linked quarter and 3.47 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 3.81 percent for the third quarter of 2022, 3.62 percent for the linked quarter and 3.41 percent for the year-ago period.
Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for third quarter 2022 was $4.89 million compared to $3.86 million for the linked quarter and $4.57 million for the comparable period of 2021. The Company recorded realized securities losses on debt securities of $242,000 in the third quarter of 2022 and $289,000 in the linked quarter. In addition, the Company recognized a gain on equity investments of $283,000 in third quarter 2022 compared to a loss of $669,000 in the linked quarter.
Mortgage origination revenue increased to $538,000 in the third quarter of 2022 compared to $317,000 in the linked quarter and $742,000 for the year-ago period. Mortgage origination revenue for third quarter 2022 includes an increase in the fair value of mortgage servicing rights of $318,000.
Excluding gains and losses on debt securities and equity investments, noninterest income was $4.85 million for third quarter 2022 compared to $4.81 million for Q2 2022 and $4.64 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 $39.0 million, up 8.9 percent from $35.8 million in the linked quarter and 19.2 percent from $32.7 million in the year-ago quarter. Revenue, excluding gains and losses on debt securities and equity investments, for the first nine months of 2022, grew to $108.6 million, up 14.6 percent from the first nine months of 2021, outpacing the 6.3 percent noninterest expense increase recorded for the comparable nine-month period.
Total noninterest expense increased to $19.2 million in the third quarter of 2022, up 9.2 percent from $17.6 million in the linked quarter and 10.8 percent from $17.3 million for the prior-year third quarter. The sequential-quarter increase in total noninterest expense, primarily on higher salary and benefits expenses and deferred director compensation expense, reflected modest fluctuations in most other categories of operating costs.
Salary and benefit expenses of $10.2 million in the third quarter of 2022 increased from $10.0 million for the linked quarter and $8.75 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 declined to $26,000 during third quarter 2022 compared to $141,000 in the linked quarter and $370,000 in the year-ago period.
Other expenses were $3.83 million for Q3 2022 compared to $2.36 million for the linked quarter and $2.72 million in the year-ago period. The increase in other expenses was primarily from an increase in deferred director compensation plan-related expense to $830,000 during the third quarter of 2022 compared to $726,000 plan-related income during the second quarter of 2022 and plan-related expense of $72,000 in the year-ago quarter. For the first nine month period of 2022, deferred director compensation plan-related income totaled $296,000 compared to plan related expense of $498,000 for the same period of 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 to 47.95 percent in the third quarter of 2022 compared to 47.45 percent in the linked quarter and 49.52 percent for the year-ago period. Non-interest expense to average assets was 2.01 percent in both the third quarter of 2022 and 2021 and was 1.91 percent in the linked quarter.
Balance Sheet
As of September 30, 2022, total assets were $3.9 billion, an increase of $310.6 million, or 8.7 percent, since December 31, 2021 and an increase of $378.3 million, or 10.8 percent, since September 30, 2021.
Total loans net of unearned fees grew to $3.1 billion on September 30, 2022, up 3.3 percent (or 13.2 percent annualized) during the quarter, and up 20.4 percent from September 30, 2021. Excluding PPP and mortgage warehouse lending, total loans grew to $2.9 billion on September 30, 2022, up 2.73 percent (or 10.9 percent annualized) during the third quarter and up 14.2 percent year-to-date and 21.5 percent since September 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 September 30, 2022, up 1.4 percent during the third quarter, 14.2 percent year-to-date and 24.0 percent since September 30, 2021.
Residential real estate and consumer lending totaled $577.5 million on September 30, 2022, up 2.6 percent during the third quarter, 1.7 percent year-to-date and 1.2 percent from September 30, 2021.
As of September 30, 2022, PPP balances were paid down to $1.99 million and mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, totaled $194.7 million compared to $171.4 million at June 30, 2022 and $161.6 million at the year-ago period end.
Deposits totaled $3.1 billion on September 30, 2022, a 4.5 percent (or 17.9 percent annualized) increase during the third quarter, a 5.6 percent increase year-to-date and a 5.1 percent increase since September 30, 2021. Core deposits increased 5.1 percent during third quarter 2022 to $3.0 billion, and increased 6.0 percent year-to-date and 5.6 percent since September 30, 2021. Changes in core deposits by category are as follows:
- Non-interest bearing deposit accounts increased $18.3 million or 3.0 percent in the third quarter of 2022 and increased $43.5 million or 7.6 percent since September 30, 2021.
- Interest bearing checking accounts grew $237.3 million or 19.2 percent in the third quarter of 2022 and $354.6 million or 31.6 percent since September 30, 2021.
- Savings accounts declined $62.2 million or 9.6 percent in the third quarter of 2022 and $110.8 million or 16.0 percent since September 30, 2021.
- Core time deposits declined $47.9 million or 12.4 percent in the third quarter of 2022 and $128.4 million or 27.5 percent since September 30, 2021.
Total shareholders’ equity was $341.7 million as of September 30, 2022 compared to $327.5 million at December 31, 2021 and $323.3 million at September 30, 2021. Summit paid a quarterly common dividend of $0.20 per share in Q3 2022, representing an 11.1 percent increase compared to the $0.18 per share paid in Q2 2022.
Year-to-date 2022, TBVPCS has increased $1.15 to $20.69. TBVPCS was negatively impacted during the first nine months of 2022 by unrealized net losses on AFS debt securities of $3.21 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 $1.86 per common share (net of deferred income taxes), in the same period.
Summit had 12,774,645 outstanding common shares at the end of the third 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 third quarter of 2022, no shares of Summit’s common stock were repurchased under the Plan.
Asset Quality
Net loan charge-offs (“NCOs”) declined to $8,000 in the third quarter of 2022. NCOs of $159,000 represented 0.02 percent of average loans annualized in the linked quarter and $370,000 or 0.06 percent of average loans annualized in the year-ago period.
Summit recorded a $1.50 million provision for credit losses in the third 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 $2.00 million for the linked quarter and no provision was recorded for the year-ago quarter.
Summit’s allowance for loan credit losses was $36.8 million on September 30, 2022, $35.1 million at the end of the linked quarter, and $32.4 million on September 30, 2021.
The allowance for loan credit losses stood at 1.19 percent of total loans at September 30, 2022 compared to 1.18 percent at the end of the linked quarter, and 1.27 percent at September 30, 2021. The allowance was 399.5 percent of nonperforming loans at September 30, 2022, compared to 254.4 percent at year-end 2021 and 291.6 percent at September 30, 2021.
Summit’s allowance for credit losses on unfunded loan commitments was $7.60 million on September 30, 2022, $7.79 million at the end of the linked quarter and $5.86 million on September 30, 2021. The allowance for credit losses on unfunded loan commitments decreased $195,000 during the most recent quarter primarily due to a decrease in unfunded commitments for the period.
As of September 30, 2022, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $14.4 million, or 0.37 percent of assets, compared to NPAs of $16.3 million, or 0.43 percent of assets at the linked quarter-end, $22.6 million or 0.63 percent of assets at year-end 2021 and $23.6 million, or 0.67 percent of assets at the end of third quarter 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) Q3 2022 vs Q3 2021 For the Quarter Ended Percent Dollars in thousands 9/30/2022 9/30/2021 Change Statements of Income Interest income Loans, including fees $ 38,784 $ 28,416 36.5% Securities 3,497 2,348 48.9% Other 170 118 44.1% Total interest income 42,451 30,882 37.5% Interest expense Deposits 6,140 1,832 235.2% Borrowings 2,198 1,013 117.0% Total interest expense 8,338 2,845 193.1% Net interest income 34,113 28,037 21.7% Provision for credit losses 1,500 - n/a Net interest income after provision for credit losses 32,613 28,037 16.3% Noninterest income Trust and wealth management fees 725 718 1.0% Mortgage origination revenue 538 742 -27.5% Service charges on deposit accounts 1,550 1,338 15.8% Bank card revenue 1,639 1,509 8.6% Gains on equity investments 283 - n/a Realized (losses) on debt securities (242 ) (68 ) 255.9% Bank owned life insurance and annuity income 229 160 43.1% Other income 165 168 -1.8% Total noninterest income 4,887 4,567 7.0% Noninterest expense Salaries and employee benefits 10,189 8,745 16.5% Net occupancy expense 1,301 1,254 3.7% Equipment expense 1,851 1,908 -3.0% Professional fees 372 374 -0.5% Advertising and public relations 276 254 8.7% Amortization of intangibles 354 390 -9.2% FDIC premiums 292 354 -17.5% Bank card expense 726 705 3.0% Foreclosed properties expense, net of (gains)/losses 26 370 -93.0% Acquisition-related expense - 273 -100.0% Other expenses 3,834 2,716 41.2% Total noninterest expense 19,221 17,343 10.8% Income before income taxes 18,279 15,261 19.8% Income taxes 3,856 3,023 27.6% Net income 14,423 12,238 17.9% Preferred stock dividends 225 225 0.0% Net income applicable to common shares $ 14,198 $ 12,013 18.2% SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Quarterly Performance Summary (unaudited) Q3 2022 vs Q3 2021 For the Quarter Ended Percent 9/30/2022 9/30/2021 Change Per Share Data Earnings per common share Basic $ 1.11 $ 0.93 19.4% Diluted $ 1.11 $ 0.92 20.7% Cash dividends per common share $ 0.20 $ 0.18 11.1% Common stock dividend payout ratio 17.7% 19.1% -7.3% Average common shares outstanding Basic 12,766,473 12,964,575 -1.5% Diluted 12,835,670 13,018,672 -1.4% Common shares outstanding at period end 12,774,645 12,976,693 -1.6% Performance Ratios Return on average equity 17.05% 15.30% 11.4% Return on average tangible equity (C) 21.33% 19.51% 9.3% Return on average tangible common equity (D) 22.20% 20.34% 9.1% Return on average assets 1.51% 1.42% 6.3% Net interest margin (A) 3.84% 3.47% 10.7% Efficiency ratio (B) 47.95% 49.52% -3.2% 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) Nine Month Performance Summary (unaudited) 2022 vs 2021 For the Nine Months Ended Percent Dollars in thousands 9/30/2022 9/30/2021 Change Statements of Income Interest income Loans, including fees $ 101,774 $ 83,651 21.7% Securities 8,871 6,707 32.3% Other 262 240 9.2% Total interest income 110,907 90,598 22.4% Interest expense Deposits 10,489 6,464 62.3% Borrowings 5,785 3,035 90.6% Total interest expense 16,274 9,499 71.3% Net interest income 94,633 81,099 16.7% Provision for credit losses 5,450 2,500 118.0% Net interest income after provision for credit losses 89,183 78,599 13.5% Noninterest income Trust and wealth management fees 2,228 2,039 9.3% Mortgage origination revenue 1,194 2,638 -54.7% Service charges on deposit accounts 4,625 3,530 31.0% Bank card revenue 4,748 4,369 8.7% (Losses) on equity investments (14 ) - n/a Realized gains/(losses) on debt securities, net (684 ) 534 -228.1% Bank owned life insurance and annuity income 843 733 15.0% Other income 348 413 -15.7% Total noninterest income 13,288 14,256 -6.8% Noninterest expense Salaries and employee benefits 29,920 25,410 17.7% Net occupancy expense 3,801 3,559 6.8% Equipment expense 5,484 5,088 7.8% Professional fees 1,242 1,140 8.9% Advertising and public relations 613 482 27.2% Amortization of intangibles 1,088 1,176 -7.5% FDIC premiums 872 1,119 -22.1% Bank card expense 2,249 1,964 14.5% Foreclosed properties expense, net of (gains)/losses 77 1,342 -94.3% Acquisition-related expense 33 1,167 -97.2% Other expenses 8,651 8,365 3.4% Total noninterest expense 54,030 50,812 6.3% Income before income taxes 48,441 42,043 15.2% Income taxes 10,311 8,886 16.0% Net income 38,130 33,157 15.0% Preferred stock dividends 675 364 85.4% Net income applicable to common shares $ 37,455 $ 32,793 14.2% SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Nine Month Performance Summary (unaudited) 2022 vs 2021 For the Nine Months Ended Percent 9/30/2022 9/30/2021 Change Per Share Data Earnings per common share Basic $ 2.94 $ 2.53 16.2% Diluted $ 2.92 $ 2.52 15.9% Cash dividends per common share $ 0.56 $ 0.52 7.7% Common stock dividend payout ratio 18.7% 20.4% -8.3% Average common shares outstanding Basic 12,755,576 12,953,053 -1.5% Diluted 12,815,365 13,011,526 -1.5% Common shares outstanding at period end 12,774,645 12,976,693 -1.6% Performance Ratios Return on average equity 15.26% 14.51% 5.2% Return on average tangible equity (C) 19.23% 18.35% 4.8% Return on average tangible common equity (D) 20.00% 18.83% 6.2% Return on average assets 1.37% 1.34% 2.2% Net interest margin (A) 3.71% 3.56% 4.2% Efficiency ratio (B) 48.25% 49.54% -2.6% NOTES
(A) – Presented on a tax-equivalent basis assuming a federal tax rate of 21%.
(B) – Computed on a tax equivalent basis excluding acquisition-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.
(C) – Return on average tangible equity = (Net income + Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).
(D) – Return on average tangible common equity = (Net income 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 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Statements of Income Interest income Loans, including fees $ 38,784 $ 32,766 $ 30,224 $ 28,979 $ 28,416 Securities 3,497 2,752 2,623 2,763 2,348 Other 170 45 46 75 118 Total interest income 42,451 35,563 32,893 31,817 30,882 Interest expense Deposits 6,140 2,622 1,727 1,718 1,832 Borrowings 2,198 1,976 1,612 1,267 1,013 Total interest expense 8,338 4,598 3,339 2,985 2,845 Net interest income 34,113 30,965 29,554 28,832 28,037 Provision for credit losses 1,500 2,000 1,950 1,500 - Net interest income after provision for credit losses 32,613 28,965 27,604 27,332 28,037 Noninterest income Trust and wealth management fees 725 745 757 847 718 Mortgage origination revenue 538 317 339 1,361 742 Service charges on deposit accounts 1,550 1,674 1,401 1,501 1,338 Bank card revenue 1,639 1,618 1,491 1,528 1,509 Gains/(losses) on equity investments 283 (669 ) 372 202 - Realized (losses) on debt securities, net (242 ) (289 ) (152 ) (109 ) (68 ) Bank owned life insurance and annuity income 229 331 283 293 160 Other income 165 129 54 330 168 Total noninterest income 4,887 3,856 4,545 5,953 4,567 Noninterest expense Salaries and employee benefits 10,189 10,030 9,700 8,977 8,745 Net occupancy expense 1,301 1,258 1,242 1,265 1,254 Equipment expense 1,851 1,791 1,843 1,902 1,908 Professional fees 372 507 362 438 374 Advertising and public relations 276 165 172 216 254 Amortization of intangibles 354 355 378 387 390 FDIC premiums 292 190 390 330 354 Bank card expense 726 810 714 703 705 Foreclosed properties expense, net of (gains)/losses 26 141 (90 ) 403 370 Acquisition-related expenses - 4 29 57 273 Other expenses 3,834 2,358 2,459 3,250 2,716 Total noninterest expense 19,221 17,609 17,199 17,928 17,343 Income before income taxes 18,279 15,212 14,950 15,357 15,261 Income tax expense 3,856 3,198 3,257 2,777 3,023 Net income 14,423 12,014 11,693 12,580 12,238 Preferred stock dividends 225 225 225 225 225 Net income applicable to common shares $ 14,198 $ 11,789 $ 11,468 $ 12,355 $ 12,013 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Five Quarter Performance Summary (unaudited) For the Quarter Ended 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Per Share Data Earnings per common share Basic $ 1.11 $ 0.92 $ 0.90 $ 0.96 $ 0.93 Diluted $ 1.11 $ 0.92 $ 0.90 $ 0.95 $ 0.92 Cash dividends per common share $ 0.20 $ 0.18 $ 0.18 $ 0.18 $ 0.18 Common stock dividend payout ratio 17.7% 19.1% 19.7% 18.5% 19.1% Average common shares outstanding Basic 12,766,473 12,754,724 12,745,297 12,916,555 12,964,575 Diluted 12,835,670 12,810,174 12,801,903 12,976,181 13,018,672 Common shares outstanding at period end 12,774,645 12,763,422 12,753,094 12,743,125 12,976,693 Performance Ratios Return on average equity 17.05% 14.48% 14.20% 15.48% 15.30% Return on average tangible equity (C) 21.33% 18.28% 18.02% 19.72% 19.51% Return on average tangible common equity (D) 22.20% 19.00% 18.74% 20.55% 20.34% Return on average assets 1.51% 1.30% 1.30% 1.42% 1.42% Net interest margin (A) 3.84% 3.66% 3.61% 3.49% 3.47% Efficiency ratio (B) 47.95% 47.45% 49.44% 48.85% 49.52% 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 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Assets Cash and due from banks $ 16,141 $ 17,921 $ 18,404 $ 21,006 $ 21,247 Interest bearing deposits other banks 29,510 31,680 42,853 57,452 189,862 Debt securities, available for sale 383,965 368,049 374,855 401,103 424,741 Debt securities, held to maturity 96,640 97,116 97,589 98,060 98,528 Equity investments 20,314 19,905 20,574 20,202 - Other investments 18,105 18,329 10,974 11,304 10,649 Loans, net 3,038,377 2,941,813 2,817,998 2,729,093 2,521,704 Property held for sale 5,193 5,319 6,900 9,858 12,450 Premises and equipment, net 54,628 55,034 55,713 56,371 56,818 Goodwill and other intangible assets, net 62,502 62,856 63,212 63,590 63,977 Cash surrender value of life insurance policies and annuities 71,216 71,073 70,825 60,613 60,241 Derivative financial instruments 42,179 31,452 24,455 11,187 10,380 Other assets 48,529 42,252 39,339 36,880 38,354 Total assets $ 3,887,299 $ 3,762,799 $ 3,643,691 $ 3,576,719 $ 3,508,951 Liabilities and Shareholders' Equity Deposits $ 3,108,072 $ 2,975,304 $ 3,008,063 $ 2,943,089 $ 2,955,940 Short-term borrowings 273,148 291,447 140,146 140,146 140,146 Long-term borrowings and subordinated debentures, net 123,427 123,311 123,260 123,159 49,739 Other liabilities 40,978 38,846 41,756 42,852 39,837 Preferred stock and related surplus 14,920 14,920 14,920 14,920 14,920 Common stock and related surplus 90,345 90,008 89,675 89,301 95,577 Retained earnings 248,084 236,438 226,944 217,770 207,704 Accumulated other comprehensive income (loss) (11,675 ) (7,475 ) (1,073 ) 5,482 5,088 Total liabilities and shareholders' equity $ 3,887,299 $ 3,762,799 $ 3,643,691 $ 3,576,719 $ 3,508,951 Book value per common share $ 25.58 $ 24.99 $ 24.74 $ 24.53 $ 23.76 Tangible book value per common share (A) $ 20.69 $ 20.07 $ 19.79 $ 19.54 $ 18.83 Tangible common equity to tangible assets (B) 6.9% 6.9% 7.0% 7.1% 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) 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Summit Financial Group, Inc. CET1 Risk-based Capital 8.2 % 8.2 % 8.3 % 8.4 % 9.0 % Tier 1 Risk-based Capital 9.2 % 9.2 % 9.3 % 9.5 % 10.2 % Total Risk-based Capital 13.1 % 13.3 % 13.5 % 13.8 % 12.1 % Tier 1 Leverage 8.4 % 8.4 % 8.4 % 8.3 % 8.4 % Summit Community Bank, Inc. CET1 Risk-based Capital 11.3 % 11.4 % 11.6 % 11.9 % 11.2 % Tier 1 Risk-based Capital 11.3 % 11.4 % 11.6 % 11.9 % 11.2 % Total Risk-based Capital 12.2 % 12.4 % 12.5 % 12.8 % 12.1 % Tier 1 Leverage 10.3 % 10.4 % 10.5 % 10.4 % 9.2 % SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Loan Composition (unaudited) Dollars in thousands 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Commercial $ 512,771 $ 455,202 $ 447,482 $ 365,301 $ 317,855 Mortgage warehouse lines 194,740 171,399 164,895 227,869 161,628 Commercial real estate Owner occupied 473,298 502,152 491,059 484,708 439,202 Non-owner occupied 960,627 963,646 910,174 866,031 835,071 Construction and development Land and development 104,437 106,840 103,203 100,805 99,718 Construction 248,564 211,955 171,383 146,038 127,432 Residential real estate Conventional 382,203 377,980 375,240 384,794 394,889 Jumbo 87,449 79,803 81,443 79,108 71,977 Home equity 72,756 71,136 70,770 72,112 71,496 Consumer 35,116 33,816 32,095 31,923 32,284 Other 3,166 2,947 2,877 2,702 2,558 Total loans, net of unearned fees 3,075,127 2,976,876 2,850,621 2,761,391 2,554,110 Less allowance for loan credit losses 36,750 35,063 32,623 32,298 32,406 Loans, net $ 3,038,377 $ 2,941,813 $ 2,817,998 $ 2,729,093 $ 2,521,704 Unfunded loan commitments $ 889,854 $ 876,157 $ 840,705 $ 688,493 $ 627,461 SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF) Deposit Composition (unaudited) Dollars in thousands 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Core deposits Non-interest bearing checking $ 619,067 $ 600,791 $ 629,002 $ 568,986 $ 575,542 Interest bearing checking 1,475,643 1,238,368 1,134,964 1,127,298 1,121,028 Savings 582,922 645,099 702,069 698,156 693,686 Time deposits 338,668 386,562 427,076 451,713 467,024 Total core deposits 3,016,300 2,870,820 2,893,111 2,846,153 2,857,280 Brokered time deposits 32,778 32,767 32,755 14,677 14,671 Other non-core time deposits 58,994 71,717 82,197 82,259 83,989 Total deposits $ 3,108,072 $ 2,975,304 $ 3,008,063 $ 2,943,089 $ 2,955,940 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Asset Quality Information (unaudited) For the Quarter Ended Dollars in thousands 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Gross loan charge-offs $ 265 $ 306 $ 618 $ 282 $ 528 Gross loan recoveries (257 ) (147 ) (109 ) (89 ) (158 ) Net loan charge-offs $ 8 $ 159 $ 509 $ 193 $ 370 Net loan charge-offs to average loans (annualized) 0.00% 0.02% 0.07% 0.03% 0.06% Allowance for loan credit losses $ 36,750 $ 35,063 $ 32,623 $ 32,298 $ 32,406 Allowance for loan credit losses as a percentage of period end loans 1.19% 1.18% 1.14% 1.17% 1.27% Allowance for credit losses on unfunded loan commitments ("ULC") $ 7,597 $ 7,792 $ 8,392 $ 7,275 $ 5,860 Allowance for credit losses on ULC as a percentage of period end ULC 0.85% 0.89% 1.00% 1.06% 0.93% Nonperforming assets: Nonperforming loans Commercial $ 347 $ 345 $ 433 $ 740 $ 459 Commercial real estate 1,860 2,703 4,765 4,603 4,643 Residential construction and development 902 1,053 968 1,560 448 Residential real estate 6,083 6,799 5,549 5,772 5,514 Consumer 8 37 20 21 48 Total nonperforming loans 9,200 10,937 11,735 12,696 11,112 Foreclosed properties Commercial real estate 297 440 1,251 1,389 2,192 Commercial construction and development 2,332 2,332 2,332 2,332 2,925 Residential construction and development 2,293 2,293 3,018 5,561 6,712 Residential real estate 271 254 299 576 621 Total foreclosed properties 5,193 5,319 6,900 9,858 12,450 Other repossessed assets - - - - - Total nonperforming assets $ 14,393 $ 16,256 $ 18,635 $ 22,554 $ 23,562 Nonperforming loans to period end loans 0.30% 0.37% 0.41% 0.46% 0.44% Nonperforming assets to period end assets 0.37% 0.43% 0.51% 0.63% 0.67% Troubled debt restructurings Performing $ 18,206 $ 18,657 $ 18,971 $ 18,887 $ 20,535 Nonperforming 1,920 2,236 1,822 2,039 1,141 Total troubled debt restructurings $ 20,126 $ 20,893 $ 20,793 $ 20,926 $ 21,676 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Loans Past Due 30-89 Days (unaudited) Dollars in thousands 9/30/2022 6/30/2022 3/31/2022 12/31/2021 9/30/2021 Commercial $ 1,329 $ 989 $ 388 $ 751 $ 304 Commercial real estate 1,550 4,084 1,446 683 281 Construction and development 236 821 645 45 1,215 Residential real estate 2,824 3,452 3,407 3,552 2,643 Consumer 216 196 69 190 193 Other 4 14 28 22 1 Total $ 6,159 $ 9,556 $ 5,983 $ 5,243 $ 4,637 SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF) Average Balance Sheet, Interest Earnings & Expenses and Average Rates Q3 2022 vs Q2 2022 vs Q3 2021 (unaudited) Q3 2022 Q2 2022 Q3 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 $ 3,018,219 $ 38,741 5.09 % $ 2,902,370 $ 32,721 4.52 % $ 2,495,880 $ 28,340 4.50 % Tax-exempt (2) 4,834 54 4.43 % 5,127 57 4.46 % 7,871 96 4.84 % Securities Taxable 283,645 2,273 3.18 % 297,701 1,765 2.38 % 315,082 1,432 1.80 % Tax-exempt (2) 203,951 1,549 3.01 % 178,043 1,249 2.81 % 166,285 1,159 2.77 % Interest bearing deposits other banks and Federal funds sold 49,048 170 1.38 % 37,757 45 0.48 % 248,315 118 0.19 % Total interest earning assets 3,559,697 42,787 4.77 % 3,420,998 35,837 4.20 % 3,233,433 31,145 3.82 % Noninterest earning assets Cash & due from banks 17,455 16,351 20,077 Premises & equipment 54,976 55,449 55,908 Intangible assets 62,705 63,058 62,944 Other assets 171,409 165,788 113,031 Allowance for credit losses (35,381 ) (33,232 ) (33,911 ) Total assets $ 3,830,861 $ 3,688,412 $ 3,451,482 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilities Interest bearing demand deposits $ 1,454,815 $ 4,276 1.17 % $ 1,189,324 $ 1,274 0.43 % $ 1,092,392 $ 325 0.12 % Savings deposits 611,075 1,243 0.81 % 672,353 689 0.41 % 691,411 602 0.35 % Time deposits 461,134 621 0.53 % 517,360 659 0.51 % 571,445 905 0.63 % Short-term borrowings 191,421 850 1.76 % 207,227 696 1.35 % 140,146 470 1.33 % Long-term borrowings and subordinated debentures 123,368 1,348 4.34 % 123,263 1,280 4.17 % 49,724 543 4.33 % Total interest bearing liabilities 2,841,813 8,338 1.16 % 2,709,527 4,598 0.68 % 2,545,118 2,845 0.44 % Noninterest bearing liabilities . Demand deposits 609,424 605,724 547,627 Other liabilities 41,339 41,307 38,789 Total liabilities 3,492,576 3,356,558 3,131,534 Shareholders' equity - preferred 14,920 14,920 14,920 Shareholders' equity - common 323,365 316,934 305,028 Total liabilities and shareholders' equity $ 3,830,861 $ 3,688,412 $ 3,451,482 NET INTEREST EARNINGS $ 34,449 $ 31,239 $ 28,300 NET INTEREST MARGIN 3.84 % 3.66 % 3.47 % (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 $336,000, $274,000, and $263,000 for Q3 2022, Q2 2022 and Q3 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 $ 2,898,380 $ 101,640 4.69 % $ 2,436,295 $ 83,352 4.57 % Tax-exempt (2) 5,108 170 4.45 % 10,622 377 4.75 % Securities Taxable 300,371 5,695 2.53 % 288,999 4,079 1.89 % Tax-exempt (2) 187,575 4,021 2.87 % 153,035 3,328 2.91 % Interest bearing deposits other banks and Federal funds sold 53,142 262 0.66 % 190,154 240 0.17 % Total interest earning assets 3,444,576 111,788 4.34 % 3,079,105 91,376 3.97 % Noninterest earning assets Cash & due from banks 17,671 19,093 Premises & equipment 55,486 54,154 Intangible assets 63,061 57,343 Other assets 159,912 113,525 Allowance for loan losses (33,705 ) (33,765 ) Total assets $ 3,707,001 $ 3,289,455 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Interest bearing liabilities Interest bearing demand deposits $ 1,260,907 $ 6,015 0.64 % $ 1,016,569 $ 1,090 0.14 % Savings deposits 660,855 2,505 0.51 % 666,642 1,881 0.38 % Time deposits 506,654 1,969 0.52 % 572,547 3,493 0.82 % Short-term borrowings 179,813 1,918 1.43 % 140,146 1,403 1.34 % Long-term borrowings and subordinated debentures 123,279 3,867 4.19 % 49,694 1,632 4.39 % 2,731,508 16,274 0.80 % 2,445,598 9,499 0.52 % Noninterest bearing liabilities Demand deposits 600,766 501,309 Other liabilities 41,541 37,856 Total liabilities 3,373,815 2,984,763 Shareholders' equity - preferred 14,920 8,780 Shareholders' equity - common 318,266 295,912 Total liabilities and shareholders' equity $ 3,707,001 $ 3,289,455 NET INTEREST EARNINGS $ 95,514 $ 81,877 NET INTEREST MARGIN 3.71 % 3.56 % (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 $881,000 and $778,000 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 
