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GlobeNewswire (Europe)
278 Leser
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(1)

Summit Financial Group, Inc.: Summit Financial Group Reports Earnings of $1.09 Per Share for Third Quarter 2023

MOOREFIELD, W.Va., Oct. 26, 2023 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (NASDAQ: SMMF) today reported financial results for the third quarter of 2023, highlighting robust core operating performance marked by continued notable strength in its net interest margin. The Company's continued success underscores its position as an exceptional community bank, reflecting a sound strategy and solid operational execution.

The Company, which serves commercial and individual clients across West Virginia, the Washington D.C. metropolitan area, Virginia, Kentucky, the Eastern Shore of Maryland and Delaware through Summit Community Bank, Inc., reported net income applicable to common shares of $16.1 million, or $1.09 per diluted share, for the third quarter of 2023, as compared to $7.98 million, or $0.54 per diluted share, for the second quarter of 2023 and $14.2 million, or $1.11 per diluted share, for the third quarter of 2022. Higher earnings in Q3 2023 were driven primarily by lower provision for credit losses and acquisition-related expenses compared to Q2 2023 as Q2 included significant acquisition-related expenses attributable to the acquisition of PSB Holding Corp. and its bank subsidiary, Provident State Bank, Inc. ("PSB") and higher provision for credit losses recorded on purchased non-credit deteriorated ("non-PCD") loans from PSB and on a nonperforming commercial real estate participation loan.

"We are extremely encouraged by our achievements in the third quarter of 2023, as our strategic initiatives have continued to bear fruit in several critical areas," stated H. Charles Maddy III, President and Chief Executive Officer of Summit Financial Group. "Our core operational performance was robust, demonstrated by favorable net interest margin and a marked growth in our core deposits, reflecting the strong confidence our customers place in us."

Mr. Maddy continued, "A pivotal highlight of this quarter was the announcement of our merger of peers with Burke & Herbert Financial Services Corp. ("Burke & Herbert") headquartered in Alexandria, Virginia, a renowned financial institution located in one of the best banking markets in the U.S. This significant step forward is not just a growth strategy but a commitment to expanding our service excellence and community impact. We anticipate this consolidation to be a cornerstone event in our history, positioning us for substantial opportunities in 2024 and beyond." Mr. Maddy concluded, "Looking ahead as we edge closer to the culmination of our strategic merger with Burke & Herbert, we remain committed to enhancing shareholder value, driven by our foundational strengths and synergistic growth plans. With our dedicated team, resilient strategies and community trust, we are optimistic and geared up for the opportunities and challenges ahead."

Key Highlights for the Third Quarter of 2023

  • Summit Financial Group, Inc. entered into an Agreement and Plan of Reorganization with Burke & Herbert pursuant to which Summit will merge with and into Burke & Herbert, with Burke & Herbert as the surviving entity. Immediately following the Merger, Summit Community Bank, Inc., Summit's wholly owned banking subsidiary, will be merged with Burke & Herbert's wholly-owned banking subsidiary, Burke & Herbert Bank & Trust Company, with B&H Bank the surviving bank. The transaction is expected to close in Q1 2024.
  • Our net interest margin ("NIM") decreased 1 basis point to 3.88 percent from the linked quarter and increased by 4 basis points from the prior-year quarter.
  • Summit's core deposits experienced modest growth in the third quarter of 2023, up 1.1 percent from the linked quarter, showcasing customer confidence and a robust deposit base.
  • The third quarter saw a modest increase in total loans, excluding mortgage warehouse lines of credit and acquired loans, registering an increase of 1.47 percent (5.87 percent annualized). This performance was further underscored by a year-over-year growth of 4.87 percent, a testament to our successful lending approach and effective customer acquisition.
  • The Company's provision for credit losses totaled $1.25 million in the third quarter of 2023 compared to $8.00 million in the linked quarter. Included in the Company's Q2 2023 provision for credit losses was $3.01 million to establish an allowance on non-PCD loans acquired from PSB in accordance with the Current Expected Credit Loss accounting standard and $3.66 million to recognize an allowance on a nonperforming commercial real estate loan participation.
  • Summit achieved an efficiency ratio of 47.15 percent, a marked improvement from 47.90 percent in the linked quarter, indicating optimized use of resources.
  • Annualized non-interest expense ratio decreased to 2.10 percent of average assets from 2.41 percent in the previous quarter and increased from 2.01 percent in the same quarter last year. Excluding acquisition-related expenses, annualized non-interest expense would have been 2.01 percent of average assets in Q3 2023 and 2.05 percent of average assets for Q2 2023.

Results from Operations

Net interest income totaled $41.3 million in the third quarter of 2023, marking an increase of 21.0 percent from the prior-year third quarter and 2.4 percent from the linked quarter. This robust growth is attributable primarily to our strategic expansion of the loan portfolio and optimizations in investment allocations. NIM for the third quarter 2023 was 3.88 percent compared to 3.89 percent for the linked quarter and 3.84 percent for the prior-year quarter, representing a stable margin performance despite volatile interest rates.

Summit recorded a $1.25 million provision for credit losses in the third quarter of 2023. The provision for credit losses was $8.0 million for the linked quarter, which included $3.01 million to establish an allowance on non-PCD loans acquired from PSB in accordance with the CECL accounting standard and $3.66 million, an allowance for a nonperforming loan participation with a regional bank secured by a shopping complex at the fair value of its collateral. The provision for credit losses was $1.5 million in the third quarter of 2022.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for third quarter 2023 was $5.27 million compared to $5.42 million for the linked quarter and $4.89 million for the comparable period of 2022. The Company recorded realized securities losses on debt securities of $12,000 in the third quarter of 2023 and $211,000 in the linked quarter. In addition, the Company recognized net gains on equity investments of $180,000 in the third quarter 2023 compared to $150,000 in the linked quarter. Excluding gains and losses from debt securities and equity investments, the combined revenue from net interest income and non-interest income for Q3 2023 rose to $46.4 million. This represents an increase of 1.3 percent from $45.8 million in the linked quarter and a substantial 19.0 percent growth from $39.0 million recorded in the third quarter of 2022.

Total noninterest expense decreased to $24.2 million in the third quarter of 2023, down 11.6 percent from $27.3 million in the linked quarter primarily due to fewer acquisition-related expenses in the third quarter. Conversely, there was a 25.7 percent hike from $19.2 million for the same quarter in the prior year, attributed mainly to the assimilation of operational costs from the newly integrated PSB operations.

Salary and benefit expenses were $12.0 million in the third quarter of 2023, a nominal decrease from $12.2 million in the preceding quarter but up from $10.2 million in the same period last year. The year-over-year increase was primarily due to the PSB acquisition and higher group health insurance premiums.

Acquisition-related expenses were $1.11 million for Q3 2023, representing legal, due diligence and fairness opinion costs relative to the Burke & Herbert merger, compared to $4.16 million for the linked quarter, consisting of contract termination costs, executive and employee severance benefits and legal and consulting fees associated with the PSB acquisition, and none during Q3 2022.

Summit's efficiency ratio improved, registering 47.15 percent in the third quarter of 2023, a decrease from 47.95 percent in the third quarter of 2022, and marginally better than the 47.90 percent in the linked quarter. Concurrently, the non-interest expense to average assets ratio was optimized to 2.10 percent, compared to 2.41 percent in the previous quarter, indicating enhanced operational efficiency despite the expanded asset base post-PSB acquisition.

Balance Sheet

As of September 30, 2023, total assets were $4.6 billion, an increase of $687.5 million, or 17.6 percent since December 31, 2022. Excluding acquired PSB assets, total assets increased by $119.2 million, or 3.0 percent since December 31, 2022.

Total loans net of unearned fees increased to $3.6 billion as of September 30, 2023, from $3.1 billion at December 31, 2022, and increased 17.0 percent from the third quarter of 2022. Total loans, excluding those related to mortgage warehouse lending and acquired loans, reached $3.1 billion on September 30, 2023. This represents an increase of 1.65 percent (or 6.59 percent when annualized) during the quarter just ended.

Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE), increased 0.3 percent (1.1 percent annualized) during the third quarter to $2.3 billion as of September 30, 2023.

Residential real estate and consumer lending totaled $737.2 million on September 30, 2023, reflecting an increase of 0.75 percent (3.0 percent annualized) during the third quarter.

As of September 30, 2023, mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, totaled $114.7 million compared to $130.4 million as of December 31, 2022, and $194.7 million at the year-ago period end.

Deposits totaled $3.8 billion on September 30, 2023, a 0.5 percent increase during the third quarter. Core deposits increased 1.1 percent during the third quarter 2023 to $3.7 billion. Adjusted uninsured deposits (excluding uninsured public deposits otherwise secured or collateralized as required by law) were 34.2 percent of total deposits at September 30, 2023 compared to 29.8 percent at year-end 2022 and 24.4 percent at the year-ago period end.

Total shareholders' equity was $416.5 million as of September 30, 2023, compared to $354.5 million at December 31, 2022. Summit paid a quarterly common dividend of $0.22 per share in the third quarter of 2023.

Tangible Book Value Per Share ("TBVPS") increased by $0.29 to $22.22 during the third quarter of 2023, representing a 1.3 percent increase. This increase was primarily due to retained earnings which more than offset the decline in the fair value of available for sale securities reflected in accumulated other comprehensive loss. Summit had 14,674,852 outstanding common shares at September 30, 2023, compared to 12,783,646 at year-end 2022.

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 2023, no shares of Summit's common stock were repurchased under the Plan.

Asset Quality

The Company recorded net loan charge-offs ("NCOs") of $118,000 during the third quarter 2023, representing 0.01 percent of average loans annualized, compared to $3.8 million, representing 0.44 percent of average loans annualized, in the linked quarter. NCOs of $8,000 represented 0.0 percent of average loans annualized in the year-ago period.

Summit's allowance for loan credit losses was $47.2 million on September 30, 2023, $45.7 million at the end of the linked quarter, and $36.8 million on September 30, 2022. As of September 30, 2023, the allowance for loan credit losses stood at 1.31 percent of total loans, reflecting a slight increase compared to the rate of 1.26 percent recorded as of December 31, 2022. In terms of the allowance's coverage, it represented 367.7 percent of nonperforming loans at September 30, 2023, in contrast to the figure of 497.2 percent at December 31, 2022.

Summit's allowance for credit losses on unfunded loan commitments was $6.91 million as of September 30, 2023, compared to $7.33 million at the end of the linked quarter. During the most recent quarter, the allowance for credit losses on unfunded loan commitments decreased by $420,000, primarily due to a reduction in unfunded loan balances.

As of September 30, 2023, nonperforming assets ("NPAs"), consisting of nonperforming loans, foreclosed properties, and repossessed assets, totaled $17.4 million, or 0.38 percent of assets, compared to NPAs of $12.9 million, or 0.33 percent of assets at year-end 2022.

About the Company

Summit Financial Group, Inc. is the $4.6 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, Kentucky, Eastern Shore of Maryland and Delaware. 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 54 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.

Non-GAAP Financial Measures

In addition to the results of operations presented in accordance with Generally Accepted Accounting Principles (GAAP), Summit's management uses, and this press release contains or references, certain non-GAAP financial measures, such as tangible common equity/tangible assets; efficiency ratio; return on average tangible equity and return on average tangible common equity. Summit believes these financial measures provide information useful to investors in understanding our operational performance and business and performance trends which facilitate comparisons with the performance of others in the financial services industry. Although Summit believes that these non-GAAP financial measures enhance investors' understanding of Summit's business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP or are they necessarily comparable to non-GAAP performance measures presented by other companies.

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 pandemics, 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; changes in the national and local economies, the impact of natural disasters, extreme weather events, military conflict (including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas, the possible expansion of such conflicts and potential geopolitical consequences), terrorism or other geopolitical events; delays in completing the pending merger of Summit and Burke & Herbert, the failure to obtain necessary regulatory approvals and shareholder approvals or to satisfy any of the other conditions to the merger on a timely basis or at all, the possibility that the anticipated benefits of the merger are not realized when expected or at all, corporate strategies or objectives, including the impact of certain actions and initiatives, anticipated trends in Summit's business, regulatory developments, estimated synergies, cost savings and financial benefits of completed transactions, growth strategies, the inability to realize cost savings or improved revenues or to implement integration plans and other consequences associated with the proposed merger; and the other factors discussed in the "Risk Factors" section of Summit's Annual Report on Form 10-K for the year ended December 31, 2022, in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of Summit's Quarterly Report on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023, and other reports Summit files with the SEC. We undertake no obligation to revise these statements following the date of this press release.

Additional Information and Where to Find It

In connection with the proposed transaction, Burke & Herbert filed a registration statement on Form S-4 with the SEC on October 2, 2023. The registration statement includes a joint proxy statement of Burke & Herbert and Summit, which also constitutes a prospectus of Burke & Herbert, that was declared effective by the SEC on October 16, 2023. A copy of the joint proxy statement/prospectus has been sent to shareholders of Burke & Herbert and shareholders of Summit seeking certain approvals related to the proposed transaction.

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. INVESTORS AND SHAREHOLDERS OF BURKE & HERBERT AND SUMMIT AND THEIR RESPECTIVE AFFILIATES ARE URGED TO READ, THE REGISTRATION STATEMENT ON FORM S-4, THE JOINT PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT BURKE & HERBERT, SUMMIT AND THE PROPOSED TRANSACTION. Investors and shareholders will be able to obtain a free copy of the registration statement, including the joint proxy statement/prospectus, as well as other relevant documents filed with the SEC containing information about Burke & Herbert and Summit, without charge, at the SEC's website www.sec.gov. Copies of documents filed with the SEC by Burke & Herbert will be made available free of charge in the "Investor Relations" section of Burke & Herbert's website, www.burkeandherbertbank.com, under the heading "Financials." Copies of documents filed with the SEC by Summit will be made available free of charge in the "News" section of Summit's website, www.summitfgi.com, under the heading "News / Presentations and Events" link.

Participants in Solicitation

Burke & Herbert, Summit, and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction under the rules of the SEC. Information regarding Burke & Herbert's directors and executive officers is available in its Registration Statement on Form 10, as amended and as ordered effective by the SEC on April 21, 2023. Information regarding Summit's directors and executive officers is available in its definitive proxy statement, which was filed with the SEC on March 31, 2023, and certain other documents filed by Summit with the SEC. Other information regarding the participants in the solicitation of proxies in respect of the proposed transaction and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC. Free copies of these documents, when available, may be obtained as described in the preceding paragraph.


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q3 2023 vs Q3 2022
For the Quarter EndedPercent
Dollars in thousands9/30/20239/30/2022Change
Statements of Income
Interest income
Loans, including fees$58,102 $38,784 49.8%
Securities 6,357 3,497 81.8%
Other 235 170 38.2%
Total interest income 64,694 42,451 52.4%
Interest expense
Deposits 19,924 6,140 224.5%
Borrowings 3,497 2,198 59.1%
Total interest expense 23,421 8,338 180.9%
Net interest income 41,273 34,113 21.0%
Provision for credit losses 1,250 1,500 -16.7%
Net interest income after provision
for credit losses 40,023 32,613 22.7%
Noninterest income
Trust and wealth management fees 819 725 13.0%
Mortgage origination revenue 172 538 -68.0%
Service charges on deposit accounts 1,775 1,550 14.5%
Bank card revenue 1,907 1,639 16.4%
Net gains on equity investments 180 283 -36.4%
Net realized losses on debt securities (12) (242)-95.0%
Bank owned life insurance and annuity income 311 229 35.8%
Other income 113 165 -31.5%
Total noninterest income 5,265 4,887 7.7%
Noninterest expense
Salaries and employee benefits 11,959 10,189 17.4%
Net occupancy expense 1,436 1,301 10.4%
Equipment expense 2,361 1,851 27.6%
Professional fees 400 372 7.5%
Advertising and public relations 247 276 -10.5%
Amortization of intangibles 998 354 181.9%
FDIC premiums 716 292 145.2%
Bank card expense 972 726 33.9%
Foreclosed properties expense, net of (gains)/losses 10 26 -61.5%
Acquisition-related expense 1,110 - n/m
Other expenses 3,953 3,834 3.1%
Total noninterest expense 24,162 19,221 25.7%
Income before income taxes 21,126 18,279 15.6%
Income taxes 4,794 3,856 24.3%
Net income 16,332 14,423 13.2%
Preferred stock dividends 225 225 n/a
Net income applicable to common shares$ 16,107 $ 14,198 13.4%



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q3 2023 vs Q3 2022
For the Quarter EndedPercent
9/30/20239/30/2022Change
Per Share Data
Earnings per common share
Basic$1.10 $1.11 -0.9%
Diluted$1.09 $1.11 -1.8%
Cash dividends per common share$0.22 $0.20 10.0%
Common stock dividend payout ratio 19.8% 17.7%11.5%
Average common shares outstanding
Basic 14,672,176 12,766,473 14.9%
Diluted 14,714,211 12,835,670 14.6%
Common shares outstanding at period end 14,674,852 12,774,645 14.9%
Performance Ratios
Return on average equity 15.66% 17.05%-8.2%
Return on average tangible equity (C)(E) 20.03% 21.33%-6.1%
Return on average tangible common equity (D)(E) 20.95% 22.20%-5.6%
Return on average assets 1.42% 1.51%-6.0%
Net interest margin (A) 3.88% 3.84%1.0%
Efficiency ratio (B) 47.15% 47.95%-1.7%

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).

(E) - See Non-GAAP Financial Measures for additional information relating to the calculation of this item.


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Nine Month Performance Summary (unaudited)
2023 vs 2022
For the Nine Months EndedPercent
Dollars in thousands9/30/20239/30/2022Change
Statements of Income
Interest income
Loans, including fees$157,999 $101,774 55.2%
Securities 17,423 8,871 96.4%
Other 610 262 132.8%
Total interest income 176,032 110,907 58.7%
Interest expense
Deposits 51,775 10,489 393.6%
Borrowings 8,481 5,785 46.6%
Total interest expense 60,256 16,274 270.3%
Net interest income 115,776 94,633 22.3%
Provision for credit losses 10,750 5,450 97.2%
Net interest income after provision
for credit losses 105,026 89,183 17.8%
Noninterest income
Trust and wealth management fees 2,484 2,228 11.5%
Mortgage origination revenue 513 1,194 -57.0%
Service charges on deposit accounts 5,110 4,625 10.5%
Bank card revenue 5,462 4,748 15.0%
Net gains/(losses) on equity investments 375 (14)n/m
Net realized losses on debt securities, net (282) (684)-58.8%
Bank owned life insurance and annuity income 1,078 843 27.9%
Other income 334 348 -4.0%
Total noninterest income 15,074 13,288 13.4%
Noninterest expense
Salaries and employee benefits 34,922 29,920 16.7%
Net occupancy expense 4,297 3,801 13.0%
Equipment expense 6,752 5,484 23.1%
Professional fees 1,246 1,242 0.3%
Advertising and public relations 681 613 11.1%
Amortization of intangibles 2,340 1,088 115.1%
FDIC premiums 1,788 872 105.0%
Bank card expense 2,620 2,249 16.5%
Foreclosed properties expense, net of (gains)/losses 73 77 -5.2%
Acquisition-related expense 5,604 33 n/m
Other expenses 10,563 8,651 22.1%
Total noninterest expense 70,886 54,030 31.2%
Income before income taxes 49,214 48,441 1.6%
Income taxes 10,572 10,311 2.5%
Net income 38,642 38,130 1.3%
Preferred stock dividends 675 675 0.0%
Net income applicable to common shares$ 37,967 $ 37,455 1.4%



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Nine Month Performance Summary (unaudited)
2023 vs 2022
For the Nine Months EndedPercent
9/30/20239/30/2022Change
Per Share Data
Earnings per common share
Basic$2.70 $2.94 -8.2%
Diluted$2.69 $2.92 -7.9%
Cash dividends per common share$0.62 $0.56 10.7%
Common stock dividend payout ratio 22.6% 18.7%20.7%
Average common shares outstanding
Basic 14,048,567 12,755,576 10.1%
Diluted 14,090,796 12,815,365 10.0%
Common shares outstanding at period end 14,674,852 12,774,645 14.9%
Performance Ratios
Return on average equity 12.97% 15.26%-15.0%
Return on average tangible equity (C) (E) 17.60% 19.23%-8.5%
Return on average tangible common equity (D) (E) 17.42% 20.00%-12.9%
Return on average assets 1.18% 1.37%-13.9%
Net interest margin (A) 3.87% 3.71%4.3%
Efficiency ratio (B) 47.66% 48.25%-1.2%

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).

(E) - See Non-GAAP Financial Measures for additional information relating to the calculation of this item.



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
For the Quarter Ended
Dollars in thousands9/30/20236/30/20233/31/202312/31/20229/30/2022
Statements of Income
Interest income
Loans, including fees$58,102 $54,413 $45,485 $43,589 $38,784
Securities 6,357 6,247 4,819 4,181 3,497
Other 235 203 171 70 170
Total interest income 64,694 60,863 50,475 47,840 42,451
Interest expense
Deposits 19,924 17,851 14,000 10,194 6,140
Borrowings 3,497 2,699 2,286 3,293 2,198
Total interest expense 23,421 20,550 16,286 13,487 8,338
Net interest income 41,273 40,313 34,189 34,353 34,113
Provision for credit losses 1,250 8,000 1,500 1,500 1,500
Net interest income after provision
for credit losses 40,023 32,313 32,689 32,853 32,613
Noninterest income
Trust and wealth management fees 819 854 811 750 725
Mortgage origination revenue 172 169 171 286 538
Service charges on deposit accounts 1,775 1,943 1,392 1,526 1,550
Bank card revenue 1,907 1,987 1,568 1,513 1,639
Net gains on equity investments 180 150 45 280 283
Net realized losses on debt securities (12) (211) (59) (24) (242)
Bank owned life insurance and annuity income 311 431 336 367 229
Other income 113 100 122 167 165
Total noninterest income 5,265 5,423 4,386 4,865 4,887
Noninterest expense
Salaries and employee benefits 11,959 12,156 10,807 10,532 10,189
Net occupancy expense 1,436 1,528 1,333 1,328 1,301
Equipment expense 2,361 2,361 2,030 1,769 1,851
Professional fees 400 471 376 386 372
Advertising and public relations 247 264 170 280 276
Amortization of intangibles 998 999 343 351 354
FDIC premiums 716 742 330 352 292
Bank card expense 972 951 696 679 726
Foreclosed properties expense, net of (gains)/losses 10 48 15 159 26
Acquisition-related expenses 1,110 4,163 331 81 -
Other expenses 3,953 3,641 2,968 2,932 3,834
Total noninterest expense 24,162 27,324 19,399 18,849 19,221
Income before income taxes 21,126 10,412 17,676 18,869 18,279
Income tax expense 4,794 2,203 3,575 3,783 3,856
Net income 16,332 8,209 14,101 15,086 14,423
Preferred stock dividends 225 225 225 225 225
Net income applicable to common shares$ 16,107 $ 7,984 $ 13,876 $ 14,861 $ 14,198



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
For the Quarter Ended
9/30/20236/30/20233/31/202312/31/20229/30/2022
Per Share Data
Earnings per common share
Basic$1.10 $0.54 $1.09 $1.16 $1.11
Diluted$1.09 $0.54 $1.08 $1.16 $1.11
Cash dividends per common share$0.22 $0.20 $0.20 $0.20 $0.20
Common stock dividend payout ratio 19.8% 36.7% 18.1% 16.9% 17.7%
Average common shares outstanding
Basic 14,672,176 14,668,923 12,783,851 12,775,703 12,766,473
Diluted 14,714,211 14,703,636 12,830,102 12,837,637 12,835,670
Common shares outstanding at period end 14,674,852 14,672,147 12,786,404 12,783,646 12,774,645
Performance Ratios
Return on average equity 15.66% 7.99% 15.55% 17.50% 17.05%
Return on average tangible equity (C)(E) 20.03% 10.86% 19.10% 21.75% 21.33%
Return on average tangible common equity (D)(E) 20.95% 11.37% 20.10% 22.96% 22.20%
Return on average assets 1.42% 0.73% 1.43% 1.54% 1.51%
Net interest margin (A) 3.88% 3.89% 3.83% 3.80% 3.84%
Efficiency ratio (B) 47.15% 47.90% 48.00% 46.40% 47.95%

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).

(E) - See Non-GAAP Financial Measures for additional information relating to the calculation of this item.


SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data (unaudited)
Dollars in thousands, except per share amounts9/30/20236/30/20233/31/202312/31/20229/30/2022
Assets
Cash and due from banks$23,159 $23,341 $16,488 $16,469 $16,141
Interest bearing deposits other banks 36,398 39,902 54,328 28,248 29,510
Debt securities, available for sale 511,403 512,038 431,933 405,201 383,965
Debt securities, held to maturity 94,715 95,200 95,682 96,163 96,640
Equity investments 31,241 30,818 29,867 29,494 20,314
Other investments 19,579 16,014 12,696 16,029 18,105
Loans, net 3,551,686 3,506,880 3,059,099 3,043,919 3,038,377
Property held for sale 4,505 4,742 5,128 5,067 5,193
Premises and equipment, net 62,721 60,967 54,491 53,981 54,628
Goodwill and other intangible assets, net 75,425 76,423 61,807 62,150 62,502
Cash surrender value of life insurance policies and annuities 85,076 84,790 72,019 71,640 71,216
Derivative financial instruments 44,527 39,951 34,758 40,506 42,179
Other assets 63,773 61,204 49,111 47,825 48,529
Total assets$ 4,604,208 $ 4,552,270 $ 3,977,407 $ 3,916,692 $ 3,887,299
Liabilities and Shareholders' Equity
Deposits$3,754,495 $3,735,034 $3,299,846 $3,169,879 $3,108,072
Short-term borrowings 258,054 232,150 140,150 225,999 273,148
Long-term borrowings and
subordinated debentures, net 123,892 123,776 123,660 123,543 123,427
Other liabilities 51,315 48,136 44,205 42,741 40,978
Total liabilities 4,187,756 4,139,096 3,607,861 3,562,162 3,545,625
Preferred stock and related surplus 14,920 14,920 14,920 14,920 14,920
Common stock and related surplus 130,508 130,227 90,939 90,696 90,345
Retained earnings 289,641 276,762 271,712 260,393 248,084
Accumulated other comprehensive income (loss) (18,617) (8,735) (8,025) (11,479) (11,675)
Total shareholders' equity 416,452 413,174 369,546 354,530 341,674
Total liabilities and shareholders' equity$ 4,604,208 $ 4,552,270 $ 3,977,407 $ 3,916,692 $ 3,887,299
Book value per common share$27.36 $27.14 $27.73 $26.57 $25.58
Tangible book value per common share (A)(C)$22.22 $21.93 $22.90 $21.70 $20.69
Tangible common equity to tangible assets (B)(C) 7.2% 7.2% 7.5% 7.2% 6.9%

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).

(C) - See Non-GAAP Financial Measures for additional information relating to the calculation of this item.



SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition (unaudited)
Dollars in thousands9/30/20236/30/20233/31/202312/31/20229/30/2022
Commercial$511,951 $511,457 $498,268 $501,844 $512,771
Mortgage warehouse lines 114,734 118,785 86,240 130,390 194,740
Commercial real estate
Owner occupied 547,886 566,447 469,560 467,050 473,298
Non-owner occupied 1,217,029 1,193,927 1,036,358 1,004,368 960,627
Construction and development
Land and development 114,354 117,371 102,351 106,362 104,437
Construction 349,049 309,709 290,556 282,935 248,564
Residential real estate
Conventional 497,076 483,998 395,312 386,874 382,203
Jumbo 113,837 117,219 111,475 92,103 87,449
Home equity 81,967 86,050 70,167 71,986 72,756
Consumer 44,288 44,429 36,531 35,372 35,116
Other 6,748 3,169 3,117 3,534 3,166
Total loans, net of unearned fees 3,598,919 3,552,561 3,099,935 3,082,818 3,075,127
Less allowance for loan credit losses 47,233 45,681 40,836 38,899 36,750
Loans, net$3,551,686 $3,506,880 $3,059,099 $3,043,919 $3,038,377
Unfunded loan commitments$943,508 $957,278 $907,757 $925,657 $889,854



SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands9/30/20236/30/20233/31/202312/31/20229/30/2022
Core deposits
Non-interest bearing checking$630,055 $679,139 $552,716 $553,616 $619,067
Interest bearing checking 2,144,737 2,024,341 1,886,011 1,743,299 1,475,643
Savings 477,348 512,129 462,631 496,751 582,922
Time deposits 469,530 465,026 327,037 343,423 397,662
Total core deposits 3,721,670 3,680,635 3,228,395 3,137,089 3,075,294
Brokered time deposits 32,825 54,399 71,451 32,790 32,778
Total deposits$3,754,495 $3,735,034 $3,299,846 $3,169,879 $3,108,072
Estimated uninsured deposits (A)$1,283,610 $1,189,908 $933,703 $946,188 $757,038

(A) - Excludes uninsured public funds otherwise secured or collateralized as required by law



SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (unaudited)
9/30/20236/30/20233/31/202312/31/20229/30/2022
Summit Financial Group, Inc.
CET1 Risk-based Capital8.9%8.7%8.9%8.6%8.2%
Tier 1 Risk-based Capital9.7%9.5%9.8%9.5%9.2%
Total Risk-based Capital13.5%13.3%14.0%13.5%13.1%
Tier 1 Leverage8.5%8.4%8.7%8.5%8.4%
Summit Community Bank, Inc.
CET1 Risk-based Capital11.6%11.3%11.9%11.6%11.3%
Tier 1 Risk-based Capital11.6%11.3%11.9%11.6%11.3%
Total Risk-based Capital12.7%12.5%13.1%12.6%12.2%
Tier 1 Leverage10.1%9.9%10.6%10.4%10.3%



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
For the Quarter Ended
Dollars in thousands9/30/20236/30/20233/31/202312/31/20229/30/2022
Gross loan charge-offs$226 $4,009 $164 $250 $265
Gross loan recoveries (108) (118) (227) (249) (257)
Net loan charge-offs$ 118 $ 3,891 $ (63)$ 1 $ 8
Net loan charge-offs to average loans (annualized) 0.01% 0.44% -0.01% 0.00% 0.00%
Allowance for loan credit losses$47,233 $45,681 $40,836 $38,899 $36,750
Allowance for loan credit losses as a percentage
of period end loans 1.31% 1.29% 1.32% 1.26% 1.19%
Allowance for credit losses on
unfunded loan commitments ("ULC")$6,912 $7,332 $6,572 $6,947 $7,597
Allowance for credit losses on ULC
as a percentage of period end ULC 0.73% 0.81% 0.72% 0.75% 0.85%
Nonperforming assets:
Nonperforming loans
Commercial$783 $254 $402 $93 $347
Commercial real estate 6,402 5,970 1,700 1,750 1,860
Residential construction and development 750 772 813 851 902
Residential real estate 4,787 4,298 4,322 5,117 6,083
Consumer 124 46 65 12 8
Total nonperforming loans 12,846 11,340 7,302 7,823 9,200
Foreclosed properties
Commercial real estate 297 297 297 297 297
Commercial construction and development 2,187 2,187 2,187 2,187 2,332
Residential construction and development 1,924 2,161 2,293 2,293 2,293
Residential real estate 97 97 351 290 271
Total foreclosed properties 4,505 4,742 5,128 5,067 5,193
Total nonperforming assets$ 17,351 $ 16,082 $ 12,430 $ 12,890 $ 14,393
Nonperforming loans to period end loans 0.36% 0.32% 0.24% 0.25% 0.30%
Nonperforming assets to period end assets 0.38% 0.35% 0.31% 0.33% 0.37%



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Loans Past Due 30-89 Days (unaudited)
Dollars in thousands9/30/20236/30/20233/31/202312/31/20229/30/2022
Commercial$3,300 $1,006 $463 $3,168 $1,329
Commercial real estate 781 513 1,000 641 1,550
Construction and development 793 161 3,459 317 236
Residential real estate 4,620 4,933 2,311 6,231 2,824
Consumer 440 389 252 253 216
Other 37 17 13 22 4
Total$9,971 $7,019 $7,498 $10,632 $6,159



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q3 2023 vs Q2 2023 vs Q3 2022 (unaudited)
Q3 2023 Q2 2023 Q3 2022
AverageEarnings /Yield / AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate BalancesExpenseRate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable$3,591,583 $58,040 6.41% $3,516,306 $54,374 6.20% $3,018,219 $38,741 5.09%
Tax-exempt (2) 3,911 78 7.91% 4,144 49 4.74% 4,834 54 4.43%
Securities
Taxable 417,299 4,972 4.73% 428,039 4,900 4.59% 283,645 2,273 3.18%
Tax-exempt (2) 211,150 1,754 3.30% 209,931 1,705 3.26% 203,951 1,549 3.01%
Interest bearing deposits other banks
and Federal funds sold 39,200 235 2.38% 35,218 203 2.31% 49,048 170 1.38%
Total interest earning assets 4,263,143 65,079 6.06% 4,193,638 61,231 5.86% 3,559,697 42,787 4.77%
Noninterest earning assets
Cash & due from banks 24,229 23,588 17,455
Premises & equipment 62,085 60,872 54,976
Intangible assets 76,037 80,445 62,705
Other assets 219,150 212,104 171,409
Allowance for loan credit losses (46,498) (44,312) (35,381)
Total assets$4,598,146 $4,526,335 $3,830,861
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits 2,057,035 15,053 2.90% 1,985,134 13,423 2.71% $1,454,815 $4,276 1.17%
Savings deposits 493,565 2,035 1.64% 528,694 2,000 1.52% 611,075 1,243 0.81%
Time deposits 505,824 2,836 2.22% 513,236 2,428 1.90% 461,134 621 0.53%
Short-term borrowings 267,935 1,988 2.94% 207,418 1,212 2.34% 191,421 850 1.76%
Long-term borrowings and
subordinated debentures 123,839 1,509 4.83% 123,843 1,487 4.82% 123,368 1,348 4.34%
Total interest bearing liabilities 3,448,198 23,421 2.69% 3,358,325 20,550 2.45% 2,841,813 8,338 1.16%
Noninterest bearing liabilities .
Demand deposits 681,035 706,391 609,424
Other liabilities 51,669 50,863 41,339
Total liabilities 4,180,902 4,115,579 3,492,576
Shareholders' equity - preferred 14,920 14,920 14,920
Shareholders' equity - common 402,324 395,836 323,365
Total liabilities and
shareholders' equity$4,598,146 $4,526,335 $3,830,861
NET INTEREST EARNINGS $41,658 $40,681 $34,449
NET INTEREST MARGIN 3.88% 3.89% 3.84%
(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 $385,000, $368,000, and $336,000 for Q3 2023,
Q2 2023 and Q3 2022, respectively.



SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2023 vs YTD 2022 (unaudited)
YTD 2023 YTD 2022
AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable$3,400,167 $157,813 6.21% $2,898,380 $101,640 4.69%
Tax-exempt (2) 4,706 235 6.68% 5,108 170 4.45%
Securities
Taxable 386,825 13,283 4.59% 300,371 5,695 2.53%
Tax-exempt (2) 212,484 5,241 3.30% 187,575 4,021 2.87%
Interest bearing deposits other banks
and Federal funds sold 36,261 610 2.25% 53,142 262 0.66%
Total interest earning assets 4,040,443 177,182 5.86% 3,444,576 111,788 4.34%
Noninterest earning assets
Cash & due from banks 21,766 17,671
Premises & equipment 59,053 55,486
Intangible assets 72,887 63,061
Other assets 207,111 159,912
Allowance for loan credit losses (43,466) (33,705)
Total assets$4,357,794 $3,707,001
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits$1,954,761 $39,276 2.69% $1,260,907 $6,015 0.64%
Savings deposits 500,647 5,949 1.59% 660,855 2,505 0.51%
Time deposits 469,864 6,550 1.86% 506,654 1,969 0.52%
Short-term borrowings 214,322 4,024 2.51% 179,813 1,918 1.43%
Long-term borrowings and
subordinated debentures 123,717 4,457 4.82% 123,279 3,867 4.19%
3,263,311 60,256 2.47% 2,731,508 16,274 0.80%
Noninterest bearing liabilities
Demand deposits 648,789 600,766
Other liabilities 48,554 41,541
Total liabilities 3,960,654 3,373,815
Shareholders' equity - preferred 14,920 14,920
Shareholders' equity - common 382,220 318,266
Total liabilities and
shareholders' equity$4,357,794 $3,707,001
NET INTEREST EARNINGS $116,926 $95,514
NET INTEREST MARGIN 3.87% 3.71%
(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 $1,150,000 and $881,000 for the
YTD 2023 and YTD 2022 periods, respectively.
Contact:Robert S. Tissue, Executive Vice President & CFO
Telephone:(304) 530-0552
Email:rtissue@summitfgi.com


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