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GlobeNewswire (Europe)
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(1)

Summit Financial Group, Inc.: Summit Financial Group Reports Earnings of $1.11 Per Share for Fourth Quarter 2023

MOOREFIELD, W.Va., Jan. 25, 2024 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. ("Company" or "Summit") (NASDAQ: SMMF) today reported financial results for the fourth 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 $16.4 million, or $1.11 per diluted share, for the fourth quarter of 2023, as compared to $16.1 million, or $1.09 per diluted share, for the third quarter of 2023 and $14.9 million, or $1.16 per diluted share, for the fourth quarter of 2022.

Key Highlights for the Fourth Quarter and Year 2023

  • Our pending merger with Burke & Herbert Financial Services Corp. ("Burke & Herbert") was approved by both Burke & Herbert's and Summit's shareholders on December 6, 2023. The transaction is expected to close in late Q1 2024 following receipt of Federal regulatory approval.
  • Tangible Book Value Per Common Share ("TBVPCS") increased by $1.67 to $23.89 during the fourth quarter of 2023, representing a 7.5 percent increase. This increase was primarily due to retained earnings and the increase in the fair value of available for sale securities reflected in accumulated other comprehensive loss. For 2023, TBVPCS increased by $2.19.
  • Our net interest margin ("NIM") decreased 12 basis points to 3.76 percent from the linked quarter. For the year 2023, NIM increased 11 basis points.
  • The fourth quarter saw a modest increase in total loans, excluding mortgage warehouse lines of credit and acquired loans, registering an increase of 2.85 percent (11.4 percent annualized). This performance was further underscored by year-over-year growth of 8.3 percent.
  • Summit's core deposits experienced modest decline in the fourth quarter of 2023, down 1.1 percent from the linked quarter and, excluding acquired Provident State Bank, Inc. ("PSB") deposits, increased 1.5 percent during full-year 2023.
  • The Company's provision for credit losses totaled $1.50 million in the fourth quarter of 2023 compared to $1.25 million in the linked quarter.
  • Summit's efficiency ratio was 47.33 percent compared to 47.15 percent in the linked quarter, indicating optimized use of resources. For full year 2023, the efficiency ratio was 47.51 percent compared to 47.76 percent in 2022.
  • Annualized non-interest expense ratio decreased to 2.05 percent of average assets from 2.10 percent in the previous quarter and increased from 1.92 percent in the same quarter last year. Excluding acquisition-related expenses, annualized non-interest expense would have been 1.98 percent of average assets in Q4 2023 and 2.01 percent of average assets for Q3 2023.

"We are extremely pleased by our core performance both for fourth quarter and for the year 2023," stated H. Charles Maddy III, President and Chief Executive Officer of Summit Financial Group, "highlighted by solid loan growth, a stable top quartile peer net interest margin, an enviable efficiency ratio and best-in-class return on tangible common equity." Mr. Maddy continued, "Looking ahead as we prepare for 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."

Results from Operations

Net interest income totaled $40.8 million in the fourth quarter of 2023, marking an increase of 18.7 percent from the prior-year fourth quarter and down 1.2 percent from the linked quarter. This year-over-year robust growth is primarily attributable to our strategic expansion of the loan portfolio and optimizations in investment allocations. NIM for the fourth quarter 2023 was 3.76 percent compared to 3.88 percent for the linked quarter and 3.80 percent for the prior-year quarter, as the cost of interest-bearing funds outpaced the increased yields on interest earning assets.

Summit recorded a $1.50 million provision for credit losses in the fourth quarter of 2023 compared to $1.25 million for the linked quarter and $1.50 million in the fourth quarter of 2022.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for fourth quarter 2023 was $5.80 million compared to $5.27 million for the linked quarter and $4.87 million for the comparable period of 2022. The Company recognized net gains on equity investments of $365,000 in the fourth quarter 2023 compared to $180,000 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 Q4 2023 was $46.2 million compared to $46.4 million in the linked quarter and a substantial 18.6 percent growth from $39.0 million recorded in the fourth quarter of 2022.

Total noninterest expense decreased to $23.9 million in the fourth quarter of 2023, down 1.1 percent from $24.2 million in the linked quarter primarily due to lower salaries and employee benefits and fewer acquisition-related expenses in the fourth quarter. Conversely, there was a 26.8 percent hike from $18.8 million for the same quarter in the prior year, attributed mainly to the assimilation of operational costs from the newly integrated PSB operations and higher acquisition-related expenses in 2024.

Salary and benefit expenses were $11.4 million in the fourth quarter of 2023, a decrease from $12.0 million in the preceding quarter but up from $10.5 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 representing legal, due diligence and fairness opinion costs relative to the Burke & Herbert merger were $839,000 for Q4 2023 compared to $1.11 million for the linked quarter and $81,000 during Q4 2022.

Summit's efficiency ratio was 47.33 percent in the fourth quarter of 2023, an increase from 46.40 percent in the fourth quarter of 2022, and marginally better than the 47.15 percent in the linked quarter. Concurrently, the non-interest expense to average assets ratio was optimized to 2.05 percent, compared to 2.10 percent in the previous quarter, indicating enhanced operational efficiency despite the expanded asset base post-PSB acquisition.

Balance Sheet

As of December 31, 2023, total assets were $4.6 billion, an increase of $717.6 million, or 18.3 percent since December 31, 2022. Excluding acquired PSB assets, total assets increased by $149.3 million, or 3.8 percent since December 31, 2022.

Total loans net of unearned fees increased 19.4 percent to $3.7 billion as of December 31, 2023, from $3.1 billion at December 31, 2022. Total loans, excluding those related to mortgage warehouse lending and acquired loans, reached $3.2 billion as of December 31, 2023. This represents an increase of 2.85 percent (or 11.4 percent when annualized) during the quarter just ended.

Deposits totaled $3.7 billion on December 31, 2023, a 1.0 percent decrease during the fourth quarter. Core deposits decreased 1.1 percent during the fourth quarter 2023 to $3.7 billion. Adjusted uninsured deposits (excluding uninsured public deposits otherwise secured or collateralized as required by law) were 34.8 percent of total deposits at December 31, 2023 compared to 29.8 percent at year-end 2022.

Total shareholders' equity was $440.2 million as of December 31, 2023, compared to $354.5 million at December 31, 2022. Summit paid a quarterly common dividend of $0.22 per share in the fourth quarter of 2023.

Tangible Book Value Per Common Share ("TBVPCS") increased by $1.67 to $23.89 during the fourth quarter of 2023, representing a 7.5 percent increase. This increase was primarily due to retained earnings and the increase in the fair value of available for sale securities reflected in accumulated other comprehensive loss. Summit had 14,683,457 outstanding common shares at December 31, 2023, compared to 12,783,646 at year-end 2022.

Asset Quality

The Company recorded net loan recoveries of $188,000 during the fourth quarter 2023, representing 0.02 percent of average loans annualized, compared to net loan charge-offs ("NCOs") of $119,000, representing 0.01 percent of average loans annualized, in the linked quarter. NCOs of $1,000 represented 0.0 percent of average loans annualized in the year-ago period.

Summit's allowance for loan credit losses was $48.1 million on December 31, 2023, $47.2 million at the end of the linked quarter, and $38.9 million on December 31, 2022. As of December 31, 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 386.6 percent of nonperforming loans at December 31, 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 $7.74 million as of December 31, 2023, compared to $6.91 million at the end of the linked quarter. During the most recent quarter, the allowance for credit losses on unfunded loan commitments increased by $830,000, primarily due to a change in mix of type of unfunded loan balances.

As of December 31, 2023, nonperforming assets ("NPAs"), consisting of nonperforming loans, foreclosed properties, and repossessed assets, totaled $16.2 million, or 0.35 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, June 30, 2023 and September 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.

Contact:Robert S. Tissue, Executive Vice President & CFO
Telephone:(304) 530-0552
Email:rtissue@summitfgi.com
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q4 2023 vs Q4 2022
For the Quarter EndedPercent
Dollars in thousands12/31/202312/31/2022Change
Statements of Income
Interest income
Loans, including fees$59,856 $43,589 37.3%
Securities 6,538 4,181 56.4%
Other 122 70 74.3%
Total interest income 66,516 47,840 39.0%
Interest expense
Deposits 21,417 10,194 110.1%
Borrowings 4,306 3,293 30.8%
Total interest expense 25,723 13,487 90.7%
Net interest income 40,793 34,353 18.7%
Provision for credit losses 1,500 1,500 0.0%
Net interest income after provision for credit losses 39,293 32,853 19.6%
Noninterest income
Trust and wealth management fees 952 750 26.9%
Mortgage origination revenue 65 286 -77.3%
Service charges on deposit accounts 1,866 1,526 22.3%
Bank card revenue 1,837 1,513 21.4%
Net gains on equity investments 365 280 30.4%
Net realized gains/(losses) on debt securities 15 (24)n/m
Bank owned life insurance and annuity income 499 367 36.0%
Other income 202 167 21.0%
Total noninterest income 5,801 4,865 19.2%
Noninterest expense
Salaries and employee benefits 11,374 10,532 8.0%
Net occupancy expense 1,554 1,328 17.0%
Equipment expense 2,342 1,769 32.4%
Professional fees 529 386 37.0%
Advertising and public relations 432 280 54.3%
Amortization of intangibles 995 351 183.5%
FDIC premiums 670 352 90.3%
Bank card expense 809 679 19.1%
Foreclosed properties expense, net of (gains)/losses 16 159 -89.9%
Acquisition-related expense 839 81 n/m
Other expenses 4,347 2,932 48.3%
Total noninterest expense 23,907 18,849 26.8%
Income before income taxes 21,187 18,869 12.3%
Income taxes 4,590 3,783 21.3%
Net income 16,597 15,086 10.0%
Preferred stock dividends 225 225 n/a
Net income applicable to common shares$16,372 $14,861 10.2%
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q4 2023 vs Q4 2022
For the Quarter EndedPercent
12/31/202312/31/2022Change
Per Share Data
Earnings per common share
Basic$1.12 $1.16 -3.4%
Diluted$1.11 $1.16 -4.3%
Cash dividends per common share$0.22 $0.20 10.0%
Common stock dividend payout ratio 19.5% 16.9%15.4%
Average common shares outstanding
Basic 14,676,383 12,775,703 14.9%
Diluted 14,718,790 12,837,637 14.7%
Common shares outstanding at period end 14,683,457 12,783,646 14.9%
Performance Ratios
Return on average equity 15.74% 17.50%-10.1%
Return on average tangible equity (C) 20.01% 21.75%-8.0%
Return on average tangible common equity (D) 20.91% 22.96%-8.9%
Return on average assets 1.42% 1.54%-7.8%
Net interest margin (A) 3.76% 3.80%-1.1%
Efficiency ratio (B) 47.33% 46.40%2.0%

NOTES

(A) - Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

(B) - Non-GAAP financial measure 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) - Non-GAAP financial measure that equals: (Net income + Amortization of intangibles [after-tax]) / (Average shareholders' equity - Average intangible assets).

(D) - Non-GAAP financial measure that equals: (Net income + Amortization of intangibles [after-tax]) / (Average common shareholders' equity - Average intangible assets).

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Annual Performance Summary (unaudited)
2023 vs 2022
For the Year EndedPercent
Dollars in thousands12/31/202312/31/2022Change
Statements of Income
Interest income
Loans, including fees$217,855 $145,364 49.9%
Securities 23,961 13,052 83.6%
Other 732 331 121.1%
Total interest income 242,548 158,747 52.8%
Interest expense
Deposits 73,191 20,683 253.9%
Borrowings 12,788 9,078 40.9%
Total interest expense 85,979 29,761 188.9%
Net interest income 156,569 128,986 21.4%
Provision for credit losses 12,250 6,950 76.3%
Net interest income after provision for credit losses 144,319 122,036 18.3%
Noninterest income
Trust and wealth management fees 3,436 2,978 15.4%
Mortgage origination revenue 577 1,480 -61.0%
Service charges on deposit accounts 6,977 6,150 13.4%
Bank card revenue 7,299 6,261 16.6%
Net gains on equity investments 740 265 179.2%
Net realized (losses) on debt securities (266) (708)62.4%
Bank owned life insurance and annuity income 1,576 1,211 30.1%
Other income 537 516 4.1%
Total noninterest income 20,876 18,153 15.0%
Noninterest expense
Salaries and employee benefits 46,296 40,452 14.4%
Net occupancy expense 5,851 5,128 14.1%
Equipment expense 9,094 7,253 25.4%
Professional fees 1,775 1,628 9.0%
Advertising and public relations 1,113 893 24.6%
Amortization of intangibles 3,335 1,440 131.6%
FDIC premiums 2,458 1,224 100.8%
Bank card expense 3,429 2,928 17.1%
Foreclosed properties expense, net of (gains)/losses 89 236 -62.3%
Acquisition-related expense 6,444 114 n/m
Other expenses 14,909 11,583 28.7%
Total noninterest expense 94,793 72,879 30.1%
Income before income taxes 70,402 67,310 4.6%
Income taxes 15,163 14,094 7.6%
Net income 55,239 53,216 3.8%
Preferred stock dividends 900 900 0.0%
Net income applicable to common shares$54,339 $52,316 3.9%
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Annual Performance Summary (unaudited)
2023 vs 2022
For the Year EndedPercent
12/31/202312/31/2022Change
Per Share Data
Earnings per common share
Basic$3.82 $4.10 -6.8%
Diluted$3.81 $4.08 -6.6%
Cash dividends per common share$0.76 $0.76 0.0%
Common stock dividend payout ratio 21.6% 18.2%18.7%
Average common shares outstanding
Basic 14,206,811 12,760,649 11.3%
Diluted 14,249,129 12,821,533 11.1%
Common shares outstanding at period end 14,683,457 12,783,646 14.9%
Performance Ratios
Return on average equity 13.69% 15.83%-13.5%
Return on average tangible equity (C) 17.51% 19.88%-11.9%
Return on average tangible common equity (D) 18.34% 21.03%-12.8%
Return on average assets 1.25% 1.42%-12.0%
Net interest margin (A) 3.84% 3.73%2.9%
Efficiency ratio (B) 47.57% 47.76%-0.4%

NOTES

(A) - Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

(B) - Non-GAAP financial measure 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) - Non-GAAP financial measure that equals: (Net income + Amortization of intangibles [after-tax]) / (Average shareholders' equity - Average intangible assets).

(D) - Non-GAAP financial measure that equals: (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 thousands12/31/20239/30/20236/30/20233/31/202312/31/2022
Statements of Income
Interest income
Loans, including fees $59,856 $58,102 $54,413 $45,485 $43,589
Securities 6,538 6,357 6,247 4,819 4,181
Other 122 235 203 171 70
Total interest income 66,516 64,694 60,863 50,475 47,840
Interest expense
Deposits 21,417 19,924 17,851 14,000 10,194
Borrowings 4,306 3,497 2,699 2,286 3,293
Total interest expense 25,723 23,421 20,550 16,286 13,487
Net interest income 40,793 41,273 40,313 34,189 34,353
Provision for credit losses 1,500 1,250 8,000 1,500 1,500
Net interest income after provision for credit losses 39,293 40,023 32,313 32,689 32,853
Noninterest income
Trust and wealth management fees 952 819 854 811 750
Mortgage origination revenue 65 172 169 171 286
Service charges on deposit accounts 1,866 1,775 1,943 1,392 1,526
Bank card revenue 1,837 1,907 1,987 1,568 1,513
Net gains on equity investments 365 180 150 45 280
Net realized gains/(losses) on debt securities 15 (12) (211) (59) (24)
Bank owned life insurance and annuity income 499 311 431 336 367
Other income 202 113 100 122 167
Total noninterest income 5,801 5,265 5,423 4,386 4,865
Noninterest expense
Salaries and employee benefits 11,374 11,959 12,156 10,807 10,532
Net occupancy expense 1,554 1,436 1,528 1,333 1,328
Equipment expense 2,342 2,361 2,361 2,030 1,769
Professional fees 529 400 471 376 386
Advertising and public relations 432 247 264 170 280
Amortization of intangibles 995 998 999 343 351
FDIC premiums 670 716 742 330 352
Bank card expense 809 972 951 696 679
Foreclosed properties expense, net of (gains)/losses 16 10 48 15 159
Acquisition-related expenses 839 1,110 4,163 331 81
Other expenses 4,347 3,953 3,641 2,968 2,932
Total noninterest expense 23,907 24,162 27,324 19,399 18,849
Income before income taxes 21,187 21,126 10,412 17,676 18,869
Income tax expense 4,590 4,794 2,203 3,575 3,783
Net income 16,597 16,332 8,209 14,101 15,086
Preferred stock dividends 225 225 225 225 225
Net income applicable to common shares $16,372 $16,107 $7,984 $13,876 $14,861
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
For the Quarter Ended
12/31/20239/30/20236/30/20233/31/202312/31/2022
Per Share Data
Earnings per common share
Basic$1.12 $1.10 $0.54 $1.09 $1.16
Diluted$1.11 $1.09 $0.54 $1.08 $1.16
Cash dividends per common share$0.22 $0.22 $0.20 $0.20 $0.20
Common stock dividend payout ratio 19.5% 19.8% 36.7% 18.1% 16.9%
Average common shares outstanding
Basic 14,676,383 14,672,176 14,668,923 12,783,851 12,775,703
Diluted 14,718,790 14,714,211 14,703,636 12,830,102 12,837,637
Common shares outstanding at period end 14,683,457 14,674,852 14,672,147 12,786,404 12,783,646
Performance Ratios
Return on average equity 15.74% 15.66% 7.99% 15.55% 17.50%
Return on average tangible equity (C) 20.01% 20.03% 10.86% 19.10% 21.75%
Return on average tangible common equity (D) 20.91% 20.95% 11.37% 20.10% 22.96%
Return on average assets 1.42% 1.42% 0.73% 1.43% 1.54%
Net interest margin (A) 3.76% 3.88% 3.89% 3.83% 3.80%
Efficiency ratio (B) 47.33% 47.15% 47.90% 48.00% 46.40%

NOTES

(A) - Presented on a tax-equivalent basis assuming a federal tax rate of 21%.

(B) - Non-GAAP financial measure 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) - Non-GAAP financial measure that equals: (Net income + Amortization of intangibles [after-tax]) / (Average shareholders' equity - Average intangible assets).

(D) - Non-GAAP financial measure that equals: (Net income + Amortization of intangibles [after-tax]) / (Average common shareholders' equity - Average intangible assets).

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data (unaudited)
Dollars in thousands, except per share amounts12/31/20239/30/20236/30/20233/31/202312/31/2022
Assets
Cash and due from banks$21,834 $23,159 $23,341 $16,488 $16,469
Interest bearing deposits other banks 30,398 36,398 39,902 54,328 28,248
Debt securities, available for sale 502,762 511,403 512,038 431,933 405,201
Debt securities, held to maturity 94,227 94,715 95,200 95,682 96,163
Equity investments 10,958 31,241 30,818 29,867 29,494
Other investments 21,130 19,579 16,014 12,696 16,029
Loans, net 3,633,522 3,551,686 3,506,880 3,059,099 3,043,919
Property held for sale 3,729 4,505 4,742 5,128 5,067
Premises and equipment, net 63,038 62,721 60,967 54,491 53,981
Goodwill and other intangible assets, net 74,430 75,425 76,423 61,807 62,150
Cash surrender value of life insurance policies and annuities 85,679 85,076 84,790 72,019 71,640
Derivative financial instruments 33,145 44,527 39,951 34,758 40,506
Other assets 59,470 63,773 61,204 49,111 47,825
Total assets$4,634,322 $4,604,208 $4,552,270 $3,977,407 $3,916,692
Liabilities and Shareholders' Equity
Deposits$3,715,148 $3,754,495 $3,735,034 $3,299,846 $3,169,879
Short-term borrowings 302,957 258,054 232,150 140,150 225,999
Long-term borrowings and subordinated debentures, net 124,008 123,892 123,776 123,660 123,543
Other liabilities 52,001 51,315 48,136 44,205 42,741
Total liabilities 4,194,114 4,187,756 4,139,096 3,607,861 3,562,162
Preferred stock and related surplus 14,920 14,920 14,920 14,920 14,920
Common stock and related surplus 129,990 130,508 130,227 90,939 90,696
Retained earnings 302,783 289,641 276,762 271,712 260,393
Accumulated other comprehensive loss (7,485) (18,617) (8,735) (8,025) (11,479)
Total shareholders' equity 440,208 416,452 413,174 369,546 354,530
Total liabilities and shareholders' equity$4,634,322 $4,604,208 $4,552,270 $3,977,407 $3,916,692
Book value per common share$28.96 $27.36 $27.14 $27.73 $26.57
Tangible book value per common share (A)$23.89 $22.22 $21.93 $22.90 $21.70
Tangible common equity to tangible assets (B) 7.7% 7.2% 7.2% 7.5% 7.2%

NOTES

(A) - Non-GAAP financial measure that equals: (Common stock and related surplus + Retained earnings + Accumulated other comprehensive income/loss - Intangible assets) / Common shares outstanding.

(B) - Non-GAAP financial measure that equals: (Common stock and related surplus + Retained earnings + Accumulated other comprehensive income/loss - Intangible assets) / (Total assets - Intangible assets).

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition (unaudited)
Dollars in thousands12/31/20239/30/20236/30/20233/31/202312/31/2022
Commercial $503,842 $511,951 $511,457 $498,268 $501,844
Mortgage warehouse lines 108,848 114,734 118,785 86,240 130,390
Commercial real estate
Owner occupied 545,108 547,886 566,447 469,560 467,050
Non-owner occupied 1,254,337 1,217,029 1,193,927 1,036,358 1,004,368
Construction and development
Land and development 145,258 114,354 117,371 102,351 106,362
Construction 374,026 349,049 309,709 290,556 282,935
Residential real estate
Conventional 505,398 497,076 483,998 395,312 386,874
Jumbo 116,614 113,837 117,219 111,475 92,103
Home equity 81,126 81,967 86,050 70,167 71,986
Consumer 43,756 44,288 44,429 36,531 35,372
Other 3,299 6,748 3,169 3,117 3,534
Total loans, net of unearned fees 3,681,612 3,598,919 3,552,561 3,099,935 3,082,818
Less allowance for loan credit losses 48,090 47,233 45,681 40,836 38,899
Loans, net$3,633,522 $3,551,686 $3,506,880 $3,059,099 $3,043,919
Unfunded loan commitments$950,001 $943,508 $957,278 $907,757 $925,657
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands 12/31/20239/30/20236/30/20233/31/202312/31/2022
Core deposits
Non-interest bearing checking$593,576 $630,055 $679,139 $552,716 $553,616
Interest bearing checking 2,164,522 2,144,737 2,024,341 1,886,011 1,743,299
Savings 450,526 477,348 512,129 462,631 496,751
Time deposits 473,687 469,530 465,026 327,037 343,423
Total core deposits 3,682,311 3,721,670 3,680,635 3,228,395 3,137,089
Brokered time deposits 32,837 32,825 54,399 71,451 32,790
Total deposits$3,715,148 $3,754,495 $3,735,034 $3,299,846 $3,169,879
Estimated uninsured deposits (A)$1,291,467 $1,283,610 $1,189,908 $933,703 $946,188
(A) - Excludes uninsured public funds otherwise secured or collateralized as required by law.
SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (unaudited)
12/31/20239/30/20236/30/20233/31/202312/31/2022
Summit Financial Group, Inc.
CET1 Risk-based Capital9.1%8.9%8.7%8.9%8.6%
Tier 1 Risk-based Capital9.9%9.7%9.5%9.8%9.5%
Total Risk-based Capital13.7%13.5%13.3%14.0%13.5%
Tier 1 Leverage8.7%8.5%8.4%8.7%8.5%
Summit Community Bank, Inc.
CET1 Risk-based Capital11.7%11.6%11.3%11.9%11.6%
Tier 1 Risk-based Capital11.7%11.6%11.3%11.9%11.6%
Total Risk-based Capital12.9%12.7%12.5%13.1%12.6%
Tier 1 Leverage10.2%10.1%9.9%10.6%10.4%
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
For the Quarter Ended
Dollars in thousands12/31/20239/30/20236/30/20233/31/202312/31/2022
Gross loan charge-offs$444 $227 $4,009 $164 $250
Gross loan recoveries (632) (108) (118) (227) (249)
Net loan charge-offs (recoveries)$(188)$119 $3,891 $(63)$1
Net loan charge-offs (recoveries) to average loans (annualized) -0.02% 0.01% 0.44% -0.01% 0.00%
Allowance for loan credit losses$48,090 $47,233 $45,681 $40,836 $38,899
Allowance for loan credit losses as a percentage of period end loans 1.31% 1.31% 1.29% 1.32% 1.26%
Allowance for credit losses on unfunded loan commitments ("ULC")$7,742 $6,912 $7,332 $6,572 $6,947
Allowance for credit losses on ULC as a percentage of period end ULC 0.81% 0.73% 0.81% 0.72% 0.75%
Nonperforming assets:
Nonperforming loans
Commercial$1,088 $783 $254 $402 $93
Commercial real estate 5,675 6,402 5,970 1,700 1,750
Residential construction and development 708 750 772 813 851
Residential real estate 4,831 4,787 4,298 4,322 5,117
Consumer 137 124 46 65 12
Total nonperforming loans 12,439 12,846 11,340 7,302 7,823
Foreclosed properties
Commercial real estate 297 297 297 297 297
Commercial construction and development 1,253 2,187 2,187 2,187 2,187
Residential construction and development 1,924 1,924 2,161 2,293 2,293
Residential real estate 255 97 97 351 290
Total foreclosed properties 3,729 4,505 4,742 5,128 5,067
Total nonperforming assets$16,168 $17,351 $16,082 $12,430 $12,890
Nonperforming loans to period end loans 0.34% 0.36% 0.32% 0.24% 0.25%
Nonperforming assets to period end assets 0.35% 0.38% 0.35% 0.31% 0.33%
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Loans Past Due 30-89 Days (unaudited)
Dollars in thousands12/31/20239/30/20236/30/20233/31/202312/31/2022
Commercial$1,152 $3,300 $1,006 $463 $3,168
Commercial real estate 1,711 781 513 1,000 641
Construction and development 570 793 161 3,459 317
Residential real estate 6,114 4,620 4,933 2,311 6,231
Consumer 401 440 389 252 253
Other 43 37 17 13 22
Total$9,991 $9,971 $7,019 $7,498 $10,632
SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q4 2023 vs Q3 2023 vs Q4 2022 (unaudited)
Q4 2023 Q3 2023 Q4 2022
AverageEarnings /Yield / AverageEarnings /Yield / AverageEarnings /Yield /
Dollars in thousandsBalancesExpenseRate BalancesExpenseRate BalancesExpenseRate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable$3,688,505 $59,802 6.43% $3,591,583 $58,040 6.41% $3,100,595 $43,549 5.57%
Tax-exempt (2) 4,357 68 6.19% 3,911 78 7.91% 4,525 52 4.56%
Securities
Taxable 410,211 5,129 4.96% 417,299 4,972 4.73% 280,114 2,747 3.89%
Tax-exempt (2) 206,375 1,784 3.43% 211,150 1,754 3.30% 219,245 1,813 3.28%
Interest bearing deposits other banks and Federal funds sold 31,053 122 1.56% 39,200 235 2.38% 25,785 70 1.08%
Total interest earning assets 4,340,501 66,905 6.12% 4,263,143 65,079 6.06% 3,630,264 48,231 5.27%
Noninterest earning assets
Cash & due from banks 22,485 24,229 16,892
Premises & equipment 63,298 62,085 54,431
Intangible assets 75,043 76,037 62,336
Other assets 215,821 219,150 191,926
Allowance for loan credit losses (47,834) (46,498) (37,377)
Total assets$4,669,314 $4,598,146 $3,918,472
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits 2,170,953 16,196 2.96% 2,057,035 15,053 2.90% 1,615,275 7,848 1.93%
Savings deposits 459,277 1,986 1.72% 493,565 2,035 1.64% 529,039 1,651 1.24%
Time deposits 508,383 3,235 2.52% 505,824 2,836 2.22% 399,101 695 0.69%
Short-term borrowings 309,657 2,791 3.58% 267,935 1,988 2.94% 276,823 1,868 2.68%
Long-term borrowings and subordinated debentures 123,954 1,515 4.85% 123,839 1,509 4.83% 123,488 1,425 4.58%
Total interest bearing liabilities 3,572,224 25,723 2.86% 3,448,198 23,421 2.69% 2,943,726 13,487 1.82%
Noninterest bearing liabilities
Demand deposits 621,082 681,035 586,617
Other liabilities 54,160 51,669 43,378
Total liabilities 4,247,466 4,180,902 3,573,721
Shareholders' equity - preferred 14,920 14,920 14,920
Shareholders' equity - common 406,928 402,324 329,831
Total liabilities and shareholders' equity$4,669,314 $4,598,146 $3,918,472
NET INTEREST EARNINGS $41,182 $41,658 $34,744
NET INTEREST MARGIN 3.76% 3.88% 3.80%
(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 $389,000, $385,000, and $391,000 for Q4 2023,
Q3 2023 and Q4 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$3,472,844 $217,615 6.27% $2,949,350 $145,189 4.92%
Tax-exempt (2) 4,618 304 6.58% 4,961 222 4.47%
Securities
Taxable 392,720 18,412 4.69% 295,264 8,442 2.86%
Tax-exempt (2) 210,945 7,024 3.33% 195,558 5,836 2.98%
Interest bearing deposits other banks and Federal funds sold 34,948 732 2.09% 46,248 331 0.72%
Total interest earning assets 4,116,075 244,087 5.93% 3,491,381 160,020 4.58%
Noninterest earning assets
Cash & due from banks 21,948 17,473
Premises & equipment 60,123 55,219
Intangible assets 73,430 62,878
Other assets 209,305 167,982
Allowance for loan credit losses (44,564) (34,630)
Total assets$4,436,317 $3,760,303
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits$2,009,253 $55,471 2.76% $1,350,227 $13,863 1.03%
Savings deposits 490,219 7,935 1.62% 627,630 4,155 0.66%
Time deposits 479,573 9,785 2.04% 479,545 2,665 0.56%
Short-term borrowings 238,351 6,816 2.86% 204,265 3,786 1.85%
Long-term borrowings and subordinated debentures 123,777 5,972 4.82% 123,331 5,292 4.29%
3,341,173 85,979 2.57% 2,784,998 29,761 1.07%
Noninterest bearing liabilities
Demand deposits 641,806 597,199
Other liabilities 49,966 42,005
Total liabilities 4,032,945 3,424,202
Shareholders' equity - preferred 14,920 14,920
Shareholders' equity - common 388,452 321,181
Total liabilities and shareholders' equity$4,436,317 $3,760,303
NET INTEREST EARNINGS $158,108 $130,259
NET INTEREST MARGIN 3.84% 3.73%
(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 $1,539,000 and $1,273,000 for the
YTD 2023 and YTD 2022 periods, respectively.

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