Summit Financial Group Reports Record Q4 2022 EPS of $1.16 on Continued Strong Loan Growth Resulting in 19.5 Percent Annualized Increase in TBVPS

Rhea-AI Summary

Summit Financial Group (SMMF) reported strong Q4 2022 results, with net income of $14.9 million ($1.16 per diluted share), up from $14.2 million ($1.11) in Q3 2022 and $12.4 million ($0.95) in Q4 2021. Total loans grew 2.6% during the quarter, with deposits up 2.0%. Tangible book value per common share increased to $21.70, a 4.9% rise. However, net interest margin decreased slightly to 3.80%. Noninterest income fell primarily due to lower mortgage origination revenue. The company is positioned for growth in 2023, aided by the planned merger with PSB Holding Corp.

Positive

• Net income rose to $14.9 million, a 5% increase from Q3 2022.
• Total loans increased by 2.6% in Q4 2022, showing strong demand.
• Tangible book value per common share increased by 4.9% to $21.70.
• Deposits grew by 2.0%, reflecting healthy customer relationships.

Negative

• Net interest margin decreased by 4 basis points to 3.80%.
• Noninterest income declined, primarily due to decreased mortgage origination revenue.

MOOREFIELD, W.V., Jan. 26, 2023 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported financial results for the fourth quarter of 2022, including continued strong earnings on growth in loans and total revenue.

The Company, which serves commercial and individual clients across West Virginia, the Washington D.C. metropolitan area, Virginia and Kentucky through Summit Community Bank, Inc., reported net income applicable to common shares of $14.9 million, or $1.16 per diluted share, for the fourth quarter of 2022, as compared to $14.2 million, or $1.11 per diluted share, for the third quarter of 2022 and $12.4 million, or $0.95 per diluted share, for the fourth quarter of 2021.

“In the fourth quarter and full year of 2022, our team continued expanding existing customer relationships and cultivating new relationships from our strong commercial pipelines to continue to deliver annualized double-digit loan growth, strong deposit growth, increased revenue and earnings,” said H. Charles Maddy, III, President and Chief Executive Officer. “Our disciplined underwriting standards consistently provide stable asset quality metrics and improved in the fourth quarter and for year-end. Given the challenging interest rate environment, the sequential increase in our tangible book value per common share differentiates us from our peers. Our tremendous operating results in 2022, pending merger with PSB Holding Corp. and the strength of our balance sheet well-positions us for continued growth in 2023.”

Highlights for Q4 2022

• Total loans, excluding mortgage warehouse lines of credit and Paycheck Protection Program (“PPP”) lending, increased 2.6 percent (10.3 percent annualized) during the quarter and 17.1 percent since December 31, 2021.
• Deposits increased 2.0 percent (8.0 percent annualized) during the fourth quarter and 7.7 percent for full year 2022.
• Tangible book value per common share (“TBVPS”) increased $1.01 (4.9 percent or 19.5 percent annualized) to $21.70 during the quarter, which included unrealized net gains on debt securities available for sale (“AFS”) of $0.09 per common share (net of deferred income taxes) recorded in Other Comprehensive Income (“OCI”), partially offset by decreases in the fair values of derivative financial instruments hedging against higher interest rates totaling $0.08 per common share (net of deferred income taxes) also recorded in OCI. For full year 2022, Summit’s TBVPS increased 11.1 percent, while for the vast majority of our peers’ TBVPS declined, and in some cases significantly so, during the same period.
• Net interest margin (“NIM”) decreased 4 basis points to 3.80 percent from the linked quarter and increased 31 basis points from the year-ago quarter, as increased yields on interest earning assets were offset by increased cost of deposits and other funding.
• Total noninterest expense decreased 1.9 percent to $18.8 million in the quarter, primarily due to deferred director compensation income of $316,000 in Q4 compared to $830,000 deferred director compensation expense in the linked quarter and up 5.1 percent from the year-ago quarter primarily due to higher salary and benefits expenses.
• Annualized non-interest expense decreased to 1.92 percent of average assets compared to 2.01 percent of average assets for the linked quarter and 2.02 for the year-ago period.
• Achieved an efficiency ratio of 46.40 percent compared to 47.95 percent in Q3 2022 and 48.85 percent in the year-ago quarter.
• Incurred $1.50 million provision for credit losses in the quarter increasing period-end allowance for loan credit losses to $38.9 million, or 1.26 percent of total loans and 497.2 percent of nonperforming loans.
• Foreclosed property held for sale declined by 2.4 percent during the quarter and 48.6 percent from the year-ago quarter to $5.07 million or 0.13 percent of assets at period end.
• Nonperforming assets (“NPAs”) improved to 0.33 percent of total assets at period end, excluding restructured assets, down 4 basis points during the quarter and 30 basis points from December 31, 2021.
• Announced expansion of our footprint into Eastern Shore of Maryland and Delaware by entering into a definitive merger agreement to acquire PSB Holding Corp. and its bank subsidiary, Provident State Bank, Inc. headquartered in Preston, Maryland.
  

Results from Operations

Net interest income grew to $34.4 million in the fourth quarter of 2022, an increase of 0.7 percent from the linked quarter and 19.1 percent from the prior-year fourth quarter. NIM for fourth quarter 2022 was 3.80 percent compared to 3.84 percent for the linked quarter and 3.49 percent for the year-ago quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summit’s net interest margin would have been 3.78 percent for the fourth quarter of 2022, 3.81 percent for the linked quarter and 3.45 percent for the year-ago period.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for fourth quarter 2022 was $4.87 million compared to $4.89 million for the linked quarter and $5.95 million for the comparable period of 2021. The Company recorded realized securities losses on debt securities of $24,000 in the fourth quarter of 2022 and $242,000 in the linked quarter. In addition, the Company recognized net gains on equity investments of $280,000 in fourth quarter 2022 compared to $283,000 in the linked quarter.

Mortgage origination revenue decreased to $286,000 in the fourth quarter of 2022 compared to $538,000 in the linked quarter and $1.36 million for the year-ago period reflecting continuing negative impact of higher interest rates on demand for new mortgage loans. Mortgage origination revenue includes an increase in the fair value of mortgage servicing rights of $140,000 for fourth quarter 2022, $318,000 during the linked quarter and $879,000 for the year-ago period.

Excluding gains and losses on debt securities and equity investments, noninterest income was $4.61 million for fourth quarter 2022 compared to $4.85 million for Q3 2022 and $5.86 million in the year-ago quarter, down primarily as result of lower mortgage origination revenue.

Revenue from net interest income and noninterest income, excluding gains and losses on debt securities and equity investments, remained unchanged compared to the linked quarter at $39.0 million, and up 12.3 percent from $34.7 million in the year-ago quarter, while for the year 2022, it grew to $147.6 million, up 14.0 percent from 2021, outpacing the 6.0 percent noninterest expense increase recorded.

Total noninterest expense decreased to $18.8 million in the fourth quarter of 2022, down 1.9 percent from $19.2 million in the linked quarter and was up 5.1 percent from $17.9 million for the prior-year fourth quarter. The sequential-quarter decrease in total noninterest expense, primarily on higher salary and benefits expenses offset by deferred director compensation income, reflected modest fluctuations in most other categories of operating costs.

Salary and benefit expenses of $10.5 million in the fourth quarter of 2022 increased from $10.2 million for the linked quarter and $9.0 million during the year-ago period. Higher group health insurance premiums and increased accruals for anticipated 2022 performance bonuses account for the primary reasons for the increases.

Net losses and expenses on foreclosed properties were $159,000 during fourth quarter 2022 compared to $26,000 in the linked quarter and $403,000 in the year-ago period.

Other expenses were $2.93 million for Q4 2022 compared to $3.83 million for the linked quarter and $3.25 million in the year-ago period. The decrease in other expenses was primarily from an increase in deferred director compensation plan-related income to $316,000 during the fourth quarter of 2022 compared to $850,000 plan-related expense during the third quarter of 2022 and $227,000 in the year-ago quarter. For full-year 2022, deferred director compensation plan-related income totaled $612,000 compared to plan related expense of $725,000 for full-year 2021. During Q3 2022, we purchased investments to hedge the changes in the Plan participants’ phantom investments which should serve to significantly reduce the period-to-period volatility of the Plan’s impact on the Company’s statements of income.

Summit’s efficiency ratio was 46.40 percent in the fourth quarter of 2022 compared to 47.95 percent in the linked quarter and 48.85 percent for the year-ago period. Non-interest expense to average assets was 1.92 percent in fourth quarter of 2022 compared to 2.01 percent in the linked quarter and 2.02 percent in the year-ago quarter.

Balance Sheet

As of December 31, 2022, total assets were $3.9 billion, an increase of $340.0 million, or 9.5 percent since December 31, 2021.

Total loans net of unearned fees grew to $3.1 billion on December 31, 2022, up 0.3 percent (or 1.0 percent annualized) during the quarter, and up 11.6 percent from December 31, 2021. Excluding PPP and mortgage warehouse lending, total loans grew to $3.0 billion on December 31, 2022, up 2.6 percent (or 10.3 percent annualized) during the fourth quarter and up 17.1 percent year-to-date.

Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE) but excluding PPP lending, grew to $2.0 billion on December 31, 2022, up 1.5 percent (5.9 percent annualized) during the fourth quarter and 15.9 percent year-to-date.

Residential real estate and consumer lending totaled $586.3 million on December 31, 2022, up 1.5 percent (6.1 percent annualized) during the fourth quarter and 3.2 percent year-to-date.

As of December 31, 2022, PPP balances were paid down to $8,000 and mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, totaled $130.4 million compared to $194.7 million at September 30, 2022 and $227.9 million at the year-ago period end.

Deposits totaled $3.2 billion on December 31, 2022, a 2.0 percent (or 8.0 percent annualized) increase during the fourth quarter and a 7.7 percent increase year-to-date. Core deposits increased 2.4 percent (9.5 percent annualized) during fourth quarter 2022 to $3.1 billion and increased 8.5 percent in 2022. Changes in core deposits by category are as follows:

• Non-interest bearing deposit accounts decreased $65.5 million or 10.6 percent in the fourth quarter of 2022 and $15.4 million or 2.7 percent since December 31, 2021.
• Interest bearing checking accounts grew $267.7 million or 18.1 percent in the fourth quarter of 2022 and $616.0 million or 54.6 percent since December 31, 2021.
• Savings accounts declined $86.2 million or 14.8 percent in the fourth quarter of 2022 and $201.4 million or 28.8 percent since December 31, 2021.
• Core time deposits declined $44.0 million or 13.0 percent in the fourth quarter of 2022 and $157.1 million or 34.8 percent since December 31, 2021.

Total shareholders’ equity was $354.5 million as of December 31, 2022 compared to $327.5 million at December 31, 2021. Summit paid a quarterly common dividend of $0.20 per share in Q4 2022.

For the year 2022, TBVPS increased $2.16 to $21.70. TBVPS was negatively impacted during 2022 by unrealized net losses on AFS debt securities of $3.11 per common share (net of deferred income taxes) recorded in OCI. However, these losses were partially offset by increased fair values of interest rate caps and swaps (also recorded in OCI) held as hedges against higher interest rates totaling $1.78 per common share (net of deferred income taxes), in the same period.

Summit had 12,783,646 outstanding common shares at the end of 2022 compared to 12,743,125 at year-end 2021.

As announced in the first quarter of 2020, the Board of Directors authorized the open market repurchase of up to 750,000 shares of the issued and outstanding shares of Summit's common stock, of which 323,577 shares have been repurchased to date. The timing and quantity of stock purchases under this repurchase plan are at the discretion of management. During the fourth quarter of 2022, no shares of Summit’s common stock were repurchased under the Plan.

Asset Quality

Net loan charge-offs (“NCOs”) declined to $1,000 in the fourth quarter of 2022. NCOs of $193,000 represented 0.03 percent of average loans annualized in the year-ago period.

Summit recorded a $1.50 million provision for credit losses in the fourth quarter of 2022, reflecting reserve build to support the Company’s significant loan growth and increasing forecasted economic uncertainty. The provision for credit losses was $1.50 million for the linked quarter and the year-ago quarter.

Summit’s allowance for loan credit losses was $38.9 million on December 31, 2022, $36.8 million at the end of the linked quarter, and $32.3 million on December 31, 2021.

The allowance for loan credit losses stood at 1.26 percent of total loans at December 31, 2022 compared to 1.19 percent at the end of the linked quarter, and 1.17 percent at December 31, 2021. The allowance was 497.2 percent of nonperforming loans at December 31, 2022, compared to 254.4 percent at year-end 2021.

Summit’s allowance for credit losses on unfunded loan commitments was $6.95 million on December 31, 2022, $7.60 million at the end of the linked quarter and $7.28 million on December 31, 2021. The allowance for credit losses on unfunded loan commitments decreased $650,000 during the most recent quarter, principally as result of a change in mix of unfunded commitments. Construction loan commitments, which on average have a higher historical loss ratio than do other loans, decreased, while commercial unfunded lines of credit, which carry a lower loss factor and lower utilization rates, increased.

As of December 31, 2022, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $12.9 million, or 0.33 percent of assets, compared to NPAs of $14.4 million, or 0.37 percent of assets at the linked quarter-end and $22.6 million or 0.63 percent of assets at year-end 2021.

About the Company

Summit Financial Group, Inc. is the $3.9 billion financial holding company for Summit Community Bank, Inc. Its talented bankers serve commercial and individual clients throughout West Virginia, the Washington, D.C. metropolitan area, Virginia, and Kentucky. Summit’s focus on in-market commercial lending and providing other business banking services in dynamic markets is designed to leverage its highly efficient operations and core deposits in strong legacy locations. Residential and consumer lending, trust and wealth management, and other retail financial services are offered through convenient digital and mobile banking platforms, including MySummitBank.com and 44 full-service branch locations. More information on Summit Financial Group, Inc. (NASDAQ: SMMF), headquartered in West Virginia’s Eastern Panhandle in Moorefield, is available at SummitFGI.com.

FORWARD-LOOKING STATEMENTS

This press release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Words such as “expects”, “anticipates”, “believes”, “estimates” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could” are intended to identify such forward-looking statements.

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include: the effect of the COVID-19 pandemic, including the negative impacts and disruptions on the communities we serve, and the domestic and global economy, which may have an adverse effect on our business; current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; fiscal and monetary policies of the Federal Reserve; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; the successful integration of operations of our acquisitions; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; and changes in the national and local economies. We undertake no obligation to revise these statements following the date of this press release.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q4 2022 vs Q4 2021
		For the Quarter Ended						Percent
Dollars in thousands		12/31/2022			12/31/2021			Change
Statements of Income
	Interest income
	Loans, including fees	$	43,589		$	28,979		50.4%
	Securities		4,181			2,763		51.3%
	Other		70			75		-6.7%
	Total interest income		47,840			31,817		50.4%
	Interest expense
	Deposits		10,194			1,718		493.4%
	Borrowings		3,293			1,267		159.9%
	Total interest expense		13,487			2,985		351.8%
	Net interest income		34,353			28,832		19.1%
	Provision for credit losses		1,500			1,500		0.0%
	Net interest income after provision
	for credit losses		32,853			27,332		20.2%
	Noninterest income
	Trust and wealth management fees		750			847		-11.5%
	Mortgage origination revenue		286			1,361		-79.0%
	Service charges on deposit accounts		1,526			1,501		1.7%
	Bank card revenue		1,513			1,528		-1.0%
	Net gains on equity investments		280			202		38.6%
	Net realized losses on debt securities		(24	)		(109	)	-78.0%
	Bank owned life insurance and annuity income		367			293		25.3%
	Other income		167			330		-49.4%
	Total noninterest income		4,865			5,953		-18.3%
	Noninterest expense
	Salaries and employee benefits		10,532			8,977		17.3%
	Net occupancy expense		1,328			1,265		5.0%
	Equipment expense		1,769			1,902		-7.0%
	Professional fees		386			438		-11.9%
	Advertising and public relations		280			216		29.6%
	Amortization of intangibles		351			387		-9.3%
	FDIC premiums		352			330		6.7%
	Bank card expense		679			703		-3.4%
	Foreclosed properties expense, net of (gains)/losses		159			403		-60.5%
	Acquisition-related expense		81			57		42.1%
	Other expenses		2,932			3,250		-9.8%
	Total noninterest expense		18,849			17,928		5.1%
	Income before income taxes		18,869			15,357		22.9%
	Income taxes		3,783			2,777		36.2%
	Net income		15,086			12,580		19.9%
	Preferred stock dividends		225			225		n/a
	Net income applicable to common shares	$	14,861		$	12,355		20.3%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q4 2022 vs Q4 2021
		For the Quarter Ended						Percent
		12/31/2022			12/31/2021			Change
Per Share Data
	Earnings per common share
	Basic	$	1.16		$	0.96		20.8%
	Diluted	$	1.16		$	0.95		22.1%
	Cash dividends per common share	$	0.20		$	0.18		11.1%
	Common stock dividend payout ratio		16.9%			18.3%		-7.7%
	Average common shares outstanding
	Basic		12,775,703			12,916,555		-1.1%
	Diluted		12,837,637			12,976,181		-1.1%
	Common shares outstanding at period end		12,783,646			12,743,125		0.3%
Performance Ratios
	Return on average equity		17.50%			15.48%		13.0%
	Return on average tangible equity (C)		21.75%			19.72%		10.3%
	Return on average tangible common equity (D)		22.96%			20.91%		9.8%
	Return on average assets		1.54%			1.42%		8.5%
	Net interest margin (A)		3.80%			3.49%		8.9%
	Efficiency ratio (B)		46.40%			48.85%		-5.0%

NOTES

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

(B) – Computed on a tax equivalent basis excluding acquisition-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

(C) – Return on average tangible equity = (Net income + Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).

(D) – Return on average tangible common equity = (Net income + Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Annual Performance Summary (unaudited)
2022 vs 2021
		For the Year Ended					Percent
Dollars in thousands		12/31/2022			12/31/2021		Change
Statements of Income
	Interest income
	Loans, including fees	$	145,364		$	112,630	29.1%
	Securities		13,052			9,470	37.8%
	Other		331			316	4.7%
	Total interest income		158,747			122,416	29.7%
	Interest expense
	Deposits		20,683			8,182	152.8%
	Borrowings		9,078			4,302	111.0%
	Total interest expense		29,761			12,484	138.4%
	Net interest income		128,986			109,932	17.3%
	Provision for credit losses		6,950			4,000	73.8%
	Net interest income after provision
	for credit losses		122,036			105,932	15.2%
	Noninterest income
	Trust and wealth management fees		2,978			2,886	3.2%
	Mortgage origination revenue		1,480			3,999	-63.0%
	Service charges on deposit accounts		6,150			5,032	22.2%
	Bank card revenue		6,261			5,896	6.2%
	Net gains on equity investments		265			202	31.2%
	Net realized (losses)/gains on debt securities		(708	)		425	-266.6%
	Bank owned life insurance and annuity income		1,211			1,026	18.0%
	Other income		516			742	-30.5%
	Total noninterest income		18,153			20,208	-10.2%
	Noninterest expense
	Salaries and employee benefits		40,452			34,386	17.6%
	Net occupancy expense		5,128			4,824	6.3%
	Equipment expense		7,253			6,990	3.8%
	Professional fees		1,628			1,578	3.2%
	Advertising and public relations		893			697	28.1%
	Amortization of intangibles		1,440			1,563	-7.9%
	FDIC premiums		1,224			1,449	-15.5%
	Bank card expense		2,928			2,668	9.7%
	Foreclosed properties expense, net of (gains)/losses		236			1,745	-86.5%
	Acquisition-related expense		114			1,224	-90.7%
	Other expenses		11,583			11,615	-0.3%
	Total noninterest expense		72,879			68,739	6.0%
	Income before income taxes		67,310			57,401	17.3%
	Income taxes		14,094			11,663	20.8%
	Net income		53,216			45,738	16.3%
	Preferred stock dividends		900			589	52.8%
	Net income applicable to common shares	$	52,316		$	45,149	15.9%

    

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Annual Performance Summary (unaudited)
2022 vs 2021
		For the Year Ended						Percent
		12/31/2022			12/31/2021			Change
Per Share Data
	Earnings per common share
	Basic	$	4.10		$	3.49		17.5%
	Diluted	$	4.08		$	3.47		17.6%
	Cash dividends per common share	$	0.76		$	0.70		8.6%
	Common stock dividend payout ratio		18.2%			19.9%		-8.5%
	Average common shares outstanding
	Basic		12,760,649			12,943,883		-1.4%
	Diluted		12,821,533			13,003,428		-1.4%
	Common shares outstanding at period end		12,783,646			12,743,125		0.3%
Performance Ratios
	Return on average equity		15.83%			14.76%		7.2%
	Return on average tangible equity (C)		19.88%			18.71%		6.3%
	Return on average tangible common equity (D)		21.03%			19.51%		7.8%
	Return on average assets		1.42%			1.36%		4.4%
	Net interest margin (A)		3.73%			3.54%		5.4%
	Efficiency ratio (B)		47.76%			49.22%		-3.0%

NOTES

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

(B) – Computed on a tax equivalent basis excluding acquisition-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

(C) – Return on average tangible equity = (Net income + Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).

(D) – Return on average tangible common equity = (Net income + Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
Dollars in thousands		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Statements of Income
	Interest income
	Loans, including fees	$	43,589		$	38,784		$	32,766		$	30,224		$	28,979
	Securities		4,181			3,497			2,752			2,623			2,763
	Other		70			170			45			46			75
	Total interest income		47,840			42,451			35,563			32,893			31,817
	Interest expense
	Deposits		10,194			6,140			2,622			1,727			1,718
	Borrowings		3,293			2,198			1,976			1,612			1,267
	Total interest expense		13,487			8,338			4,598			3,339			2,985
	Net interest income		34,353			34,113			30,965			29,554			28,832
	Provision for credit losses		1,500			1,500			2,000			1,950			1,500
	Net interest income after provision
	for credit losses		32,853			32,613			28,965			27,604			27,332
	Noninterest income
	Trust and wealth management fees		750			725			745			757			847
	Mortgage origination revenue		286			538			317			339			1,361
	Service charges on deposit accounts		1,526			1,550			1,674			1,401			1,501
	Bank card revenue		1,513			1,639			1,618			1,491			1,528
	Net gains/(losses) on equity investments		280			283			(669	)		372			202
	Net realized losses on debt securities		(24	)		(242	)		(289	)		(152	)		(109	)
	Bank owned life insurance and annuity income		367			229			331			283			293
	Other income		167			165			129			54			330
	Total noninterest income		4,865			4,887			3,856			4,545			5,953
	Noninterest expense
	Salaries and employee benefits		10,532			10,189			10,030			9,700			8,977
	Net occupancy expense		1,328			1,301			1,258			1,242			1,265
	Equipment expense		1,769			1,851			1,791			1,843			1,902
	Professional fees		386			372			507			362			438
	Advertising and public relations		280			276			165			172			216
	Amortization of intangibles		351			354			355			378			387
	FDIC premiums		352			292			190			390			330
	Bank card expense		679			726			810			714			703
	Foreclosed properties expense, net of (gains)/losses		159			26			141			(90	)		403
	Acquisition-related expenses		81			-			4			29			57
	Other expenses		2,932			3,834			2,358			2,459			3,250
	Total noninterest expense		18,849			19,221			17,609			17,199			17,928
	Income before income taxes		18,869			18,279			15,212			14,950			15,357
	Income tax expense		3,783			3,856			3,198			3,257			2,777
	Net income		15,086			14,423			12,014			11,693			12,580
	Preferred stock dividends		225			225			225			225			225
	Net income applicable to common shares	$	14,861		$	14,198		$	11,789		$	11,468		$	12,355

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Per Share Data
	Earnings per common share
	Basic	$	1.16		$	1.11		$	0.92		$	0.90		$	0.96
	Diluted	$	1.16		$	1.11		$	0.92		$	0.90		$	0.95
	Cash dividends per common share	$	0.20		$	0.20		$	0.18		$	0.18		$	0.18
	Common stock dividend payout ratio		16.9%			17.7%			19.1%			19.7%			18.5%
	Average common shares outstanding
	Basic		12,775,703			12,766,473			12,754,724			12,745,297			12,916,555
	Diluted		12,837,637			12,835,670			12,810,174			12,801,903			12,976,181
	Common shares outstanding at period end		12,783,646			12,774,645			12,763,422			12,753,094			12,743,125
Performance Ratios
	Return on average equity		17.50%			17.05%			14.48%			14.20%			15.48%
	Return on average tangible equity (C)		21.75%			21.33%			18.28%			18.02%			19.72%
	Return on average tangible common equity (D)		22.96%			22.20%			19.00%			18.74%			20.55%
	Return on average assets		1.54%			1.51%			1.30%			1.30%			1.42%
	Net interest margin (A)		3.80%			3.84%			3.66%			3.61%			3.49%
	Efficiency ratio (B)		46.40%			47.95%			47.45%			49.44%			48.85%

NOTES

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

(B) – Computed on a tax equivalent basis excluding acquisition-related expenses, gains/losses on sales of assets, write-downs of OREO properties to fair value and amortization of intangibles.

(C) – Return on average tangible equity = (Net income + Amortization of intangibles [after-tax]) / (Average shareholders’ equity – Average intangible assets).

(D) – Return on average tangible common equity = (Net income + Amortization of intangibles [after-tax]) / (Average common shareholders’ equity – Average intangible assets).

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data (unaudited)
Dollars in thousands, except per share amounts		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
Assets
	Cash and due from banks	$	16,469		$	16,141		$	17,921		$	18,404		$	21,006
	Interest bearing deposits other banks		28,248			29,510			31,680			42,853			57,452
	Debt securities, available for sale		405,201			383,965			368,049			374,855			401,103
	Debt securities, held to maturity		96,163			96,640			97,116			97,589			98,060
	Equity investments		29,494			20,314			19,905			20,574			20,202
	Other investments		16,029			18,105			18,329			10,974			11,304
	Loans, net		3,043,919			3,038,377			2,941,813			2,817,998			2,729,093
	Property held for sale		5,067			5,193			5,319			6,900			9,858
	Premises and equipment, net		53,981			54,628			55,034			55,713			56,371
	Goodwill and other intangible assets, net		62,150			62,502			62,856			63,212			63,590
	Cash surrender value of life insurance policies and annuities		71,640			71,216			71,073			70,825			60,613
	Derivative financial instruments		40,506			42,179			31,452			24,455			11,187
	Other assets		47,825			48,529			42,252			39,339			36,880
	Total assets	$	3,916,692		$	3,887,299		$	3,762,799		$	3,643,691		$	3,576,719
Liabilities and Shareholders' Equity
	Deposits	$	3,169,879		$	3,108,072		$	2,975,304		$	3,008,063		$	2,943,089
	Short-term borrowings		225,999			273,148			291,447			140,146			140,146
	Long-term borrowings and
	subordinated debentures, net		123,543			123,427			123,311			123,260			123,159
	Other liabilities		42,741			40,978			38,846			41,756			42,852
	Total liabilities		3,562,162			3,545,625			3,428,908			3,313,225			3,249,246
	Preferred stock and related surplus		14,920			14,920			14,920			14,920			14,920
	Common stock and related surplus		90,696			90,345			90,008			89,675			89,301
	Retained earnings		260,393			248,084			236,438			226,944			217,770
	Accumulated other comprehensive income (loss)		(11,479	)		(11,675	)		(7,475	)		(1,073	)		5,482
	Total shareholders' equity		354,530			341,674			333,891			330,466			327,473
	Total liabilities and shareholders' equity	$	3,916,692		$	3,887,299		$	3,762,799		$	3,643,691		$	3,576,719
	Book value per common share	$	26.57		$	25.58		$	24.99		$	24.74		$	24.53
	Tangible book value per common share (A)	$	21.70		$	20.69		$	20.07		$	19.79		$	19.54
	Tangible common equity to tangible assets (B)		7.2%			6.9%			6.9%			7.0%			7.1%

NOTES

(A) – Tangible book value per share = (Common stock and related surplus plus Retained earnings plus Accumulated other comprehensive income/loss – Intangible assets) / Common shares outstanding.
(B) – Tangible common equity to tangible assets = (Common stock and related surplus plus Retained earnings plus Accumulated other comprehensive income/loss – Intangible assets) / (Total assets – Intangible assets).

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (unaudited)
		12/31/2022	9/30/2022	6/30/2022	3/31/2022	12/31/2021
Summit Financial Group, Inc.
	CET1 Risk-based Capital	8.6%	8.2%	8.2%	8.3%	8.4%
	Tier 1 Risk-based Capital	9.5%	9.2%	9.2%	9.3%	9.5%
	Total Risk-based Capital	13.5%	13.1%	13.3%	13.5%	13.8%
	Tier 1 Leverage	8.5%	8.4%	8.4%	8.4%	8.3%
Summit Community Bank, Inc.
	CET1 Risk-based Capital	11.6%	11.3%	11.4%	11.6%	11.9%
	Tier 1 Risk-based Capital	11.6%	11.3%	11.4%	11.6%	11.9%
	Total Risk-based Capital	12.6%	12.2%	12.4%	12.5%	12.8%
	Tier 1 Leverage	10.4%	10.3%	10.4%	10.5%	10.4%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition (unaudited)
Dollars in thousands		12/31/2022		9/30/2022			6/30/2022			3/31/2022			12/31/2021
Commercial		$	501,844		$	512,771		$	455,202		$	447,482		$	365,301
Mortgage warehouse lines			130,390			194,740			171,399			164,895			227,869
Commercial real estate
Owner occupied			467,050			473,298			502,152			491,059			484,708
Non-owner occupied			1,004,368			960,627			963,646			910,174			866,031
Construction and development
Land and development			106,362			104,437			106,840			103,203			100,805
Construction			282,935			248,564			211,955			171,383			146,038
Residential real estate
Conventional			386,874			382,203			377,980			375,240			384,794
Jumbo			92,103			87,449			79,803			81,443			79,108
Home equity			71,986			72,756			71,136			70,770			72,112
Consumer			35,372			35,116			33,816			32,095			31,923
Other			3,534			3,166			2,947			2,877			2,702
Total loans, net of unearned fees			3,082,818			3,075,127			2,976,876			2,850,621			2,761,391
Less allowance for loan credit losses			38,899			36,750			35,063			32,623			32,298
Loans, net		$	3,043,919		$	3,038,377		$	2,941,813		$	2,817,998		$	2,729,093
Unfunded loan commitments		$	925,657		$	889,854		$	876,157		$	840,705		$	688,493

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands		12/31/2022		9/30/2022			6/30/2022			3/31/2022			12/31/2021
Core deposits
Non-interest bearing checking		$	553,616		$	619,067		$	600,791		$	629,002		$	568,986
Interest bearing checking			1,743,299			1,475,643			1,238,368			1,134,964			1,127,298
Savings			496,751			582,922			645,099			702,069			698,156
Time deposits			294,630			338,668			386,562			427,076			451,713
Total core deposits			3,088,296			3,016,300			2,870,820			2,893,111			2,846,153
Brokered time deposits			32,790			32,778			32,767			32,755			14,677
Other non-core time deposits			48,793			58,994			71,717			82,197			82,259
Total deposits		$	3,169,879		$	3,108,072		$	2,975,304		$	3,008,063		$	2,943,089

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
		For the Quarter Ended
Dollars in thousands		12/31/2022			9/30/2022			6/30/2022			3/31/2022			12/31/2021
	Gross loan charge-offs	$	250		$	265		$	306		$	618		$	282
	Gross loan recoveries		(249	)		(257	)		(147	)		(109	)		(89	)
	Net loan charge-offs	$	1		$	8		$	159		$	509		$	193
	Net loan charge-offs to average loans (annualized)		0.00%			0.00%			0.02%			0.07%			0.03%
	Allowance for loan credit losses	$	38,899		$	36,750		$	35,063		$	32,623		$	32,298
	Allowance for loan credit losses as a percentage
	of period end loans		1.26%			1.19%			1.18%			1.14%			1.17%
	Allowance for credit losses on
	unfunded loan commitments ("ULC")	$	6,947		$	7,597		$	7,792		$	8,392		$	7,275
	Allowance for credit losses on ULC
	as a percentage of period end ULC		0.75%			0.85%			0.89%			1.00%			1.06%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	93		$	347		$	345		$	433		$	740
	Commercial real estate		1,750			1,860			2,703			4,765			4,603
	Residential construction and development		851			902			1,053			968			1,560
	Residential real estate		5,117			6,083			6,799			5,549			5,772
	Consumer		12			8			37			20			21
	Total nonperforming loans		7,823			9,200			10,937			11,735			12,696
	Foreclosed properties
	Commercial real estate		297			297			440			1,251			1,389
	Commercial construction and development		2,187			2,332			2,332			2,332			2,332
	Residential construction and development		2,293			2,293			2,293			3,018			5,561
	Residential real estate		290			271			254			299			576
	Total foreclosed properties		5,067			5,193			5,319			6,900			9,858
	Other repossessed assets		-			-			-			-			-
	Total nonperforming assets	$	12,890		$	14,393		$	16,256		$	18,635		$	22,554
	Nonperforming loans to period end loans		0.25%			0.30%			0.37%			0.41%			0.46%
	Nonperforming assets to period end assets		0.33%			0.37%			0.43%			0.51%			0.63%
	Troubled debt restructurings
	Performing	$	18,966		$	18,206		$	18,657		$	18,971		$	18,887
	Nonperforming		1,648			1,920			2,236			1,822			2,039
	Total troubled debt restructurings	$	20,614		$	20,126		$	20,893		$	20,793		$	20,926

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Loans Past Due 30-89 Days (unaudited)
Dollars in thousands		12/31/2022		9/30/2022			6/30/2022			3/31/2022			12/31/2021
	Commercial	$	3,168		$	1,329		$	989		$	388		$	751
	Commercial real estate		641			1,550			4,084			1,446			683
	Construction and development		317			236			821			645			45
	Residential real estate		6,231			2,824			3,452			3,407			3,552
	Consumer		253			216			196			69			190
	Other		22			4			14			28			22
	Total	$	10,632		$	6,159		$	9,556		$	5,983		$	5,243

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q4 2022 vs Q3 2022 vs Q4 2021 (unaudited)
	Q4 2022									Q3 2022									Q4 2021
	Average			Earnings /		Yield /				Average			Earnings /		Yield /				Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate				Balances			Expense		Rate				Balances			Expense		Rate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable	$	3,100,595		$	43,549		5.57	%		$	3,018,219		$	38,741		5.09	%		$	2,640,975		$	28,916		4.34	%
Tax-exempt (2)		4,525			52		4.56	%			4,834			54		4.43	%			6,888			81		4.67	%
Securities
Taxable		280,114			2,747		3.89	%			283,645			2,273		3.18	%			349,541			1,806		2.05	%
Tax-exempt (2)		219,245			1,813		3.28	%			203,951			1,549		3.01	%			177,757			1,212		2.71	%
Interest bearing deposits other banks
and Federal funds sold		25,785			70		1.08	%			49,048			170		1.38	%			132,471			75		0.22	%
Total interest earning assets		3,630,264			48,231		5.27	%			3,559,697			42,787		4.77	%			3,307,632			32,090		3.85	%
Noninterest earning assets
Cash & due from banks		16,892									17,455									21,037
Premises & equipment		54,431									54,976									56,566
Intangible assets		62,336									62,705									63,810
Other assets		191,926									171,409									126,635
Allowance for loan credit losses		(37,377	)								(35,381	)								(32,691	)
Total assets	$	3,918,472								$	3,830,861								$	3,542,989
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits		1,615,275			7,848		1.93	%		$	1,454,815		$	4,276		1.17	%			1,128,637			319		0.11	%
Savings deposits		529,039			1,651		1.24	%			611,075			1,243		0.81	%			692,893			590		0.34	%
Time deposits		399,101			695		0.69	%			461,134			621		0.53	%			560,140			809		0.57	%
Short-term borrowings		276,823			1,868		2.68	%			191,421			850		1.76	%			140,146			365		1.03	%
Long-term borrowings and
subordinated debentures		123,488			1,425		4.58	%			123,368			1,348		4.34	%			86,509			902		4.14	%
Total interest bearing liabilities		2,943,726			13,487		1.82	%			2,841,813			8,338		1.16	%			2,608,325			2,985		0.45	%
Noninterest bearing liabilities															.
Demand deposits		586,617									609,424									568,764
Other liabilities		43,378									41,339									40,905
Total liabilities		3,573,721									3,492,576									3,217,994
Shareholders' equity - preferred		14,920									14,920									14,920
Shareholders' equity - common		329,831									323,365									310,075
Total liabilities and
shareholders' equity	$	3,918,472								$	3,830,861								$	3,542,989
NET INTEREST EARNINGS				$	34,744								$	34,449								$	29,105
NET INTEREST MARGIN							3.80	%								3.84	%								3.49	%
(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented.
The tax equivalent adjustment resulted in an increase in interest income of $391,000, $336,000, and $273,000 for Q4 2022,
Q3 2022 and Q4 2021, respectively.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2022 vs YTD 2021 (unaudited)
	YTD 2022									YTD 2021
	Average			Earnings /		Yield /				Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate				Balances			Expense		Rate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable	$	2,949,350		$	145,189		4.92	%		$	2,487,885		$	112,269		4.51	%
Tax-exempt (2)		4,961			222		4.47	%			9,681			458		4.73	%
Securities
Taxable		295,264			8,442		2.86	%			301,446			5,883		1.95	%
Tax-exempt (2)		195,558			5,836		2.98	%			159,266			4,541		2.85	%
Interest bearing deposits other banks
and Federal funds sold		46,248			331		0.72	%			175,615			315		0.18	%
Total interest earning assets		3,491,381			160,020		4.58	%			3,133,893			123,466		3.94	%
Noninterest earning assets
Cash & due from banks		17,473									19,582
Premises & equipment		55,219									54,762
Intangible assets		62,878									58,973
Other assets		167,982									119,562
Allowance for loan credit losses		(34,630	)								(33,491	)
Total assets	$	3,760,303								$	3,353,281
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	1,350,227		$	13,863		1.03	%		$	1,044,817		$	1,409		0.13	%
Savings deposits		627,630			4,155		0.66	%			673,259			2,471		0.37	%
Time deposits		479,545			2,665		0.56	%			569,420			4,302		0.76	%
Short-term borrowings		204,265			3,786		1.85	%			140,146			1,768		1.26	%
Long-term borrowings and
subordinated debentures		123,331			5,292		4.29	%			58,974			2,534		4.30	%
		2,784,998			29,761		1.07	%			2,486,616			12,484		0.50	%
Noninterest bearing liabilities
Demand deposits		597,199									518,311
Other liabilities		42,005									38,545
Total liabilities		3,424,202									3,043,472
Shareholders' equity - preferred		14,920									10,327
Shareholders' equity - common		321,181									299,482
Total liabilities and
shareholders' equity	$	3,760,303								$	3,353,281
NET INTEREST EARNINGS				$	130,259								$	110,982
NET INTEREST MARGIN							3.73	%								3.54	%
(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21%.
The tax equivalent adjustment resulted in an increase in interest income of $1,273,000 and $1,050,000 for the
YTD 2022 and YTD 2021 periods, respectively.

Contact:	Robert S. Tissue, Executive Vice President & CFO
Telephone:	(304) 530-0552
Email:	rtissue@summitfgi.com

FAQ

What were Summit Financial Group's Q4 2022 earnings?

Summit Financial Group reported net income of $14.9 million, or $1.16 per diluted share for Q4 2022.

How much did total loans increase in Q4 2022 for SMMF?

Total loans increased by 2.6% during the fourth quarter of 2022.

What is the tangible book value per share for Summit Financial Group?

The tangible book value per common share increased to $21.70 in Q4 2022.

Did Summit Financial Group's deposits increase in Q4 2022?

Yes, deposits increased by 2.0% during the fourth quarter of 2022.

What are the impacts of the merger with PSB Holding Corp. on Summit Financial Group?

The merger with PSB Holding Corp. is expected to bolster Summit's growth prospects in 2023.