Summit Financial Group Reports Third Quarter 2022 EPS of $1.11 on Continued Strong Loan and Revenue Growth

Rhea-AI Summary

Summit Financial Group reported strong Q3 2022 earnings with net income of $14.2 million ($1.11 per diluted share), compared to $11.8 million in Q2 2022. Total loans rose to $2.9 billion, showing a 2.7% increase during the quarter. The net interest income grew by 10.2%, reaching $34.1 million, driven by higher market rates. The company experienced a decline in nonperforming assets to 0.37%. Despite an increase in noninterest expenses to $19.2 million, the efficiency ratio improved to 47.95%. Tangible book value per common share rose to $20.69, reflecting a 5.89% year-to-date growth.

Positive

• Net income increased to $14.2 million, or $1.11 per diluted share, compared to $11.8 million in Q2 2022.
• Total loans reached $2.9 billion, marking a 2.7% growth during the quarter and 21.5% year-over-year.
• Net interest income rose 10.2% to $34.1 million from the linked quarter, primarily due to higher market rates.
• Efficiency ratio improved to 47.95% compared to 49.52% in the year-ago quarter.
• Tangible book value per common share increased to $20.69, reflecting a 5.89% year-to-date growth.

Negative

• Total noninterest expenses increased to $19.2 million, up 9.2% from the linked quarter.
• Provision for credit losses rose to $1.50 million, reflecting increased reserve requirements amid economic uncertainty.

MOOREFIELD, W.Va., Oct. 27, 2022 (GLOBE NEWSWIRE) -- Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported financial results for the third quarter of 2022, including continued strong earnings on growth in loans and total revenue.

The Company, which serves commercial and individual clients across West Virginia, the Washington D.C. metropolitan area, Virginia and Kentucky through Summit Community Bank, Inc., reported net income applicable to common shares of $14.2 million, or $1.11 per diluted share, for the third quarter of 2022, as compared to $11.8 million, or $0.92 per diluted share, for the second quarter of 2022 and $12.0 million, or $0.92 per diluted share, for the third quarter of 2021.

“Third quarter results included annualized double-digit loan growth and our fourth consecutive quarter of record net interest income growth and margin expansion,” said H. Charles Maddy, III, President and Chief Executive Officer. “Our asset quality metrics remain very solid and continue to demonstrate the quality of the underwriting practices of our bankers while we cultivate the relationships from our robust commercial lending pipelines. I am particularly gratified by the continued increases in our tangible book value per common share, despite a challenging interest rate environment. The strength of our balance sheet, operating results and profitability positions us to continue our growth trajectory through fourth quarter 2022 and into 2023.”

Highlights for Q3 2022

• Total loans of $2.9 billion, excluding mortgage warehouse lines of credit and Paycheck Protection Program (“PPP”) lending, increased 2.7 percent, or 10.9 percent annualized, during the quarter and 21.5 percent since September 30, 2021.
• Net interest income increased 10.2 percent compared to the linked quarter principally due to higher market rates, and increased 21.7 percent from the year-ago period, primarily due to loan growth.
• Net interest margin (“NIM”) increased 18 basis points to 3.84 percent from the linked quarter and 37 basis points from the year-ago quarter, as increased yields on interest earning assets were partially offset by increased cost of deposits and other funding.
• Total noninterest expense increased to $19.2 million in the quarter, up 9.2 percent from the linked quarter primarily due to deferred director compensation expense of $830,000 in Q3 compared to $726,000 deferred director compensation income in the linked quarter and up 10.8 percent from the year-ago quarter, as salary and benefits increases and deferred director compensation increases were largely offset by disciplined management of other operating costs.
• Annualized non-interest expense increased to 2.01 percent of average assets compared to 1.91 percent of average assets for the linked quarter, and remained unchanged from the year-ago period.
• Achieved an efficiency ratio of 47.95 percent compared to 47.45 percent in Q2 2022 and 49.52 percent in the year-ago quarter.
• Incurred $1.50 million provision for credit losses in the quarter increasing period-end allowance for loan credit losses to $36.8 million, or 1.19 percent of total loans and 399.5 percent of nonperforming loans.
• Foreclosed property held for sale declined by 2.4 percent during the quarter and 58.3 percent from the year-ago quarter to $5.19 million or 0.13 percent of assets at period end.
• Nonperforming assets (“NPAs”) improved to 0.37 percent of total assets at period end, excluding restructured assets, down 6 basis points during the quarter and 30 basis points from September 30, 2021.
• Tangible book value per common share (“TBVPCS”) increased $0.62 to $20.69 during the quarter, despite unrealized net losses on debt securities available for sale (“AFS”) of $0.95 per common share (net of deferred income taxes) recorded in Other Comprehensive Income (“OCI”), partially offset by increases in the fair values of derivative financial instruments hedging against higher interest rates totaling $0.62 per common share (net of deferred income taxes) also recorded in OCI. Year-to-date for 2022, Summit’s TBVPCS has increased 5.89 percent, while for the vast majority of our peers TBVPCS has declined, and in some cases significantly so, during the same period.

Results from Operations

Net interest income grew to $34.1 million in the third quarter of 2022, an increase of 10.2 percent from the linked quarter and 21.7 percent from the prior-year third quarter. NIM for third quarter 2022 was 3.84 percent compared to 3.66 percent for the linked quarter and 3.47 percent for the year-ago quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summit’s net interest margin would have been 3.81 percent for the third quarter of 2022, 3.62 percent for the linked quarter and 3.41 percent for the year-ago period.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for third quarter 2022 was $4.89 million compared to $3.86 million for the linked quarter and $4.57 million for the comparable period of 2021. The Company recorded realized securities losses on debt securities of $242,000 in the third quarter of 2022 and $289,000 in the linked quarter. In addition, the Company recognized a gain on equity investments of $283,000 in third quarter 2022 compared to a loss of $669,000 in the linked quarter.

Mortgage origination revenue increased to $538,000 in the third quarter of 2022 compared to $317,000 in the linked quarter and $742,000 for the year-ago period. Mortgage origination revenue for third quarter 2022 includes an increase in the fair value of mortgage servicing rights of $318,000.

Excluding gains and losses on debt securities and equity investments, noninterest income was $4.85 million for third quarter 2022 compared to $4.81 million for Q2 2022 and $4.64 million in the year-ago quarter primarily as result of higher deposit service charges and bank card fees.

Revenue from net interest income and noninterest income, excluding gains and losses on debt securities and equity investments, grew to $39.0 million, up 8.9 percent from $35.8 million in the linked quarter and 19.2 percent from $32.7 million in the year-ago quarter. Revenue, excluding gains and losses on debt securities and equity investments, for the first nine months of 2022, grew to $108.6 million, up 14.6 percent from the first nine months of 2021, outpacing the 6.3 percent noninterest expense increase recorded for the comparable nine-month period.

Total noninterest expense increased to $19.2 million in the third quarter of 2022, up 9.2 percent from $17.6 million in the linked quarter and 10.8 percent from $17.3 million for the prior-year third quarter. The sequential-quarter increase in total noninterest expense, primarily on higher salary and benefits expenses and deferred director compensation expense, reflected modest fluctuations in most other categories of operating costs.

Salary and benefit expenses of $10.2 million in the third quarter of 2022 increased from $10.0 million for the linked quarter and $8.75 million during the year-ago period. Higher group health insurance premiums and increased accruals for anticipated 2022 performance bonuses account for the primary reasons for the increases.

Net losses and expenses on foreclosed properties declined to $26,000 during third quarter 2022 compared to $141,000 in the linked quarter and $370,000 in the year-ago period.

Other expenses were $3.83 million for Q3 2022 compared to $2.36 million for the linked quarter and $2.72 million in the year-ago period. The increase in other expenses was primarily from an increase in deferred director compensation plan-related expense to $830,000 during the third quarter of 2022 compared to $726,000 plan-related income during the second quarter of 2022 and plan-related expense of $72,000 in the year-ago quarter. For the first nine month period of 2022, deferred director compensation plan-related income totaled $296,000 compared to plan related expense of $498,000 for the same period of 2021. During Q3 2022, we purchased investments to hedge the changes in the Plan participants’ phantom investments which should serve to significantly reduce the period-to-period volatility of the Plan’s impact on the Company’s statements of income.

Summit’s efficiency ratio was to 47.95 percent in the third quarter of 2022 compared to 47.45 percent in the linked quarter and 49.52 percent for the year-ago period. Non-interest expense to average assets was 2.01 percent in both the third quarter of 2022 and 2021 and was 1.91 percent in the linked quarter.

Balance Sheet

As of September 30, 2022, total assets were $3.9 billion, an increase of $310.6 million, or 8.7 percent, since December 31, 2021 and an increase of $378.3 million, or 10.8 percent, since September 30, 2021.

Total loans net of unearned fees grew to $3.1 billion on September 30, 2022, up 3.3 percent (or 13.2 percent annualized) during the quarter, and up 20.4 percent from September 30, 2021. Excluding PPP and mortgage warehouse lending, total loans grew to $2.9 billion on September 30, 2022, up 2.73 percent (or 10.9 percent annualized) during the third quarter and up 14.2 percent year-to-date and 21.5 percent since September 30, 2021.

Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE) but excluding PPP lending, grew to $1.9 billion on September 30, 2022, up 1.4 percent during the third quarter, 14.2 percent year-to-date and 24.0 percent since September 30, 2021.

Residential real estate and consumer lending totaled $577.5 million on September 30, 2022, up 2.6 percent during the third quarter, 1.7 percent year-to-date and 1.2 percent from September 30, 2021.

As of September 30, 2022, PPP balances were paid down to $1.99 million and mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, totaled $194.7 million compared to $171.4 million at June 30, 2022 and $161.6 million at the year-ago period end.

Deposits totaled $3.1 billion on September 30, 2022, a 4.5 percent (or 17.9 percent annualized) increase during the third quarter, a 5.6 percent increase year-to-date and a 5.1 percent increase since September 30, 2021. Core deposits increased 5.1 percent during third quarter 2022 to $3.0 billion, and increased 6.0 percent year-to-date and 5.6 percent since September 30, 2021. Changes in core deposits by category are as follows:

• Non-interest bearing deposit accounts increased $18.3 million or 3.0 percent in the third quarter of 2022 and increased $43.5 million or 7.6 percent since September 30, 2021.
• Interest bearing checking accounts grew $237.3 million or 19.2 percent in the third quarter of 2022 and $354.6 million or 31.6 percent since September 30, 2021.
• Savings accounts declined $62.2 million or 9.6 percent in the third quarter of 2022 and $110.8 million or 16.0 percent since September 30, 2021.
• Core time deposits declined $47.9 million or 12.4 percent in the third quarter of 2022 and $128.4 million or 27.5 percent since September 30, 2021.

Total shareholders’ equity was $341.7 million as of September 30, 2022 compared to $327.5 million at December 31, 2021 and $323.3 million at September 30, 2021. Summit paid a quarterly common dividend of $0.20 per share in Q3 2022, representing an 11.1 percent increase compared to the $0.18 per share paid in Q2 2022.

Year-to-date 2022, TBVPCS has increased $1.15 to $20.69. TBVPCS was negatively impacted during the first nine months of 2022 by unrealized net losses on AFS debt securities of $3.21 per common share (net of deferred income taxes) recorded in OCI. However, these losses were partially offset by increased fair values of interest rate caps and swaps (also recorded in OCI) held as hedges against higher interest rates totaling $1.86 per common share (net of deferred income taxes), in the same period.

Summit had 12,774,645 outstanding common shares at the end of the third quarter of 2022 compared to 12,743,125 at year-end 2021.

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

Asset Quality

Net loan charge-offs (“NCOs”) declined to $8,000 in the third quarter of 2022. NCOs of $159,000 represented 0.02 percent of average loans annualized in the linked quarter and $370,000 or 0.06 percent of average loans annualized in the year-ago period.

Summit recorded a $1.50 million provision for credit losses in the third quarter of 2022, reflecting reserve build to support the Company’s significant loan growth and increasing forecasted economic uncertainty. The provision for credit losses was $2.00 million for the linked quarter and no provision was recorded for the year-ago quarter.

Summit’s allowance for loan credit losses was $36.8 million on September 30, 2022, $35.1 million at the end of the linked quarter, and $32.4 million on September 30, 2021.

The allowance for loan credit losses stood at 1.19 percent of total loans at September 30, 2022 compared to 1.18 percent at the end of the linked quarter, and 1.27 percent at September 30, 2021. The allowance was 399.5 percent of nonperforming loans at September 30, 2022, compared to 254.4 percent at year-end 2021 and 291.6 percent at September 30, 2021.

Summit’s allowance for credit losses on unfunded loan commitments was $7.60 million on September 30, 2022, $7.79 million at the end of the linked quarter and $5.86 million on September 30, 2021. The allowance for credit losses on unfunded loan commitments decreased $195,000 during the most recent quarter primarily due to a decrease in unfunded commitments for the period.

As of September 30, 2022, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties and repossessed assets, totaled $14.4 million, or 0.37 percent of assets, compared to NPAs of $16.3 million, or 0.43 percent of assets at the linked quarter-end, $22.6 million or 0.63 percent of assets at year-end 2021 and $23.6 million, or 0.67 percent of assets at the end of third quarter 2021.

About the Company

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

FORWARD-LOOKING STATEMENTS

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q3 2022 vs Q3 2021
		For the Quarter Ended						Percent
Dollars in thousands		9/30/2022			9/30/2021			Change
Statements of Income
	Interest income
	Loans, including fees	$	38,784		$	28,416		36.5%
	Securities		3,497			2,348		48.9%
	Other		170			118		44.1%
	Total interest income		42,451			30,882		37.5%
	Interest expense
	Deposits		6,140			1,832		235.2%
	Borrowings		2,198			1,013		117.0%
	Total interest expense		8,338			2,845		193.1%
	Net interest income		34,113			28,037		21.7%
	Provision for credit losses		1,500			-		n/a
	Net interest income after provision
	for credit losses		32,613			28,037		16.3%
	Noninterest income
	Trust and wealth management fees		725			718		1.0%
	Mortgage origination revenue		538			742		-27.5%
	Service charges on deposit accounts		1,550			1,338		15.8%
	Bank card revenue		1,639			1,509		8.6%
	Gains on equity investments		283			-		n/a
	Realized (losses) on debt securities		(242	)		(68	)	255.9%
	Bank owned life insurance and annuity income		229			160		43.1%
	Other income		165			168		-1.8%
	Total noninterest income		4,887			4,567		7.0%
	Noninterest expense
	Salaries and employee benefits		10,189			8,745		16.5%
	Net occupancy expense		1,301			1,254		3.7%
	Equipment expense		1,851			1,908		-3.0%
	Professional fees		372			374		-0.5%
	Advertising and public relations		276			254		8.7%
	Amortization of intangibles		354			390		-9.2%
	FDIC premiums		292			354		-17.5%
	Bank card expense		726			705		3.0%
	Foreclosed properties expense, net of (gains)/losses		26			370		-93.0%
	Acquisition-related expense		-			273		-100.0%
	Other expenses		3,834			2,716		41.2%
	Total noninterest expense		19,221			17,343		10.8%
	Income before income taxes		18,279			15,261		19.8%
	Income taxes		3,856			3,023		27.6%
	Net income		14,423			12,238		17.9%
	Preferred stock dividends		225			225		0.0%
	Net income applicable to common shares	$	14,198		$	12,013		18.2%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q3 2022 vs Q3 2021
		For the Quarter Ended						Percent
		9/30/2022			9/30/2021			Change
Per Share Data
	Earnings per common share
	Basic	$	1.11		$	0.93		19.4%
	Diluted	$	1.11		$	0.92		20.7%
	Cash dividends per common share	$	0.20		$	0.18		11.1%
	Common stock dividend payout ratio		17.7%			19.1%		-7.3%
	Average common shares outstanding
	Basic		12,766,473			12,964,575		-1.5%
	Diluted		12,835,670			13,018,672		-1.4%
	Common shares outstanding at period end		12,774,645			12,976,693		-1.6%
Performance Ratios
	Return on average equity		17.05%			15.30%		11.4%
	Return on average tangible equity (C)		21.33%			19.51%		9.3%
	Return on average tangible common equity (D)		22.20%			20.34%		9.1%
	Return on average assets		1.51%			1.42%		6.3%
	Net interest margin (A)		3.84%			3.47%		10.7%
	Efficiency ratio (B)		47.95%			49.52%		-3.2%

NOTES

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

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

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Nine Month Performance Summary (unaudited)
2022 vs 2021
		For the Nine Months Ended					Percent
Dollars in thousands		9/30/2022			9/30/2021		Change
Statements of Income
	Interest income
	Loans, including fees	$	101,774		$	83,651	21.7%
	Securities		8,871			6,707	32.3%
	Other		262			240	9.2%
	Total interest income		110,907			90,598	22.4%
	Interest expense
	Deposits		10,489			6,464	62.3%
	Borrowings		5,785			3,035	90.6%
	Total interest expense		16,274			9,499	71.3%
	Net interest income		94,633			81,099	16.7%
	Provision for credit losses		5,450			2,500	118.0%
	Net interest income after provision
	for credit losses		89,183			78,599	13.5%
	Noninterest income
	Trust and wealth management fees		2,228			2,039	9.3%
	Mortgage origination revenue		1,194			2,638	-54.7%
	Service charges on deposit accounts		4,625			3,530	31.0%
	Bank card revenue		4,748			4,369	8.7%
	(Losses) on equity investments		(14	)		-	n/a
	Realized gains/(losses) on debt securities, net		(684	)		534	-228.1%
	Bank owned life insurance and annuity income		843			733	15.0%
	Other income		348			413	-15.7%
	Total noninterest income		13,288			14,256	-6.8%
	Noninterest expense
	Salaries and employee benefits		29,920			25,410	17.7%
	Net occupancy expense		3,801			3,559	6.8%
	Equipment expense		5,484			5,088	7.8%
	Professional fees		1,242			1,140	8.9%
	Advertising and public relations		613			482	27.2%
	Amortization of intangibles		1,088			1,176	-7.5%
	FDIC premiums		872			1,119	-22.1%
	Bank card expense		2,249			1,964	14.5%
	Foreclosed properties expense, net of (gains)/losses		77			1,342	-94.3%
	Acquisition-related expense		33			1,167	-97.2%
	Other expenses		8,651			8,365	3.4%
	Total noninterest expense		54,030			50,812	6.3%
	Income before income taxes		48,441			42,043	15.2%
	Income taxes		10,311			8,886	16.0%
	Net income		38,130			33,157	15.0%
	Preferred stock dividends		675			364	85.4%
	Net income applicable to common shares	$	37,455		$	32,793	14.2%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Nine Month Performance Summary (unaudited)
2022 vs 2021
		For the Nine Months Ended						Percent
		9/30/2022			9/30/2021			Change
Per Share Data
	Earnings per common share
	Basic	$	2.94		$	2.53		16.2%
	Diluted	$	2.92		$	2.52		15.9%
	Cash dividends per common share	$	0.56		$	0.52		7.7%
	Common stock dividend payout ratio		18.7%			20.4%		-8.3%
	Average common shares outstanding
	Basic		12,755,576			12,953,053		-1.5%
	Diluted		12,815,365			13,011,526		-1.5%
	Common shares outstanding at period end		12,774,645			12,976,693		-1.6%
Performance Ratios
	Return on average equity		15.26%			14.51%		5.2%
	Return on average tangible equity (C)		19.23%			18.35%		4.8%
	Return on average tangible common equity (D)		20.00%			18.83%		6.2%
	Return on average assets		1.37%			1.34%		2.2%
	Net interest margin (A)		3.71%			3.56%		4.2%
	Efficiency ratio (B)		48.25%			49.54%		-2.6%

NOTES

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

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

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
Dollars in thousands		9/30/2022			6/30/2022			3/31/2022			12/31/2021			9/30/2021
Statements of Income
	Interest income
	Loans, including fees	$	38,784		$	32,766		$	30,224		$	28,979		$	28,416
	Securities		3,497			2,752			2,623			2,763			2,348
	Other		170			45			46			75			118
	Total interest income		42,451			35,563			32,893			31,817			30,882
	Interest expense
	Deposits		6,140			2,622			1,727			1,718			1,832
	Borrowings		2,198			1,976			1,612			1,267			1,013
	Total interest expense		8,338			4,598			3,339			2,985			2,845
	Net interest income		34,113			30,965			29,554			28,832			28,037
	Provision for credit losses		1,500			2,000			1,950			1,500			-
	Net interest income after provision
	for credit losses		32,613			28,965			27,604			27,332			28,037
	Noninterest income
	Trust and wealth management fees		725			745			757			847			718
	Mortgage origination revenue		538			317			339			1,361			742
	Service charges on deposit accounts		1,550			1,674			1,401			1,501			1,338
	Bank card revenue		1,639			1,618			1,491			1,528			1,509
	Gains/(losses) on equity investments		283			(669	)		372			202			-
	Realized (losses) on debt securities, net		(242	)		(289	)		(152	)		(109	)		(68	)
	Bank owned life insurance and annuity income		229			331			283			293			160
	Other income		165			129			54			330			168
	Total noninterest income		4,887			3,856			4,545			5,953			4,567
	Noninterest expense
	Salaries and employee benefits		10,189			10,030			9,700			8,977			8,745
	Net occupancy expense		1,301			1,258			1,242			1,265			1,254
	Equipment expense		1,851			1,791			1,843			1,902			1,908
	Professional fees		372			507			362			438			374
	Advertising and public relations		276			165			172			216			254
	Amortization of intangibles		354			355			378			387			390
	FDIC premiums		292			190			390			330			354
	Bank card expense		726			810			714			703			705
	Foreclosed properties expense, net of (gains)/losses		26			141			(90	)		403			370
	Acquisition-related expenses		-			4			29			57			273
	Other expenses		3,834			2,358			2,459			3,250			2,716
	Total noninterest expense		19,221			17,609			17,199			17,928			17,343
	Income before income taxes		18,279			15,212			14,950			15,357			15,261
	Income tax expense		3,856			3,198			3,257			2,777			3,023
	Net income		14,423			12,014			11,693			12,580			12,238
	Preferred stock dividends		225			225			225			225			225
	Net income applicable to common shares	$	14,198		$	11,789		$	11,468		$	12,355		$	12,013

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
		9/30/2022			6/30/2022			3/31/2022			12/31/2021			9/30/2021
Per Share Data
	Earnings per common share
	Basic	$	1.11		$	0.92		$	0.90		$	0.96		$	0.93
	Diluted	$	1.11		$	0.92		$	0.90		$	0.95		$	0.92
	Cash dividends per common share	$	0.20		$	0.18		$	0.18		$	0.18		$	0.18
	Common stock dividend payout ratio		17.7%			19.1%			19.7%			18.5%			19.1%
	Average common shares outstanding
	Basic		12,766,473			12,754,724			12,745,297			12,916,555			12,964,575
	Diluted		12,835,670			12,810,174			12,801,903			12,976,181			13,018,672
	Common shares outstanding at period end		12,774,645			12,763,422			12,753,094			12,743,125			12,976,693
Performance Ratios
	Return on average equity		17.05%			14.48%			14.20%			15.48%			15.30%
	Return on average tangible equity (C)		21.33%			18.28%			18.02%			19.72%			19.51%
	Return on average tangible common equity (D)		22.20%			19.00%			18.74%			20.55%			20.34%
	Return on average assets		1.51%			1.30%			1.30%			1.42%			1.42%
	Net interest margin (A)		3.84%			3.66%			3.61%			3.49%			3.47%
	Efficiency ratio (B)		47.95%			47.45%			49.44%			48.85%			49.52%

NOTES

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

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

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Selected Balance Sheet Data (unaudited)
Dollars in thousands, except per share amounts		9/30/2022			6/30/2022			3/31/2022			12/31/2021			9/30/2021
Assets
	Cash and due from banks	$	16,141		$	17,921		$	18,404		$	21,006		$	21,247
	Interest bearing deposits other banks		29,510			31,680			42,853			57,452			189,862
	Debt securities, available for sale		383,965			368,049			374,855			401,103			424,741
	Debt securities, held to maturity		96,640			97,116			97,589			98,060			98,528
	Equity investments		20,314			19,905			20,574			20,202			-
	Other investments		18,105			18,329			10,974			11,304			10,649
	Loans, net		3,038,377			2,941,813			2,817,998			2,729,093			2,521,704
	Property held for sale		5,193			5,319			6,900			9,858			12,450
	Premises and equipment, net		54,628			55,034			55,713			56,371			56,818
	Goodwill and other intangible assets, net		62,502			62,856			63,212			63,590			63,977
	Cash surrender value of life insurance policies and annuities		71,216			71,073			70,825			60,613			60,241
	Derivative financial instruments		42,179			31,452			24,455			11,187			10,380
	Other assets		48,529			42,252			39,339			36,880			38,354
	Total assets	$	3,887,299		$	3,762,799		$	3,643,691		$	3,576,719		$	3,508,951
Liabilities and Shareholders' Equity
	Deposits	$	3,108,072		$	2,975,304		$	3,008,063		$	2,943,089		$	2,955,940
	Short-term borrowings		273,148			291,447			140,146			140,146			140,146
	Long-term borrowings and
	subordinated debentures, net		123,427			123,311			123,260			123,159			49,739
	Other liabilities		40,978			38,846			41,756			42,852			39,837
	Preferred stock and related surplus		14,920			14,920			14,920			14,920			14,920
	Common stock and related surplus		90,345			90,008			89,675			89,301			95,577
	Retained earnings		248,084			236,438			226,944			217,770			207,704
	Accumulated other comprehensive income (loss)		(11,675	)		(7,475	)		(1,073	)		5,482			5,088
	Total liabilities and shareholders' equity	$	3,887,299		$	3,762,799		$	3,643,691		$	3,576,719		$	3,508,951
	Book value per common share	$	25.58		$	24.99		$	24.74		$	24.53		$	23.76
	Tangible book value per common share (A)	$	20.69		$	20.07		$	19.79		$	19.54		$	18.83
	Tangible common equity to tangible assets (B)		6.9%			6.9%			7.0%			7.1%			7.1%

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

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (unaudited)
		9/30/2022		6/30/2022		3/31/2022		12/31/2021		9/30/2021
Summit Financial Group, Inc.
	CET1 Risk-based Capital	8.2	%	8.2	%	8.3	%	8.4	%	9.0	%
	Tier 1 Risk-based Capital	9.2	%	9.2	%	9.3	%	9.5	%	10.2	%
	Total Risk-based Capital	13.1	%	13.3	%	13.5	%	13.8	%	12.1	%
	Tier 1 Leverage	8.4	%	8.4	%	8.4	%	8.3	%	8.4	%
Summit Community Bank, Inc.
	CET1 Risk-based Capital	11.3	%	11.4	%	11.6	%	11.9	%	11.2	%
	Tier 1 Risk-based Capital	11.3	%	11.4	%	11.6	%	11.9	%	11.2	%
	Total Risk-based Capital	12.2	%	12.4	%	12.5	%	12.8	%	12.1	%
	Tier 1 Leverage	10.3	%	10.4	%	10.5	%	10.4	%	9.2	%

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Loan Composition (unaudited)
Dollars in thousands		9/30/2022		6/30/2022		3/31/2022		12/31/2021		9/30/2021
Commercial		$	512,771	$	455,202	$	447,482	$	365,301	$	317,855
Mortgage warehouse lines			194,740		171,399		164,895		227,869		161,628
Commercial real estate
Owner occupied			473,298		502,152		491,059		484,708		439,202
Non-owner occupied			960,627		963,646		910,174		866,031		835,071
Construction and development
Land and development			104,437		106,840		103,203		100,805		99,718
Construction			248,564		211,955		171,383		146,038		127,432
Residential real estate
Conventional			382,203		377,980		375,240		384,794		394,889
Jumbo			87,449		79,803		81,443		79,108		71,977
Home equity			72,756		71,136		70,770		72,112		71,496
Consumer			35,116		33,816		32,095		31,923		32,284
Other			3,166		2,947		2,877		2,702		2,558
Total loans, net of unearned fees			3,075,127		2,976,876		2,850,621		2,761,391		2,554,110
Less allowance for loan credit losses			36,750		35,063		32,623		32,298		32,406
Loans, net		$	3,038,377	$	2,941,813	$	2,817,998	$	2,729,093	$	2,521,704
Unfunded loan commitments		$	889,854	$	876,157	$	840,705	$	688,493	$	627,461

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands		9/30/2022		6/30/2022		3/31/2022		12/31/2021		9/30/2021
Core deposits
Non-interest bearing checking		$	619,067	$	600,791	$	629,002	$	568,986	$	575,542
Interest bearing checking			1,475,643		1,238,368		1,134,964		1,127,298		1,121,028
Savings			582,922		645,099		702,069		698,156		693,686
Time deposits			338,668		386,562		427,076		451,713		467,024
Total core deposits			3,016,300		2,870,820		2,893,111		2,846,153		2,857,280
Brokered time deposits			32,778		32,767		32,755		14,677		14,671
Other non-core time deposits			58,994		71,717		82,197		82,259		83,989
Total deposits		$	3,108,072	$	2,975,304	$	3,008,063	$	2,943,089	$	2,955,940

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
		For the Quarter Ended
Dollars in thousands		9/30/2022			6/30/2022			3/31/2022			12/31/2021			9/30/2021
	Gross loan charge-offs	$	265		$	306		$	618		$	282		$	528
	Gross loan recoveries		(257	)		(147	)		(109	)		(89	)		(158	)
	Net loan charge-offs	$	8		$	159		$	509		$	193		$	370
	Net loan charge-offs to average loans (annualized)		0.00%			0.02%			0.07%			0.03%			0.06%
	Allowance for loan credit losses	$	36,750		$	35,063		$	32,623		$	32,298		$	32,406
	Allowance for loan credit losses as a percentage
	of period end loans		1.19%			1.18%			1.14%			1.17%			1.27%
	Allowance for credit losses on
	unfunded loan commitments ("ULC")	$	7,597		$	7,792		$	8,392		$	7,275		$	5,860
	Allowance for credit losses on ULC
	as a percentage of period end ULC		0.85%			0.89%			1.00%			1.06%			0.93%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	347		$	345		$	433		$	740		$	459
	Commercial real estate		1,860			2,703			4,765			4,603			4,643
	Residential construction and development		902			1,053			968			1,560			448
	Residential real estate		6,083			6,799			5,549			5,772			5,514
	Consumer		8			37			20			21			48
	Total nonperforming loans		9,200			10,937			11,735			12,696			11,112
	Foreclosed properties
	Commercial real estate		297			440			1,251			1,389			2,192
	Commercial construction and development		2,332			2,332			2,332			2,332			2,925
	Residential construction and development		2,293			2,293			3,018			5,561			6,712
	Residential real estate		271			254			299			576			621
	Total foreclosed properties		5,193			5,319			6,900			9,858			12,450
	Other repossessed assets		-			-			-			-			-
	Total nonperforming assets	$	14,393		$	16,256		$	18,635		$	22,554		$	23,562
	Nonperforming loans to period end loans		0.30%			0.37%			0.41%			0.46%			0.44%
	Nonperforming assets to period end assets		0.37%			0.43%			0.51%			0.63%			0.67%
	Troubled debt restructurings
	Performing	$	18,206		$	18,657		$	18,971		$	18,887		$	20,535
	Nonperforming		1,920			2,236			1,822			2,039			1,141
	Total troubled debt restructurings	$	20,126		$	20,893		$	20,793		$	20,926		$	21,676

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Loans Past Due 30-89 Days (unaudited)
Dollars in thousands		9/30/2022		6/30/2022			3/31/2022			12/31/2021			9/30/2021
	Commercial	$	1,329		$	989		$	388		$	751		$	304
	Commercial real estate		1,550			4,084			1,446			683			281
	Construction and development		236			821			645			45			1,215
	Residential real estate		2,824			3,452			3,407			3,552			2,643
	Consumer		216			196			69			190			193
	Other		4			14			28			22			1
	Total	$	6,159		$	9,556		$	5,983		$	5,243		$	4,637

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q3 2022 vs Q2 2022 vs Q3 2021 (unaudited)
	Q3 2022								Q2 2022								Q3 2021
	Average			Earnings /		Yield /			Average			Earnings /		Yield /			Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate			Balances			Expense		Rate			Balances			Expense		Rate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable	$	3,018,219		$	38,741	5.09	%		$	2,902,370		$	32,721	4.52	%		$	2,495,880		$	28,340	4.50	%
Tax-exempt (2)		4,834			54	4.43	%			5,127			57	4.46	%			7,871			96	4.84	%
Securities
Taxable		283,645			2,273	3.18	%			297,701			1,765	2.38	%			315,082			1,432	1.80	%
Tax-exempt (2)		203,951			1,549	3.01	%			178,043			1,249	2.81	%			166,285			1,159	2.77	%
Interest bearing deposits other banks
and Federal funds sold		49,048			170	1.38	%			37,757			45	0.48	%			248,315			118	0.19	%
Total interest earning assets		3,559,697			42,787	4.77	%			3,420,998			35,837	4.20	%			3,233,433			31,145	3.82	%
Noninterest earning assets
Cash & due from banks		17,455								16,351								20,077
Premises & equipment		54,976								55,449								55,908
Intangible assets		62,705								63,058								62,944
Other assets		171,409								165,788								113,031
Allowance for credit losses		(35,381	)							(33,232	)							(33,911	)
Total assets	$	3,830,861							$	3,688,412							$	3,451,482
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	1,454,815		$	4,276	1.17	%		$	1,189,324		$	1,274	0.43	%		$	1,092,392		$	325	0.12	%
Savings deposits		611,075			1,243	0.81	%			672,353			689	0.41	%			691,411			602	0.35	%
Time deposits		461,134			621	0.53	%			517,360			659	0.51	%			571,445			905	0.63	%
Short-term borrowings		191,421			850	1.76	%			207,227			696	1.35	%			140,146			470	1.33	%
Long-term borrowings and
subordinated debentures		123,368			1,348	4.34	%			123,263			1,280	4.17	%			49,724			543	4.33	%
Total interest bearing liabilities		2,841,813			8,338	1.16	%			2,709,527			4,598	0.68	%			2,545,118			2,845	0.44	%
Noninterest bearing liabilities						.
Demand deposits		609,424								605,724								547,627
Other liabilities		41,339								41,307								38,789
Total liabilities		3,492,576								3,356,558								3,131,534
Shareholders' equity - preferred		14,920								14,920								14,920
Shareholders' equity - common		323,365								316,934								305,028
Total liabilities and
shareholders' equity	$	3,830,861							$	3,688,412							$	3,451,482
NET INTEREST EARNINGS				$	34,449							$	31,239							$	28,300
NET INTEREST MARGIN						3.84	%							3.66	%							3.47	%
(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented.
The tax equivalent adjustment resulted in an increase in interest income of $336,000, $274,000, and $263,000 for Q3 2022, Q2 2022 and
Q3 2021, respectively.

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
YTD 2022 vs YTD 2021 (unaudited)
	YTD 2022								YTD 2021
	Average			Earnings /		Yield /			Average			Earnings /		Yield /
Dollars in thousands	Balances			Expense		Rate			Balances			Expense		Rate
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable	$	2,898,380		$	101,640	4.69	%		$	2,436,295		$	83,352	4.57	%
Tax-exempt (2)		5,108			170	4.45	%			10,622			377	4.75	%
Securities
Taxable		300,371			5,695	2.53	%			288,999			4,079	1.89	%
Tax-exempt (2)		187,575			4,021	2.87	%			153,035			3,328	2.91	%
Interest bearing deposits other banks
and Federal funds sold		53,142			262	0.66	%			190,154			240	0.17	%
Total interest earning assets		3,444,576			111,788	4.34	%			3,079,105			91,376	3.97	%
Noninterest earning assets
Cash & due from banks		17,671								19,093
Premises & equipment		55,486								54,154
Intangible assets		63,061								57,343
Other assets		159,912								113,525
Allowance for loan losses		(33,705	)							(33,765	)
Total assets	$	3,707,001							$	3,289,455
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits	$	1,260,907		$	6,015	0.64	%		$	1,016,569		$	1,090	0.14	%
Savings deposits		660,855			2,505	0.51	%			666,642			1,881	0.38	%
Time deposits		506,654			1,969	0.52	%			572,547			3,493	0.82	%
Short-term borrowings		179,813			1,918	1.43	%			140,146			1,403	1.34	%
Long-term borrowings and
subordinated debentures		123,279			3,867	4.19	%			49,694			1,632	4.39	%
		2,731,508			16,274	0.80	%			2,445,598			9,499	0.52	%
Noninterest bearing liabilities
Demand deposits		600,766								501,309
Other liabilities		41,541								37,856
Total liabilities		3,373,815								2,984,763
Shareholders' equity - preferred		14,920								8,780
Shareholders' equity - common		318,266								295,912
Total liabilities and
shareholders' equity	$	3,707,001							$	3,289,455
NET INTEREST EARNINGS				$	95,514							$	81,877
NET INTEREST MARGIN						3.71	%							3.56	%
(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented.
The tax equivalent adjustment resulted in an increase in interest income of $881,000 and $778,000 for the
YTD 2022 and YTD 2021 periods, respectively.

 

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

FAQ

What were Summit Financial Group's Q3 2022 earnings?

Summit Financial Group reported net income of $14.2 million, or $1.11 per diluted share for Q3 2022.

How did total loans change for Summit in Q3 2022?

Total loans increased to $2.9 billion, which is a 2.7% growth during the quarter.

What is the net interest income for Summit Financial Group in Q3 2022?

Net interest income for Q3 2022 was $34.1 million, up 10.2% from the linked quarter.

How much did tangible book value per common share increase in Q3 2022?

Tangible book value per common share increased to $20.69 in Q3 2022, a 5.89% rise year-to-date.

What was the efficiency ratio for Summit in Q3 2022?

The efficiency ratio for Q3 2022 improved to 47.95%.