Summit Financial Group Reports Earnings of $1.09 Per Share for Third Quarter 2023

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

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

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

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

Key Highlights for the Third Quarter of 2023

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

Results from Operations

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

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

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

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

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

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

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

Balance Sheet

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

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

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

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

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

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

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

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

As announced in the first quarter of 2020, the Board of Directors authorized the open market repurchase of up to 750,000 shares of the issued and outstanding shares of Summit's common stock, of which 323,577 shares have been repurchased to date. The timing and quantity of stock purchases under this repurchase plan are at the discretion of management. During the third quarter of 2023, no shares of Summit's common stock were repurchased under the Plan.

Asset Quality

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

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

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

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

About the Company

Summit Financial Group, Inc. is the $4.6 billion financial holding company for Summit Community Bank, Inc. Its talented bankers serve commercial and individual clients throughout West Virginia, the Washington, D.C. metropolitan area, Virginia, Kentucky, Eastern Shore of Maryland and Delaware. Summit's focus on in-market commercial lending and providing other business banking services in dynamic markets is designed to leverage its highly efficient operations and core deposits in strong legacy locations. Residential and consumer lending, trust and wealth management, and other retail financial services are offered through convenient digital and mobile banking platforms, including MySummitBank.com and 54 full-service branch locations. More information on Summit Financial Group, Inc. (NASDAQ:SMMF), headquartered in West Virginia's Eastern Panhandle in Moorefield, is available at SummitFGI.com.

Non-GAAP Financial Measures

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

Forward-Looking Statements

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

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include: the effect of pandemics, including the negative impacts and disruptions on the communities we serve, and the domestic and global economy, which may have an adverse effect on our business; current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; fiscal and monetary policies of the Federal Reserve; future provisions for credit losses on loans and debt securities; changes in nonperforming assets; changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; the successful integration of operations of our acquisitions; changes in banking laws and regulations; changes in tax laws; the impact of technological advances; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in the national and local economies, the impact of natural disasters, extreme weather events, military conflict (including the Russia/Ukraine conflict, the conflict in Israel and surrounding areas, the possible expansion of such conflicts and potential geopolitical consequences), terrorism or other geopolitical events; delays in completing the pending merger of Summit and Burke & Herbert, the failure to obtain necessary regulatory approvals and shareholder approvals or to satisfy any of the other conditions to the merger on a timely basis or at all, the possibility that the anticipated benefits of the merger are not realized when expected or at all, corporate strategies or objectives, including the impact of certain actions and initiatives, anticipated trends in Summit's business, regulatory developments, estimated synergies, cost savings and financial benefits of completed transactions, growth strategies, the inability to realize cost savings or improved revenues or to implement integration plans and other consequences associated with the proposed merger; and the other factors discussed in the "Risk Factors" section of Summit's Annual Report on Form 10–K for the year ended December 31, 2022, in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of Summit's Quarterly Report on Form 10–Q for the quarters ended March 31, 2023 and June 30, 2023, and other reports Summit files with the SEC. We undertake no obligation to revise these statements following the date of this press release.

Additional Information and Where to Find It

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

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

Participants in Solicitation

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Quarterly Performance Summary (unaudited)
Q3 2023 vs Q3 2022
		For the Quarter Ended						Percent
Dollars in thousands		9/30/2023			9/30/2022			Change
Statements of Income
	Interest income
	Loans, including fees	$	58,102		$	38,784		49.8	%
	Securities		6,357			3,497		81.8	%
	Other		235			170		38.2	%
	Total interest income		64,694			42,451		52.4	%
	Interest expense
	Deposits		19,924			6,140		224.5	%
	Borrowings		3,497			2,198		59.1	%
	Total interest expense		23,421			8,338		180.9	%
	Net interest income		41,273			34,113		21.0	%
	Provision for credit losses		1,250			1,500		-16.7	%
	Net interest income after provision
	for credit losses		40,023			32,613		22.7	%
	Noninterest income
	Trust and wealth management fees		819			725		13.0	%
	Mortgage origination revenue		172			538		-68.0	%
	Service charges on deposit accounts		1,775			1,550		14.5	%
	Bank card revenue		1,907			1,639		16.4	%
	Net gains on equity investments		180			283		-36.4	%
	Net realized losses on debt securities		(12	)		(242	)	-95.0	%
	Bank owned life insurance and annuity income		311			229		35.8	%
	Other income		113			165		-31.5	%
	Total noninterest income		5,265			4,887		7.7	%
	Noninterest expense
	Salaries and employee benefits		11,959			10,189		17.4	%
	Net occupancy expense		1,436			1,301		10.4	%
	Equipment expense		2,361			1,851		27.6	%
	Professional fees		400			372		7.5	%
	Advertising and public relations		247			276		-10.5	%
	Amortization of intangibles		998			354		181.9	%
	FDIC premiums		716			292		145.2	%
	Bank card expense		972			726		33.9	%
	Foreclosed properties expense, net of (gains)/losses		10			26		-61.5	%
	Acquisition-related expense		1,110			-		n/m
	Other expenses		3,953			3,834		3.1	%
	Total noninterest expense		24,162			19,221		25.7	%
	Income before income taxes		21,126			18,279		15.6	%
	Income taxes		4,794			3,856		24.3	%
	Net income		16,332			14,423		13.2	%
	Preferred stock dividends		225			225		n/a
	Net income applicable to common shares	$	16,107		$	14,198		13.4	%

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

NOTES

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

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

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

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

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

    

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Nine Month Performance Summary (unaudited)
2023 vs 2022
		For the Nine Months Ended						Percent
Dollars in thousands		9/30/2023			9/30/2022			Change
Statements of Income
	Interest income
	Loans, including fees	$	157,999		$	101,774		55.2	%
	Securities		17,423			8,871		96.4	%
	Other		610			262		132.8	%
	Total interest income		176,032			110,907		58.7	%
	Interest expense
	Deposits		51,775			10,489		393.6	%
	Borrowings		8,481			5,785		46.6	%
	Total interest expense		60,256			16,274		270.3	%
	Net interest income		115,776			94,633		22.3	%
	Provision for credit losses		10,750			5,450		97.2	%
	Net interest income after provision
	for credit losses		105,026			89,183		17.8	%
	Noninterest income
	Trust and wealth management fees		2,484			2,228		11.5	%
	Mortgage origination revenue		513			1,194		-57.0	%
	Service charges on deposit accounts		5,110			4,625		10.5	%
	Bank card revenue		5,462			4,748		15.0	%
	Net gains/(losses) on equity investments		375			(14	)	n/m
	Net realized losses on debt securities, net		(282	)		(684	)	-58.8	%
	Bank owned life insurance and annuity income		1,078			843		27.9	%
	Other income		334			348		-4.0	%
	Total noninterest income		15,074			13,288		13.4	%
	Noninterest expense
	Salaries and employee benefits		34,922			29,920		16.7	%
	Net occupancy expense		4,297			3,801		13.0	%
	Equipment expense		6,752			5,484		23.1	%
	Professional fees		1,246			1,242		0.3	%
	Advertising and public relations		681			613		11.1	%
	Amortization of intangibles		2,340			1,088		115.1	%
	FDIC premiums		1,788			872		105.0	%
	Bank card expense		2,620			2,249		16.5	%
	Foreclosed properties expense, net of (gains)/losses		73			77		-5.2	%
	Acquisition-related expense		5,604			33		n/m
	Other expenses		10,563			8,651		22.1	%
	Total noninterest expense		70,886			54,030		31.2	%
	Income before income taxes		49,214			48,441		1.6	%
	Income taxes		10,572			10,311		2.5	%
	Net income		38,642			38,130		1.3	%
	Preferred stock dividends		675			675		0.0	%
	Net income applicable to common shares	$	37,967		$	37,455		1.4	%

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

NOTES

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

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

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

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
Dollars in thousands		9/30/2023			6/30/2023			3/31/2023			12/31/2022			9/30/2022
Statements of Income
	Interest income
	Loans, including fees	$	58,102		$	54,413		$	45,485		$	43,589		$	38,784
	Securities		6,357			6,247			4,819			4,181			3,497
	Other		235			203			171			70			170
	Total interest income		64,694			60,863			50,475			47,840			42,451
	Interest expense
	Deposits		19,924			17,851			14,000			10,194			6,140
	Borrowings		3,497			2,699			2,286			3,293			2,198
	Total interest expense		23,421			20,550			16,286			13,487			8,338
	Net interest income		41,273			40,313			34,189			34,353			34,113
	Provision for credit losses		1,250			8,000			1,500			1,500			1,500
	Net interest income after provision
	for credit losses		40,023			32,313			32,689			32,853			32,613
	Noninterest income
	Trust and wealth management fees		819			854			811			750			725
	Mortgage origination revenue		172			169			171			286			538
	Service charges on deposit accounts		1,775			1,943			1,392			1,526			1,550
	Bank card revenue		1,907			1,987			1,568			1,513			1,639
	Net gains on equity investments		180			150			45			280			283
	Net realized losses on debt securities		(12	)		(211	)		(59	)		(24	)		(242	)
	Bank owned life insurance and annuity income		311			431			336			367			229
	Other income		113			100			122			167			165
	Total noninterest income		5,265			5,423			4,386			4,865			4,887
	Noninterest expense
	Salaries and employee benefits		11,959			12,156			10,807			10,532			10,189
	Net occupancy expense		1,436			1,528			1,333			1,328			1,301
	Equipment expense		2,361			2,361			2,030			1,769			1,851
	Professional fees		400			471			376			386			372
	Advertising and public relations		247			264			170			280			276
	Amortization of intangibles		998			999			343			351			354
	FDIC premiums		716			742			330			352			292
	Bank card expense		972			951			696			679			726
	Foreclosed properties expense, net of (gains)/losses		10			48			15			159			26
	Acquisition-related expenses		1,110			4,163			331			81			-
	Other expenses		3,953			3,641			2,968			2,932			3,834
	Total noninterest expense		24,162			27,324			19,399			18,849			19,221
	Income before income taxes		21,126			10,412			17,676			18,869			18,279
	Income tax expense		4,794			2,203			3,575			3,783			3,856
	Net income		16,332			8,209			14,101			15,086			14,423
	Preferred stock dividends		225			225			225			225			225
	Net income applicable to common shares	$	16,107		$	7,984		$	13,876		$	14,861		$	14,198

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
		9/30/2023			6/30/2023			3/31/2023			12/31/2022			9/30/2022
Per Share Data
	Earnings per common share
	Basic	$	1.10		$	0.54		$	1.09		$	1.16		$	1.11
	Diluted	$	1.09		$	0.54		$	1.08		$	1.16		$	1.11
	Cash dividends per common share	$	0.22		$	0.20		$	0.20		$	0.20		$	0.20
	Common stock dividend payout ratio		19.8	%		36.7	%		18.1	%		16.9	%		17.7	%
	Average common shares outstanding
	Basic		14,672,176			14,668,923			12,783,851			12,775,703			12,766,473
	Diluted		14,714,211			14,703,636			12,830,102			12,837,637			12,835,670
	Common shares outstanding at period end		14,674,852			14,672,147			12,786,404			12,783,646			12,774,645
Performance Ratios
	Return on average equity		15.66	%		7.99	%		15.55	%		17.50	%		17.05	%
	Return on average tangible equity (C)(E)		20.03	%		10.86	%		19.10	%		21.75	%		21.33	%
	Return on average tangible common equity (D)(E)		20.95	%		11.37	%		20.10	%		22.96	%		22.20	%
	Return on average assets		1.42	%		0.73	%		1.43	%		1.54	%		1.51	%
	Net interest margin (A)		3.88	%		3.89	%		3.83	%		3.80	%		3.84	%
	Efficiency ratio (B)		47.15	%		47.90	%		48.00	%		46.40	%		47.95	%

NOTES

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

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

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

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

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Selected Balance Sheet Data (unaudited)
Dollars in thousands, except per share amounts		9/30/2023			6/30/2023			3/31/2023			12/31/2022			9/30/2022
Assets
	Cash and due from banks	$	23,159		$	23,341		$	16,488		$	16,469		$	16,141
	Interest bearing deposits other banks		36,398			39,902			54,328			28,248			29,510
	Debt securities, available for sale		511,403			512,038			431,933			405,201			383,965
	Debt securities, held to maturity		94,715			95,200			95,682			96,163			96,640
	Equity investments		31,241			30,818			29,867			29,494			20,314
	Other investments		19,579			16,014			12,696			16,029			18,105
	Loans, net		3,551,686			3,506,880			3,059,099			3,043,919			3,038,377
	Property held for sale		4,505			4,742			5,128			5,067			5,193
	Premises and equipment, net		62,721			60,967			54,491			53,981			54,628
	Goodwill and other intangible assets, net		75,425			76,423			61,807			62,150			62,502
	Cash surrender value of life insurance policies and annuities		85,076			84,790			72,019			71,640			71,216
	Derivative financial instruments		44,527			39,951			34,758			40,506			42,179
	Other assets		63,773			61,204			49,111			47,825			48,529
	Total assets	$	4,604,208		$	4,552,270		$	3,977,407		$	3,916,692		$	3,887,299
Liabilities and Shareholders' Equity
	Deposits	$	3,754,495		$	3,735,034		$	3,299,846		$	3,169,879		$	3,108,072
	Short-term borrowings		258,054			232,150			140,150			225,999			273,148
	Long-term borrowings and
	subordinated debentures, net		123,892			123,776			123,660			123,543			123,427
	Other liabilities		51,315			48,136			44,205			42,741			40,978
	Total liabilities		4,187,756			4,139,096			3,607,861			3,562,162			3,545,625
	Preferred stock and related surplus		14,920			14,920			14,920			14,920			14,920
	Common stock and related surplus		130,508			130,227			90,939			90,696			90,345
	Retained earnings		289,641			276,762			271,712			260,393			248,084
	Accumulated other comprehensive income (loss)		(18,617	)		(8,735	)		(8,025	)		(11,479	)		(11,675	)
	Total shareholders' equity		416,452			413,174			369,546			354,530			341,674
	Total liabilities and shareholders' equity	$	4,604,208		$	4,552,270		$	3,977,407		$	3,916,692		$	3,887,299
	Book value per common share	$	27.36		$	27.14		$	27.73		$	26.57		$	25.58
	Tangible book value per common share (A)(C)	$	22.22		$	21.93		$	22.90		$	21.70		$	20.69
	Tangible common equity to tangible assets (B)(C)		7.2	%		7.2	%		7.5	%		7.2	%		6.9	%

NOTES

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



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



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

SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)
Loan Composition (unaudited)
Dollars in thousands	9/30/2023		6/30/2023			3/31/2023			12/31/2022			9/30/2022
Commercial	$	511,951		$	511,457		$	498,268		$	501,844		$	512,771
Mortgage warehouse lines		114,734			118,785			86,240			130,390			194,740
Commercial real estate
Owner occupied		547,886			566,447			469,560			467,050			473,298
Non-owner occupied		1,217,029			1,193,927			1,036,358			1,004,368			960,627
Construction and development
Land and development		114,354			117,371			102,351			106,362			104,437
Construction		349,049			309,709			290,556			282,935			248,564
Residential real estate
Conventional		497,076			483,998			395,312			386,874			382,203
Jumbo		113,837			117,219			111,475			92,103			87,449
Home equity		81,967			86,050			70,167			71,986			72,756
Consumer		44,288			44,429			36,531			35,372			35,116
Other		6,748			3,169			3,117			3,534			3,166
Total loans, net of unearned fees		3,598,919			3,552,561			3,099,935			3,082,818			3,075,127
Less allowance for loan credit losses		47,233			45,681			40,836			38,899			36,750
Loans, net	$	3,551,686		$	3,506,880		$	3,059,099		$	3,043,919		$	3,038,377
Unfunded loan commitments	$	943,508		$	957,278		$	907,757		$	925,657		$	889,854

SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)
Deposit Composition (unaudited)
Dollars in thousands	9/30/2023		6/30/2023			3/31/2023			12/31/2022			9/30/2022
Core deposits
Non-interest bearing checking	$	630,055		$	679,139		$	552,716		$	553,616		$	619,067
Interest bearing checking		2,144,737			2,024,341			1,886,011			1,743,299			1,475,643
Savings		477,348			512,129			462,631			496,751			582,922
Time deposits		469,530			465,026			327,037			343,423			397,662
Total core deposits		3,721,670			3,680,635			3,228,395			3,137,089			3,075,294
Brokered time deposits		32,825			54,399			71,451			32,790			32,778
Total deposits	$	3,754,495		$	3,735,034		$	3,299,846		$	3,169,879		$	3,108,072
Estimated uninsured deposits (A)	$	1,283,610		$	1,189,908		$	933,703		$	946,188		$	757,038

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

SUMMIT FINANCIAL GROUP INC. (NASDAQ:SMMF)
Regulatory Capital Ratios (unaudited)
		9/30/2023		6/30/2023		3/31/2023		12/31/2022		9/30/2022
Summit Financial Group, Inc.
	CET1 Risk-based Capital	8.9	%	8.7	%	8.9	%	8.6	%	8.2	%
	Tier 1 Risk-based Capital	9.7	%	9.5	%	9.8	%	9.5	%	9.2	%
	Total Risk-based Capital	13.5	%	13.3	%	14.0	%	13.5	%	13.1	%
	Tier 1 Leverage	8.5	%	8.4	%	8.7	%	8.5	%	8.4	%
Summit Community Bank, Inc.
	CET1 Risk-based Capital	11.6	%	11.3	%	11.9	%	11.6	%	11.3	%
	Tier 1 Risk-based Capital	11.6	%	11.3	%	11.9	%	11.6	%	11.3	%
	Total Risk-based Capital	12.7	%	12.5	%	13.1	%	12.6	%	12.2	%
	Tier 1 Leverage	10.1	%	9.9	%	10.6	%	10.4	%	10.3	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Asset Quality Information (unaudited)
		For the Quarter Ended
Dollars in thousands		9/30/2023			6/30/2023			3/31/2023			12/31/2022			9/30/2022
	Gross loan charge-offs	$	226		$	4,009		$	164		$	250		$	265
	Gross loan recoveries		(108	)		(118	)		(227	)		(249	)		(257	)
	Net loan charge-offs	$	118		$	3,891		$	(63	)	$	1		$	8
	Net loan charge-offs to average loans (annualized)		0.01	%		0.44	%		-0.01	%		0.00	%		0.00	%
	Allowance for loan credit losses	$	47,233		$	45,681		$	40,836		$	38,899		$	36,750
	Allowance for loan credit losses as a percentage
	of period end loans		1.31	%		1.29	%		1.32	%		1.26	%		1.19	%
	Allowance for credit losses on
	unfunded loan commitments ("ULC")	$	6,912		$	7,332		$	6,572		$	6,947		$	7,597
	Allowance for credit losses on ULC
	as a percentage of period end ULC		0.73	%		0.81	%		0.72	%		0.75	%		0.85	%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	783		$	254		$	402		$	93		$	347
	Commercial real estate		6,402			5,970			1,700			1,750			1,860
	Residential construction and development		750			772			813			851			902
	Residential real estate		4,787			4,298			4,322			5,117			6,083
	Consumer		124			46			65			12			8
	Total nonperforming loans		12,846			11,340			7,302			7,823			9,200
	Foreclosed properties
	Commercial real estate		297			297			297			297			297
	Commercial construction and development		2,187			2,187			2,187			2,187			2,332
	Residential construction and development		1,924			2,161			2,293			2,293			2,293
	Residential real estate		97			97			351			290			271
	Total foreclosed properties		4,505			4,742			5,128			5,067			5,193
	Total nonperforming assets	$	17,351		$	16,082		$	12,430		$	12,890		$	14,393
	Nonperforming loans to period end loans		0.36	%		0.32	%		0.24	%		0.25	%		0.30	%
	Nonperforming assets to period end assets		0.38	%		0.35	%		0.31	%		0.33	%		0.37	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Loans Past Due 30-89 Days (unaudited)
	Dollars in thousands	9/30/2023		6/30/2023			3/31/2023			12/31/2022			9/30/2022
	Commercial	$	3,300		$	1,006		$	463		$	3,168		$	1,329
	Commercial real estate		781			513			1,000			641			1,550
	Construction and development		793			161			3,459			317			236
	Residential real estate		4,620			4,933			2,311			6,231			2,824
	Consumer		440			389			252			253			216
	Other		37			17			13			22			4
	Total	$	9,971		$	7,019		$	7,498		$	10,632		$	6,159

SUMMIT FINANCIAL GROUP, INC. (NASDAQ:SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q3 2023 vs Q2 2023 vs Q3 2022 (unaudited)
	Q3 2023									Q2 2023									Q3 2022
	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	$	3,591,583		$	58,040		6.41	%		$	3,516,306		$	54,374		6.20	%		$	3,018,219		$	38,741		5.09	%
Tax-exempt (2)		3,911			78		7.91	%			4,144			49		4.74	%			4,834			54		4.43	%
Securities
Taxable		417,299			4,972		4.73	%			428,039			4,900		4.59	%			283,645			2,273		3.18	%
Tax-exempt (2)		211,150			1,754		3.30	%			209,931			1,705		3.26	%			203,951			1,549		3.01	%
Interest bearing deposits other banks
and Federal funds sold		39,200			235		2.38	%			35,218			203		2.31	%			49,048			170		1.38	%
Total interest earning assets		4,263,143			65,079		6.06	%			4,193,638			61,231		5.86	%			3,559,697			42,787		4.77	%
Noninterest earning assets
Cash & due from banks		24,229									23,588									17,455
Premises & equipment		62,085									60,872									54,976
Intangible assets		76,037									80,445									62,705
Other assets		219,150									212,104									171,409
Allowance for loan credit losses		(46,498	)								(44,312	)								(35,381	)
Total assets	$	4,598,146								$	4,526,335								$	3,830,861
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits		2,057,035			15,053		2.90	%			1,985,134			13,423		2.71	%		$	1,454,815		$	4,276		1.17	%
Savings deposits		493,565			2,035		1.64	%			528,694			2,000		1.52	%			611,075			1,243		0.81	%
Time deposits		505,824			2,836		2.22	%			513,236			2,428		1.90	%			461,134			621		0.53	%
Short-term borrowings		267,935			1,988		2.94	%			207,418			1,212		2.34	%			191,421			850		1.76	%
Long-term borrowings and
subordinated debentures		123,839			1,509		4.83	%			123,843			1,487		4.82	%			123,368			1,348		4.34	%
Total interest bearing liabilities		3,448,198			23,421		2.69	%			3,358,325			20,550		2.45	%			2,841,813			8,338		1.16	%
Noninterest bearing liabilities																								.
Demand deposits		681,035									706,391									609,424
Other liabilities		51,669									50,863									41,339
Total liabilities		4,180,902									4,115,579									3,492,576
Shareholders' equity - preferred		14,920									14,920									14,920
Shareholders' equity - common		402,324									395,836									323,365
Total liabilities and
shareholders' equity	$	4,598,146								$	4,526,335								$	3,830,861
NET INTEREST EARNINGS				$	41,658								$	40,681								$	34,449
NET INTEREST MARGIN							3.88	%								3.89	%								3.84	%
(1) - For purposes of this table, nonaccrual loans are included in average loan balances.
(2) - Interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for all periods presented.
The tax equivalent adjustment resulted in an increase in interest income of $385,000, $368,000, and $336,000 for Q3 2023,
Q2 2023 and Q3 2022, respectively.

   

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

Contact:	Robert S. Tissue, Executive Vice President & CFO
Telephone:	(304) 530-0552
Email:	[email protected]