SMMF Summit Financial Group Inc

Summit Financial Group, Inc. (“Company” or “Summit”) (NASDAQ: SMMF) today reported financial results for the first quarter of 2023, revealing a strong earnings performance marked by notable growth in both loans and total revenue. The Company’s continued success underscores its position as a reliable partner in the financial services industry, 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 and Kentucky through Summit Community Bank, Inc., reported net income applicable to common shares of $13.9 million, or $1.08 per diluted share, for the first quarter of 2023, as compared to $14.9 million, or $1.16 per diluted share, for the fourth quarter of 2022 and $11.5 million, or $0.90 per diluted share, for the first quarter of 2022.

"We had a strong start to the year with impressive loan and deposit growth in the first quarter of 2023, increased tangible book value per common share, and improved net interest margin. We maintained strong credit quality and improved our provision for credit losses while achieving a low efficiency ratio through expense management,” noted H. Charles Maddy, III, President and Chief Executive Officer. “Despite challenging conditions, we remain optimistic about our growth prospects and are excited about our recent acquisition of PSB Holding Corp. and its bank subsidiary, Provident State Bank, Inc., which will enable us to expand our footprint in the Eastern Shore of Maryland and Delaware. I am confident that our bank is well-positioned to deliver long-term shareholder value through organic growth and strategic acquisitions."

Key Highlights for the First Quarter of 2023

• Despite concerns about the banking industry’s stability of deposit bases and adequacy of liquidity levels as result of recent bank failures, Summit’s core deposits grew 3.0 percent (11.8 percent annualized) during the first quarter of 2023.
• Total loans, excluding mortgage warehouse lines of credit and Paycheck Protection Program (“PPP”) lending, increased 2.1 percent (8.3 percent annualized) during the first quarter of 2023 and 12.5 percent since March 31, 2022.
• Tangible book value per common share (“TBVPS”) increased $1.20 (5.5 percent or 22.1 percent annualized) to $22.90 during the first quarter of 2023. This increase was due in part to unrealized net gains on debt securities available for sale, which added $0.59 per common share (net of deferred income taxes) recorded in Other Comprehensive Income (OCI), partially offset by a decrease in the fair values of derivative financial instruments hedging against higher interest rates, totaling $0.32 per common share (net of deferred income taxes) also recorded in OCI.
• Net interest margin (“NIM”) increased 3 basis points to 3.83 percent from the linked quarter and by 22 basis points from the prior-year quarter, driven by increased yields on interest-earning assets, which were partially offset by higher costs of deposits and other funding.
• Total noninterest expense increased 2.9 percent to $19.4 million in the first quarter of 2023, primarily due to acquisition-related expenses of $331,000 compared to $81,000 in the linked quarter. The annualized non-interest expense ratio increased slightly to 1.97 percent of average assets from 1.92 percent in the linked quarter and 1.91 percent in the year-ago period.
• The bank achieved an efficiency ratio of 48.00 percent, an improvement from 49.44 percent in the prior-year quarter.
• The bank incurred a provision for credit losses of $1.50 million in the first quarter of 2023, which increased the period-end allowance for loan credit losses to $40.8 million, or 1.32 percent of total loans and 559.2 percent of nonperforming loans.
• Nonperforming assets (“NPAs”) improved to 0.31 percent of total assets at period end, down 2 basis points during the quarter and down 20 basis points from the prior-year quarter.
• The Company completed its acquisition effective April 1, 2023, of PSB Holding Corp. and its bank subsidiary, Provident State Bank, Inc., headquartered in Preston, Maryland, expanding its footprint in the Eastern Shore of Maryland and Delaware.

Results from Operations

Net interest income totaled $34.2 million in the first quarter of 2023, an increase of 15.7 percent from the prior-year first quarter, and a slight decrease of 0.5 percent from the linked quarter. NIM for the first quarter 2023 was 3.83 percent compared to 3.80 percent for the linked quarter and 3.61 percent for the prior-year quarter. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments, Summit’s net interest margin would have been 3.82 percent for the first quarter of 2023, 3.78 percent for the linked quarter and 3.57 percent for the prior-year quarter.

Noninterest income, consisting primarily of service fee income from community banking activities and trust and wealth management fees, for first quarter 2023 was $4.39 million compared to $4.87 million for the linked quarter and $4.55 million for the comparable period of 2022. The Company recorded realized securities losses on debt securities of $59,000 in the first quarter of 2023 and $24,000 in the linked quarter. In addition, the Company recognized net gains on equity investments of $45,000 in the first quarter 2023 compared to $280,000 in the linked quarter.

Mortgage origination revenue decreased to $171,000 in the first quarter of 2023 compared to $286,000 in the linked quarter and $339,000 for the year-ago period reflecting continuing negative impact of higher interest rates on demand for new mortgage loans. Mortgage origination revenue included an increase in the fair value of mortgage servicing rights of $140,000 for the linked quarter.

Excluding gains and losses on debt securities and equity investments, noninterest income was $4.40 million for the first quarter of 2023 compared to $4.61 million for the fourth quarter of 2022 and $4.33 million in the first quarter of 2022.

Revenue from net interest income and noninterest income, excluding gains and losses on debt securities and equity investments, increased 13.9 percent from $33.9 million in the first quarter of 2022 and declined 1.0 percent to $38.6 million for first quarter 2023 compared to $39.0 million during the linked quarter.

Total noninterest expense increased to $19.4 million in the first quarter of 2023, up 2.9 percent from $18.8 million in the linked quarter and up 12.8 percent from $17.2 million for the prior-year first quarter.

Salary and benefit expenses of $10.8 million in the first quarter of 2023 increased from $10.5 million for the linked quarter and $9.70 million from the prior-year first quarter. This increase was primarily due to higher group health insurance premiums.

Acquisition-related expense were $331,000 for Q1 2023 compared to $81,000 for the linked quarter and $29,000 for Q1 2022.

Other expenses were very controlled at $2.97 million for Q1 2023 compared to $2.93 million for the linked quarter and $2.46 million in the year-ago period.

Summit’s efficiency ratio was 48.00 percent in the first quarter of 2023, down from 49.44 percent for the first quarter of 2022 and marginally higher compared to 46.40 percent in the linked quarter. Non-interest expense to average assets was 1.97 percent in first quarter of 2023 compared to 1.92 percent in the linked quarter and 1.91 percent in the year-ago quarter.

Balance Sheet

As of March 31, 2023, total assets were $4.0 billion, an increase of $60.7 million, or 1.6 percent since December 31, 2022.

Total loans net of unearned fees remained unchanged at $3.1 billion as of March 31, 2023, and December 31, 2022, and increased 8.7 percent from the first quarter of 2022. Excluding PPP and mortgage warehouse lending, total loans grew to $3.0 billion on March 31, 2023, up 2.1 percent (or 8.3 percent annualized) during the first quarter.

Total commercial loans, including commercial and industrial (C&I) and commercial real estate (CRE) but excluding PPP lending, remained at $2.0 billion on March 31, 2023, up 1.6 percent (6.3 percent annualized) during the first quarter.

Residential real estate and consumer lending totaled $613.5 million on March 31, 2023, up 4.6 percent (18.5 percent annualized) during the first quarter.

As of March 31, 2023, PPP balances were paid down to zero and mortgage warehouse lines of credit, sourced solely from a participation arrangement with a large regional bank, totaled $86.2 million compared to $130.4 million as of December 31, 2022, and $164.9 million at the year-ago period end.

Deposits totaled $3.3 billion on March 31, 2023, a 4.1 percent (or 16.4 percent annualized) increase during the first quarter. Core deposits increased 3.0 percent (11.8 percent annualized) during the first quarter 2023 to $3.2 billion. Interest bearing checking deposits grew $142.7 million or 8.2 percent during the quarter and was partially offset by $16.2 million or 5.5 percent decrease in core time deposits. Adjusted uninsured deposits (excluding uninsured public deposits otherwise secured or collateralized as required by law) were 29.3 percent of total deposits at March 31, 2023 compared to 29.8 percent at year-end 2022 and 24.8 percent at the year-ago period end.

Total shareholders’ equity was $369.5 million as of March 31, 2023, compared to $354.5 million at December 31, 2022. Summit paid a quarterly common dividend of $0.20 per share in the first quarter of 2023.

During the first quarter 2023, TBVPS increased $1.20 to $22.90. TBVPS was negatively impacted by unrealized net losses on interest rate caps and swaps held as hedges against higher interest rates totaling $0.32 per common share (net of deferred income taxes) recorded in OCI. However, these losses were more than offset by unrealized net gains on AFS debt securities of $0.59 per common share (net of deferred income taxes), also recorded in OCI, in the same period.

Summit had 12,786,404 outstanding common shares at March 31, 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 first quarter of 2023, no shares of Summit’s common stock were repurchased under the Plan.

Asset Quality

The Company recorded net loan recoveries of $63,000 during first quarter 2023 compared to net loan charge-offs (“NCOs”) of $1,000 in the fourth quarter of 2022. NCOs of $509,000 represented 0.07 percent of average loans annualized in the year-ago period.

Summit recorded a $1.50 million provision for credit losses in the first quarter of 2023, reflecting reserve build to support the Company’s loan growth and increasing forecasted economic uncertainty. The provision for credit losses was $1.50 million for the linked quarter and $1.95 million in the first quarter of 2022.

Summit’s allowance for loan credit losses was $40.8 million on March 31, 2023, $38.9 million at the end of the linked quarter, and $32.6 million on March 31, 2022.

The allowance for loan credit losses stood at 1.32 percent of total loans at March 31, 2023 compared to 1.26 percent at December 31, 2022. The allowance was 559.2 percent of nonperforming loans at March 31, 2023, compared to 497.2 percent at year-end 2022.

Summit’s allowance for credit losses on unfunded loan commitments was $6.57 million as of March 31, 2023, compared to $6.95 million at the end of the linked quarter. The allowance for credit losses on unfunded loan commitments decreased $375,000 during the most recent quarter, principally as a result of a change in the 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 March 31, 2023, nonperforming assets (“NPAs”), consisting of nonperforming loans, foreclosed properties, and repossessed assets, totaled $12.4 million, or 0.31 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 $4.0 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 53 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.

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.

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

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q1 2023 vs Q1 2022
		For the Quarter Ended						Percent
Dollars in thousands		3/31/2023			3/31/2022			Change
Statements of Income
	Interest income
	Loans, including fees	$	45,485		$	30,224		50.5	%
	Securities		4,819			2,623		83.7	%
	Other		171			46		271.7	%
	Total interest income		50,475			32,893		53.5	%
	Interest expense
	Deposits		14,000			1,727		710.7	%
	Borrowings		2,286			1,612		41.8	%
	Total interest expense		16,286			3,339		387.8	%
	Net interest income		34,189			29,554		15.7	%
	Provision for credit losses		1,500			1,950		-23.1	%
	Net interest income after provision
	for credit losses		32,689			27,604		18.4	%
	Noninterest income
	Trust and wealth management fees		811			757		7.1	%
	Mortgage origination revenue		171			339		-49.6	%
	Service charges on deposit accounts		1,392			1,401		-0.6	%
	Bank card revenue		1,568			1,491		5.2	%
	Net gains on equity investments		45			372		-87.9	%
	Net realized losses on debt securities		(59	)		(152	)	-61.2	%
	Bank owned life insurance and annuity income		336			283		18.7	%
	Other income		122			54		125.9	%
	Total noninterest income		4,386			4,545		-3.5	%
	Noninterest expense
	Salaries and employee benefits		10,807			9,700		11.4	%
	Net occupancy expense		1,333			1,242		7.3	%
	Equipment expense		2,030			1,843		10.1	%
	Professional fees		376			362		3.9	%
	Advertising and public relations		170			172		-1.2	%
	Amortization of intangibles		343			378		-9.3	%
	FDIC premiums		330			390		-15.4	%
	Bank card expense		696			714		-2.5	%
	Foreclosed properties expense, net of (gains)/losses		15			(90	)	-116.7	%
	Acquisition-related expense		331			29		1041.4	%
	Other expenses		2,968			2,459		20.7	%
	Total noninterest expense		19,399			17,199		12.8	%
	Income before income taxes		17,676			14,950		18.2	%
	Income taxes		3,575			3,257		9.8	%
	Net income		14,101			11,693		20.6	%
	Preferred stock dividends		225			225		n/a
	Net income applicable to common shares	$	13,876		$	11,468		21.0	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Quarterly Performance Summary (unaudited)
Q1 2023 vs Q1 2022
		For the Quarter Ended						Percent
		3/31/2023			3/31/2022			Change
Per Share Data
	Earnings per common share
	Basic	$	1.09		$	0.90		21.1	%
	Diluted	$	1.08		$	0.90		20.0	%
	Cash dividends per common share	$	0.20		$	0.18		11.1	%
	Common stock dividend payout ratio		18.1	%		19.7	%	-8.1	%
	Average common shares outstanding
	Basic		12,783,851			12,745,297		0.3	%
	Diluted		12,830,102			12,801,903		0.2	%
	Common shares outstanding at period end		12,786,404			12,753,094		0.3	%
Performance Ratios
	Return on average equity		15.55	%		14.20	%	9.5	%
	Return on average tangible equity (C)(E)		19.10	%		18.02	%	6.0	%
	Return on average tangible common equity (D)(E)		20.10	%		18.74	%	7.3	%
	Return on average assets		1.43	%		1.30	%	10.0	%
	Net interest margin (A)		3.83	%		3.61	%	6.1	%
	Efficiency ratio (B)		48.00	%		49.44	%	-2.9	%

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)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
Dollars in thousands		3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
Statements of Income
	Interest income
	Loans, including fees	$	45,485		$	43,589		$	38,784		$	32,766		$	30,224
	Securities		4,819			4,181			3,497			2,752			2,623
	Other		171			70			170			45			46
	Total interest income		50,475			47,840			42,451			35,563			32,893
	Interest expense
	Deposits		14,000			10,194			6,140			2,622			1,727
	Borrowings		2,286			3,293			2,198			1,976			1,612
	Total interest expense		16,286			13,487			8,338			4,598			3,339
	Net interest income		34,189			34,353			34,113			30,965			29,554
	Provision for credit losses		1,500			1,500			1,500			2,000			1,950
	Net interest income after provision
	for credit losses		32,689			32,853			32,613			28,965			27,604
	Noninterest income
	Trust and wealth management fees		811			750			725			745			757
	Mortgage origination revenue		171			286			538			317			339
	Service charges on deposit accounts		1,392			1,526			1,550			1,674			1,401
	Bank card revenue		1,568			1,513			1,639			1,618			1,491
	Net gains/(losses) on equity investments		45			280			283			(669	)		372
	Net realized losses on debt securities		(59	)		(24	)		(242	)		(289	)		(152	)
	Bank owned life insurance and annuity income		336			367			229			331			283
	Other income		122			167			165			129			54
	Total noninterest income		4,386			4,865			4,887			3,856			4,545
	Noninterest expense
	Salaries and employee benefits		10,807			10,532			10,189			10,030			9,700
	Net occupancy expense		1,333			1,328			1,301			1,258			1,242
	Equipment expense		2,030			1,769			1,851			1,791			1,843
	Professional fees		376			386			372			507			362
	Advertising and public relations		170			280			276			165			172
	Amortization of intangibles		343			351			354			355			378
	FDIC premiums		330			352			292			190			390
	Bank card expense		696			679			726			810			714
	Foreclosed properties expense, net of (gains)/losses		15			159			26			141			(90	)
	Acquisition-related expenses		331			81			-			4			29
	Other expenses		2,968			2,932			3,834			2,358			2,459
	Total noninterest expense		19,399			18,849			19,221			17,609			17,199
	Income before income taxes		17,676			18,869			18,279			15,212			14,950
	Income tax expense		3,575			3,783			3,856			3,198			3,257
	Net income		14,101			15,086			14,423			12,014			11,693
	Preferred stock dividends		225			225			225			225			225
	Net income applicable to common shares	$	13,876		$	14,861		$	14,198		$	11,789		$	11,468

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Five Quarter Performance Summary (unaudited)
		For the Quarter Ended
		3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
Per Share Data
	Earnings per common share
	Basic	$	1.09		$	1.16		$	1.11		$	0.92		$	0.90
	Diluted	$	1.08		$	1.16		$	1.11		$	0.92		$	0.90
	Cash dividends per common share	$	0.20		$	0.20		$	0.20		$	0.18		$	0.18
	Common stock dividend payout ratio		18.1	%		16.9	%		17.7	%		19.1	%		19.7	%
	Average common shares outstanding
	Basic		12,783,851			12,775,703			12,766,473			12,754,724			12,745,297
	Diluted		12,830,102			12,837,637			12,835,670			12,810,174			12,801,903
	Common shares outstanding at period end		12,786,404			12,783,646			12,774,645			12,763,422			12,753,094
Performance Ratios
	Return on average equity		15.55	%		17.50	%		17.05	%		14.48	%		14.20	%
	Return on average tangible equity (C)(E)		19.10	%		21.75	%		21.33	%		18.28	%		18.02	%
	Return on average tangible common equity (D)(E)		20.10	%		22.96	%		22.20	%		19.00	%		18.74	%
	Return on average assets		1.43	%		1.54	%		1.51	%		1.30	%		1.30	%
	Net interest margin (A)		3.83	%		3.80	%		3.84	%		3.66	%		3.61	%
	Efficiency ratio (B)		48.00	%		46.40	%		47.95	%		47.45	%		49.44	%

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		3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
Assets
	Cash and due from banks	$	16,488		$	16,469		$	16,141		$	17,921		$	18,404
	Interest bearing deposits other banks		54,328			28,248			29,510			31,680			42,853
	Debt securities, available for sale		431,933			405,201			383,965			368,049			374,855
	Debt securities, held to maturity		95,682			96,163			96,640			97,116			97,589
	Equity investments		29,867			29,494			20,314			19,905			20,574
	Other investments		12,696			16,029			18,105			18,329			10,974
	Loans, net		3,059,099			3,043,919			3,038,377			2,941,813			2,817,998
	Property held for sale		5,128			5,067			5,193			5,319			6,900
	Premises and equipment, net		54,491			53,981			54,628			55,034			55,713
	Goodwill and other intangible assets, net		61,807			62,150			62,502			62,856			63,212
	Cash surrender value of life insurance policies and annuities		72,019			71,640			71,216			71,073			70,825
	Derivative financial instruments		34,758			40,506			42,179			31,452			24,455
	Other assets		49,111			47,825			48,529			42,252			39,339
	Total assets	$	3,977,407		$	3,916,692		$	3,887,299		$	3,762,799		$	3,643,691
Liabilities and Shareholders' Equity
	Deposits	$	3,299,846		$	3,169,879		$	3,108,072		$	2,975,304		$	3,008,063
	Short-term borrowings		140,150			225,999			273,148			291,447			140,146
	Long-term borrowings and
	subordinated debentures, net		123,660			123,543			123,427			123,311			123,260
	Other liabilities		44,205			42,741			40,978			38,846			41,756
	Total liabilities		3,607,861			3,562,162			3,545,625			3,428,908			3,313,225
	Preferred stock and related surplus		14,920			14,920			14,920			14,920			14,920
	Common stock and related surplus		90,939			90,696			90,345			90,008			89,675
	Retained earnings		271,712			260,393			248,084			236,438			226,944
	Accumulated other comprehensive income (loss)		(8,025	)		(11,479	)		(11,675	)		(7,475	)		(1,073	)
	Total shareholders' equity		369,546			354,530			341,674			333,891			330,466
	Total liabilities and shareholders' equity	$	3,977,407		$	3,916,692		$	3,887,299		$	3,762,799		$	3,643,691
	Book value per common share	$	27.73		$	26.57		$	25.58		$	24.99		$	24.74
	Tangible book value per common share (A)(C)	$	22.90		$	21.70		$	20.69		$	20.07		$	19.79
	Tangible common equity to tangible assets (B)(C)		7.5	%		7.2	%		6.9	%		6.9	%		7.0	%

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	3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
Commercial	$	498,268		$	501,844		$	512,771		$	455,202		$	447,482
Mortgage warehouse lines		86,240			130,390			194,740			171,399			164,895
Commercial real estate
Owner occupied		469,560			467,050			473,298			502,152			491,059
Non-owner occupied		1,036,358			1,004,368			960,627			963,646			910,174
Construction and development
Land and development		102,351			106,362			104,437			106,840			103,203
Construction		290,556			282,935			248,564			211,955			171,383
Residential real estate
Conventional		395,312			386,874			382,203			377,980			375,240
Jumbo		111,475			92,103			87,449			79,803			81,443
Home equity		70,167			71,986			72,756			71,136			70,770
Consumer		36,531			35,372			35,116			33,816			32,095
Other		3,117			3,534			3,166			2,947			2,877
Total loans, net of unearned fees		3,099,935			3,082,818			3,075,127			2,976,876			2,850,621
Less allowance for loan credit losses		40,836			38,899			36,750			35,063			32,623
Loans, net	$	3,059,099		$	3,043,919		$	3,038,377		$	2,941,813		$	2,817,998
Unfunded loan commitments	$	907,757		$	925,657		$	889,854		$	876,157		$	840,705

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Deposit Composition (unaudited)
Dollars in thousands	3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
Core deposits
Non-interest bearing checking	$	552,716		$	553,616		$	619,067		$	600,791		$	629,002
Interest bearing checking		1,886,011			1,743,299			1,475,643			1,238,368			1,134,964
Savings		462,631			496,751			582,922			645,099			702,069
Time deposits		278,410			294,630			338,668			386,562			427,076
Total core deposits		3,179,768			3,088,296			3,016,300			2,870,820			2,893,111
Brokered time deposits		71,451			32,790			32,778			32,767			32,755
Other non-core time deposits		48,627			48,793			58,994			71,717			82,197
Total deposits	$	3,299,846		$	3,169,879		$	3,108,072		$	2,975,304		$	3,008,063
Estimated uninsured deposits (A)	$	966,175		$	946,188		$	757,038		$	762,466		$	744,686
(A) - Excludes uninsured public funds otherwise secured or collateralized as required by law

SUMMIT FINANCIAL GROUP INC. (NASDAQ: SMMF)
Regulatory Capital Ratios (unaudited)
		3/31/2023		12/31/2022		9/30/2022		6/30/2022		3/31/2022
Summit Financial Group, Inc.
	CET1 Risk-based Capital	8.9	%	8.6	%	8.2	%	8.2	%	8.3	%
	Tier 1 Risk-based Capital	9.8	%	9.5	%	9.2	%	9.2	%	9.3	%
	Total Risk-based Capital	14.0	%	13.5	%	13.1	%	13.3	%	13.5	%
	Tier 1 Leverage	8.7	%	8.5	%	8.4	%	8.4	%	8.4	%
Summit Community Bank, Inc.
	CET1 Risk-based Capital	11.9	%	11.6	%	11.3	%	11.4	%	11.6	%
	Tier 1 Risk-based Capital	11.9	%	11.6	%	11.3	%	11.4	%	11.6	%
	Total Risk-based Capital	13.1	%	12.6	%	12.2	%	12.4	%	12.5	%
	Tier 1 Leverage	10.6	%	10.4	%	10.3	%	10.4	%	10.5	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Asset Quality Information (unaudited)
		For the Quarter Ended
Dollars in thousands		3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
	Gross loan charge-offs	$	164		$	250		$	265		$	306		$	618
	Gross loan recoveries		(227	)		(249	)		(257	)		(147	)		(109	)
	Net loan charge-offs	$	(63	)	$	1		$	8		$	159		$	509
	Net loan charge-offs to average loans (annualized)		-0.01	%		0.00	%		0.00	%		0.02	%		0.07	%
	Allowance for loan credit losses	$	40,836		$	38,899		$	36,750		$	35,063		$	32,623
	Allowance for loan credit losses as a percentage
	of period end loans		1.32	%		1.26	%		1.19	%		1.18	%		1.14	%
	Allowance for credit losses on
	unfunded loan commitments ("ULC")	$	6,572		$	6,947		$	7,597		$	7,792		$	8,392
	Allowance for credit losses on ULC
	as a percentage of period end ULC		0.72	%		0.75	%		0.85	%		0.89	%		1.00	%
	Nonperforming assets:
	Nonperforming loans
	Commercial	$	402		$	93		$	347		$	345		$	433
	Commercial real estate		1,700			1,750			1,860			2,703			4,765
	Residential construction and development		813			851			902			1,053			968
	Residential real estate		4,322			5,117			6,083			6,799			5,549
	Consumer		65			12			8			37			20
	Total nonperforming loans		7,302			7,823			9,200			10,937			11,735
	Foreclosed properties
	Commercial real estate		297			297			297			440			1,251
	Commercial construction and development		2,187			2,187			2,332			2,332			2,332
	Residential construction and development		2,293			2,293			2,293			2,293			3,018
	Residential real estate		351			290			271			254			299
	Total foreclosed properties		5,128			5,067			5,193			5,319			6,900
	Other repossessed assets		-			-			-			-			-
	Total nonperforming assets	$	12,430		$	12,890		$	14,393		$	16,256		$	18,635
	Nonperforming loans to period end loans		0.24	%		0.25	%		0.30	%		0.37	%		0.41	%
	Nonperforming assets to period end assets		0.31	%		0.33	%		0.37	%		0.43	%		0.51	%

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Loans Past Due 30-89 Days (unaudited)
Dollars in thousands		3/31/2023			12/31/2022			9/30/2022			6/30/2022			3/31/2022
	Commercial	$	463		$	3,168		$	1,329		$	989		$	388
	Commercial real estate		1,000			641			1,550			4,084			1,446
	Construction and development		3,459			317			236			821			645
	Residential real estate		2,311			6,231			2,824			3,452			3,407
	Consumer		252			253			216			196			69
	Other		13			22			4			14			28
	Total	$	7,498		$	10,632		$	6,159		$	9,556		$	5,983

SUMMIT FINANCIAL GROUP, INC. (NASDAQ: SMMF)
Average Balance Sheet, Interest Earnings & Expenses and Average Rates
Q1 2023 vs Q4 2022 vs Q1 2022 (unaudited)
	Q1 2023									Q4 2022									Q1 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	$	3,087,068		$	45,421		5.97	%		$	3,100,595		$	43,549		5.57	%		$	2,771,842		$	30,178		4.42	%
Tax-exempt (2)		6,086			81		5.40	%			4,525			52		4.56	%			5,369			58		4.38	%
Securities
Taxable		314,004			3,412		4.41	%			280,114			2,747		3.89	%			320,170			1,657		2.10	%
Tax-exempt (2)		216,430			1,781		3.34	%			219,245			1,813		3.28	%			180,473			1,223		2.75	%
Interest bearing deposits other banks
and Federal funds sold		34,330			171		2.02	%			25,785			70		1.08	%			72,883			46		0.26	%
Total interest earning assets		3,657,918			50,866		5.64	%			3,630,264			48,231		5.27	%			3,350,737			33,162		4.01	%
Noninterest earning assets
Cash & due from banks		17,387									16,892									19,226
Premises & equipment		54,112									54,431									56,043
Intangible assets		62,024									62,336									63,429
Other assets		190,533									191,926									142,719
Allowance for loan credit losses		(39,507	)								(37,377	)								(32,462	)
Total assets	$	3,942,467								$	3,918,472								$	3,599,692
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing
demand deposits		1,819,505			10,796		2.41	%			1,615,275			7,848		1.93	%		$	1,135,068		$	465		0.17	%
Savings deposits		480,207			1,917		1.62	%			529,039			1,651		1.24	%			700,115			573		0.33	%
Time deposits		389,252			1,287		1.34	%			399,101			695		0.69	%			542,360			689		0.52	%
Short-term borrowings		166,365			824		2.01	%			276,823			1,868		2.68	%			140,230			373		1.08	%
Long-term borrowings and
subordinated debentures		123,599			1,462		4.80	%			123,488			1,425		4.58	%			123,203			1,239		4.08	%
Total interest bearing liabilities		2,978,928			16,286		2.22	%			2,943,726			13,487		1.82	%			2,640,976			3,339		0.51	%
Noninterest bearing liabilities
Demand deposits		557,209									586,617									586,903
Other liabilities		43,508									43,378									42,493
Total liabilities		3,579,645									3,573,721									3,270,372
Shareholders' equity - preferred		14,920									14,920									14,921
Shareholders' equity - common		347,902									329,831									314,399
Total liabilities and
shareholders' equity	$	3,942,467								$	3,918,472								$	3,599,692
NET INTEREST EARNINGS				$	34,580								$	34,744								$	29,823
NET INTEREST MARGIN							3.83	%								3.80	%								3.61	%
(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, $391,000, and $269,000 for Q1 2023,
Q4 2022 and Q1 2022, respectively.