Summit Financial Group, Inc. 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, DC, 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 the third quarter were as follows:
- Total loans of $2.9 billion, excluding mortgage warehouse lines of credit and Paycheck Protection Program lending, increased 2.7%, or 10.9% annualized, during the quarter and 21.5% since Sept. 30, 2021.
- Net interest income increased 10.2% compared to the linked quarter principally due to higher market rates, and increased 21.7% from the year-ago period, primarily due to loan growth.
- Net interest margin increased 18 basis points to 3.84% 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% from
the linked quarter primarily due to deferred director compensation expense of $830,000 in quarter three compared to $726,000 deferred director compensation income in the linked quarter and up 10.8% 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% of average assets compared to 1.91% of average assets for the linked quarter, and remained unchanged from the year-ago period.
- Achieved an efficiency ratio of 47.95% compared to 47.45% in second quarter this year and 49.52% 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% of total loans and 399.5% of nonperforming loans.
- Foreclosed property held for sale declined by 2.4% during the quarter and 58.3% from the year-ago quarter to $5.19 million or 0.13% of assets at period end.
- Nonperforming assets improved to 0.37% of total assets at period end, excluding restructured assets, down six basis points during the quarter and 30 basis points from Sept. 30, 2021.
- Tangible book value per common share increased $0.62 to $20.69 during the quarter, despite unrealized net losses on debt securities available for sale of $0.95 per common share (net of deferred income taxes) recorded in Other Comprehensive Income, 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%, while for the vast majority of our peers TBVPCS has declined, and in some cases significantly so, during the same period.