Summit Financial 10Q 2024 Q1 Quarterly report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934 For the transition period from ___________ to __________.

Commission File Number 0-16587

Summit Financial Group, Inc.

(Exact name of registrant as specified in its charter)

West Virginia	55-0672148
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

300 North Main Street
Moorefield, West Virginia	26836
(Address of principal executive offices)	(Zip Code)

(304) 530-1000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☑ Non-accelerated filer ☐

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $2.50 per share	SMMF	NASDAQ Global Select Market

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date.

Common Stock, $2.50 par value

14,686,738 shares outstanding as of April 29, 2024

Table of Contents

			Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated balance sheets March 31, 2024 (unaudited) and December 31, 2023	3

		Consolidated statements of income for the three months ended March 31, 2024 and 2023 (unaudited)	4

		Consolidated statements of comprehensive income for the three months ended March 31, 2024 and 2023 (unaudited)	5

		Consolidated statements of shareholders’ equity for the three months ended March 31, 2024 and 2023 (unaudited)	6

		Consolidated statements of cash flows for the three months ended March 31, 2024 and 2023 (unaudited)	7

		Notes to consolidated financial statements (unaudited)	9

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	42

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53

	Item 4.	Controls and Procedures	54

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	55

	Item 1A.	Risk Factors	55

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55

	Item 3.	Defaults upon Senior Securities	None

	Item 4.	Mine Safety Disclosures	None

	Item 5.	Other Information	None

	Item 6.	Exhibits	56

EXHIBIT INDEX			57

SIGNATURES			58

Table of Contents

Item 1. Financial Statements

Consolidated Balance Sheets (unaudited)

	*March 31,*			*December 31,*
	*2024*			*2023*
Dollars in thousands (except per share amounts)	*(unaudited)*			**()***
ASSETS
Cash and due from banks	$	23,706		$	21,834
Interest bearing deposits with other banks		31,950			30,398
Cash and cash equivalents		55,656			52,232
Debt securities available for sale (at fair value)		490,271			502,762
Debt securities held to maturity (at amortized cost; estimated fair value - $87,029 - 2024, $88,319 - 2023)		93,737			94,227
Less: allowance for credit losses		—			—
Debt securities held to maturity, net		93,737			94,227
Equity investments (at fair value)		11,571			10,958
Other investments		21,842			21,130
Loans, net of unearned fees		3,697,042			3,681,612
Less: allowance for credit losses		(49,232	)		(48,090	)
Loans, net		3,647,810			3,633,522
Property held for sale		3,432			3,729
Premises and equipment, net		62,293			63,038
Accrued interest and fees receivable		20,238			20,004
Goodwill and other intangible assets, net		73,443			74,430
Cash surrender value of life insurance policies and annuities		86,230			85,679
Derivative financial instruments		36,803			33,145
Other assets		39,558			39,466
Total assets	$	4,642,884		$	4,634,322

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing	$	605,509		$	593,576
Interest bearing		3,142,906			3,121,572
Total deposits		3,748,415			3,715,148
Short-term borrowings		262,359			302,957
Long-term borrowings		630			637
Subordinated debentures, net		103,904			103,782
Subordinated debentures owed to unconsolidated subsidiary trusts		19,589			19,589
Other liabilities		53,706			52,001
Total liabilities		4,188,603			4,194,114
Commitments and Contingencies

Shareholders' Equity
Preferred stock and related surplus, $1.00 par value, authorized 250,000 shares; issued: 2024 and 2023 - 1,500 shares		14,920			14,920
Common stock and related surplus, $2.50 par value; authorized 20,000,000 shares; issued and outstanding: 2024 - 14,686,738 shares and 2023 - 14,683,457 shares		130,235			129,990
Retained earnings		316,375			302,783
Accumulated other comprehensive loss		(7,249	)		(7,485	)
Total shareholders' equity		454,281			440,208

Total liabilities and shareholders' equity	$	4,642,884		$	4,634,322

(*) - Derived from audited consolidated financial statements

See Notes to Consolidated Financial Statements

Table of Contents

Consolidated Statements of Income (unaudited)

	*For the Three Months Ended March 31,*
Dollars in thousands (except per share amounts)	*2024*			*2023*
Interest income
Loans, including fees
Taxable	$	59,204		$	45,421
Tax-exempt		45			64
Securities
Taxable		5,025			3,412
Tax-exempt		1,116			1,407
Interest on interest bearing deposits with other banks		132			171
Total interest income		65,522			50,475
Interest expense
Deposits		21,430			14,000
Short-term borrowings		2,661			824
Long-term borrowings and subordinated debentures		1,508			1,462
Total interest expense		25,599			16,286
Net interest income		39,923			34,189
Provision for credit losses		—			1,500
Net interest income after provision for credit losses		39,923			32,689
Noninterest income
Trust and wealth management fees		847			811
Mortgage origination revenue		154			171
Service charges on deposit accounts		1,723			1,392
Bank card revenue		1,833			1,568
Net realized losses on available for sale debt securities		(94	)		(59	)
Net gains on equity investments		40			45
Bank owned life insurance and annuities income		463			336
Other		112			122
Total noninterest income		5,078			4,386
Noninterest expenses
Salaries, commissions and employee benefits		12,058			10,807
Net occupancy expense		1,695			1,333
Equipment expense		2,508			2,030
Professional fees		385			376
Advertising and public relations		272			170
Amortization of intangibles		987			343
FDIC premiums		717			330
Bank card expense		832			696
Foreclosed properties expense, net of losses		12			15
Merger-related expenses		53			331
Other		3,439			2,968
Total noninterest expenses		22,958			19,399
Income before income tax expense		22,043			17,676
Income tax expense		4,996			3,575
Net income		17,047			14,101
Preferred stock dividends		225			225
Net income applicable to common shares	$	16,822		$	13,876

Basic earnings per common share	$	1.15		$	1.09
Diluted earnings per common share	$	1.14		$	1.08

See Notes to Consolidated Financial Statements

Table of Contents

Consolidated Statements of Comprehensive Income (unaudited)

	*For the Three Months Ended*
	*March 31,*
Dollars in thousands	*2024*			*2023*
Net income	$	17,047		$	14,101
Other comprehensive (loss) income:
Net unrealized gain (loss) on cashflow hedges of:
2024 - $1,776, net of deferred taxes of $(426); 2023 - $(4,126), net of deferred taxes of $990		1,350			(3,136	)
Net unrealized gain (loss) on fair value hedge of debt securities available for sale of:
2024 - $2,080, net of deferred taxes of $(499); 2023 - $(1,247), net of deferred taxes of $299		1,581			(948	)
Net unrealized (loss) gain on debt securities available for sale of:
2024 - $(3,546), net of deferred taxes of $851 and reclassification adjustment for net realized losses included in net income of $(94), net of tax of $23; 2023 - $9,918, net of deferred taxes of $(2,380) and reclassification adjustment for net realized losses included in net income of $(59), net of tax of $14		(2,695	)		7,538
Total other comprehensive income		236			3,454
Total comprehensive income	$	17,283		$	17,555

See Notes to Consolidated Financial Statements

Table of Contents

Consolidated Statements of Shareholders’ Equity (unaudited)

								Accumulated
	*Preferred*		*Common*					*Other*			*Total*
	*Stock and*		*Stock and*					*Compre-*			*Share-*
	*Related*		*Related*		*Retained*			*hensive*			*holders'*
Dollars in thousands (except per share amounts)	*Surplus*		*Surplus*		*Earnings*			*(Loss) Income*			*Equity*

Balance December 31, 2023	$	14,920	$	129,990	$	302,783		$	(7,485	)	$	440,208

Three Months Ended March 31, 2024
Net income		—		—		17,047			—			17,047
Other comprehensive income		—		—		—			236			236
Exercise of SARs - 272 shares		—		—		—			—			—
Share-based compensation expense		—		163		—			—			163
Common stock issuances from reinvested dividends - 3,009 shares		—		82		—			—			82
Preferred stock cash dividends declared		—		—		(225	)		—			(225	)
Common stock cash dividends declared ($0.22 per share)		—		—		(3,230	)		—			(3,230	)
Balance, March 31, 2024	$	14,920	$	130,235	$	316,375		$	(7,249	)	$	454,281

Balance December 31, 2022	$	14,920	$	90,696	$	260,393		$	(11,479	)	$	354,530

Three Months Ended March 31, 2023
Net income		—		—		14,101			—			14,101
Other comprehensive income		—		—		—			3,454			3,454
Exercise of SARs - 522 shares		—		—		—			—			—
Share-based compensation expense		—		196		—			—			196
Common stock issuances from reinvested dividends - 2,236 shares		—		47		—			—			47
Preferred stock cash dividends declared		—		—		(225	)		—			(225	)
Common stock cash dividends declared ($0.20 per share)		—		—		(2,557	)		—			(2,557	)
Balance, March 31, 2023	$	14,920	$	90,939	$	271,712		$	(8,025	)	$	369,546

See Notes to Consolidated Financial Statements

Table of Contents

Consolidated Statements of Cash Flows (unaudited)

	*Three Months Ended*
	*March 31,*			*March 31,*
Dollars in thousands	*2024*			*2023*
Cash Flows from Operating Activities
Net income	$	17,047		$	14,101
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,059			869
Provision for credit losses		—			1,500
Share-based compensation expense		163			196
Deferred income tax expense (benefit)		322			(413	)
Loans originated for sale		(1,154	)		(946	)
Proceeds from sale of loans		1,178			963
Gains on loans held for sale		(24	)		(17	)
Realized losses on debt securities, net		94			59
Gain on equity investments		(40	)		(45	)
Gain on disposal of assets		(8	)		(5	)
Amortization of securities premiums, net		118			843
Accretion related to acquisition adjustments, net		(931	)		(167	)
Amortization of intangibles		987			343
Earnings on bank owned life insurance and annuities		(551	)		(379	)
Increase in accrued interest receivable		(234	)		(398	)
Increase in other assets		(834	)		(916	)
Increase in other liabilities		2,171			1,590
Net cash provided by operating activities		19,363			17,178
Cash Flows from Investing Activities
Proceeds from maturities and calls of debt securities available for sale		1,500			1,145
Proceeds from sales of debt securities available for sale		14,874			36,940
Principal payments received on debt securities available for sale		10,721			8,048
Purchases of debt securities available for sale		(17,871	)		(63,369	)
Purchase of equity investments		(23	)		(41	)
Purchases of other investments		(9,542	)		(3,171	)
Proceeds from redemptions of other investments		8,486			6,141
Net loan originations		(13,351	)		(16,872	)
Purchases of premises and equipment		(684	)		(1,384	)
Proceeds from disposal of premises and equipment		381			12
Improvements to property held for sale		—			(2	)
Proceeds from sales of repossessed assets & property held for sale		294			—
Net cash used in investing activities		(5,215	)		(32,553	)
Cash Flows from Financing Activities
Net (decrease) increase in demand deposit, NOW and savings accounts		(18,839	)		107,693
Net increase in time deposits		52,093			22,370
Net decrease in short-term borrowings		(40,598	)		(85,849	)
Repayment of long-term borrowings		(7	)		(5	)
Proceeds from issuance of common stock		82			47
Dividends paid on common stock		(3,230	)		(2,557	)
Dividends paid on preferred stock		(225	)		(225	)
Net cash (used in) provided by financing activities		(10,724	)		41,474
Increase in cash and cash equivalents		3,424			26,099

continued

See Notes to Consolidated Financial Statements

Table of Contents

Consolidated Statements of Cash Flows (unaudited)(continued)

	*Three Months Ended*
	*March 31,*		*March 31,*
Dollars in thousands	*2024*		*2023*
Cash and cash equivalents:
Beginning		52,232		44,717
Ending	$	55,656	$	70,816


Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest	$	24,451	$	15,545

Supplemental Disclosures of Noncash Investing and Financing Activities
Real property and other assets acquired in settlement of loans	$	—	$	59
Right of use assets obtained in exchange for lease obligations	$	—	$	733

See Notes to Consolidated Financial Statements

Table of Contents

NOTE 1. BASIS OF PRESENTATION

We, Summit Financial Group, Inc. and subsidiary, prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual year end financial statements. In our opinion, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature.

The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates. You should carefully consider each risk factor discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year. The consolidated financial statements and notes included herein should be read in conjunction with our 2023 audited financial statements and Annual Report on Form 10-K.

NOTE 2. SIGNIFICANT NEW AUTHORITATIVE ACCOUNTING GUIDANCE

Recently Adopted

In March 2023, the FASB issued ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits. The ASU was effective for us January 1, 2024 and did not have a material impact on our consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. ASU 2022-03 clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The ASU was effective for us January 1, 2024 and did not have a material impact on our consolidated financial statements.

Pending Adoption

In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. We do not expect the adoption of ASU 2023-09 to have a material impact on our consolidated financial statements.

In October 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification. The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. We do not expect the adoption of ASU 2023-06 to have a material impact on our consolidated financial statements.

Table of Contents

NOTE 3. FAIR VALUE MEASUREMENTS

The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring basis.

	*Balance at*		*Fair Value Measurements Using:*
Dollars in thousands	*March 31, 2024*		*Level 1*		*Level 2*		*Level 3*
Debt securities available for sale
U.S. Government sponsored agencies and corporations	$	21,503	$	—	$	21,503	$	—
Residential mortgage-backed securities:
Government sponsored agencies		123,119		—		123,119		—
Nongovernment sponsored entities		73,856		—		69,389		4,467
State and political subdivisions		95,992		—		95,992		—
Corporate debt securities		36,589		—		36,589		—
Asset-backed securities		41,350		—		41,350		—
Tax-exempt state and political subdivisions		97,862		—		97,862		—
Total debt securities available for sale	$	490,271	$	—	$	485,804	$	4,467

Equity investments	$	11,571	$	7,107	$	4,464	$	—

Derivative financial assets
Interest rate caps	$	25,321	$	—	$	25,321	$	—
Interest rate swaps		11,482		—		11,482		—

	*Balance at*		*Fair Value Measurements Using:*
Dollars in thousands	*December 31, 2023*		*Level 1*		*Level 2*		*Level 3*
Debt securities available for sale
U.S. Government sponsored agencies and corporations	$	22,825	$	—	$	22,825	$	—
Residential mortgage-backed securities:
Government sponsored agencies		129,567		—		129,567		—
Nongovernment sponsored entities		73,869		—		69,262		4,607
State and political subdivisions		94,929		—		94,929		—
Corporate debt securities		37,907		—		37,907		—
Asset-backed securities		44,205		—		44,205		—
Tax-exempt state and political subdivisions		99,460		—		99,460		—
Total debt securities available for sale	$	502,762	$	—	$	498,155	$	4,607

Equity investments	$	10,958	$	6,557	$	4,401	$	—

Derivative financial assets
Interest rate caps	$	24,314	$	—	$	24,314	$	—
Interest rate swaps		8,831		—		8,831		—

Table of Contents

We may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower of cost or market that were recognized at fair value below cost at the end of the period. Assets measured at fair value on a nonrecurring basis are included in the table below.

	*Balance at*		*Fair Value Measurements Using:*
Dollars in thousands	*March 31, 2024*		*Level 1*		*Level 2*		*Level 3*

Collateral-dependent loans with an ACLL
Commercial	$	3,299	$	—	$	3,299	$	—
Commercial real estate		16,653		—		16,653		—
Construction and development		248		—		248		—
Residential real estate		352		—		352		—
Total collateral-dependent loans with an ACLL	$	20,552	$	—	$	20,552	$	—

Property held for sale
Commercial real estate	$	—	$	—	$	—	$	—
Construction and development		3,176		—		3,176		—
Total property held for sale	$	3,176	$	—	$	3,176	$	—

	*Balance at*		*Fair Value Measurements Using:*
Dollars in thousands	*December 31, 2023*		*Level 1*		*Level 2*		*Level 3*

Collateral-dependent loans with an ACLL
Commercial real estate	$	13,488	$	—	$	13,488	$	—
Construction and development		248		—		248		—
Residential real estate		637		—		637		—
Total collateral-dependent loans with an ACLL	$	14,373	$	—	$	14,373	$	—

Property held for sale
Commercial real estate	$	297	$	—	$	297	$	—
Construction and development		3,176		—		3,176		—
Total property held for sale	$	3,473	$	—	$	3,473	$	—

Table of Contents

The carrying values and estimated fair values of our financial instruments are summarized below:

	*March 31, 2024*				*Fair Value Measurements Using:*
			*Estimated*
	*Carrying*		*Fair*
Dollars in thousands	*Value*		*Value*		*Level 1*		*Level 2*		*Level 3*
Financial assets
Cash and cash equivalents	$	55,656	$	55,656	$	23,706	$	31,950	$	—
Debt securities available for sale		490,271		490,271		—		485,804		4,467
Debt securities held to maturity		93,737		87,029		—		87,029		—
Equity investments		11,571		11,571		7,107		4,464		—
Other investments		21,842		21,842		—		21,842		—
Loans, net		3,647,810		3,483,889		—		20,552		3,463,337
Accrued interest receivable		20,238		20,238		—		20,238		—
Cash surrender value of life insurance policies and annuities		86,230		86,230		—		86,230		—
Derivative financial assets		36,803		36,803		—		36,803		—
	$	4,464,158	$	4,293,529	$	30,813	$	794,912	$	3,467,804
Financial liabilities
Deposits	$	3,748,415	$	3,740,170	$	—	$	3,740,170	$	—
Short-term borrowings		262,359		262,359		—		262,359		—
Long-term borrowings		630		632		—		632		—
Subordinated debentures		103,904		91,605		—		91,605		—
Subordinated debentures owed to unconsolidated subsidiary trusts		19,589		19,589		—		19,589		—
Accrued interest payable		4,646		4,646		—		4,646		—
	$	4,139,543	$	4,119,001	$	—	$	4,119,001	$	—

	*December 31, 2023*				*Fair Value Measurements Using:*
			*Estimated*
	*Carrying*		*Fair*
Dollars in thousands	*Value*		*Value*		*Level 1*		*Level 2*		*Level 3*
Financial assets
Cash and cash equivalents	$	52,232	$	52,232	$	21,834	$	30,398	$	—
Debt securities available for sale		502,762		502,762		—		498,155		4,607
Debt securities held to maturity		94,227		88,319		—		88,319		—
Equity investments		10,958		10,958		6,557		4,401		—
Other investments		21,130		21,130		—		21,130		—
Loans, net		3,633,522		3,467,324		—		14,373		3,452,951
Accrued interest receivable		20,004		20,004		—		20,004		—
Cash surrender value of life insurance policies and annuities		85,679		85,679		—		85,679		—
Derivative financial assets		33,145		33,145		—		33,145		—
	$	4,453,659	$	4,281,553	$	28,391	$	795,604	$	3,457,558
Financial liabilities
Deposits	$	3,715,148	$	3,706,250	$	—	$	3,706,250	$	—
Short-term borrowings		302,957		302,957		—		302,957		—
Long-term borrowings		637		642		—		642		—
Subordinated debentures		103,782		90,902		—		90,902		—
Subordinated debentures owed to unconsolidated subsidiary trusts		19,589		19,589		—		19,589		—
Accrued interest payable		3,980		3,980		—		3,980		—
	$	4,146,093	$	4,124,320	$	—	$	4,124,320	$	—

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NOTE 4. EARNINGS PER SHARE

The computations of basic and diluted earnings per share follow:

	*For the Three Months Ended March 31,*
	*2024*							*2023*
				*Common*							*Common*
	*Net Income*			*Shares*		*Per*		*Net Income*			*Shares*		*Per*
Dollars in thousands,except per share amounts	*(Numerator)*			*(Denominator)*		*Share*		*(Numerator)*			*(Denominator)*		*Share*
Net income	$	17,047						$	14,101
Less preferred stock dividends		(225	)						(225	)

Basic earnings per share	$	16,822			14,683,596	$	1.15	$	13,876			12,783,851	$	1.09

Effect of dilutive securities:
Stock appreciation rights ("SARs")					65,017							43,287
Restricted stock units ("RSUs")					1,439							2,964

Diluted earnings per share	$	16,822			14,750,052	$	1.14	$	13,876			12,830,102	$	1.08

SAR grants and RSUs are disregarded in this computation if they are determined to be anti-dilutive. Our anti-dilutive SARs totaled 215,388 for the three months ended March 31, 2024 and 563,936 for the three months ended March 31, 2023, respectively. All RSUs were dilutive at March, 31 2024. There were 707 anti-dilutive RSUs at March 31, 2023.

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NOTE 5. DEBT SECURITIES

Debt Securities Available for Sale

The amortized cost, unrealized gains, unrealized losses and estimated fair values of debt securities available for sale at March 31, 2024 and December 31, 2023 are summarized as follows:

	*March 31, 2024*
	*Amortized*		*Unrealized*				*Estimated*
Dollars in thousands	*Cost*		*Gains*		*Losses*		*Fair Value*
Debt Securities Available for Sale
Taxable debt securities
U.S. Government sponsored agencies and corporations	$	22,116	$	33	$	646	$	21,503
Residential mortgage-backed securities:
Government-sponsored agencies		129,634		133		6,648		123,119
Nongovernment-sponsored entities		78,023		137		4,304		73,856
State and political subdivisions
General obligations		80,334		12		14,978		65,368
Various tax revenues		10,657		—		2,052		8,605
Other revenues		26,816		—		4,797		22,019
Corporate debt securities		38,201		39		1,651		36,589
Asset-backed securities		41,287		133		70		41,350
Total taxable debt securities		427,068		487		35,146		392,409
Tax-exempt debt securities
State and political subdivisions
General obligations		80,408		100		4,699		75,809
Other revenues		24,774		4		2,725		22,053
Total tax-exempt debt securities		105,182		104		7,424		97,862
Total debt securities available for sale	$	532,250	$	591	$	42,570	$	490,271

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	*December 31, 2023*
	*Amortized*		*Unrealized*				*Estimated*
Dollars in thousands	*Cost*		*Gains*		*Losses*		*Fair Value*
Debt Securities Available for Sale
Taxable debt securities
U.S. Government sponsored agencies and corporations	$	23,295	$	38	$	508	$	22,825
Residential mortgage-backed securities:
Government-sponsored agencies		133,709		729		4,871		129,567
Nongovernment-sponsored entities		78,350		22		4,503		73,869
State and political subdivisions
General obligations		79,323		3		14,995		64,331
Various tax revenues		10,665		—		2,107		8,558
Other revenues		26,822		—		4,782		22,040
Corporate debt securities		39,618		52		1,763		37,907
Asset-backed securities		44,388		81		264		44,205
Total taxable debt securities		436,170		925		33,793		403,302
Tax-exempt debt securities
State and political subdivisions
General obligations		80,144		581		3,716		77,009
Other revenues		24,882		28		2,459		22,451
Total tax-exempt debt securities		105,026		609		6,175		99,460
Total debt securities available for sale	$	541,196	$	1,534	$	39,968	$	502,762

Accrued interest receivable on debt securities available for sale totaled $2.9 million at March 31, 2024 and $3.1 million at December 31, 2023, and is included in accrued interest and fees receivable in the accompanying consolidated balance sheets.

The below information is relative to the five states where issuers with the highest volume of state and political subdivision securities held in our available for sale portfolio are located. We own no such securities of any single issuer which we deem to be a concentration.

	*March 31, 2024*
	*Amortized*		*Unrealized*				*Estimated*
Dollars in thousands	*Cost*		*Gains*		*Losses*		*Fair Value*

California	$	43,888	$	—	$	8,389	$	35,499
Texas		27,926		28		3,733		24,221
Oregon		16,283		—		2,938		13,345
Michigan		14,502		—		1,616		12,886
Pennsylvania		10,662		7		1,273		9,396

Management performs pre-purchase and ongoing analysis to confirm that all investment securities meet applicable credit quality standards.

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The maturities, amortized cost and estimated fair values of debt securities available for sale at March 31, 2024, are summarized as follows:

	*Amortized*		*Estimated*
Dollars in thousands	*Cost*		*Fair Value*
Due in one year or less	$	61,182	$	59,324
Due from one to five years		155,429		149,212
Due from five to ten years		113,695		104,397
Due after ten years		201,944		177,338
Total	$	532,250	$	490,271

The proceeds from sales, calls and maturities of debt securities available for sale, including principal payments received on mortgage-backed obligations, and the related gross gains and losses realized, for the three months ended March 31, 2024 and 2023 are as follows:

	*Proceeds from*						*Gross realized*
			*Calls and*		*Principal*
Dollars in thousands	*Sales*		*Maturities*		*Payments*		*Gains*		*Losses*
For the Three Months Ended
March 31,
2024	$	14,874	$	1,500	$	10,721	$	55	$	149

2023	$	36,940	$	1,145	$	8,048	$	446	$	505

Provided below is a summary of debt securities available for sale which were in an unrealized loss position at March 31, 2024 and December 31, 2023.

	*March 31, 2024*
			*Less than 12 months*				*12 months or more*				*Total*
	*# of securities*		*Estimated*		*Unrealized*		*Estimated*		*Unrealized*		*Estimated*		*Unrealized*
Dollars in thousands	*in loss position*		*Fair Value*		*Loss*		*Fair Value*		*Loss*		*Fair Value*		*Loss*
Taxable debt securities
U.S. Government sponsored agencies and corporations		38	$	1,929	$	4	$	18,013	$	642	$	19,942	$	646
Residential mortgage-backed securities:
Government-sponsored agencies		140		35,647		1,060		75,938		5,588		111,585		6,648
Nongovernment-sponsored entities		34		5,955		736		58,633		3,568		64,588		4,304
State and political subdivisions:
General obligations		54		—		—		63,352		14,978		63,352		14,978
Various tax revenues		7		—		—		8,605		2,052		8,605		2,052
Other revenues		21		—		—		22,020		4,797		22,020		4,797
Corporate debt securities		19		4,626		44		19,089		1,607		23,715		1,651
Asset-backed securities		9		4,397		9		7,219		61		11,616		70
Tax-exempt debt securities
State and political subdivisions:
General obligations		52		28,338		419		41,116		4,280		69,454		4,699
Other revenues		21		1,237		12		19,762		2,713		20,999		2,725
Total		395	$	82,129	$	2,284	$	333,747	$	40,286	$	415,876	$	42,570

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	*December 31, 2023*
			*Less than 12 months*				*12 months or more*				*Total*
	*# of securities*		*Estimated*		*Unrealized*		*Estimated*		*Unrealized*		*Estimated*		*Unrealized*
Dollars in thousands	*in loss position*		*Fair Value*		*Loss*		*Fair Value*		*Loss*		*Fair Value*		*Loss*
Taxable debt securities
U.S. Government sponsored agencies and corporations		39	$	11,809	$	287	$	9,329	$	221	$	21,138	$	508
Residential mortgage-backed securities:
Government-sponsored agencies		133		68,815		1,528		32,902		3,343		101,717		4,871
Nongovernment-sponsored entities		35		27,804		1,493		40,274		3,010		68,078		4,503
State and political subdivisions:
General obligations		54		—		—		63,336		14,995		63,336		14,995
Various tax revenues		7		—		—		8,558		2,107		8,558		2,107
Other revenues		21		1,530		56		18,854		4,726		20,384		4,782
Corporate debt securities		21		6,758		341		18,310		1,422		25,068		1,763
Asset-backed securities		17		23,823		110		9,961		154		33,784		264
Tax-exempt debt securities
State and political subdivisions:
General obligations		39		7,479		69		43,626		3,647		51,105		3,716
Other revenues		19		807		28		19,317		2,431		20,124		2,459
Total		385	$	148,825	$	3,912	$	264,467	$	36,056	$	413,292	$	39,968

We do not intend to sell the above securities, and it is more likely than not that we will not be required to sell these securities before recovery of their amortized cost bases. We believe that this decline in value is primarily attributable to changes in market interest rates, and in some cases limited market liquidity and is not due to credit quality, as none of these securities are in default and all carry above investment grade ratings. Accordingly, no allowance for credit losses has been recognized relative to these securities.

Debt Securities Held to Maturity

The amortized cost, unrealized gains, unrealized losses and estimated fair values of debt securities held to maturity at March 31, 2024 and December 31, 2023 are summarized as follows:

	*March 31, 2024*
	*Amortized*		*Unrealized*				*Estimated*
Dollars in thousands	*Cost*		*Gains*		*Losses*		*Fair Value*
Debt Securities Held to Maturity
Tax-exempt debt securities
State and political subdivisions:
General obligations	$	68,603	$	—	$	4,567	$	64,036
Water and sewer revenues		7,768		—		461		7,307
Lease revenues		4,130		—		354		3,776
Sales tax revenues		4,428		—		450		3,978
Various tax revenues		5,403		—		649		4,754
Other revenues		3,405		—		227		3,178
Total debt securities held to maturity	$	93,737	$	—	$	6,708	$	87,029

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	*December 31, 2023*
	*Amortized*		*Unrealized*				*Estimated*
Dollars in thousands	*Cost*		*Gains*		*Losses*		*Fair Value*
Debt Securities Held to Maturity
Tax-exempt debt securities
State and political subdivisions:
General obligations	$	68,966	$	—	$	4,029	$	64,937
Water and sewer revenues		7,816		—		417		7,399
Lease revenues		4,151		—		321		3,830
Sales tax revenues		4,446		—		409		4,037
Various tax revenues		5,425		—		536		4,889
Other revenues		3,423		—		196		3,227
Total debt securities held to maturity	$	94,227	$	—	$	5,908	$	88,319

Accrued interest receivable on debt securities held to maturity totaled $937,000 at March 31, 2024 and $1.1 million at December 31, 2023, respectively and is included in accrued interest and fees receivable in the accompanying consolidated balance sheets.

The below information is relative to the five states where issuers with the highest volume of state and political subdivision securities held in our held to maturity portfolio are located. We own no such securities of any single issuer which we deem to be a concentration.

	*March 31, 2024*
	*Amortized*		*Unrealized*				*Estimated*
Dollars in thousands	*Cost*		*Gains*		*Losses*		*Fair Value*
Texas	$	14,718	$	—	$	955	$	13,763
California		9,396		—		521		8,875
Pennsylvania		8,282		—		493		7,789
Florida		7,297		—		710		6,587
Michigan		6,739		—		561		6,178

The following table displays the amortized cost of held to maturity debt securities by credit rating at March 31, 2024 and December 31, 2023.

	*March 31, 2024*
Dollars in thousands	*AAA*		AA		A		*BBB*		*Below Investment Grade*
Tax-exempt state and political subdivisions	$	14,791	$	71,697	$	7,249	$	—	$	—

	*December 31, 2023*
Dollars in thousands	*AAA*		AA		A		*BBB*		*Below Investment Grade*
Tax-exempt state and political subdivisions	$	14,866	$	72,086	$	7,275	$	—	$	—

We owned no past due or nonaccrual held to maturity debt securities at March 31, 2024 or December 31, 2023.

The maturities, amortized cost and estimated fair values of held to maturity debt securities at March 31, 2024, are summarized as follows:

	*Amortized*		*Estimated*
Dollars in thousands	*Cost*		*Fair Value*
Due in one year or less	$	—	$	—
Due from one to five years		—		—
Due from five to ten years		4,003		3,809
Due after ten years		89,734		83,220
Total	$	93,737	$	87,029

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There were no proceeds from calls and maturities of debt securities held to maturity for the three months ended March 31, 2024 or 2023.

At March 31, 2024, no allowance for credit losses on debt securities held to maturity has been recognized.

NOTE 6. LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS (ACLL)

Loans

The following table presents the amortized cost of loans held for investment:

	*March 31,*		*December 31,*
Dollars in thousands	*2024*		*2023*
Commercial	$	533,214	$	503,842
Commercial real estate - owner occupied
Professional & medical		167,386		156,941
Retail		178,994		170,391
Other		223,027		217,776
Commercial real estate - non-owner occupied
Hotels & motels		216,170		215,642
Mini-storage		80,838		68,517
Multifamily		309,190		302,298
Retail		247,109		254,246
Other		427,641		413,634
Construction and development
Land & land development		105,425		145,258
Construction		341,727		374,026
Residential 1-4 family real estate
Personal residence		362,942		362,733
Rental - small loan		144,657		142,665
Rental - large loan		123,132		116,614
Home equity		80,027		81,126
Mortgage warehouse lines		108,858		108,848
Consumer		43,107		43,756
Other
Credit cards		2,251		2,286
Overdrafts		1,347		1,013
Total loans, net of unearned fees		3,697,042		3,681,612
Less allowance for credit losses - loans		49,232		48,090
Loans, net	$	3,647,810	$	3,633,522

Accrued interest and fees receivable on loans totaled $14.6 million and $14.1 million at March 31, 2024 and December 31, 2023, respectively and is included in accrued interest and fees receivable in the accompanying consolidated balance sheets.

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The following table presents the contractual aging of the amortized cost basis of past due loans by class as of March 31, 2024 and December 31, 2023.

	*March 31, 2024*
	*Past Due*										*90 days or more and*
Dollars in thousands	*30-59 days*		*60-89 days*		*90 days or more*		*Total*		*Current*		*Accruing*
Commercial	$	6,111	$	—	$	880	$	6,991	$	526,223	$	290
Commercial real estate - owner occupied
Professional & medical		61		—		357		418		166,968		—
Retail		—		—		—		—		178,994		—
Other		1,512		19		72		1,603		221,424		—
Commercial real estate - non-owner occupied
Hotels & motels		—		—		—		—		216,170		—
Mini-storage		—		—		—		—		80,838		—
Multifamily		—		—		—		—		309,190		—
Retail		—		—		487		487		246,622		—
Other		455		858		—		1,313		426,328		—
Construction and development
Land & land development		—		—		216		216		105,209		—
Construction		—		—		—		—		341,727		—
Residential 1-4 family real estate
Personal residence		2,809		273		1,435		4,517		358,425		114
Rental - small loan		487		401		263		1,151		143,506		77
Rental - large loan		—		—		181		181		122,951		—
Home equity		728		206		313		1,247		78,780		—
Mortgage warehouse lines		—		—		—		—		108,858		—
Consumer		284		119		53		456		42,651		12
Other
Credit cards		10		—		13		23		2,228		13
Overdrafts		—		—		—		—		1,347		—
Total	$	12,457	$	1,876	$	4,270	$	18,603	$	3,678,439	$	506

	*December 31, 2023*
	*Past Due*										*90 days or more and*
Dollars in thousands	*30-59 days*		*60-89 days*		*90 days or more*		*Total*		*Current*		*Accruing*
Commercial	$	1,092	$	60	$	485	$	1,637	$	502,205	$	—
Commercial real estate - owner occupied
Professional & medical		327		—		357		684		156,257		—
Retail		195		165		119		479		169,912		—
Other		270		—		—		270		217,506		—
Commercial real estate - non-owner occupied
Hotels & motels		—		—		—		—		215,642		—
Mini-storage		130		—		—		130		68,387		—
Multifamily		211		—		—		211		302,087		—
Retail		777		18		—		795		253,451		—
Other		—		—		—		—		413,634		—
Construction and development
Land & land development		295		275		—		570		144,688		—
Construction		—		—		—		—		374,026		—
Residential 1-4 family real estate
Personal residence		3,511		489		1,071		5,071		357,662		—
Rental - small loan		331		78		75		484		142,181		—
Rental - large loan		—		—		411		411		116,203		—
Home equity		1,723		269		466		2,458		78,668		307
Mortgage warehouse lines		—		—		—		—		108,848		—
Consumer		228		181		106		515		43,241		5
Other
Credit cards		40		3		22		65		2,221		23
Overdrafts		—		—		—		—		1,013		—
Total	$	9,130	$	1,538	$	3,112	$	13,780	$	3,667,832	$	335

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The following table presents the nonaccrual loans included in the net balance of loans at March 31, 2024 and December 31, 2023.

	*March 31,*				*December 31,*
	*2024*				*2023*
			*Nonaccrual*				*Nonaccrual*
			*with No*				*with No*
			*Allowance for*				*Allowance for*
			*Credit Losses*				*Credit Losses*
Dollars in thousands	*Nonaccrual*		*- Loans*		*Nonaccrual*		*- Loans*
Commercial	$	7,537	$	—	$	1,088	$	2
Commercial real estate - owner occupied
Professional & medical		357		—		395		—
Retail		254		—		525		—
Other		1,553		73		236		—
Commercial real estate - non-owner occupied
Hotels & motels		—		—		—		—
Mini-storage		—		—		—		—
Multifamily		434		—		446		—
Retail		4,467		3,300		4,073		3,520
Other		1,313		456		—		—
Construction and development
Land & land development		891		—		708		—
Construction		—		—		—		—
Residential 1-4 family real estate
Personal residence		1,873		—		1,879		—
Rental - small loan		1,822		439		1,922		245
Rental - large loan		181		—		410		—
Home equity		369		—		313		—
Mortgage warehouse lines		—		—		—		—
Consumer		70		—		109		—
Other
Credit cards		—		—		—		—
Overdrafts		—		—		—		—
Total	$	21,121	$	4,268	$	12,104	$	3,767

Modifications to Borrowers Experiencing Financial Difficulty

We adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. Generally, the modifications we grant are extensions of terms, deferrals of payments for an extended period or interest rate reductions. Occasionally, we may modify a loan by providing principal forgiveness. In some cases, we will modify a loan by providing multiple types, or combinations, of concessions. During first quarter 2024, we modified 2 loans totaling $188,000, which we deem insignificant, there were no commitments to lend additional funds under these modifications and one modified loan totaling $19,000 was past due 53 days. During first quarter 2023, we modified 3 loans totaling $456,000, which we deem insignificant, there were no commitments to lend additional funds under these modifications, and the payment status of each loan was current at March 31, 2023.

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Credit Quality Indicators: We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. We analyze loans individually by classifying the loans as to credit risk. We internally grade all commercial loans at the time of loan origination. In addition, we perform an annual loan review on all non-homogenous commercial loan relationships with an aggregate exposure of $5.0 million, at which time these loans are re-graded. We use the following definitions for our risk grades:

Pass: Loans graded as Pass are loans to borrowers of acceptable credit quality and risk. They are higher quality loans that do not fit any of the other categories described below.

Special Mention: Commercial loans categorized as Special Mention are potentially weak. The credit risk may be relatively minor yet represent a risk given certain specific circumstances. If the potential weaknesses are not monitored or mitigated, the asset may weaken or inadequately protect our position in the future.

Substandard: Commercial loans categorized as Substandard are inadequately protected by the borrower’s ability to repay, equity and/or the collateral pledged to secure the loan. These loans have identified weaknesses that could hinder normal repayment or collection of the debt. These loans are characterized by the distinct possibility that we will sustain some loss if the identified weaknesses are not mitigated.

Doubtful: Commercial loans categorized as Doubtful have all the weaknesses inherent in those loans classified as Substandard, with the added elements that the full collection of the loan is improbable and the possibility of loss is high.

Loss: Loans classified as loss are considered to be non-collectible and of such little value that their continuance as a bankable asset is not warranted. This does not mean that the loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future.

Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for purposes of the table below. As of March 31, 2024 and December 31, 2023, based on the most recent analysis performed, the risk category of loans based on year of origination is as follows:

	*March 31, 2024*
																	*Revolvi-*		*Revolving-*
Dollars in thousands		*Risk Rating*	*2024*		*2023*			*2022*		*2021*		*2020*		*Prior*			ng		*Term*		*Total*

Commercial		Pass	$	35,472	$	60,037		$	99,157	$	49,650	$	14,627	$	17,027		$	204,092	$	—	$	480,062
		Special Mention		—		718			5,535		3,793		2,400		2,721			30,172		—		45,339
		Substandard		—		110			968		506		—		5,972			257		—		7,813
Total Commercial				35,472		60,865			105,660		53,949		17,027		25,720			234,521		—		533,214
Current Period Charge-Offs				—		(22	)		—		—		—		(16	)		—		—		(38	)

Commercial Real Estate - Owner Occupied

Professional & medical		Pass		575		20,207			18,994		63,814		9,376		48,660			1,457		—		163,083
		Special Mention		—		—			—		1,935		1,085		849			—		—		3,869
		Substandard		—		—			—		—		—		434			—		—		434
Total Professional & Medical				575		20,207			18,994		65,749		10,461		49,943			1,457		—		167,386
Current Period Charge-Offs				—		—			—		—		—		—			—		—		—

Retail		Pass		1,464		5,430			22,717		76,843		11,575		56,069			3,157		—		177,255
		Special Mention		—		—			—		—		—		1,379			—		—		1,379
		Substandard		—		—			—		—		—		360			—		—		360
Total Retail				1,464		5,430			22,717		76,843		11,575		57,808			3,157		—		178,994
Current Period Charge-Offs				—		—			—		—		—		—			—		—		—

Other		Pass		1,183		32,323			48,256		37,961		20,458		71,010			3,277		—		214,468
		Special Mention		—		—			—		52		4,645		1,789			—		—		6,486
		Substandard		—		—			—		—		—		2,037			36		—		2,073
Total Other				1,183		32,323			48,256		38,013		25,103		74,836			3,313		—		223,027
Current Period Charge-Offs				—		—			—		—		—		—			—		—		—

Total Commercial Real Estate - Owner Occupied				3,222		57,960			89,967		180,605		47,139		182,587			7,927		—		569,407

Commercial Real Estate - Non-Owner Occupied

Hotels & motels		Pass		—		55,682			41,328		11,931		9,104		80,535			550		—		199,130
		Special Mention		—		—			—		—		—		—			—		—		—
		Substandard		—		—			—		—		2,631		14,409			—		—		17,040
Total Hotels & Motels				—		55,682			41,328		11,931		11,735		94,944			550		—		216,170
Current Period Charge-Offs				—		—			—		—		—		—			—		—		—

Mini-storage		Pass		710		1,707			30,227		15,279		6,587		26,263			26		—		80,799
		Special Mention		—		—			—		—		—		39			—		—		39
		Substandard		—		—			—		—		—		—			—		—		—
Total Mini-storage				710		1,707			30,227		15,279		6,587		26,302			26		—		80,838
Current Period Charge-Offs				—		—			—		—		—		—			—		—		—

Multifamily		Pass		2,558		15,381			68,569		95,618		41,911		75,418			1,386		—		300,841
		Special Mention		—		—			—		—		7,916		—			—		—		7,916
		Substandard		—		—			—		—		391		42			—		—		433
Total Multifamily				2,558		15,381			68,569		95,618		50,218		75,460			1,386		—		309,190
Current Period Charge-Offs				—		—			—		—		—		—			—		—		—

Table of Contents

	*March 31, 2024*
															*Revolvi-*		*Revolving-*
Dollars in thousands	*Risk Rating*	*2024*		*2023*		*2022*		*2021*		*2020*		*Prior*			ng		*Term*		*Total*

Retail	Pass		199		36,392		49,341		53,050		48,691		44,541			3,998		—		236,212
	Special Mention		—		2,777		3,340		65		—		873			—		—		7,055
	Substandard		—				—		—		—		3,842			—		—		3,842
Total Retail			199		39,169		52,681		53,115		48,691		49,256			3,998		—		247,109
*Current Period Charge-Offs*			—		—		—		—		—		—			—		—		—

Other	Pass		1,905		84,478		103,578		90,545		55,678		61,613			12,059		—		409,856
	Special Mention				443		5,449		—		—		7,578			—		—		13,470
	Substandard		—		—		—		—		—		4,315			—		—		4,315
Total Other			1,905		84,921		109,027		90,545		55,678		73,506			12,059		—		427,641
*Current Period Charge-Offs*			—		—		—		—		—		(286	)		—		—		(286	)

*Total Commercial Real Estate - Non-Owner Occupied*			5,372		196,860		301,832		266,488		172,909		319,468			18,019		—		1,280,948

Construction and Development

Land & land development	Pass		1,638		16,916		21,255		19,945		9,319		18,545			11,312		—		98,930
	Special Mention		—		—		4,488		—		143		561			—		—		5,192
	Substandard		—		121		95		—		—		1,087			—		—		1,303
Total Land & land development			1,638		17,037		25,838		19,945		9,462		20,193			11,312		—		105,425
*Current Period Charge-Offs*			—		—		—		—		—		—			—		—		—

Construction	Pass		1,296		71,615		81,729		147,730		38,093		—			600		—		341,063
	Special Mention		—		664		—		—		—		—			—		—		664
	Substandard		—		—		—		—		—		—			—		—		—
Total Construction			1,296		72,279		81,729		147,730		38,093		—			600		—		341,727
*Current Period Charge-Offs*			—		—		—		—		—		—			—		—		—

*Total Construction and Development*			2,934		89,316		107,567		167,675		47,555		20,193			11,912		—		447,152

Residential 1-4 Family Real Estate

Personal residence	Pass		8,402		54,486		62,806		54,423		31,357		133,857			—		—		345,331
	Special Mention		54		217		51		51		203		8,752			—		—		9,328
	Substandard		—		162		54		65		—		8,002			—		—		8,283
Total Personal Residence			8,456		54,865		62,911		54,539		31,560		150,611			—		—		362,942
*Current Period Charge-Offs*			—		—		—		—		—		(6	)		—		—		(6	)

Rental - small loan	Pass		5,333		18,155		22,045		26,265		10,866		49,027			6,790		—		138,481
	Special Mention		—		—		277		360		98		2,501			174		—		3,410
	Substandard		—		534		151		—		—		1,984			97		—		2,766
Total Rental - Small Loan			5,333		18,689		22,473		26,625		10,964		53,512			7,061		—		144,657
*Current Period Charge-Offs*			—		—		—		—		—		—			—		—		—

Rental - large loan	Pass		6,912		6,745		41,397		35,163		12,171		13,428			3,641		—		119,457
	Special Mention		—		—		—		—		—		2,865			—		—		2,865
	Substandard		—		—		629		—		—		181			—		—		810
Total Rental - Large Loan			6,912		6,745		42,026		35,163		12,171		16,474			3,641		—		123,132
*Current Period Charge-Offs*			—		—		—		—		—		—			—		—		—

Home equity	Pass		—		11		822		423		206		2,629			72,974		—		77,065
	Special Mention		—		—		31		311		100		818			838		—		2,098
	Substandard		—		—		—		25		—		794			45		—		864
Total Home Equity			—		11		853		759		306		4,241			73,857		—		80,027
*Current Period Charge-Offs*			—		—		—		—		—		(15	)		—		—		(15	)

*Total Residential 1-4 Family Real Estate*			20,701		80,310		128,263		117,086		55,001		224,838			84,559		—		710,758

Table of Contents

	*March 31, 2024*
																					*Revolvi-*		*Revolving-*
Dollars in thousands		*Risk Rating*	*2024*			*2023*			*2022*			*2021*			*2020*			*Prior*			ng		*Term*		*Total*

Mortgage warehouse lines		Pass		—			—			—			—			—			—			108,858		—		108,858
Total Mortgage Warehouse Lines				—			—			—			—			—			—			108,858		—		108,858
Current Period Charge-Offs				—			—			—			—			—			—			—		—		—

Consumer		Pass		8,256			16,304			8,864			3,286			1,481			1,376			969		—		40,536
		Special Mention		278			925			645			134			84			100			3		—		2,169
		Substandard		70			138			132			34			—			2			26		—		402
Total Consumer				8,604			17,367			9,641			3,454			1,565			1,478			998		—		43,107
Current Period Charge-Offs				(70	)		(21	)		(70	)		(11	)		(35	)		—			—		—		(207	)

Other

Credit cards		Pass		2,251			—			—			—			—			—			—		—		2,251
Total Credit Cards				2,251			—			—			—			—			—			—		—		2,251
Current Period Charge-Offs				(7	)		—			—			—			—			—			—		—		(7	)

Overdrafts		Pass		1,347			—			—			—			—			—			—		—		1,347
Total Overdrafts				1,347			—			—			—			—			—			—		—		1,347
Current Period Charge-Offs				(217	)		—			—			—			—			—			—		—		(217	)

Total Other				3,598			—			—			—			—			—			—		—		3,598

Total			$	79,903		$	502,678		$	742,930		$	789,257		$	341,196		$	774,284		$	466,794	$	—	$	3,697,042
Total Charge-Offs			$	(294	)	$	(43	)	$	(70	)	$	(11	)	$	(35	)	$	(323	)	$	—	$	—	$	(776	)

	*December 31, 2023*
																*Revolvi-*			*Revolving-*
Dollars in thousands	*Risk Rating*	*2023*		*2022*		*2021*			*2020*		*2019*		*Prior*			ng			*Term*		*Total*

Commercial	Pass	$	63,526	$	130,075	$	55,932		$	17,841	$	15,802	$	9,693		$	205,654		$	—	$	498,523
	Special Mention		369		402		299			251		218		1,897			966			—		4,402
	Substandard		78		124		447			—		40		—			228			—		917
Total Commercial			63,973		130,601		56,678			18,092		16,060		11,590			206,848			—		503,842
Current Period Charge-Offs			—		—		(1	)		—		—		(3	)		(58	)		—		(62	)

Commercial Real Estate - Owner Occupied

Professional & medical	Pass		20,453		18,882		53,241			9,522		7,668		42,993			1,723			—		154,482
	Special Mention		—		—		—			1,092		—		867			—			—		1,959
	Substandard		—		—		—			67		—		433			—			—		500
Total Professional & Medical			20,453		18,882		53,241			10,681		7,668		44,293			1,723			—		156,941
Current Period Charge-Offs			—		—		—			—		—		(3	)		—			—		(3	)

Retail	Pass		5,600		22,936		66,848			11,794		23,778		34,173			3,116			—		168,245
	Special Mention		—		—		—			—		—		1,756			—			—		1,756
	Substandard		—		—		—			—		—		390			—			—		390
Total Retail			5,600		22,936		66,848			11,794		23,778		36,319			3,116			—		170,391
Current Period Charge-Offs			—		—		—			—		—		—			—			—		—

Other	Pass		27,260		47,405		36,980			25,611		14,807		59,992			2,823			—		214,878
	Special Mention		—		—		53			—		128		1,670			—			—		1,851
	Substandard		—		—		—			—		367		644			36			—		1,047
Total Other			27,260		47,405		37,033			25,611		15,302		62,306			2,859			—		217,776
Current Period Charge-Offs			—		—		—			—		—		(28	)		—			—		(28	)

Total Commercial Real Estate - Owner Occupied			53,313		89,223		157,122			48,086		46,748		142,918			7,698			—		545,108

Table of Contents

	December 31, 2023
																Revolvi-		Revolving-
Dollars in thousands	Risk Rating	2023		2022		2021		2020		2019			Prior			ng		Term		Total
Commercial Real Estate - Non-Owner Occupied

Hotels & motels	Pass		55,770		37,994		11,995		9,161		53,781			28,209			1,650		—		198,560
	Special Mention		—		—		—		—		—			—			—		—		—
	Substandard		—		—		—		2,647		14,238			197			—		—		17,082
Total Hotels & Motels			55,770		37,994		11,995		11,808		68,019			28,406			1,650		—		215,642
Current Period Charge-Offs			—		—		—		—		—			—			—		—		—

Mini-storage	Pass		1,488		22,994		12,460		5,047		4,288			22,184			16		—		68,477
	Special Mention		—		—		—		—		—			40			—		—		40
	Substandard		—		—		—		—		—			—			—		—		—
Total Mini-storage			1,488		22,994		12,460		5,047		4,288			22,224			16		—		68,517
Current Period Charge-Offs			—		—		—		—		—			—			—		—		—

Multifamily	Pass		15,406		69,803		72,257		52,648		21,966			68,610			1,163		—		301,853
	Special Mention		—		—		—		—		—			—			—		—		—
	Substandard		—		—		—		400		—			45			—		—		445
Total Multifamily			15,406		69,803		72,257		53,048		21,966			68,655			1,163		—		302,298
Current Period Charge-Offs			—		—		—		—		—			(57	)		—		—		(57	)

Retail	Pass		39,462		53,109		57,587		49,146		10,623			35,241			4,046		—		249,214
	Special Mention		—		—		66		—		—			893			—		—		959
	Substandard		—		—		—		—		3,520			553			—		—		4,073
Total Retail			39,462		53,109		57,653		49,146		14,143			36,687			4,046		—		254,246
Current Period Charge-Offs			—		—		—		—		(3,658	)		—			—		—		(3,658	)

Other	Pass		45,146		104,191		114,862		56,165		15,509			55,330			9,237		—		400,440
	Special Mention		—		5,466		—		—		—			176			—		—		5,642
	Substandard		—		—		—		—		2,237			5,315			—		—		7,552
Total Other			45,146		109,657		114,862		56,165		17,746			60,821			9,237		—		413,634
Current Period Charge-Offs			—		—		—		—		—			—			—		—		—

Total Commercial Real Estate - Non-Owner Occupied			157,272		293,557		269,227		175,214		126,162			216,793			16,112		—		1,254,337

Construction and Development

Land & land development	Pass		56,159		26,369		20,843		9,383		4,008			15,072			11,486		—		143,320
	Special Mention		—		—		—		144		155			419			—		—		718
	Substandard		—		95		—		—		—			1,125			—		—		1,220
Total Land & land development			56,159		26,464		20,843		9,527		4,163			16,616			11,486		—		145,258
Current Period Charge-Offs			—		—		—		—		—			—			—		—		—

Construction	Pass		53,929		98,497		178,043		41,800		—			1,302			455		—		374,026
	Special Mention		—		—		—		—		—			—			—		—		—
	Substandard		—		—		—		—		—			—			—		—		—
Total Construction			53,929		98,497		178,043		41,800		—			1,302			455		—		374,026
Current Period Charge-Offs			—		—		—		—		—			—			—		—		—

Total Construction and Development			110,088		124,961		198,886		51,327		4,163			17,918			11,941		—		519,284

Residential 1-4 Family Real Estate

Personal residence	Pass		54,170		65,858		55,445		32,016		16,499			121,272			—		—		345,260
	Special Mention		217		73		51		—		176			8,889			—		—		9,406
	Substandard		—		—		66		—		533			7,468			—		—		8,067
Total Personal Residence			54,387		65,931		55,562		32,016		17,208			137,629			—		—		362,733
Current Period Charge-Offs			—		—		—		—		—			(89	)		—		—		(89	)

Table of Contents

	December 31, 2023
																				Revolvi-			Revolving-
Dollars in thousands	Risk Rating	2023			2022			2021			2020			2019			Prior			ng			Term		Total
Rental - small loan	Pass		17,930			21,637			27,323			11,244			10,951			40,298			7,490			—		136,873
	Special Mention		—			280			219			99			182			2,283			—			—		3,063
	Substandard		534			153			—			—			—			1,942			100			—		2,729
Total Rental - Small Loan			18,464			22,070			27,542			11,343			11,133			44,523			7,590			—		142,665
Current Period Charge-Offs			—			—			—			—			—			—			—			—		—

Rental - large loan	Pass		7,490			43,818			35,605			10,185			2,379			9,554			3,028			—		112,059
	Special Mention		—			—			—			—			—			3,516			—			—		3,516
	Substandard		—			629			—			—			—			410			—			—		1,039
Total Rental - Large Loan			7,490			44,447			35,605			10,185			2,379			13,480			3,028			—		116,614
Current Period Charge-Offs			—			—			—			—			—			—			—			—		—

Home equity	Pass		—			100			326			97			82			1,756			76,234			—		78,595
	Special Mention		—			—			—			—			17			609			1,093			—		1,719
	Substandard		—			—			25			—			37			600			150			—		812
Total Home Equity			—			100			351			97			136			2,965			77,477			—		81,126
Current Period Charge-Offs			—			—			—			—			—			—			—			—		—

Total Residential 1-4 Family Real Estate			80,341			132,548			119,060			53,641			30,856			198,597			88,095			—		703,138

Mortgage warehouse lines	Pass		—			—			—			—			—			—			108,848			—		108,848
Total Mortgage Warehouse Lines			—			—			—			—			—			—			108,848			—		108,848
Current Period Charge-Offs			—			—			—			—			—			—			—			—		—

Consumer	Pass		21,206			11,580			3,953			1,720			695			1,011			912			—		41,077
	Special Mention		1,171			749			160			94			39			76			4			—		2,293
	Substandard		127			160			37			35			—			2			25			—		386
Total Consumer			22,504			12,489			4,150			1,849			734			1,089			941			—		43,756
Current Period Charge-Offs			(124	)		(170	)		(39	)		(10	)		(1	)		(7	)		—			—		(351	)

Other

Credit cards	Pass		2,286			—			—			—			—			—			—			—		2,286
Total Credit Cards			2,286			—			—			—			—			—			—			—		2,286
Current Period Charge-Offs			(93	)		—			—			—			—			—			—			—		(93	)

Overdrafts	Pass		1,013			—			—			—			—			—			—			—		1,013
Total Overdrafts			1,013			—			—			—			—			—			—			—		1,013
Current Period Charge-Offs			(503	)		—			—			—			—			—			—			—		(503	)

Total Other			3,299			—			—			—			—			—			—			—		3,299

Total		$	490,790		$	783,379		$	805,123		$	348,209		$	224,723		$	588,905		$	440,483		$	—	$	3,681,612
Total Charge-Offs		$	(720	)	$	(170	)	$	(40	)	$	(10	)	$	(3,659	)	$	(187	)	$	(58	)	$	—	$	(4,844	)

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Allowance for Credit Losses - Loans

The following tables presents the activity in the ACLL by portfolio segment during the three months ended March 31, 2024 and 2023 and the twelve months ended December 31, 2023:

	*For the Three Months Ended March 31, 2024*
	*Allowance for Credit Losses - Loans*
			*Provision*
			*for*
			*Credit*
	*Beginning*		*Losses -*			*Charge-*					*Ending*
Dollars in thousands	*Balance*		*Loans*			*offs*			*Recoveries*		*Balance*
Commercial	$	4,319	$	3,519		$	(38	)	$	5	$	7,805
Commercial real estate - owner occupied
Professional & medical		1,207		64			—			—		1,271
Retail		543		(87	)		—			—		456
Other		601		561			—			—		1,162
Commercial real estate - non-owner occupied
Hotels & motels		3,124		589			—			—		3,713
Mini-storage		79		107			—			—		186
Multifamily		3,144		(30	)		—			1		3,115
Retail		2,518		111			—			18		2,647
Other		2,747		446			(286	)		3		2,910
Construction and development
Land & land development		5,576		(2,215	)		—			224		3,585
Construction		14,283		(1,636	)		—			—		12,647
Residential 1-4 family real estate
Personal residence		3,317		(314	)		(6	)		34		3,031
Rental - small loan		1,871		(70	)		—			74		1,875
Rental - large loan		2,846		(399	)		—			440		2,887
Home equity		1,430		(58	)		(15	)		11		1,368
Mortgage warehouse lines		—		—			—			—		—
Consumer		205		172			(207	)		32		202
Other
Credit cards		26		3			(7	)		2		24
Overdrafts		254		287			(217	)		24		348
Total	$	48,090	$	1,050		$	(776	)	$	868	$	49,232

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	*For the Three Months Ended March 31, 2023*
	*Allowance for Credit Losses - Loans*
			*Provision*
			*for*
			*Credit*
	*Beginning*		*Losses -*			*Charge-*					*Ending*
Dollars in thousands	*Balance*		*Loans*			*offs*			*Recoveries*		*Balance*
Commercial	$	4,941	$	(242	)	$	(21	)	$	2	$	4,680
Commercial real estate - owner occupied
Professional & medical		966		(95	)		—			—		871
Retail		1,176		(51	)		—			—		1,125
Other		426		34			—			—		460
Commercial real estate - non-owner occupied
Hotels & motels		1,203		(65	)		—			—		1,138
Mini-storage		82		8			—			—		90
Multifamily		2,907		395			—			1		3,303
Retail		1,362		510			—			69		1,941
Other		2,452		(46	)		—			4		2,410
Construction and development
Land & land development		3,482		486			—			2		3,970
Construction		11,138		621			—			—		11,759
Residential 1-4 family real estate
Personal residence		2,939		(468	)		(23	)		71		2,519
Rental - small loan		1,907		(50	)		—			8		1,865
Rental - large loan		2,668		1,165			—			—		3,833
Home equity		705		(310	)		—			13		408
Mortgage warehouse lines		—		—			—			—		—
Consumer		174		—			(34	)		38		178
Other
Credit cards		17		10			(11	)		1		17
Overdrafts		354		(27	)		(76	)		18		269
Total	$	38,899	$	1,875		$	(165	)	$	227	$	40,836

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	For the Twelve Months Ended December 31, 2023
	Allowance for Credit Losses - Loans
			Provision
			for
			Credit			Adjustment for
	*Beginning*		*Losses -*			*PCD*		*Charge-*					*Ending*
Dollars in thousands	*Balance*		*Loans*			*Acquired Loans*		*offs*			*Recoveries*		*Balance*
Commercial	$	4,941	$	(570	)	$	—	$	(62	)	$	10	$	4,319
Commercial real estate - owner occupied
Professional & medical		966		216			28		(3	)		—		1,207
Retail		1,176		(716	)		82		—			1		543
Other		426		(181	)		384		(28	)		—		601
Commercial real estate - non-owner occupied
Hotels & motels		1,203		1,921			—		—			—		3,124
Mini-storage		82		(3	)		—		—			—		79
Multifamily		2,907		288			1		(57	)		5		3,144
Retail		1,362		4,601			99		(3,658	)		114		2,518
Other		2,452		(349	)		632		—			12		2,747
Construction and development
Land & land development		3,482		2,085			1		—			8		5,576
Construction		11,138		3,145			—		—			—		14,283
Residential 1-4 family real estate
Personal residence		2,939		57			69		(89	)		341		3,317
Rental - small loan		1,907		(135	)		68		—			31		1,871
Rental - large loan		2,668		(112	)		1		—			289		2,846
Home equity		705		543			130		—			52		1,430
Mortgage warehouse lines		—		—			—		—			—		—
Consumer		174		251			—		(351	)		131		205
Other
Credit cards		17		93			—		(93	)		9		26
Overdrafts		354		321			—		(503	)		82		254
Total	$	38,899	$	11,455		$	1,495	$	(4,844	)	$	1,085	$	48,090

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The following tables presents, as of March 31, 2024 and December 31, 2023 segregated by loan portfolio segment, details of the loan portfolio and the ACLL calculated in accordance with our credit loss accounting methodology for loans.

	*March 31, 2024*
	*Loan Balances*						*Allowance for Credit Losses - Loans*
Dollars in thousands	*Loans Individually Evaluated*		*Loans Collectively Evaluated (1)*		*Total*		*Loans Individually Evaluated*		*Loans Collectively Evaluated*		*Total*
Commercial	$	5,996	$	527,218	$	533,214	$	2,614	$	5,191	$	7,805
Commercial real estate - owner occupied
Professional & medical		—		167,386		167,386		—		1,271		1,271
Retail		566		178,428		178,994		22		434		456
Other		1,250		221,777		223,027		167		995		1,162
Commercial real estate - non-owner occupied
Hotels & motels		17,041		199,129		216,170		1,435		2,278		3,713
Mini-storage		—		80,838		80,838		—		186		186
Multifamily		—		309,190		309,190		—		3,115		3,115
Retail		3,680		243,429		247,109		97		2,550		2,647
Other		4,580		423,061		427,641		211		2,699		2,910
Construction and development
Land & land development		676		104,749		105,425		428		3,157		3,585
Construction		—		341,727		341,727		—		12,647		12,647
Residential 1-4 family real estate
Personal residence		—		362,942		362,942		—		3,031		3,031
Rental - small loan		1,237		143,420		144,657		187		1,688		1,875
Rental - large loan		628		122,504		123,132		—		2,887		2,887
Home equity		—		80,027		80,027		—		1,368		1,368
Mortgage warehouse lines		—		108,858		108,858		—		—		—
Consumer		—		43,107		43,107		—		202		202
Other
Credit cards		—		2,251		2,251		—		24		24
Overdrafts		—		1,347		1,347		—		348		348
Total	$	35,654	$	3,661,388	$	3,697,042	$	5,161	$	44,071	$	49,232

(1) Included in the loans collectively evaluated are $9.8 million in fully guaranteed or cash secured loans, which are excluded from the pools collectively evaluated and carry no allowance.

	*December 31, 2023*
	*Loan Balances*						*Allowance for Credit Losses - Loans*
Dollars in thousands	*Loans Individually Evaluated*		*Loans Collectively Evaluated (1)*		*Total*		*Loans Individually Evaluated*		*Loans Collectively Evaluated*		*Total*
Commercial	$	92	$	503,750	$	503,842	$	—	$	4,319	$	4,319
Commercial real estate - owner occupied
Professional & medical		—		156,941		156,941		—		1,207		1,207
Retail		572		169,819		170,391		23		520		543
Other		—		217,776		217,776		—		601		601
Commercial real estate - non-owner occupied
Hotels & motels		17,083		198,559		215,642		1,456		1,668		3,124
Mini-storage		—		68,517		68,517		—		79		79
Multifamily		—		302,298		302,298		—		3,144		3,144
Retail		3,906		250,340		254,246		103		2,415		2,518
Other		7,823		405,811		413,634		214		2,533		2,747
Construction and development
Land & land development		708		144,550		145,258		460		5,116		5,576
Construction		—		374,026		374,026		—		14,283		14,283
Residential 1-4 family real estate
Personal residence		—		362,733		362,733		—		3,317		3,317
Rental - small loan		1,247		141,418		142,665		104		1,767		1,871
Rental - large loan		1,256		115,358		116,614		—		2,846		2,846
Home equity		—		81,126		81,126		—		1,430		1,430
Mortgage warehouse lines		—		108,848		108,848		—		—		—
Consumer		—		43,756		43,756		—		205		205
Other
Credit cards		—		2,286		2,286		—		26		26
Overdrafts		—		1,013		1,013		—		254		254
Total	$	32,687	$	3,648,925	$	3,681,612	$	2,360	$	45,730	$	48,090

(1) Included in the loans collectively evaluated are $9.2 million in fully guaranteed or cash secured loans, which are excluded from the pools collectively evaluated and carry no allowance.

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The following tables presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACLL allocated to those loans:

	*March 31, 2024*
	*Real Estate*						*Allowance for*
	*Secured*		*Non-Real Estate*				*Credit Losses*
Dollars in thousands	*Loans*		*Secured Loans*		*Total Loans*		*- Loans*
Commercial	$	—	$	5,996	$	5,996	$	2,614
Commercial real estate - owner occupied
Professional & medical		—		—		—		—
Retail		566		—		566		22
Other		1,250		—		1,250		167
Commercial real estate - non-owner occupied
Hotels & motels		17,041		—		17,041		1,435
Mini-storage		—		—		—		—
Multifamily		—		—		—		—
Retail		3,680		—		3,680		97
Other		4,580		—		4,580		211
Construction and development
Land & land development		676		—		676		428
Construction		—		—		—		—
Residential 1-4 family real estate
Personal residence		—		—		—		—
Rental - small loan		1,237		—		1,237		187
Rental - large loan		628		—		628		—
Home equity		—		—		—		—
Consumer		—		—		—		—
Other
Credit cards		—		—		—		—
Overdrafts		—		—		—		—
Total	$	29,658	$	5,996	$	35,654	$	5,161

	*December 31, 2023*
	*Real Estate*						*Allowance for*
	*Secured*		*Non-Real Estate*				*Credit Losses*
Dollars in thousands	*Loans*		*Secured Loans*		*Total Loans*		*- Loans*
Commercial	$	—	$	92	$	92	$	—
Commercial real estate - owner occupied
Professional & medical		572		—		572		—
Retail		—		—		—		23
Other		—		—		—		—
Commercial real estate - non-owner occupied
Hotels & motels		17,083		—		17,083		1,456
Mini-storage		—		—		—		—
Multifamily		—		—		—		—
Retail		3,906		—		3,906		103
Other		7,823		—		7,823		214
Construction and development
Land & land development		708		—		708		460
Construction		—		—		—		—
Residential 1-4 family real estate
Personal residence		—		—		—		—
Rental - small loan		1,247		—		1,247		104
Rental - large loan		1,256		—		1,256		—
Home equity		—		—		—		—
Consumer		—		—		—		—
Other
Credit cards		—		—		—		—
Overdrafts		—		—		—		—
Total	$	32,595	$	92	$	32,687	$	2,360

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NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and certain other intangible assets with indefinite useful lives are not amortized into net income over an estimated life, but rather are tested at least annually for impairment. Intangible assets determined to have definite useful lives are amortized over their estimated useful lives and also are subject to impairment testing. Our goodwill totaled $56.0 million at March 31, 2024 and December 31, 2023.

The following table presents the balance of other intangible assets at March 31, 2024 and December 31, 2023.

	*Other Intangible Assets*
Dollars in thousands	*March 31, 2024*		*December 31, 2023*
Identifiable intangible assets
Gross carrying amount	$	30,755	$	30,755
Less: accumulated amortization		13,346		12,359
Net carrying amount	$	17,409	$	18,396

We recorded amortization expense of $987,000 for the three months ended March 31, 2024 and $343,000 for the three months ended March 31, 2023, relative to our identifiable intangible assets.

Amortization relative to our identifiable intangible assets is expected to approximate the following during the next five years and thereafter:

	*Core Deposit*
Dollars in thousands	*Intangible*
Nine month period ending December 31, 2024	$	2,682
Year ending December 31, 2025		3,258
Year ending December 31, 2026		2,846
Year ending December 31, 2027		2,433
Year ending December 31, 2028		2,021
Thereafter		4,099

NOTE 8. DEPOSITS

The following is a summary of interest bearing deposits by type as of March 31, 2024 and December 31, 2023:

	*March 31,*		*December 31,*
Dollars in thousands	*2024*		*2023*
Demand deposits, interest bearing	$	2,145,824	$	2,164,522
Savings deposits		438,451		450,527
Time deposits		558,631		506,523
Total	$	3,142,906	$	3,121,572

Included in time deposits are deposits acquired through a third party (“brokered deposits”) totaling $32.7 million and $32.8 million at March 31, 2024 and December 31, 2023, respectively.

A summary of the scheduled maturities for all time deposits as of March 31, 2024 is as follows:

Dollars in thousands
Nine month period ending December 31, 2024	$	419,100
Year ending December 31, 2025		93,387
Year ending December 31, 2026		23,027
Year ending December 31, 2027		9,938
Year ending December 31, 2028		7,520
Thereafter		5,659
Total	$	558,631

The aggregate amount of time deposits in denominations that meet or exceed the FDIC insurance limit of $250,000 totaled $153.4 million at March 31, 2024 and $138.1 million at December 31, 2023.

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NOTE 9. BORROWED FUNDS

Short-term borrowings: A summary of short-term borrowings agreements are presented below.

	*Three Months Ended March 31,*
	*2024*						*2023*
Dollars in thousands		*Short-term FHLB Advances*			*Federal Funds Purchased and Short-term Repurchase Agreements*			*Short-term FHLB Advances*			*Federal Funds Purchased and Short-term Repurchase Agreements*
Balance at March 31	$	262,200		$	159		$	140,000		$	150
Average balance outstanding for the period		298,167			158			166,215			150
Maximum balance outstanding at any month end during period		325,700			159			140,000			150
Weighted average interest rate for the period (1)		5.73	%		5.47	%		4.88	%		4.62	%
Weighted average interest rate for balances outstanding at March 31 (1)		5.67	%		5.50	%		5.20	%		5.00	%
(1) Excludes effect of any hedging activity

	*Year Ended December 31, 2023*
Dollars in thousands	*Short-term FHLB Advances*			*Federal Funds Purchased and Short-term Repurchase Agreements*
Balance at December 31	$	302,800		$	157
Average balance outstanding for the period		229,850			8,502
Maximum balance outstanding at any month end during period		355,100			20,533
Weighted average interest rate for the period (1)		5.53	%		2.37	%
Weighted average interest rate for balances outstanding at December 31 (1)		5.64	%		5.50	%
(1) Excludes effect of any hedging activity

Federal funds purchased and short-term repurchase agreements mature the next business day. The securities underlying the repurchase agreements are under our control and secure the total outstanding daily balances. We generally account for securities sold under agreements to repurchase as collateralized financing transactions and record them at the amounts at which the securities were sold, plus accrued interest. Securities, generally U.S. government and Federal agency securities, pledged as collateral under these financing arrangements cannot be sold or repledged by the secured party. The fair value of collateral provided is continually monitored and additional collateral is provided as needed.

Long-term borrowings: Our long-term borrowings of $630,000 and $637,000 at March 31, 2024 and December 31, 2023, respectively, consisted of a 5.34% fixed rate advance from the Federal Home Loan Bank (“FHLB”), maturing in 2026. This FHLB advance is collateralized by a blanket lien of $2.3 billion of residential mortgage loans, certain commercial loans, mortgage backed securities and securities of U.S. Government agencies and corporations.

Subordinated debentures: We issued $75 million of subordinated debentures, net of $1.74 million debt issuance costs, during fourth quarter 2021 in a private placement transaction, which had a net balance of $74.1 million at March 31, 2024 and $74.0 million at December 31, 2023. The subordinated debt qualifies as Tier 2 capital under Federal Reserve Board guidelines, until the debt is within 5 years of its maturity; thereafter the amount qualifying as Tier 2 capital is reduced by 20 percent each year until maturity. This subordinated debt bears interest at a fixed rate of 3.25% per year, from and including November 16, 2021 to, but excluding, December 1, 2026, payable semi-annually in arrears. From and including December 1, 2026 to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”), as published by the Federal Reserve Bank of New York, plus 230 basis points, payable quarterly in arrears. This debt has a 10 year term and generally, is not prepayable by us within the first five years.

We issued $30 million of subordinated debentures, net of $681,000 debt issuance costs, during third quarter 2020 in a private placement transaction, which had a net balance of $29.8 million at March 31, 2024 and December 31, 2023. The subordinated debt qualifies as Tier 2 capital under Federal Reserve Board guidelines, until the debt is within 5 years of its maturity; thereafter the amount qualifying as Tier 2 capital is reduced by 20 percent each year until maturity. This subordinated debt bears interest at a fixed rate of 5.00% per year, from and including September 22, 2020 to, but excluding, September 30, 2025, payable quarterly in arrears. From and including September 30, 2025 to, but excluding, the maturity date or earlier redemption date, the interest rate will reset quarterly at a variable rate equal to the then current three-month term Secured Overnight Financing Rate (“SOFR”), as published by the Federal Reserve Bank of New York, plus 487 basis points, payable quarterly in arrears. This debt has a 10 year term and generally, is not prepayable by us within the first five years.

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Subordinated debentures owed to unconsolidated subsidiary trusts: We have three statutory business trusts that were formed for the purpose of issuing mandatorily redeemable securities (the “capital securities”) for which we are obligated to third party investors and investing the proceeds from the sale of the capital securities in our junior subordinated debentures (the “debentures”). The debentures held by the trusts are their sole assets. These subordinated debentures totaled $19.6 million at March 31, 2024 and December 31, 2023.

The capital securities held by SFG Capital Trust I, SFG Capital Trust II, and SFG Capital Trust III qualify as Tier 1 capital under Federal Reserve Board guidelines. In accordance with these Guidelines, trust preferred securities generally are limited to 25% of Tier 1 capital elements, net of goodwill. The amount of trust preferred securities and certain other elements in excess of the limit can be included in Tier 2 capital.

A summary of the maturities of all long-term borrowings and subordinated debentures for the next five years and thereafter is as follows:

						*Subordinated*
						*debentures owed*
		*Long-term*		*Subordinated*		*to unconsolidated*
Dollars in thousands		*borrowings*		*debentures*		*subsidiary trusts*
Year Ending December 31,	2024	$	17	$	—	$	—
	2025		24		—		—
	2026		589		—		—
	2027		—		—		—
	2028		—		—		—
	Thereafter		—		105,000		19,589
		$	630	$	105,000	$	19,589

NOTE 10. SHARE-BASED COMPENSATION

Under the 2014 Long-Term Incentive Plan (“2014 LTIP”), SARs and RSUs have generally been granted with an exercise price equal to the fair value of Summit's common stock on the grant date. We periodically grant SARs and RSUs to individual employees.

During first quarter 2023, we granted 67,637 SARs with an $8.77 grant date fair value per SAR that become exercisable ratably over seven years (14.3% per year) and expire ten years after the grant date. Also during 2023, we granted 108,747 SARs with an $8.63 grant date fair value per SAR that become exercisable ratably over five years (20% per year) and expire ten years after the grant date. There were no grants during first quarter 2024.

The fair value of our SARs granted under the Plans is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of SARs granted but are not considered by the model. Because our SARs have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its SARs at the time of grant. The assumptions used to value SARs granted in 2023 are as follows:

	*2023 grant with 7 year expiration*			*2023 grant with 5 year expiration*
Risk-free interest rate		3.79	%		3.87	%
Expected dividend yield		3.00	%		3.00	%
Expected common stock volatility		40.76	%		40.76	%
Expected life (in years)		7			6.5

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A summary of our SAR activity during the first three months of 2024 and 2023 is as follows:

	*For the Three Months Ended March 31, 2024*
				*Aggregate*		*Remaining*		*Weighted-*
				*Intrinsic Value*		*Contractual*		*Average*
	*Options/SARs*			*(in thousands)*		*Term (Yrs.)*		*Exercise Price*
Outstanding, January 1		594,561						$	22.81
Granted		—							—
Exercised		(500	)						12.01
Forfeited		—							—
Expired		—							—
Outstanding, March 31		594,061		$	2,580		5.92	$	22.82

Exercisable, March 31		347,396		$	1,909		4.37	$	21.66

	*For the Three Months Ended March 31, 2023*
				*Aggregate*		*Remaining*		*Weighted-*
				*Intrinsic Value*		*Contractual*		*Average*
	*Options/SARs*			*(in thousands)*		*Term (Yrs.)*		*Exercise Price*
Outstanding, January 1		473,212						$	21.36
Granted		176,384							26.37
Exercised		(1,000	)						12.01
Forfeited		—							—
Expired		—							—
Outstanding, March 31		648,596		$	740		6.86	$	22.74

Exercisable, March 31		288,517		$	740		4.47	$	20.78

Grants of RSUs include time-based vesting conditions that generally vest ratably over a period of 3 to 5 years. A summary of our RSU activity during the first three months of 2024 and 2023 is as follows:

	*RSUs*		*Weighted Average Grant Date Fair Value*
Nonvested, December 31, 2023		2,399	$	21.73
Granted		—		—
Forfeited		—		—
Vested		—		—
Nonvested, March 31, 2024		2,399	$	21.73

	*RSUs*		*Weighted Average Grant Date Fair Value*
Nonvested, December 31, 2022		7,204	$	20.49
Granted		—		—
Forfeited		—		—
Vested		—		—
Nonvested, March 31, 2023		7,204	$	20.49

We recognize compensation expense based on the estimated number of stock awards expected to actually vest, exclusive of the awards expected to be forfeited. During the first three months of 2024 and 2023, total stock compensation expense for all share-based arrangements was $163,000 and $196,000 and the related deferred tax benefits were approximately $39,000 and $47,000. At March 31, 2024 our total unrecognized compensation expense related to all nonvested awards not yet recognized totaled $2.1 million and on a weighted average basis, will be recognized over the next 2.24 years.

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NOTE 11. COMMITMENTS AND CONTINGENCIES

Off-Balance Sheet Arrangements

We are a party to certain financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the statement of financial position. The contract amounts of these instruments reflect the extent of involvement that we have in this class of financial instruments.

Many of our lending relationships contain both funded and unfunded elements. The funded portion is reflected on our balance sheet. The unfunded portion of these commitments is not recorded on our balance sheet until a draw is made under the loan facility. Since many of the commitments to extend credit may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash flow requirements.

A summary of the total unfunded, or off-balance sheet, credit extension commitments follows:

	*March 31,*
Dollars in thousands	*2024*
Commitments to extend credit:
Revolving home equity and credit card lines	$	116,403
Construction loans		250,672
Other loans		485,637
Standby letters of credit		58,420
Total	$	911,132

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. We evaluate each customer's credit worthiness on a case-by-case basis. The amount of collateral obtained, if we deem necessary upon extension of credit, is based on our credit evaluation. Collateral held varies but may include accounts receivable, inventory, equipment or real estate.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments.

Allowance For Credit Losses - Off-Balance-Sheet Credit Exposures

The provision for credit losses on unfunded commitments was $(1.1 million) and $(375,000) for the three months ended March 31, 2024 and March 31, 2023, respectively. The ACL on off-balance-sheet credit exposures totaled $6.69 million at March 31, 2024 compared to $7.74 million at December 31, 2023 and is included in other liabilities on the accompanying consolidated balance sheets.

Litigation

We are not a party to litigation except for matters that arise in the normal course of business. While it is impossible to ascertain the ultimate resolution or range of financial liability, if any, with respect to these contingent matters, in the opinion of management, after consultation with legal counsel, the outcome of these matters will not have a significant adverse effect on the consolidated financial statements.

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NOTE 12. PREFERRED STOCK

In April 2021, we sold through a private placement 1,500 shares or $15.0 million of Series 2021 6% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, $1.00 par value, with a liquidation preference of $10,000 per share (the “Preferred Stock”). The Preferred Stock is non-convertible and will pay noncumulative dividends, if and when declared by the Summit board of directors, at a rate of 6.0% per annum. Dividends declared will be payable quarterly in arrears on the 15th day of March, June, September and December of each year.

NOTE 13. REGULATORY MATTERS

Our bank subsidiary, Summit Community Bank, Inc. (“Summit Community”), is subject to various regulatory capital requirements administered by the banking regulatory agencies. Under the capital adequacy guidelines and the regulatory framework for prompt corrective action, Summit Community must meet specific capital guidelines that involve quantitative measures of its assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Our bank subsidiary’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation to ensure capital adequacy require Summit Community to maintain minimum amounts and ratios of Common Equity Tier 1("CET1"), Total capital and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). We believe, as of March 31, 2024, that our bank subsidiary met all capital adequacy requirements to which they were subject.

The most recent notifications from the banking regulatory agencies categorized Summit Community as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, Summit Community must maintain minimum CET1, Total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below.

In December 2018, the federal bank regulatory agencies approved a final rule modifying their regulatory capital rules to provide an option to phase-in over a period of three years the day-one regulatory capital effects of the implementation of ASC 326. In March 2020, those agencies approved a final rule providing an option to delay the estimated impact on regulatory capital. We elected this optional phase-in period upon adoption of ASC 326 on January 1, 2020 and elected to delay the estimated impact. The initial impact of adoption as well as 25% of the quarterly increases in the allowance for credit losses subsequent to adoption (collectively the “transition adjustments”) will be delayed for two years. After two years, the cumulative amount of the transition adjustments will become fixed and will be phased out of the regulatory capital calculations evenly over a three year period, with 75% recognized in year three, 50% recognized in year four, and 25% recognized in year five. After five years, the temporary regulatory capital benefits will be fully reversed.

The following tables present Summit's, as well as Summit Community's, actual and required minimum regulatory capital amounts and ratios as of March 31, 2024 and December 31, 2023.

Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended.

	*Actual*					*Minimum Required Capital - Basel III*					*Minimum Required To Be Well Capitalized*
Dollars in thousands	*Amount*		*Ratio*			*Amount*		*Ratio*			*Amount*		*Ratio*
As of March 31, 2024
CET1 (to risk weighted assets)
Summit	$	381,890		9.4	%	$	285,018		7.0	%		N/A		N/A
Summit Community		488,335		12.0	%		284,426		7.0	%		264,110		6.5	%
Tier I Capital (to risk weighted assets)
Summit		415,810		10.2	%		346,093		8.5	%		N/A		N/A
Summit Community		488,335		12.0	%		345,375		8.5	%		325,059		8.0	%
Total Capital (to risk weighted assets)
Summit		570,628		14.0	%		427,527		10.5	%		N/A		N/A
Summit Community		539,145		13.3	%		426,640		10.5	%		406,324		10.0	%
Tier I Capital (to average assets)
Summit		415,810		9.0	%		184,166		4.0	%		N/A		N/A
Summit Community		488,335		10.6	%		183,982		4.0	%		229,977		5.0	%

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	*Actual*					*Minimum Required Capital - Basel III*					*Minimum Required To Be Well Capitalized*
Dollars in thousands	*Amount*		*Ratio*			*Amount*		*Ratio*			*Amount*		*Ratio*
As of December 31, 2023
CET1 (to risk weighted assets)
Summit		369,935		9.1	%		285,338		7.0	%		N/A		N/A
Summit Community		475,785		11.7	%		284,873		7.0	%		264,525		6.5	%
Tier I Capital (to risk weighted assets)
Summit		403,855		9.9	%		346,481		8.5	%		N/A		N/A
Summit Community		475,785		11.7	%		345,917		8.5	%		325,569		8.0	%
Total Capital (to risk weighted assets)
Summit		556,590		13.7	%		428,006		10.5	%		N/A		N/A
Summit Community		524,737		12.9	%		427,309		10.5	%		406,961		10.0	%
Tier I Capital (to average assets)
Summit		403,855		8.7	%		186,747		4.0	%		N/A		N/A
Summit Community		475,785		10.2	%		186,057		4.0	%		232,571		5.0	%

NOTE 14. DERIVATIVE FINANCIAL INSTRUMENTS

We use derivative instruments primarily to protect against the risk of adverse interest rate movements on the cash flows and fair values of certain assets and liabilities. Each of our derivative transactions qualify under the rules for “hedge accounting” in accordance with GAAP. A summary of our derivative transactions follows:

Cash flow hedges

We have entered into three pay-fixed/receive variable interest rate swaps as follows:

•

A $20 million notional interest rate swap with an effective date of October 18, 2021 and expiring on October 18, 2024, designated as a cash flow hedge of $20 million of forecasted series of short-term fixed rate Federal Home Loan Bank advances. Under the terms of this swap, we pay a fixed rate of 1.1055% and receive a variable rate equal to three month LIBOR.

•

A $50 million notional interest rate swap with an effective date of May 18, 2023 and expiring on May 18, 2025, designated as a cash flow hedge of $50 million of forecasted series of short-term fixed rate Federal Home Loan Bank advances. Under the terms of this swap, we pay a fixed rate of 3.768% and receive a variable rate equal to daily SOFR.

•

A $50 million notional interest rate swap with an effective date of July 18, 2023 and expiring on January 18, 2026, designated as a cash flow hedge of $50 million of forecasted series of short-term fixed rate Federal Home Loan Bank advances. Under the terms of this swap, we pay a fixed rate of 4.36% and receive a variable rate equal to daily SOFR.

In addition, we have purchased two interest rate caps as follows:

•

A $100 million notional interest rate cap with an effective date of July 20, 2020 and expiring on April 18, 2030, designated as a cash flow hedge of $100 million of a forecasted series short-term fixed rate Federal Home Loan Bank advances. Under the terms of this cap, we hedge the variability of cash flows when three month LIBOR is above 0.75%.

•

A $100 million notional interest rate cap with an effective date of December 29, 2020 and expiring on December 18, 2025, designated as a cash flow hedge of $100 million of certain indexed interest bearing demand deposit accounts. Under the terms of this cap, we hedge the variability of cash flows when the indexed rate of daily SOFR is above 0.50%.

Fair value hedges

We have entered into three pay-fixed/receive variable interest rate swaps as follows:

•

An original $9.95 million (current $6.5 million) notional amortizing interest rate swap with an effective date of January 15, 2015 and expiring on January 15, 2025, designated to hedge the variability in fair value of a fixed rate commercial loan with the same principal, amortization, and maturity terms of the swap. Under the terms of this swap, we pay a fixed rate of 4.33% and receive a variable rate equal to three month LIBOR plus 2.23%.

•

An original $11.3 million (current $9.5 million) notional amortizing interest rate swap with an effective date of December 18, 2015 and expiring on January 15, 2026, designated to hedge the variability in fair value of a fixed rate commercial loan with the same principal, amortization, and maturity terms as the swap. Under the terms of this swap, we pay a fixed rate of 4.30% and receive a variable rate equal to one month LIBOR plus 2.18%.

•

A $71.25 million notional pay fixed/receive variable interest rate swap with an effective date of April 1, 2024 (hedge designated on October 27, 2021) and expiring on February 1, 2031 to hedge the variability in fair value of a designated portfolio of available for sale taxable municipal securities. Under the terms of this swap, we will pay a fixed rate of 1.587% and will receive a variable rate equal to daily Federal funds.

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A summary of our derivative financial instruments as of March 31, 2024 and December 31, 2023 follows:

	*March 31, 2024*
			*Derivative Fair Value*				*Net Ineffective*
Dollars in thousands	*Notional Amount*		*Asset*		*Liability*		*Hedge Gains/(Losses)*
CASH FLOW HEDGES
Pay-fixed/receive-variable interest rate swaps
Short term borrowings	$	120,000	$	1,248	$	—	$	—

Interest rate cap hedging:
Short term borrowings	$	100,000	$	18,596	$	—	$	—
Indexed interest bearing demand deposit accounts		100,000		6,725		—		—

FAIR VALUE HEDGES
Pay-fixed/receive-variable interest rate swaps
Commercial real estate loans	$	15,994	$	592	$	—	$	—
Available for sale taxable municipal securities		71,245		9,642		—		(2	)

Total	$	407,239	$	36,803	$	—	$	(2	)

	*December 31, 2023*
			*Derivative Fair Value*				*Net Ineffective*
Dollars in thousands	*Notional Amount*		*Asset*		*Liability*		*Hedge Gains/(Losses)*
CASH FLOW HEDGES
Pay-fixed/receive-variable interest rate swaps
Short term borrowings	$	120,000	$	1,059	$	375	$	—

Interest rate cap hedging:
Short term borrowings	$	100,000	$	17,578	$	—	$	—
Indexed interest bearing demand deposit accounts		100,000		6,736		—		—

FAIR VALUE HEDGES
Pay-fixed/receive-variable interest rate swaps
Commercial real estate loans	$	16,175	$	583	$	—	$	—
Available for sale taxable municipal securities		71,245		7,564		—		1

Total	$	407,420	$	33,520	$	375	$	1

Loan commitments: ASC Topic 815, Derivatives and Hedging, requires that commitments to make mortgage loans should be accounted for as derivatives if the loans are to be held for sale, because the commitment represents a written option and accordingly is recorded at the fair value of the option liability.

NOTE 15. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The following is changes in accumulated other comprehensive (loss) income by component, net of tax, for the three and three months ending March 31, 2024 and 2023.

	*For the Three Months Ended March 31, 2024*
Dollars in thousands	*Gains and (Losses) on Pension Plan*		*Gains and (Losses) on Other Post-Retirement Benefits*		*Gains and (Losses) on Cash Flow Hedges*		*Unrealized Gains (Losses) on Debt Securities Available for Sale*			*Unrealized Gains (Losses) on Securities Fair Value Hedge*		*Total*
Beginning balance	$	19	$	147	$	15,820	$	(29,211	)	$	5,740	$	(7,485	)
Other comprehensive (loss) income before reclassification		—		—		1,350		(2,766	)		1,581		165
Amounts reclassified from accumulated other comprehensive loss, net of tax		—		—		—		71			—		71
Net current period other comprehensive (loss) income		—		—		1,350		(2,695	)		1,581		236
Ending balance	$	19	$	147	$	17,170	$	(31,906	)	$	7,321	$	(7,249	)

	*For the Three Months Ended March 31, 2023*
Dollars in thousands	*Gains and (Losses) on Pension Plan*			*Gains and (Losses) on Other Post-Retirement Benefits*		*Gains and (Losses) on Cash Flow Hedges*			*Unrealized Gains (Losses) on Debt Securities Available for Sale*			*Unrealized Gains (Losses) on Securities Fair Value Hedge*			*Total*
Beginning balance	$	(23	)	$	172	$	20,867		$	(37,901	)	$	5,406		$	(11,479	)
Other comprehensive income (loss) before reclassification		—			—		(3,136	)		7,493			(948	)		3,409
Amounts reclassified from accumulated other comprehensive loss, net of tax		—			—		—			45			—			45
Net current period other comprehensive income (loss)		—			—		(3,136	)		7,538			(948	)		3,454
Ending balance	$	(23	)	$	172	$	17,731		$	(30,363	)	$	4,458		$	(8,025	)

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NOTE 16. INCOME TAXES

Our income tax expense for the three months ended March 31, 2024 and March 31, 2023 totaled $5.0 million and $3.6 million, respectively. Our effective tax rate (income tax expense as a percentage of income before taxes) for the three months ended March 31, 2024 and 2023 was 22.7% and 20.2%, respectively. A reconciliation between the statutory income tax rate and our effective income tax rate for the three months ended March 31, 2024 and 2023 is as follows:

	*For the Three Months Ended March 31,*
	*2024*			*2023*
	*Percent*			*Percent*
Applicable statutory rate		21.0	%		21.0	%
Increase (decrease) in rate resulting from:
Tax-exempt interest and dividends, net		(1.1	)%		(1.8	)%
State income taxes, net of Federal income tax benefit		2.1	%		1.8	%
Low-income housing and rehabilitation tax credits		(0.4	)%		(0.3	)%
Other, net		1.1	%		(0.5	)%
Effective income tax rate		22.7	%		20.2	%

The components of applicable income tax expense for the three months ended March 31, 2024 and 2023 are as follows:

	*For the Three Months Ended March 31,*
Dollars in thousands	*2024*		*2023*
Current
Federal	$	4,134	$	3,537
State		540		451
		4,674		3,988
Deferred
Federal		282		(364	)
State		40		(49	)
		322		(413	)
Total	$	4,996	$	3,575

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NOTE 17. REVENUE FROM CONTRACTS WITH CUSTOMERS

Interest income, loan fees, realized securities gains and losses, bank owned life insurance income and mortgage banking revenue are not in the scope of ASC Topic 606, Revenue from Contracts with Customers. With the exception of gains or losses on sales of foreclosed properties, all of our revenue from contracts with customers in the scope of ASC 606 is recognized within Noninterest Income in the Consolidated Statements of Income. Incremental costs of obtaining a contract are expensed when incurred when the amortization period is one year or less.

The following table illustrates our total non-interest income segregated by revenues within the scope of ASC Topic 606 and those which are within the scope of other ASC Topics:

	*Three Months Ended March 31,*
Dollars in thousands	*2024*		*2023*
Service fees on deposit accounts	$	1,723	$	1,392
Bank card revenue		1,833		1,568
Trust and wealth management fees		847		811
Other		97		122
Net revenue from contracts with customers		4,500		3,893
Non-interest income within the scope of other ASC topics		578		493
Total noninterest income	$	5,078	$	4,386

NOTE 18. MERGER

Pending Merger

On August 24, 2023, we entered into an Agreement and Plan of Reorganization with Burke & Herbert Financial Services Corp. (“Burke & Herbert”), a $3.6 billion Virginia corporation headquartered in Alexandria, Virginia, pursuant to which Summit will merge with and into Burke & Herbert, with Burke & Herbert as the surviving entity. Subject to the terms and conditions of the merger agreement, at the effective time of the merger, each outstanding share of Summit common stock, par value $2.50 per share will be converted into the right to receive 0.5043 shares of Burke & Herbert common stock, par value $0.50 per share. Holders of Summit common stock will receive cash in lieu of fractional shares. The merger is intended to be a tax-free reorganization under Section 368(a) of the Internal Revenue Code.

The merger will close May 3, 2024, subject to customary closing conditions. Immediately following the merger, Summit Community Bank, Inc., Summit’s wholly owned banking subsidiary, will be merged with and into Burke & Herbert’s wholly-owned banking subsidiary, Burke & Herbert Bank & Trust Company, with B&H Bank the surviving bank. Refer to our 8-K filed with the SEC on August 24, 2023 for further details.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The following discussion and analysis focuses on significant changes in our financial condition and results of operations of Summit Financial Group, Inc. (“Company” or “Summit”) and its operating subsidiary, Summit Community Bank (“Summit Community”), for the periods indicated. This discussion and analysis should be read in conjunction with our 2023 audited consolidated financial statements and Annual Report on Form 10-K.

The Private Securities Litigation Act of 1995 indicates that the disclosure of forward-looking information is desirable for investors and encourages such disclosure by providing a safe harbor for forward-looking statements by us. This Quarterly Report on Form 10-Q 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: 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; overall levels of inflation; 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 mergers and 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 filing.

OVERVIEW

On April 1, 2023, we acquired PSB Holding Corp. (“PSB”), and its subsidiary, Provident State Bank, Inc., headquartered in Preston, Maryland. PSB's results are included in our financial statements from the acquisition date forward, impacting comparisons to the prior year first quarter.

In August 2023, we 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 May 3, 2024. See Note 18 to these consolidated financial statements for further information relative to the merger.

Our primary source of income is net interest income from loans and deposits. Business volumes tend to be influenced by the overall economic factors including market interest rates, business spending, and consumer confidence, as well as competitive conditions within the marketplace.

During the first three months of 2024, Summit's Tangible Book Value Per Common Share ("TBVPCS") increased $1.02 to $24.91 primarily due to retained earrnings. Further, TBVPCS was positively impacted by unrealized net gains on interest rate caps and swaps held as hedges against higher interest rates of $0.20 per common share (net of deferred income taxes), recorded in OCI which was nearly offset by unrealized net losses on AFS debt securities of $0.18 per common share (net of deferred income taxes), also recorded in accumulated OCI, in the same period. While TBVPCS is a non-GAAP financial measure, we believe TBVPCS provides a meaningful alternative measure of capital strength and performance for investors, industry analysts and others. See reconciliation of this non-GAAP financial measure in NON-GAAP FINANCIAL MEASURES below.

Primarily due to our PSB acquisition and organic loan growth, average interest earning assets increased by 18.1% for the first three months in 2024 compared to the same period of 2023 while our net interest earnings on a tax equivalent basis increased 16.3%. Our tax equivalent net interest margin decreased 8 basis points as our yield on interest earning assets increased 49 basis points while our cost of interest bearing funds increased 70 basis points.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and follow general practices within the financial services industry. Application of these principles requires us to make estimates, assumptions and judgments that affect the amounts reported in our financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, the financial statements could reflect different estimates, assumptions and judgments. Certain policies inherently have a greater reliance on the use of estimates, assumptions and judgments and as such have a greater possibility of producing results that could be materially different than originally reported.

Our most significant accounting policies are presented in the notes to the consolidated financial statements of our 2023 Annual Report on Form 10-K. These policies, along with the other disclosures presented in the financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.

Based on the valuation techniques used and the sensitivity of financial statement amounts to the methods, assumptions and estimates underlying those amounts, we have identified the determination of ACL, fair value measurements and accounting for acquired loans to be the accounting areas that require the most subjective or complex judgments and as such could be most subject to revision as new information becomes available. Refer to Note 6 of the Notes to the Consolidated Financial Statements in the 2023 Form 10-K for a discussion of the methodology we employ regarding the ACL.

For additional information regarding critical accounting policies, refer to Critical Accounting Policies section in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2023 Form 10-K. There have been no significant changes in our application of critical accounting policies since December 31, 2023.

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NON-GAAP FINANCIAL MEASURES

We prepare our financial statements in accordance with U.S. GAAP and also present certain non-GAAP financial measures that exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with U.S. GAAP. Non-GAAP measures are provided as additional useful information to assess our financial condition and results of operations (including period-to-period operating performance). These non-GAAP measures are not intended as a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP measures with similar names used by other companies. For more information, including the reconciliation of these non-GAAP financial measures to their corresponding GAAP financial measures, see the respective sections where the measures are presented.

Book Value and Tangible Book Value Per Common Share
	March 31,		December 31,
Dollars in thousands	2024		2023
Total shareholders' equity	$	454,281	$	440,208
Less preferred stock		14,920		14,920
Common shareholders' equity		439,361		425,288
Less goodwill and intangible assets		73,443		74,430
Tangible common equity (TCE)	$	365,918	$	350,858

Common shares outstanding		14,686,738		14,683,457

Book value per common share(1)	$	29.92	$	28.96
Tangible book value per common share(2)	$	24.91	$	23.89

(1) Common shareholders' equity divided by common shares outstanding
(2) TCE divided by common shares outstanding

RESULTS OF OPERATIONS

Earnings Summary

Net income applicable to common shares for the three months ended March 31, 2024 was $16.8 million, or $1.14 per diluted share, compared to $13.9 million, or $1.08 per diluted share for the same period of 2023. The increased earnings during 2024 were primarily attributable to increased net interest income due to our growth and decreased provision for credit losses. Returns on average equity and assets for the first three months of 2024 were 15.37% and 1.47%, respectively, compared with 15.55% and 1.43% for the same period of 2023.

PSB's results of operations are included in our consolidated results of operations from the date of

acquisition

, and therefore our 2024 results reflect increased levels of average balances, income and expense as compared to the same periods of 2023 results. At consummation (prior to fair value acquisition adjustments), the PSB transaction consisted primarily of $568 million assets and $528 million liabilities.

Net Interest Income

Net interest income is the principal component of our earnings and represents the difference between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates as well as changes in the volume and mix of earning assets and interest bearing liabilities can materially impact net interest income.

Q1 2024 compared to Q4 2023

For the quarter ended March 31, 2024, our net interest income on a fully taxable-equivalent basis decreased $950,000 to $40.2 million compared to $41.2 million for the quarter end December 31, 2023. Our taxable-equivalent earnings on interest earning assets decreased $1.1 million, while the cost of interest bearing liabilities decreased $124,000 (see Tables I and II).

For the three months ended March 31, 2024, average interest earning assets decreased to $4.32 billion compared to $4.34 billion for the three months ended December 31, 2023, while average interest bearing liabilities decreased to $3.52 billion for the three months ended March 31, 2024 from $3.57 billion for the three months ended December 31, 2023.

For the quarter ended March 31, 2024, our net interest margin decreased to 3.75%, compared to 3.76% for the linked quarter, as the yields on earning assets increased 1 basis points and the cost of our interest bearing funds increased by 6 basis points. Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments related to the interest earning assets and interest bearing liabilities acquired by merger, Summit's net interest margin was 3.66% and 3.67% for the three months ended March 31, 2024 and December 31, 2023.

Q1 2024 compared to Q1 2023

For the quarter ended March 31, 2024, our net interest income on a fully taxable-equivalent basis increased $5.7 million to $40.2 million compared to $34.6 million for the quarter ended March 31, 2023. Our taxable-equivalent earnings on interest earning assets increased $15.0 million, while the cost of interest bearing liabilities increased $9.3 million (see Tables I and II).

For the three months ended March 31, 2024, average interest earning assets increased 18.07% to $4.32 billion compared to $3.66 billion for the three months ended March 31, 2023, while average interest bearing liabilities increased 19.25% from $2.98 billion for the three months ended March 31, 2023 to $3.52 billion for the three months ended March 31, 2024.

For the quarter ended March 31, 2024, our net interest margin decreased to 3.75%, compared to 3.83% for the same period of 2023, as the yields on earning assets increased 49 basis points, while the cost of our interest bearing funds increased by 70 basis points.

Excluding the impact of accretion and amortization of fair value acquisition accounting adjustments related to the interest earning assets and interest bearing liabilities acquired by merger, Summit's net interest margin was 3.82% for the three months ended March 31, 2023.

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Table I - Average Balance Sheet and Net Interest Income Analysis
	For the Quarter Ended
	March 31, 2024								December 31, 2023								March 31, 2023
	Average			Earnings/		Yield/			Average			Earnings/		Yield/			Average			Earnings/		Yield/
Dollars in thousands	Balance			Expense		Rate			Balance			Expense		Rate			Balance			Expense		Rate
Interest earning assets
Loans, net of unearned fees (1)
Taxable		3,686,788		$	59,204		6.46	%	$	3,688,505		$	59,802		6.43	%	$	3,087,068		$	45,421		5.97	%
Tax-exempt (2)		4,427			57		5.18	%		4,357			68		6.19	%		6,086			81		5.40	%
Securities
Taxable		413,656			5,025		4.89	%		410,211			5,129		4.96	%		314,004			3,412		4.41	%
Tax-exempt (2)		184,810			1,413		3.08	%		206,375			1,784		3.43	%		216,430			1,781		3.34	%
Federal funds sold and interest bearing deposits with other banks		29,287			132		1.81	%		31,053			122		1.56	%		34,330			171		2.02	%
Total interest earning assets		4,318,968			65,831		6.13	%		4,340,501			66,905		6.12	%		3,657,918			50,866		5.64	%
Noninterest earning assets
Cash & due from banks		24,037								22,485								17,387
Premises and equipment		62,773								63,298								54,112
Property held for sale		3,559								4,463								5,110
Intangible assets		74,057								75,043								62,024
Other assets		191,135								211,358								185,423
Allowance for credit losses-loans		(48,897	)							(47,834	)							(39,507	)
Total assets	$	4,625,632							$	4,669,314							$	3,942,467
Interest bearing liabilities
Interest bearing demand deposits	$	2,126,722		$	15,480		2.93	%	$	2,170,953		$	16,196		2.96	%	$	1,819,505		$	10,796		2.41	%
Savings deposits		442,122			1,822		1.66	%		459,277			1,986		1.72	%		480,207			1,917		1.62	%
Time deposits		531,125			4,128		3.13	%		508,383			3,235		2.52	%		389,252			1,287		1.34	%
Short-term borrowings		298,325			2,661		3.59	%		309,657			2,791		3.58	%		166,365			824		2.01	%
Long-term borrowings, subordinated debentures and capital trust securities		124,060			1,508		4.89	%		123,954			1,515		4.85	%		123,599			1,462		4.80	%
Total interest bearing liabilities		3,522,354			25,599		2.92	%		3,572,224			25,723		2.86	%		2,978,928			16,286		2.22	%
Noninterest bearing liabilities and shareholders' equity
Demand deposits		605,190								621,082								557,209
Other liabilities		54,513								54,160								43,508
Total liabilities		4,182,057								4,247,466								3,579,645

Shareholders' equity - preferred		14,920								14,920								14,920
Shareholders' equity - common		428,655								406,928								347,902
Total liabilities and shareholders' equity	$	4,625,632							$	4,669,314							$	3,942,467
Net interest earnings				$	40,232							$	41,182							$	34,580
Net yield on interest earning assets							3.75	%							3.76	%							3.83	%

(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 $309,000, $389,000, and $391,000 for the three months ended March 31, 2024, December 31, 2023 and March 31, 2023, respectively.

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Table II - Changes in Net Interest Income Attributable to Rate and Volume
	For the Quarter Ended									For the Quarter Ended
	March 31, 2024 vs. December 31, 2023									March 31, 2024 vs. March 31, 2023
	Increase (Decrease) Due to Change in:									Increase (Decrease) Due to Change in:
Dollars in thousands	Volume			Rate			Net			Volume			Rate			Net
Interest earned on:
Loans
Taxable	$	(111	)	$	(487	)	$	(598	)	$	9,372		$	4,411			13,783
Tax-exempt		1			(12	)		(11	)		(21	)		(3	)		(24	)
Securities
Taxable		18			(122	)		(104	)		1,176			437			1,613
Tax-exempt		(186	)		(185	)		(371	)		(248	)		(120	)		(368	)
Federal funds sold and interest bearing deposits with other banks		(8	)		18			10			(23	)		(16	)		(39	)
Total interest earned on interest earning assets		(286	)		(788	)		(1,074	)		10,256			4,709			14,965

Interest paid on:
Interest bearing demand deposits		(466	)		(250	)		(716	)		1,999			2,685			4,684
Savings deposits		(86	)		(78	)		(164	)		(155	)		60			(95	)
Time deposits		141			752			893			603			2,238			2,841
Short-term borrowings		(136	)		6			(130	)		914			923			1,837
Long-term borrowings, subordinated debentures and capital trust securities		(1	)		(6	)		(7	)		5			41			46
Total interest paid on interest bearing liabilities		(548	)		424			(124	)		3,366			5,947			9,313

Net interest income	$	262		$	(1,212	)	$	(950	)	$	6,890		$	(1,238	)	$	5,652

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Provision for Credit Losses

Provision for credit losses is determined by management as the amount to be added to the allowance for credit loss accounts for various types of financial instruments including loans, securities and off-balance-sheet credit exposure after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb expected credit losses over the lives of the respective financial instruments.

No provision for credit losses was recorded for the three months ended March 31, 2024. We recorded $1.5 million provision for credit losses for the three months ended March 31, 2023. The following table summarizes the changes in the various factors that comprise the components of credit loss expense.

Table V - Provision for Credit Losses
	For the Three Months Ended
	March 31,
Dollars in thousands	2024			2023
Provision for credit losses-loans
Due to changes in:
Loan volume and mix	$	(1,636	)	$	683
Loss experience		(606	)		(802	)
Reasonable and supportable economic forecasts & other qualitative adjustments		1,927			2,393
Individually evaluated credits		1,365			(399	)
Total provision for credit losses - loans		1,050			1,875

(Recovery of) provision for credit losses-unfunded commitments
Due to changes in:
Loan volume and mix		(1,110	)		(535	)
Loss experience		(72	)		(83	)
Reasonable and supportable economic forecasts & other qualitative adjustments		132			243
Total recovery of credit losses - unfunded commitments		(1,050	)		(375	)

Total provision for credit losses - debt securities		—			—

Total provision for credit losses	$	—		$	1,500

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Noninterest Income

Total noninterest income for the three months ended March 31, 2024 increased 15.8% compared to the same period of 2023. The increases were principally due to increased service charges on deposit accounts and higher bank card revenue. Further detail regarding noninterest income is reflected in the following table.

Table VI - Noninterest Income
	For the Three Months Ended
	March 31,
Dollars in thousands	2024			2023
Trust and wealth management fees		847			811
Mortgage origination revenue		154			171
Service charges on deposit accounts		1,723			1,392
Bank card revenue		1,833			1,568
Net realized losses on debt securities		(94	)		(59	)
Net gains on equity investments		40			45
Bank owned life insurance and annuities income		463			336
Other		112			122
Total	$	5,078		$	4,386

Noninterest Expense

Total noninterest expense increased 18.3% for the three months ended March 31, 2024 compared to the same periods of 2023, primarily due to higher salaries, commissions, and employee benefits, equipment expense, and other expenses. Table VII below shows the breakdown of the changes.

Table VII- Noninterest Expense

	For the Three Months Ended March 31,
			Change
Dollars in thousands	2024		$				%	2023
Salaries, commissions, and employee benefits	$	12,058	$	1,251		11.6	%	$	10,807
Net occupancy expense		1,695		362		27.2	%		1,333
Equipment expense		2,508		478		23.5	%		2,030
Professional fees		385		9		2.4	%		376
Advertising and public relations		272		102		60.0	%		170
Amortization of intangibles		987		644		187.8	%		343
FDIC premiums		717		387		117.3	%		330
Bank card expense		832		136		19.5	%		696
Foreclosed properties expense, net of losses/(gains)		12		(3	)	(20.0	)%		15
Merger-related expenses		53		(278	)	(84.0	)%		331
Other		3,439		471		15.9	%		2,968
Total	$	22,958	$	3,559		18.3	%	$	19,399

Salaries, commissions, and employee benefits: The increases in these expenses for the three months ended March 31, 2024 compared to the same periods of 2023 are primarily due to general merit raises, higher group health insurance premiums and an increase in the average number of full-time equivalent employees related to the PSB acquisition during second quarter 2023.

Equipment: The increase in equipment expense is primarily increased depreciation and amortization related to various technological upgrades, both hardware and software, made during the past three years including depreciation and amortization relative to equipment and software related to acquisitions.

Other: The increase in other expenses for the three months ended March 31, 2024 compared to the same period of 2023 is largely due to the following:

•

Deferred director compensation plan-related income of $313,000 for the three months ended March 31, 2024 compared to $164,000 in the comparable period of 2023 . Under the plan, the directors optionally defer their director fees into a "phantom" investment plan whereby the company recognizes expense or benefit relative to the phantom returns or losses of such investments.

	•	Internet banking expense totaled $438,000 for the three months ended March 31, 2024 compared to $366,000 for the comparable period of 2023 due to increased customer usage.
	•	Fraud losses increased from $203,000 for the three months ended March 31, 2023 to $391,000 for the three months ended March 31, 2024.
	•	Debit card issuance and processing costs were $692,000 for the three months ended March 31, 2024 compared to $574,000 for the same period of 2023 due to increased customer usage.

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Income Taxes

Our income tax expense for the three months ended March 31, 2024 and March 31, 2023 totaled $5.0 million and $3.6 million, respectively. Our effective tax rate (income tax expense as a percentage of income before taxes) for the quarters ended March 31, 2024 and 2023 was 22.7% and 20.2%, respectively. Refer to Note 16 of the accompanying financial statements for further information regarding our income taxes.

FINANCIAL CONDITION

Our total assets were $ 4.64 billion at March 31, 2024 and $ 4.63 billion at December 31, 2023. Table VIII below is a summary of significant changes in our financial position between December 31, 2023 and March 31, 2024.

Table VIII - Summary of Significant Changes in Financial Position

Dollars in thousands	Balance at December 31, 2023			Increase (Decrease)			Balance at March 31, 2024
Assets
Cash and cash equivalents	$	52,232		$	3,424		$	55,656
Debt securities available for sale		502,762			(12,491	)		490,271
Debt securities held to maturity		94,227			(490	)		93,737
Equity investments		10,958			613			11,571
Other investments		21,130			712			21,842
Loans, net of unearned fees		3,681,612			15,430			3,697,042
Less: allowance for credit losses		(48,090	)		(1,142	)		(49,232	)
Loans, net		3,633,522			14,288			3,647,810
Property held for sale		3,729			(297	)		3,432
Premises and equipment		63,038			(745	)		62,293
Accrued interest and fees receivable		20,004			234			20,238
Goodwill and other intangibles		74,430			(987	)		73,443
Cash surrender value of life insurance policies and annuities		85,679			551			86,230
Derivative financial instruments		33,145			3,658			36,803
Other assets		39,466			92			39,558
Total assets	$	4,634,322		$	8,562		$	4,642,884

Liabilities
Non-interest bearing deposits	$	593,576		$	11,933		$	605,509
Interest bearing deposits		3,121,572			21,334			3,142,906
Total deposits		3,715,148			33,267			3,748,415
Short-term borrowings		302,957			(40,598	)		262,359
Long-term borrowings		637			(7	)		630
Subordinated debentures		103,782			122			103,904
Subordinated debentures owed to unconsolidated subsidiary trusts		19,589			—			19,589
Other liabilities		52,001			1,705			53,706

Shareholders' Equity - preferred		14,920			—			14,920
Shareholders' Equity - common		425,288			14,073			439,361

Total liabilities and shareholders' equity	$	4,634,322		$	8,562		$	4,642,884

The following is a discussion of the significant changes in our financial position during the first three months of 2024:

Debt securities available for sale: The net decrease of $12.5 million in debt securities available for sale is principally attributable to sales of municipal securities.

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Loans: Excluding mortgage warehouse lines of credit, loan growth was $15.4 million during the first three months of 2024.

Deposits: During the first three months of 2024, noninterest bearing checking deposits increased $11.9 million, interest bearing checking deposits decreased $18.7 million, savings deposits declined $12.1 million, and retail CDs increased $52.1 million.

Shareholders' equity - common: Changes in common shareholders' equity are a result of net income and common dividends. Refer to the Consolidated Statements of Shareholders' Equity of the accompanying financial statements for further details. Tangible book value per common share (“TBVPCS”) increased $1.02 to $24.91. In addition to the positive impact of retained earnings, TBVPCS was positively impacted by unrealized net gains on interest rate caps and swaps held as hedges against higher interest rates totaling $0.20 per common share (net of deferred income taxes) recorded in accumulated other comprehensive loss. However, these gains were nearly offset by unrealized net losses on AFS debt securities of $0.18 per common share (net of deferred income taxes), also recorded in accumulated other comprehensive loss, in the same period.

Refer to Notes 5, 6, 8, and 9 of the notes to the accompanying consolidated financial statements for additional information with regard to changes in the composition of our securities, loans, deposits and borrowings between March 31, 2024 and December 31, 2023.

Credit Experience

For purposes of this discussion, nonperforming assets include foreclosed properties, other repossessed assets, and nonperforming loans, which is comprised of loans 90 days or more past due and still accruing interest and nonaccrual loans.

The provision for credit losses represents charges to earnings necessary to maintain an adequate allowance to cover an estimate of the full amount of expected credit losses relative to loans. Our determination of the appropriate level of the allowance is based on an ongoing analysis of credit quality and loss potential in the loan portfolio, change in the composition and risk characteristics of the loan portfolio, and the anticipated influence of national and local economic conditions. The adequacy of the allowance for loan credit losses is reviewed quarterly and adjustments are made as considered necessary.

At March 31, 2024 and December 31, 2023, our allowance for loan credit losses totaled $49.2 million, or 1.33% of total loans and $48.1 million, or 1.31% of total loans. The allowance for loan credit losses is considered adequate to cover an estimate of the full amount of expected credit losses relative to loans.

We incurred net loan recoveries of $92,000 in the first three months of 2024 (0.01 percent of average loans annualized), compared to $63,000 net loan recoveries during the first three months of 2023 (0.01 percent of average loans annualized).

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As illustrated in Table IX below, our non-performing assets have increased since year end 2023.

Table IX - Summary of Non-Performing Assets
	March 31,						December 31,
Dollars in thousands	2024			2023			2023
Accruing loans past due 90 days or more	$	506		$	17		$	335
Nonaccrual loans
Commercial		7,537			402			1,088
Commercial real estate		8,378			1,700			5,675
Commercial construction and development		—			—			—
Residential construction and development		891			813			708
Residential real estate		4,245			4,322			4,524
Consumer		70			48			109
Other		—			—			—
Total nonaccrual loans		21,121			7,285			12,104
Foreclosed properties
Commercial		—			—			—
Commercial real estate		—			297			297
Commercial construction and development		1,253			2,187			1,253
Residential construction and development		1,924			2,293			1,924
Residential real estate		255			351			255
Total foreclosed properties		3,432			5,128			3,729
Repossessed assets		—			—			—
Total nonperforming assets	$	25,059		$	12,430		$	16,168
Total nonperforming loans as a percentage of total loans		0.58	%		0.24	%		0.34	%
Total nonperforming assets as a percentage of total assets		0.54	%		0.31	%		0.35	%
Allowance for credit losses-loans as a percentage of period end loans		1.33	%		1.32	%		1.31	%
Total nonaccrual loans as a percentage of total loans		0.57	%		0.24	%		0.33	%
Allowance for credit losses on loans as a percentage of nonaccrual loans		233.10	%		560.55	%		397.31	%

Refer to Note 7 of the Notes to the Consolidated Financial Statements in the 2023 Form 10-K for a discussion of the methodology information regarding our past due loans, nonaccrual loans, modifications to borrowers experiencing financial difficulty and information regarding our methodology we employ on a quarterly basis to evaluate the overall adequacy of our allowance for credit losses.

The following table details the activity regarding our foreclosed properties for the three months ended March 31, 2024 and 2023.

Table X - Foreclosed Property Activity
	For the Three Months Ended
	March 31,
Dollars in thousands	2024			2023
Beginning balance	$	3,729		$	5,067
Acquisitions		—			59
Improvements		—			2
Disposals		(297	)		—
Balance March 31	$	3,432		$	5,128

At March 31, 2024 and December 31, 2023 we had approximately $3.4 million and $3.7 million foreclosed properties which were obtained as the result of foreclosure proceedings. Although foreclosed property is recorded at fair value less estimated costs to sell, the prices ultimately realized upon their sale may or may not result in us recognizing additional gains or losses.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity reflects our ability to ensure the availability of adequate funds to meet loan commitments and deposit withdrawals, as well as provide for other transactional requirements. Liquidity is provided primarily by funds invested in cash and due from banks (net of float and reserves), Federal funds sold, non-pledged securities, and available lines of credit with the Federal Home Loan Bank of Pittsburgh (“FHLB”) and Federal Reserve Bank of Richmond, which combined totaled approximately $1.9 billion or 39.95% of total consolidated assets at March 31, 2024.

Our liquidity strategy is to fund loan growth with deposits and other borrowed funds while maintaining an adequate level of short- and medium-term investments to meet normal daily loan and deposit activity. As a member of the FHLB, we have access to approximately $1.6 billion. As of March 31, 2024 and December 31, 2023, these advances totaled approximately $293 million and $303 million, respectively. At March 31, 2024, we had additional borrowing capacity of $1.3 billion through FHLB programs. We have established a line with the Federal Reserve Bank to be used as a contingency liquidity vehicle. The amount available on this line at March 31, 2024 was approximately $289 million, which is secured by a pledge of certain consumer and our commercial and industrial loan portfolios. We have a $6 million unsecured line of credit with a correspondent bank. Also, we have a $490 million portfolio of available for sale debt securities which can be liquidated to meet liquidity needs.

Liquidity risk represents the risk of loss due to the possibility that funds may not be available to satisfy current or future commitments based on external market issues, customer or creditor perception of financial strength, and events unrelated to Summit such as war, terrorism, pandemic or financial institution market specific issues. The Asset/Liability Management Committee (“ALCO”), comprised of members of senior management and certain members of the Board of Directors, oversees our liquidity risk management process. The ALCO develops and recommends policies and limits governing our liquidity to the Board of Directors for approval with the objective of ensuring that we can obtain cost-effective funding to meet current and future obligations, as well as maintain sufficient levels of on-hand liquidity, under both normal and “stressed” circumstances.

We continuously monitor our liquidity position to ensure that day-to-day as well as anticipated funding needs are met. We are not aware of any trends, commitments, events or uncertainties that have resulted in or are reasonably likely to result in a material change to our liquidity.

One of our continuous goals is maintenance of a strong capital position. Through management of our capital resources, we seek to provide an attractive financial return to our shareholders while retaining sufficient capital to support future growth. Shareholders’ equity at March 31, 2024 totaled $454.3 million compared to $440.2 million at December 31, 2023.

Refer to Note 13 of the notes to the accompanying consolidated financial statements for additional information regarding regulatory restrictions on our capital as well as Summit Community's capital.

CONTRACTUAL CASH OBLIGATIONS

During our normal course of business, we incur contractual cash obligations. The following table summarizes our contractual cash obligations at March 31, 2024.

Table XI - Contractual Cash Obligations
	Long				Capital
	Term		Subordinated		Trust		Operating
Dollars in thousands	Debt		Debentures		Securities		Leases
2024	$	17	$	—	$	—	$	1,006
2025		24		—		—		1,282
2026		589		—		—		1,201
2027		—		—		—		950
2028		—		—		—		730
Thereafter		—		105,000		19,589		2,531
Total	$	630	$	105,000	$	19,589	$	7,700

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OFF-BALANCE SHEET ARRANGEMENTS

We are involved with some off-balance sheet arrangements that have or are reasonably likely to have an effect on our financial condition, liquidity, or capital. These arrangements at March 31, 2024 are presented in the following table.

Table XII - Off-Balance Sheet Arrangements	March 31,
Dollars in thousands	2024
Commitments to extend credit:
Revolving home equity and credit card lines	$	116,403
Construction loans		250,672
Other loans		485,637
Standby letters of credit		58,420
Total	$	911,132

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market Risk Management

Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, exchange rates and equity prices. Interest rate risk is our primary market risk and results from timing differences in the repricing of assets, liabilities and off-balance sheet instruments, changes in relationships between rate indices and the potential exercise of imbedded options. The principal objective of asset/liability management is to minimize interest rate risk and our actions in this regard are taken under the guidance of our Asset/Liability Management Committee (“ALCO”), which is comprised of members of senior management and members of the Board of Directors. The ALCO actively formulates the economic assumptions that we use in our financial planning and budgeting process and establishes policies which control and monitor our sources, uses and prices of funds.

Some amount of interest rate risk is inherent and appropriate to the banking business. Our net income is affected by changes in the absolute level of interest rates. Our interest rate risk position is asset sensitive. That is, absent any changes in the volumes of our interest earning assets or interest bearing liabilities, assets are likely to reprice faster than liabilities, resulting in an increase in net income in a rising rate environment. Net income would decrease in a falling interest rate environment. Net income is also subject to changes in the shape of the yield curve. In general, a flattening yield curve would decrease our earnings due to the compression of earning asset yields and funding rates, while a steepening would increase earnings as margins widen.

Several techniques are available to monitor and control the level of interest rate risk. We control interest rate risk principally by matching the maturities of our interest earning assets with similar maturing interest bearing liabilities and by hedging adverse risk exposures with derivative financial instruments such as interest rate swaps and caps. We primarily use earnings simulations modeling to monitor interest rate risk. The earnings simulation model forecasts the effects on net interest income under a variety of interest rate scenarios that incorporate changes in the absolute level of interest rates and changes in the shape of the yield curve. Each increase or decrease in interest rates is assumed to gradually take place over the next 12 months (as footnoted in table below), and then remain stable. Assumptions used to project yields and rates for new loans and deposits are derived from historical analysis. Securities portfolio maturities and prepayments are reinvested in like instruments. Mortgage loan prepayment assumptions are developed from industry estimates of prepayment speeds. Noncontractual deposit repricings are modeled on historical patterns.

The following table presents the estimated sensitivity of our net interest income to changes in interest rates, as measured by our earnings simulation model as of March 31, 2024. The sensitivity is measured as a percentage change in net interest income given the stated changes in interest rates (change over 12 months, stable thereafter, see footnotes below) compared to net interest income with rates unchanged in the same period. The estimated changes set forth below are dependent on the assumptions discussed above.

	Estimated % Change in
	Net Interest Income over:
Change in	0 - 12 Months			13 - 24 Months
Interest Rates	Actual			Actual
Down 100 basis points (1)		0.9	%		5.7	%
Down 200 basis points (1)		1.8	%		5.2	%
Down 200 basis points - steepening curve (2)		6.0	%		19.3	%
Up 200 basis points (1)		-1.7	%		2.6	%

(1) assumes a parallel shift in the yield curve over 12 months, with no change thereafter
(2) assumes short-term rates move down 200 basis points over 12 months while long-term rates remain relatively unchanged over 12 months, with no change thereafter

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Item 4. Controls and Procedures

Our management, including the Chief Executive Officer and Chief Financial Officer, has conducted as of March 31, 2024, an evaluation of the effectiveness of disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures as of March 31, 2024 were effective. There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information

Item 1. Legal Proceedings

Refer to Note 11 of the Notes to the Consolidated Financial Statements in Part I, Item 1 for information regarding legal proceedings not reportable under this Item.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In February 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 ("February 2020 Repurchase Plan"). The timing and quantity of purchases under this stock repurchase plan are at the discretion of management. The plan may be discontinued, suspended, or restarted at any time at the Company's discretion.

The following table sets forth certain information regarding Summit's purchases of its common stock under the Repurchase Plan and for the benefit of Summits Employee Stock Ownership Plan for the quarter ended March 31, 2024.

Period	Total Number of Shares Purchased (a)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
January 1, 2024 - January 31, 2024		—	$	—		—		426,423
February 1, 2024 - February 29, 2024		—		—		—		426,423
March 1, 2024 - March 31, 2024		—		—		—		426,423

(a) All shares purchased for the benefit of Summit's Employee Stock Ownership Plan

Item 5. Other Information

Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements.

None

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Item 6. Exhibits

Exhibit 3.i	Amended and Restated Articles of Incorporation of Summit Financial Group, Inc.

Exhibit 3.ii	Articles of Amendment 2009

Exhibit 3.iii	Articles of Amendment 2011

Exhibit 3.iv	Amended and Restated Articles of Amendment 2021

Exhibit 3.v	Amended and Restated By-Laws of Summit Financial Group, Inc.

Exhibit 11	Statement re: Computation of Earnings per Share – Information contained in Note 4 to the Consolidated Financial Statements on page 13 of this Quarterly Report is incorporated herein by reference.

Exhibit 31.1	Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer

Exhibit 31.2	Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer

Exhibit 32.1	Sarbanes-Oxley Act Section 906 Certification of Chief Executive Officer

Exhibit 32.2	Sarbanes-Oxley Act Section 906 Certification of Chief Financial Officer

Exhibit 101	Interactive Data File (Inline XBRL)

Exhibit 104	Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)

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EXHIBIT INDEX

Exhibit No.	Description	Page Number
(3)	Articles of Incorporation and By-laws:
	(i) Amended and Restated Articles of Incorporation of Summit Financial Group, Inc.	(a)
	(ii) Articles of Amendment 2009	(b)
	(iii) Articles of Amendment 2011	(c)
	(iv) Amended and Restated Articles of Amendment 2021	(d)
	(v) Amended and Restated By-laws of Summit Financial Group, Inc.	(e)

11	Statement re: Computation of Earnings per Share	14

31.1	Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer

31.2	Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer

32.1*	Sarbanes-Oxley Act Section 906 Certification of Chief Executive Officer

32.2*	Sarbanes-Oxley Act Section 906 Certification of Chief Financial Officer

101**	Interactive data file (Inline XBRL)

104	Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)

*Furnished, not filed.

** As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

(a)	Incorporated by reference to Exhibit 3.2 of Summit Financial Group, Inc.’s filing on Form 8-K dated April 30, 2021.

(b)	Incorporated by reference to Exhibit 3.1 of Summit Financial Group, Inc.’s filing on Form 8-K dated September 30, 2009.

(c)	Incorporated by reference to Exhibit 3.1 of Summit Financial Group, Inc.’s filing on Form 8-K dated November 3, 2011.

(d)	Incorporated by reference to Exhibit 3.1 of Summit Financial Group, Inc.’s filing on Form 8-K dated April 30, 2021.

(e)	Incorporated by reference to Exhibit 3.1 of Summit Financial Group, Inc.’s filing on Form 8-K dated March 2, 2022.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		SUMMIT FINANCIAL GROUP, INC.
		(registrant)




		By:	/s/ H. Charles Maddy, III
			H. Charles Maddy, III,
			President and Chief Executive Officer



		By:	/s/ Robert S. Tissue
			Robert S. Tissue,
			Executive Vice President and Chief Financial Officer



		By:	/s/ Julie R. Markwood
			Julie R. Markwood,
			Executive Vice President and Chief Accounting Officer


Date:	May 2, 2024

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