Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

Item 1.Business

Summit Financial Group, Inc. (“Company” or “Summit”) is a $3.58 $4.6billion financial holding company headquartered in Moorefield, West Virginia and incorporated on March 5, 1987.  We provide community banking services primarily in the Eastern Panhandle, Southern and North Central regions of West Virginia, the Northern, Shenandoah Valley and Southwestern regions of Virginia, and the Central region of Kentucky.Kentucky, the Eastern Shore of Maryland and Delaware.  We provide these services through our community bank subsidiary, Summit Community Bank (“Summit Community” or “Bank”).  

Community Banking

We provide a wide range of community banking services, including demand, savings and time deposits; commercial, real estate and consumer loans; trust and wealth management services; and cash management services.  The deposits of Summit Community are insured by the Federal Deposit Insurance Corporation ("FDIC").

In order to compete with other financial service providers, we principally rely upon personal relationships established by our officers, directors and employees with our clients and specialized services tailored to meet our clients’ needs.  We have maintained a strong community orientation by, among other things, supporting the active participation of staff members in local charitable, civic, school, religious and community development activities.  We also have a marketing program that primarily utilizes local radio and newspapers to advertise.  Banking, like most industries, is becoming more dependent on technology as a means of marketing to customers, including the Internet, which we also utilize.  This approach, coupled with continuity of service by the same staff members, enables Summit Community to develop long-term customer relationships, maintain high quality service and respond quickly to customer needs.  We believe that our emphasis on local relationship banking, together with a prudent approach to lending, are important factors in our success and growth.

All operational and support functions that are transparent to clients are centralized in order to achieve consistency and cost efficiencies in the delivery of products and services by each banking office.  The central office provides services such as data processing, deposit operations, accounting, treasury management, loan administration, loan review, compliance, risk management and internal auditing to enhance our delivery of quality service.  We also provide overall direction in the areas of credit policy and administration, strategic planning, marketing, investment portfolio management, human resources administration and other financial and administrative services. The banking offices work closely with us to develop new products and services needed by their customers and to introduce enhancements to existing products and services.

Lending

Our primary lending focus is providing commercial loans to local businesses with annual sales generally up to $150 million and providing owner-occupied real estate loans to individuals.  We typically do not seek credit relationships of more than $35 million but will consider larger lending relationships exhibiting above-average credit quality.  Under our commercial banking strategy, we focus on offering a broad line of financial products and services to small and medium-sized businesses through full service banking offices.  Summit Community Bank has senior management with extensive lending experience.  These managers exercise substantial authority over credit and pricing decisions, subject to loan committee approval for larger credits.

We segment our loan portfolio in tointo the following major lending categories: commercial, commercial real estate, construction and land development, residential real estate, consumer and mortgage warehouse lines of credit. Commercial loans are loans made to commercial borrowers that are not secured by real estate. These encompass loans secured by accounts receivable, inventory and equipment, as well as unsecured loans. Commercial real estate loans consist of commercial mortgages, which generally are secured by nonresidential and multi-family residential properties. Commercial real estate loans are made to many of the same customers and carry similar industry risks as the commercial loan portfolio. Construction and development loans are loans made for the purpose of financing construction or development projects. This portfolio includes commercial and residential land development loans, one-to-four family housing construction, both pre-sold and speculative in nature, multi-family housing construction, non-residential building construction and undeveloped land. Residential real estate loans are mortgage loans to consumers and are secured primarily by a first lien deed of trust. These loans are traditional one-to-four family residential mortgages. Also included in this category of loans are second liens on one-to-four family properties, commercial loans secured by one-to-four family residence and home equity loans. Consumer loans are loans that establish consumer credit that is granted for the consumer’s personal use. These loans include automobile loans and recreational vehicle loans, as well as personal secured and unsecured loans. Our mortgage warehouse lines of credit result solely from a participation arrangement with a regional bank to fund residential mortgage warehouse lines of medium- and large-sized mortgage originators located throughout the United States.

Our real estate underwriting loan-to-value (“LTV”) policy limits are at or below current bank regulatory guidelines, as follows:

Exceptions are permitted to these regulatory guidelines as long as such exceptions are identified, monitored and reported to the Board of Directors at least quarterly and the total of such exceptions do not exceed 100% of Summit Community’s total regulatory capital, which totaled $390.2 totaled $524.7million as of December 31, 2021.2023.  As of this date, we had loans approximating $97.5$92.9 million which exceeded the above regulatory LTV guidelines, as follows:

Our underwriting standards and practice are designed to originate both fixed and variable rate loan products, consistent with the underwriting guidelines discussed above. Adjustable rate and variable rate loans are underwritten, giving consideration both to the loan’s initial rate and to higher assumed rates, commensurate with reasonably anticipated market conditions.  Accordingly, we want to insure that adequate primary repayment capacity exists to address both future increases in interest rates and fluctuations in the underlying cash flows available for repayment.  Historically, we have not offered “payment option ARM” loans.  Further, we have had no loan portfolio products which were specifically designed for “sub-prime” borrowers (defined as consumers with a credit score of less than 599).

We are subject to regulation by the Board of Governors of the Federal Reserve System (“FRB”), the West Virginia Division of Financial Institutions, the Securities and Exchange Commission (the “SEC”) and other federal and state regulators.  As a financial holding company, we are subject to the restrictions of the Bank Holding Company Act of 1956, as amended (“BHCA”), are registered pursuant to its provisions and are subject to examination by the FRB.  As a financial holding company doing business in West Virginia, we are also subject to regulation by and must submit annual reports to the West Virginia Division of Financial Institutions.

The BHCA prohibits the acquisition by a financial holding company of direct or indirect ownership of more than five percent (5%) of the voting shares of any bank within the United States without prior approval of the FRB. With certain exceptions, a financial holding company is prohibited from acquiring direct or indirect ownership or control of more than five percent (5%) of the voting shares of any company that is not a bank and from engaging directly or indirectly in business unrelated to the business of banking or managing or controlling banks.

The FRB, in its Regulation Y, permits financial holding companies to engage in non-banking activities closely related to banking or managing or controlling banks.  Approval of the FRB is necessary to engage in these activities or to make acquisitions of corporations engaging in these activities as the FRB determines whether these acquisitions or activities are in the public interest. In addition, by order, and on a case by case basis, the FRB may approve other non-banking activities.

The BHCA permits us to purchase or redeem our own securities.  However, Regulation Y provides that prior notice must be given to the FRB if the total consideration for such purchase or consideration, when aggregated with the net consideration paid by us for all such purchases or redemptions during the preceding 12 months is equal to ten percent (10%) or more of our consolidated net worth.  Prior notice is not required if (i) both before and immediately after the redemption, the financial holding company is well capitalized; (ii) the financial holding company is well managed and (iii) the financial holding company is not the subject of any unresolved supervisory issues.

The Inflation Reduction Act of 2022 (the “IRA”) imposes a new 1% excise tax on the fair market value of stock repurchased after December 31, 2022 by publicly traded U.S. corporations. With certain exceptions, the value of stock repurchased is determined net of stock issued in the year, including shares issued pursuant to compensatory arrangements.

The FRB has broad authority to prohibit activities of bank holding companies and their non-banking subsidiaries that represent unsafe and unsound banking practices or which constitute violations of laws or regulations.  The FRB also can assess civil money penalties for certain activities conducted on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution.  The penalties can be as high as $1 million for each day the activity continues.

Summit Community, our only bank subsidiary, is subject to West Virginia banking statutes and regulations, and is primarily regulated by the West Virginia Division of Financial Institutions and the FDIC.  The Bank is also subject to regulations promulgated by the FRB.  As a member of the FDIC, Summit Community’s deposits are insured as required by federal law.  Bank regulatory authorities regularly examine revenues, loans, investments, management practices and other aspects of Summit Community.  These examinations are conducted primarily to protect depositors and not shareholders.  In addition to these regular examinations, the Bank must furnish to regulatory authorities quarterly reports containing full and accurate statements of its affairs.

Because we are a public company, we are subject to regulation by the SEC.  SEC regulations require us to disclose certain types of business and financial data on a regular basis to the SEC and to our shareholders.  We are required to file annual, quarterly and current reports with the SEC.  We prepare and file an annual report on Form 10-K with the SEC that contains detailed financial and operating information, as well as a management response to specific questions about our operations.  SEC regulations require that our annual reports to shareholders contain certified financial statements and other specific items such as management’s discussion and analysis of our financial condition and results of operations.  We must also file quarterly reports

with the SEC on Form 10-Q that contain detailed financial and operating information for the prior quarter and we must file current reports on Form 8-K to provide the pubic with information on recent material events.

In addition to periodic reporting to the SEC, we are subject to proxy rules and tender offer rules issued by the SEC.  Our officers, directors and principal shareholders (holding 10% or more of our stock) must also submit reports to the SEC regarding

The “Dodd-Frank Wall Street Reform and Consumer Protection Act” (the “Dodd-Frank Act”), which is complex and broad in scope, established the Bureau of Consumer Financial Protection (the “CFPB”), which has extensive regulatory and enforcement powers over consumer financial products and services, and the Financial Stability Oversight Council, which has oversight authority for monitoring systemic risk.  We will beare required to comply with the Consumer Financial Protection Act and the CFPB’s rules; however, these rules will beare enforced by Summit Community's primary regulator, the FDIC, not the CFPB.  In addition, the Dodd-Frank Act alters the authority and duties of the federal banking and securities regulatory agencies, implements certain corporate governance requirements for all public companies, including financial institutions with regard to executive compensation, proxy access by shareholders and certain whistleblower provisions and restricts certain proprietary trading and hedge fund and private equity activities of banks and their affiliates.  Although the regulations that directly affect our business have been adopted, many of the provisions of the Dodd-Frank Act are subject to final rulemaking by the U.S. financial regulatory agencies and the implications of the Dodd-Frank Act for our business will depend to some extent on how such rules are adopted and implemented by the primary U.S. financial regulatory agencies.

In general, the BHC Act limits the business of bank holding companies to banking, managing or controlling banks and other activities that the FRB has determined to be so closely related to banking as to be a proper incident thereto. In addition, bank holding companies that qualify and elect to be financial holding companies may engage in any activity, or acquire and retain the shares of a company engaged in any activity, that is either (i) financial in nature or incidental to such financial activity (as determined by the FRB in consultation with the Secretary of the Treasury) or (ii) complementary to a financial activity and does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally (as solely determined by the FRB), without prior approval of the FRB.

Activities that are financial in nature include securities underwriting and dealing, insurance underwriting and making merchant banking investments. Some examples of non-banking activities which presently may be performed by a financial holding company are: making or acquiring, for its own account or the account of others, loans and other extensions of credit; operating as an industrial bank, or industrial loan company, in the manner authorized by state law; servicing loans and other extensions of credit; performing or carrying on any one or more of the functions or activities that may be performed or carried on by a trust company in the manner authorized by federal or state law; acting as an investment or financial advisor; leasing real or personal property; making equity or debt investments in corporations or projects designed primarily to promote community welfare, such as the economic rehabilitation and the development of low income areas; providing bookkeeping services or financially oriented data processing services for the holding company and its subsidiaries; acting as an insurance agent or a broker; acting as an underwriter for credit life insurance, which is directly related to extensions of credit by the financial holding company system; providing courier services for certain financial documents; providing management consulting advice to non-affiliated banks; selling retail money orders having a face value of not more than $1,000, traveler’s checks and U.S. savings bonds; performing appraisals of real estate; arranging commercial real estate equity financing under certain limited circumstances; providing securities brokerage services related to securities credit activities; underwriting and dealing in government obligations and money market instruments; providing foreign exchange advisory and transactional services; and acting, under certain circumstances, as futures commission merchant for non-affiliated persons in the execution and clearance on major commodity exchanges of futures contracts and options.

To maintain financial holding company status, a financial holding company and all of its depository institution subsidiaries must be “well capitalized” and “well managed.” A depository institution subsidiary is considered to be “well capitalized” if it satisfies the requirements for this status discussed in the section captioned “Capital Requirements” included elsewhere in this item. A depository institution subsidiary is considered “well managed” if it received a composite rating and management rating of at least “satisfactory” in its most recent examination. A financial holding company’s status will also depend upon it maintaining its status as “well capitalized” and “well managed’ under applicable FRB regulations. If a financial holding company ceases to meet these capital and management requirements, the FRB’s regulations provide that the financial holding company must enter into an agreement with the FRB to comply with all applicable capital and management requirements. Until the financial holding company returns to compliance, the FRB may impose limitations or conditions on the conduct of its activities and the company may not commence any of the broader financial activities permissible for financial holding companies or acquire a company

engaged in such financial activities without prior approval of the FRB. If the company does not return to compliance within 180 days, the FRB may require divestiture of the holding company’s depository institutions.

In order for a financial holding company to commence any new activity permitted by the BHC Act or to acquire a company engaged in any new activity permitted by the BHC Act, each insured depository institution subsidiary of the financial holding company must have received a rating of at least “satisfactory” in its most recent examination under the Community Reinvestment Act. See the section captioned “Community Reinvestment Act” included elsewhere in this item.

The FRB has the power to order any bank holding company or its subsidiaries to terminate any activity or to terminate its ownership or control of any subsidiary when the FRB has reasonable grounds to believe that continuation of such activity or such ownership or control constitutes a serious risk to the financial soundness, safety or stability of any bank subsidiary of the bank holding company.

The Dodd-Frank Act amends the BHC Act to require the federal financial regulatory agencies to adopt rules that prohibit banks and their affiliates from engaging in proprietary trading and investing in and sponsoring certain unregistered investment companies (defined as hedge funds and private equity funds). The statutory provision is commonly called the “Volcker Rule”. In July, 2019, the federal banking agencies adopted a final rule implementing sections of the Economic Growth, Regulatory Relief and Consumer Protection Act to grant an exclusion from the Volcker Rule for community banks with fewfewer than $10 billion in total consolidated assets and total trading assets, as well as liabilities that are equal to or less than five percent of their total consolidated assets. Not only are we now excluded from the VolkerVolcker Rule due to our asset size, the Volcker Rule has not had a material impact on our operations as we do not generally engage in activities prohibited by the Volcker Rule.

The BHC Act, the Bank Merger Act, the West Virginia Banking Code and other federal and state statutes regulate acquisitions of commercial banks. The BHC Act requires the prior approval of the FRB for the direct or indirect acquisition by a bank holding company of more than 5.0% of the voting shares of a commercial bank or its parent holding company. Under the Bank Merger Act, the prior approval of the FRB or other appropriate bank regulatory authority is required for a member bank to merge with another bank or purchase the assets or assume the deposits of another bank. In reviewing applications seeking approval of merger and acquisition transactions, the bank regulatory authorities will consider, among other things, the competitive effect and public benefits of the transactions, the capital position of the combined organization, the risks to the stability of the U.S. banking or financial system, the applicant’s performance record under the Community Reinvestment Act (see the section captioned “Community Reinvestment Act” included elsewhere in this item) and its compliance with fair lending, fair housing and other consumer protection laws and the effectiveness of the subject organizations in combating money laundering activities.

The principal source of our liquidity is dividends from Summit Community. The prior approval of the Federal Reserve is required if the total of all dividends declared by a state-chartered member bank in any calendar year would exceed the sum of the bank’s net profits for that year and its retained net profits for the preceding two calendar years, less any required transfers to surplus or to fund the retirement of preferred stock. Federal law also prohibits a state-chartered, member bank from paying dividends that would be greater than the bank’s undivided profits. Summit Community is also subject to limitations under West Virginia state law regarding the level of dividends that may be paid.

In addition, the Company and Summit Community are subject to other regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. The appropriate federal regulatory authority is authorized to determine under certain circumstances relating to the financial condition of a bank holding company or a bank that the payment of dividends would be an unsafe or unsound practice and to prohibit payment thereof. The appropriate federal regulatory authorities have stated that paying dividends that deplete a bank’s capital base to an inadequate level would be an unsafe and unsound banking practice and that banking organizations should generally pay dividends only out of current operating earnings.

Summit Community is affected by the fiscal and monetary policies of the federal government and its agencies, including the FRB.  An important function of these policies is to curb inflation and control recessions through control of the supply of money and credit.  The operations of Summit Community are affected by the policies of government regulatory authorities, including the FRB, which regulates money and credit conditions through open-market operations in United States Government and Federal agency securities, adjustments in the discount rate on member bank borrowings and requirements against deposits and regulation of interest rates payable by member banks on time and savings deposits.  These policies have a significant influence

The FRB has a policy that a financial holding company is expected to act as a source of financial and managerial strength to each of its subsidiary banks and to commit resources to support each such subsidiary bank.  Under the source of strength doctrine, the FRB may require a financial holding company to contribute capital to a troubled subsidiary bank and may charge the financial holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank.  This capital injection may be required at times when Summit may not have the resources to provide it.  Any capital loans by a holding company to any subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank.  In addition, the Crime Control Act of 1990 provides that in the event of a financial holding company's bankruptcy, any commitment by such holding company to a Federal bank or thrift regulatory agency to maintain the capital of a subsidiary bank will be assumed by the bankruptcy trustee and entitled to a priority of payment.

The FRB regulates and monitors the capital adequacy of bank holding companies, such as Summit, while the FDIC and the West Virginia Division of Financial Institutions regulate and monitor the capital adequacy of the Bank. Bank regulators use a combination of risk-based guidelines and leverage ratios to evaluate capital adequacy and consider these capital levels when conducting supervisory activities related to bank and bank holding company safety and soundness.

In July 2013, the U.S. federal banking regulators substantially amended the capital rules for banks and bank holding companies to make them generally compliant with the Basel Committee on Banking Supervision’s Basel III Global Regulatory Framework (the “Basel III Capital Rules”). The Basel III Capital Rules, which were phased in over the period 2015 through 2019, implemented higher minimum capital requirements for bank holding companies and banks. The Basel III rules included a Common Equity Tier 1 capital requirement and established criteria that instruments must meet to be considered Common Equity Tier 1 capital, additional Tier 1 capital or Tier 2 capital. These enhancements were designed to both improve the quality and increase the quantity of capital required to be held by banking organizations, better equipping the U.S. banking system to deal with adverse economic conditions.

The Basel III Capital Rules require banks and bank holding companies to maintain a minimum Common Equity Tier 1 (“CET1”) risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6%, a total risk-based capital ratio of 8% and a leverage ratio of 4%. Under the Basel III Capital Rules, banks and bank holding companies must maintain a CET1 risk-based capital ratio of 6.5%, a Tier 1 risk-based capital ratio of 8%, a total risk-based capital ratio of 10% and a leverage ratio of 5% to be deemed “well capitalized” for purposes of certain rules and requirements.

Banks and bank holding companies are also required to maintain a “capital conservation buffer” in excess of the minimum risk-based capital ratios. The buffer is intended to help ensure that banking organizations conserve capital when it is most needed, allowing them to better weather periods of economic stress. The minimum 2.5% buffer is composed solely of CET1 capital. If an institution’s capital conservation buffer is less than or equal to 2.5%, then the institution is subject to limitations on certain activities, including payment of dividends, share repurchases and discretionary bonuses to executive officers.

The Basel III Capital Rules also attempted to improve the quality of capital by implementing changes to the definition of capital. Among the most important changes are stricter eligibility criteria for regulatory capital instruments that disallow the inclusion of certain instruments, such as trust preferred securities, in Tier 1 capital going forward and new constraints on the inclusion of minority interests, mortgage-servicing assets, deferred tax assets and certain investments in the capital of unconsolidated financial institutions. In addition, the Basel III Capital Rules require that most regulatory capital deductions be made from CET1 capital.

The federal bank regulatory agencies may also set higher capital requirements for banks and bank holding companies whose circumstances warrant it. For example, bank holding companies experiencing internal growth or making acquisitions are expected to maintain strong capital positions substantially above the minimum supervisory levels. Our regulatory capital ratios and those of Summit Community are well in excess of the most restrictive minimum regulatory capital ratios plus the full Capital Conservation Buffer (as applicable) established under the Basel III Capital Rules. Our regulatory capital ratios as of December 31, 20212023 are set forth in the table in Note 19 of the notes to the consolidated financial statements beginning on page 110.

The Basel III Capital Rules also set forth changes in the methods of calculating certain risk-weighted assets, which in turn affect the calculation of risk-based capital ratios. Under the Basel III Capital Rules, higher or more sensitive risk weights are assigned

to various categories of assets, including certain credit facilities that finance the acquisition, development or construction of real property, certain exposures or credits that are 90 days past due or on non-accrual, foreign exposures and certain corporate exposures. In addition, the Basel III Capital Rules include (i) alternative standards of credit worthiness consistent with the Dodd-Frank Act, (ii) greater recognition of collateral and guarantees and (iii) revised capital treatment for derivatives and repo-style transactions.

On December 21, 2018, the federal banking agencies issued a joint final rule to revise their regulatory capital rules to: (i) address the implementation of the Current Expected Credit Losses ("CECL") accounting standard under GAAP; and (ii) provide an optional three-year phase-in period for the day-one adverse regulatory capital effects that banking organizations experienced upon adopting CECL. We implemented the CECL accounting standard on January 1, 2020, whereby we increased the allowances for loan credit losses and unfunded commitments by $8.89 million and recorded a cumulative effect adjustment to retained earnings of $7.02$6.76 million (net of deferred income taxes of $1.87$2.13 million) and elected to recognize the regulatory capital impact of its adoption over the three year period. However, relief provided community banks under the Coronavirus Aid, Relief and Economic Security Act delayed the start of this three-year phase-in period until January 1, 2022.

A bank will be (i) “well capitalized” if the institution has a total risk-based capital ratio of 10.0% or greater, a CET1 capital ratio of 6.5% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater and a leverage ratio of 5.0% or greater and is not subject to any order or written directive by any such regulatory authority to meet and maintain a specific capital level for any capital measure; (ii) “adequately capitalized” if the institution has a total risk-based capital ratio of 8.0% or greater, a CET1 capital ratio of 4.5% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater and a leverage ratio of 4.0% or greater and is not “well capitalized”; (iii) “undercapitalized” if the institution has a total risk-based capital ratio that is less than 8.0%, a CET1 capital ratio less than 4.5%, a Tier 1 risk-based capital ratio of less than 6.0% or a leverage ratio of less than 4.0%; (iv) “significantly undercapitalized” if the institution has a total risk-based capital ratio of less than 6.0%, a CET1 capital ratio less than 3.0%, a Tier 1 risk-based capital ratio of less than 4.0% or a leverage ratio of less than 3.0%; and (v) “critically undercapitalized” if the institution’s tangible equity is equal to or less than 2.0% of average quarterly tangible assets. An institution may be downgraded to, or deemed to be in, a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. A bank’s capital category is determined solely for the purpose of applying prompt corrective action regulations and the capital category may not constitute an accurate representation of the bank’s overall financial condition or prospects for other purposes.”

Beginning in the first quarter of 2020, a qualifying community banking organization could elect to use the community bank leverage ratio (“CBLR”) framework to eliminate the requirements for calculating and reporting risk-based capital ratios. A qualifying community organization is a depository institution or its holding company that has less than $10 billion in average total consolidated assets; has off-balance-sheet exposures of 25% or less of total consolidated assets; has trading assets plus trading liabilities of 5% or less of total consolidated assets; and is not an advanced approaches banking organization. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% are considered to have satisfied the risk-based and leverage capital requirements and are considered to have met the well-capitalized ratio requirements for purposes of Section 38 of the FDICIA. A qualifying community banking organization may opt into and out of the CBLR framework by completing the associated reporting requirements on its call report. We presently do not anticipate opting into the CBLR framework.

Financial holding companies and their subsidiary banks are also subject to the provisions of the Community Reinvestment Act of 1977 (“CRA”).  Under the CRA, the FRB (or other appropriate bank regulatory agency) is required, in connection with its examination of a bank, to assess such bank’s record in meeting the credit needs of the communities served by that bank, including low and moderate income neighborhoods.  Further, such assessment is also required of any financial holding

applicant financial holding company and such records may be the basis for denying the application or imposing conditions in connection with approval of the application.  

In the most recent CRA examination by the bank regulatory authorities, Summit Community was given a “satisfactory” CRA rating.

The enactment of the Graham-Leach-Bliley Act of 1999 (the “GLB Act”) represents a pivotal point in the history of the financial services industry.  The GLB Act swept away large parts of a regulatory framework that had its origins in the Depression Era of the 1930s.  New opportunities were available for banks, other depository institutions, insurance companies and securities firms to enter into combinations that permit a single financial services organization to offer customers a more complete array of financial products and services.  The GLB Act provides a new regulatory framework through the financial holding company, which has as its “umbrella regulator” the FRB.  Functional regulation of the financial holding company’s separately regulated subsidiaries is conducted by their primary functional regulators.  The GLB Act makes a CRA rating of satisfactory or above necessary for insured depository institutions and their financial holding companies to engage in new financial activities.  The GLB Act specifically gives the FRB the authority, by regulation or order, to expand the list of “financial” or “incidental” activities, but requires consultation with the U.S. Treasury Department, and gives the FRB authority to allow a financial holding company to engage in any activity that is “complementary” to a financial activity and does not “pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.”

Under the GLB Act, all financial institutions are required to adopt privacy policies, restrict the sharing of nonpublic customer data with nonaffiliated parties at the customer’s request and establish procedures and practices to protect customer data from unauthorized access.  We have established policies and procedures to assure our compliance with all privacy provisions of the GLB Act. Pursuant to Title V of the GLB Act, we, like all other financial institutions, are required to:

Under West Virginia banking law, an acquisition or merger is not permitted if the resulting depository institution or its holding company, including its affiliated depository institutions, would assume additional deposits to cause it to control deposits in the State of West Virginia in excess of twenty fivetwenty-five percent (25%) of such total amount of all deposits held by insured depository institutions in West Virginia.  This limitation may be waived by the Commissioner of Banking by showing good cause.

In addition to the banking laws and regulations discussed above, bank subsidiaries are also subject to certain consumer laws and regulations that are designed to protect consumers in transactions with banks.  Among the more prominent of such laws and regulations are the Truth in Lending Act, the Home Mortgage Disclosure Act and Regulation C, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Right to Financial Privacy Act and the Fair Housing Act.  These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits

Dodd-Frank centralized responsibility for consumer financial protection by creating the CFPB and giving it responsibility for implementing, examining and enforcing compliance with federal consumer protection laws.  The CFPB has broad rulemaking, supervisory and enforcement authority over consumer financial products and services, including deposit products, residential

mortgages, home-equity loans and credit cards.  The CFPB’s functions include investigating consumer complaints, rulemaking, supervising and examining banks’ consumer transactions and enforcing rules related to consumer financial products and services including mortgage lending and servicing, fair lending requirements, and automotive finance.  Summit Community Bank, as a bank with less than $10 billion in assets, is subject to these federal consumer financial laws, but continues to be examined for compliance by the FDIC, its primary federal banking regulator.

The CFPB has issued final regulations implementing provisions of the Dodd-Frank Act that require all creditors to determine a consumer’s ability to repay a mortgage loan before making a loan.  The final rule, referred to as the Ability-to Repay (ATR)/Qualified Mortgage (QM) standards, provide that a lender making a special type of loan, known as a Qualified Mortgage, is entitled to presume that the loan complies with the ATR safe harbor requirements.  The rule establishes different types of Qualified Mortgages that are generally identified as loans with restrictions on loan features, limits on fees being charged and underwriting requirements.

The USA Patriot Act of 2001 and its related regulations require insured depository institutions, broker-dealers and certain other financial institutions to have policies, procedures and controls to detect, prevent and report money laundering and terrorist financing.  The statute and its regulations also provide for information sharing, subject to conditions, between federal law enforcement agencies and financial institutions, as well as among financial institutions, for counter-terrorism purposes.  Federal banking regulators are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering activities of the applicants. Summit expects to continue to devote significant resources to its Bank Secrecy Act/anti-money laundering program, particularly as risks persistently emerge and evolve and as regulatory expectations escalate.

The Sarbanes-Oxley Act of 2002 (“SOA”) addresses, among other issues, corporate governance, auditing and accounting, executive compensation and enhanced and timely disclosure of corporate information.  SOA requires our Chief Executive Officer and Chief Financial Officer each to certify that Summit’s Quarterly and Annual Reports do not contain any untrue statement of a material fact. The rules have several requirements, including requiring these officers certify that:  they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal controls; they have made certain disclosures to our auditors and the audit and compliance committee of the Board of Directors about our internal controls; and they have included information in Summit’s Quarterly and Annual Reports about their evaluation and whether there have been significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation.

Furthermore, in response to the directives of the SOA, NASDAQ adopted substantially expanded corporate governance criteria for the issuers of securities quoted on the NASDAQ Capital Market (the market on which our common stock is listed for trading).  The NASDAQ rules govern, among other things, the enhancement and regulation of corporate disclosure and internal governance of listed companies and of the authority, role and responsibilities of their boards of directors and, in particular, of “independent” members of such boards of directors, in the areas of nominations, corporate governance, compensation and the monitoring of the audit and internal financial control processes.

In 2023, the SEC issued a final rule that requires disclosure of material cybersecurity incidents, as well as cybersecurity risk management, strategy and governance. Under this rule, banking organizations that are SEC registrants must generally disclose information about a material cybersecurity incident within four business days of determining it is material with periodic updates as to the status of the incident in subsequent filings as necessary.

In the ordinary course of business, we rely on electronic communications and information systems to conduct our operations and to store sensitive data. We employ an in-depth, layered, defensive approach that leverages people, processes and technology to

manage and maintain cybersecurity controls. We utilize both internal systems and third party consultants to provide the best defense possible. We employ a variety of preventative and detective tools to monitor, block and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats. Notwithstanding the strength of our defensive measures, the threat from cyber attacks is severe, attacks are sophisticated and increasing in volume and attackers respond rapidly to changes in defensive measures. While to date, we have not experienced a significant compromise, significant data loss or any material financial losses related to cybersecurity attacks, our systems and those of our customers and third-party service providers are under constant threat and it is possible that we could experience a significant event in the future. Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers. See Item 1A. Risk Factors1C. Cybersecurity for a further discussion of risks related to cybersecurity.

Federal law restricts subsidiary banks of a financial holding company from making certain extensions of credit to the parent financial holding company or to any of its subsidiaries; from investing in the holding company stock; and limits the ability of a subsidiary bank to take its parent company stock as collateral for the loans of any borrower. Additionally, federal law prohibits a financial holding company and its subsidiaries from engaging in certain tie-in arrangements in conjunction with the extension of credit or furnishing of services.

There are various statutory and regulatory limitations, including those set forth in sections 23A and 23B of the Federal Reserve Act and the related Federal Reserve Regulation W, governing the extent to which the bank will be able to purchase assets from or securities of or otherwise finance or transfer funds to us or our non-banking affiliates.  Among other restrictions, such transactions between the bank and any one affiliate (including Summit) generally will be limited to ten percent (10%) of the bank’s capital and surplus and transactions between the bank and all affiliates will be limited to twenty percent (20%) of the bank’s capital and surplus.  Furthermore, loans and extensions of credit are required to be secured in specified amounts and are required to be on terms and conditions consistent with safe and sound banking practices.

In addition, any transaction by a bank with an affiliate and any sale of assets or provisions of services to an affiliate generally must be on terms that are substantially the same, or at least as favorable, to the bank as those prevailing at the time for comparable transactions with non-affiliated companies.

The Federal Reserve Board reviews, as part of its regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as Summit, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The scope and content of the U.S. banking regulators’ policies on incentive compensation are continuing to develop.

The federal bank regulatory agencies issued joint guidance in 2010 on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. In addition, Section 956 of the Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to issue regulations or guidelines requiring covered financial institutions, including the Company and Summit Community, to prohibit incentive-based payment arrangements that encourage inappropriate risks by providing compensation that is excessive or that could lead to material financial loss to the institution. A proposed rule was issued in 2016, but this proposed rule has not been finalized. Also, pursuant to the Dodd-Frank Act, in 2015, the SEC proposed rules that would direct stock exchanges to require listed companies to implement clawback policies to recover incentive-based compensation from current or former executive officers in the event of certain financial restatements and would also require companies to disclose their clawback policies and their actions under those policies. The Company continues to evaluate the proposed rules, both of which are subject to further rulemaking procedures.

The Anti-Money Laundering Act of 2020 (“AMLA”), which amends the Bank Secrecy Act of 1970 (“BSA”), was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws. Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions; requires the development of standards for evaluating technology and internal processes for BSA compliance; expands enforcement- and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections.

Competition

We engage in highly competitive activities. Each activity and market served involves competition with other banks and savings institutions, as well as with non-banking and non-financial enterprises that offer financial products and services that compete directly with our products and services. We actively compete with other banks, mortgage companies and other financial service companies in our efforts to obtain deposits and make loans, in the scope and types of services offered, in interest rates paid on time deposits and charged on loans and in other aspects of banking.

Of particular note, banking laws limit the total amount we can lend to any one borrower generally to 15 percent of Summit Community’s Tier 1 capital plus its allowance for credit losses.  Summit Community evaluated the risks and rewards of lending up to this legal lending limit and established a self-imposed lending limit equal to 85 percent of its legal lending limit. Accordingly, institutions larger than Summit Community have a natural competitive advantage to serve the loan needs of larger clients as their legal lending limits are proportionally greater than ours.

In addition to competing with other banks and mortgage companies, we compete with other financial institutions engaged in the business of making loans or accepting deposits, such as savings and loan associations, credit unions, industrial loan associations, insurance companies, small loan companies, finance companies, real estate investment trusts, certain governmental agencies, credit card organizations and other enterprises.  In addition, competition for money market accounts from securities brokers has also intensified. Additional competition for deposits comes from government and private issues of debt obligations and other investment alternatives for depositors, such as money market funds.  We take an aggressive competitive posture and intend to continue vigorously competing for market share within our service areas by offering competitive rates and terms on both loans and deposits.

Human Capital Resources

Summit's service commitment to customers is a fundamental value of our company, and is embodied in our ‘Service Beyond Expectations’ culture. We recognize the critical role our employees play in implementing our ‘Service Beyond Expectations’ core strategy. The dedication of our employees resulted in Summit Community’s recognition as the number-one “Best-In-State-Bank” in West Virginia by Forbes in 2018. 2018, 2022 and 2023.This award was based on a survey of more than 25,000 customers in the United States for their opinions on their current and former banking relationships.

While our employees are focused on providing ‘Service Beyond Expectations’ to our customers and to the community, Summit’s Board of Directors and management team are focused on providing a workplace where employees feel valued and respected, are supported professionally and personally through on the job training, development programs and health and wellness programs, and are recognized and rewarded based on their individual results and performance and the performance of the Company.

Summit values diversity in our employees, customers, suppliers, marketplace, and community. We believe employing a diverse workforce that is reflective of our customers and the communities that we serve helps us to better identify and deliver ‘Service Beyond Expectations’ to meet our customers’ and communities’ particular financial needs. We are committed to attracting, retaining and promoting our employees regardless of sex, sexual orientation, gender identity, race, color, national origin, age, relation and physical ability. We identify and hire the best candidates for all open positions based on qualifying factors for the position and free from discrimination.

Summit is committed to employee development and retention. We provide professional development opportunities, on the job training and mentoring to all of our employees. We encourage our employees to pursue educational opportunities that will help improve their job skills and performance. Our employees attend training, development and compliance courses offered by the West Virginia Bankers Association, the Community Bankers of West Virginia and the Virginia Bankers Association, and financial and credit risk management courses offered by The Risk Management Association. We also support employees who desire to continue their education in areas that are directly related to their jobs. We reimburse fees for continuing education courses and for certain certifications. We also provide up to $500$1,000 per employee in educational assistance annually for those employees who wish to continue their education.

Our compensation and benefits package is designed to attract, motivate and retain employees. In addition to competitive base salaries, the Company provides a variety of short-term, long-term and commission-based incentive compensation programs to reward performance relative to key financial performance of the Company and customer experience metrics. The Company’s long-term compensation program is directly linked to the long-term performance of the Company, its common stock and Summit Community. Summit offers comprehensive health and benefit options to its employees consisting of health, dental, vision, life insurance, disability insurance, paid vacation, paid illness, and holidays. Summit also maintains an Employee Stock Ownership Plan (ESOP) which covers substantially all employees. Under the provisions of the ESOP, employee participants in the ESOP are not permitted to contribute to the ESOP, rather the cost of the ESOP is borne by the Company through annual contributions in amounts determined by the Company’s Board of Directors. Discretionary contributions were made by the Company for 20212023 of 5%. As of December 31, 2021,2023, the ESOP owned 4.3% 3.82% of the Company’s common stock.stock. In addition, the Company has a defined contribution plan with 401(k) provisions covering substantially all employees. Under the provisions of the plan, the Company matches 100% of the participant’s salary reduction contributions, up to 4% of such participant’s compensation.compensation. The Company may also make optional contributions at the discretion of the Company’s Board of Directors.

Available Information

In addition to the other information included or incorporated by reference into this report, readers should carefully consider that the following important factors, among others, could materially impact our business, future results of operations and future cash flows.

RISKS RELATING TO THE ECONOMIC ENVIRONMENT

Changes in interest rates could negatively impact our future earnings.

Changes in interest rates could reduce income and cash flow.  Our business, financial condition, liquidityincome and cash flow depend primarily on the difference between the interest earned on loans and investment securities and the interest paid on deposits and other borrowings.  Interest rates are beyond our control and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular, the FRB.  Changes in monetary policy, including changes in interest rates, will influence loan originations, purchases of investments, volumes of deposits and rates received on loans and investment securities and paid on deposits.  Our results of operations have been, and will likely continue to be, adversely affected by the COVID-19 pandemic.

We are subject to extensive government regulation and supervision.

The Company and Summit Community are subject to extensive federal and state regulation and supervision, which vests a significant amount of discretion in the various regulatory authorities. Banking regulations are primarily intended to protect depositors and customers, the Federal Deposit Insurance fund and the banking system as a whole, not security holders. These regulations and supervisory guidance affect our lending practices, capital structure, investment practices, dividend policy and growth, among other things. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. The Dodd-Frank Act instituted major changes to the banking and financial institutions regulatory regimes. Other changes to statutes, regulations or regulatory policies or supervisory guidance, including changes in interpretation or implementation of statutes, regulations, policies or supervisory guidance, could affect us in substantial and unpredictable ways. Such changes could subject us to additional costs, limit the types of financial services and products we may offer and/or increase the ability of non-banks to offer competing financial services and products, among other things. Failure to comply with laws, regulations, policies or supervisory guidance could result in enforcement and other legal actions by Federal or state authorities, including criminal and civil penalties, the loss of FDIC insurance, the revocation of a banking charter, other sanctions by regulatory agencies, civil money penalties and/or reputation damage.

In this regard, government authorities, including the bank regulatory agencies, are pursuing aggressive enforcement actions with respect to compliance and other legal matters involving financial activities, which heightens the risks associated with actual and perceived compliance failures. We anticipate increased regulatory scrutiny, in the course of routine examinations and otherwise, and new regulations in response to recent negative developments in the banking industry, which may increase our cost of doing business and reduce our profitability. Among other things, there may be increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, brokered deposits, unrealized losses in securities portfolios, liquidity, commercial real estate loan composition and concentrations, and capital as well as general oversight and control of the foregoing. We could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could have a material adverse effect on our business, financial condition and results of operations. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

We may become subject to additional regulatory restrictions in the event that our regulatory capital levels decline.

Although the Bank is qualified as “well capitalized” under the regulatory framework for prompt corrective action as of December 31, 2021,2023, there is no guarantee that we will not have a decline in our capital category in the future.  In the event of such a capital category decline, we would be subject to increased regulatory restrictions that could have a material adverse effect on our business, financial condition, results of operations, cash flows and/or future prospects.

If a bank is classified as undercapitalized, the bank is required to submit a capital restoration plan to the FDIC.  Pursuant to FDICIA, an undercapitalized bank is prohibited from increasing its assets, engaging in a new line of business, acquiring any interest in any company or insured depository institution, or opening or acquiring a new branch office, except under certain

circumstances, including the acceptance by the FDIC of a capital restoration plan for the bank. Furthermore, if a state non-member bank is classified as undercapitalized, the FDIC may take certain actions to correct the capital position of the bank; if a bank is classified as significantly undercapitalized or critically undercapitalized, the FDIC would be required to take one or more prompt corrective actions.  These actions would include, among other things, requiring sales of new securities to bolster capital; improvements in management; limits on interest rates paid; prohibitions on transactions with affiliates; termination of certain risky activities and restrictions on compensation paid to executive officers.  If a bank is classified as critically undercapitalized, FDICIA requires the bank to be placed into conservatorship or receivership within ninety (90) days, unless the Federal Reserve determines that other action would better achieve the purposes of FDICIA regarding prompt corrective action with respect to undercapitalized banks.

Under FDICIA, banks may be restricted in their ability to accept brokered deposits, depending on their capital classification. “Well capitalized” banks are permitted to accept brokered deposits, but all banks that are not well capitalized could be restricted from accepting such deposits.  The FDIC may, on a case-by-case basis, permit banks that are adequately capitalized to accept brokered deposits if the FDIC determines that acceptance of such deposits would not constitute an unsafe or unsound banking practice with respect to the bank.  These restrictions could materially and adversely affect our ability to access lower costscost funds and thereby decrease our future earnings capacity.

Our financial flexibility could be severely constrained if we are unable to renew our wholesale funding or if adequate financing is not available in the future at acceptable rates of interest.  We may not have sufficient liquidity to continue to fund new loan

Our decisions regarding credit risk could be inaccurate and our allowance for credit losses may be inadequate, which could materially and adversely affect our business, financial condition, results of operations, cash flows and/or future prospects.

Our loan portfolio subjects us to credit risk.  Inherent risks in lending also include fluctuations in collateral values and economic downturns.  Making loans is an essential element of our business and there is a risk that our loans will not be repaid.

The FDIC and the West Virginia Division of Financial Institutions review our allowance for credit and lease losses and may require us to establish additional allowances.  Additions to the allowance for credit and lease losses will result in a decrease in our net earnings and capital and could hinder our ability to grow our assets.

We may elect or be compelled to seek additional capital in the future, but capital may not be available when it is needed.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations.  In addition, we may elect to raise additional capital to support our business or to finance acquisitions, if any, or we may otherwise elect to raise additional capital.  Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control and based on our financial performance.  Accordingly, we cannot be assured of our ability to raise additional capital, if needed or on terms acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our financial condition, results of operations and prospects.

Item 1B.Unresolved Staff Comments

Not applicable.

Item 1C. Cybersecurity

Risk Management and Strategy

We maintain an Information Systems Security Program to safeguard all Summit and Summit Community’s information assets against unauthorized use, disclosure, modification, damage, or loss. This is achieved through a collaborative effort involving Operations, Technology, Compliance, Risk, and Senior Management. The Program is designed to:

The Company's Chief Operating Officer (COO) is designated as the program coordinator responsible for coordinating and overseeing the program.

Risk and Compliance Protocols

Annually, our Compliance Department conducts risk assessments to determine the effectiveness of controls outlined in the Information Systems Security Program. This is in alignment with the requirements of the Gramm-Leach Bliley Act (“GLBA”) and the Federal Financial Institutions Examination Council (“FFIEC”) guidance on securing customer information. Key focus areas include:

Monthly internal and external penetration testing is conducted and reviewed either by independent third parties or qualified employees not involved in developing or maintaining the security program. An audit is performed annually by qualified internal auditors or contracted independent parties and is overseen by the Company’s Audit & Compliance Committee of the Board of Directors ("Audit Committee"). Management promptly reviews test results to initiate necessary remediation, which are then reviewed by the Audit Committee, third-party auditors, and examiners.

In addition to assessing our own cybersecurity preparedness, we also identify, evaluate and manage cybersecurity risks associated with use of third-party vendors and service providers.

Cybersecurity Incident Response

The Company has established a Cybersecurity Incident Response Testing Plan ("CSIRTP"), integrated into the Business Continuity Plan. This plan outlines a systematic approach to managing information security incidents, supplemented by specific playbooks for various attack types. The CSIRTP requires approval by the Information Technology Steering Committee and is governed by the Business Continuity Plan that is approved annually by the Board of Directors. We are not aware of any cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company's business strategy, results of operations or financial condition.

Governance and Oversight

The Information Systems Security Program, reviewed and updated annually by the Board of Directors, is our benchmark for protecting the Company's confidential information. The COO, with over 30 years of experience in operations and information security, reports security incidents and updates to the Board as needed.

The Board and Senior Management are tasked with comprehensively understanding the Company’s risk environment. Incident management and response teams are in place to execute response protocols and strategies, mitigating business risk and supporting recovery initiatives. This team adapts based on the nature of incidents, ensuring a flexible and effective response.

The CSIRTP framework ensures timely reporting of cybersecurity incidents to the Executive Management Team. Incident severity is judged based on potential impacts, including damage, compromise, loss, and the likelihood of further exploitation. The Chief Risk Officer is informed of all incidents that are determined to be significant.  The Chief Executive Officer and the Board of Directors are notified of these incidents as necessary.

For further information on risks to the Company from cybersecurity threats, see "Our information systems may experience failure, interruption or breach in security" under Item 1A. Risk Factors.

		Number of Offices
Office Locations by State		Owned				Leased				Total
Summit Community Bank
West Virginia			26				3				29
Virginia			10				4				14
Maryland			5				4				9
Delaware			—				1				1
Kentucky			—				1				1

We believe that the premises occupied by us and our subsidiary generally are well located and suitably equipped to serve as financial services facilities.  See Notes 9 and 10 of our consolidated financial statements beginning on page 98.89.

Item 3.Legal Proceedings

Information required by this item is set forth under the caption "Legal Contingencies" in Note 17 of our consolidated financial statements beginning on page 109.99.

Item 4.Mine Safety Disclosures

Not applicable.

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PART II.

Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Dividend and Market Price Information:Our stock trades on the NASDAQ Global Select Market under the symbol “SMMF.”  

As of March 1, 2022,2024, there were approximately 1,114 shareholders1,345 shareholders of record of Summit’s common stock.

Purchases of Summit Equity Securities:We sponsor a qualified Employee Stock Ownership Plan (“ESOP”), which enables eligible employees to acquire shares of our common stock.  The cost of the ESOP is borne by us through annual contributions to an Employee Stock Ownership Trust in amounts determined by the Board of Directors. The Employee Stock Ownership Trust makes regular purchases of our common stock as excess funds within the plan are available.

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 purchase of its common stock under the Repurchase Plan for the quarter ended December 31, 2021.

Period			Total Number of Shares Purchased						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
October 1, 2021 - October 31, 2021			—						$	—					—						674,667
November 1, 2021 - November 30, 2021			—						—						—						674,667
December 1, 2021 - December 31, 2021			248,244						26.95						284,244						426,423

2023.

Period		Total Number of Shares Purchased				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
October 1, 2023 - October 31, 2023			—			$	—				—				426,423
November 1, 2023 - November 30, 2023			—				—				—				426,423
December 1, 2023 - December 31, 2023			—				—				—				426,423

Performance Graph: Set forth below is a line graph comparing the cumulative total return of Summit's common stock assuming reinvestment of dividends, with that of the NASDAQ Composite Index ("NASDAQ Composite"), and the S&P U.S. SmallCap Banks Index (previously known as the SNL Small Cap U.S. Bank IndexIndex) for the five year period ending December 31, 2021.

2023.

The cumulative total shareholder return assumes a $100 investment on December 31, 20162018 in the common stock of Summit and each index and the cumulative return is measured as of each subsequent fiscal year-end. There is no assurance that Summit's common stock performance will continue in the future with the same or similar trends as depicted in the graph.

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			For the Year Ended
Index			12/31/2016			12/31/2017			12/31/2018			12/31/2019			12/31/2020			12/31/2021
Summit Financial Group, Inc.			100.00			97.46			73.11			104.88			88.96			113.73
NASDAQ Composite			100.00			129.64			125.96			172.18			249.51			304.85
SNL Small Cap U.S. Bank			100.00			104.33			87.06			109.22			99.19			138.09

		For the Year Ended
Index		12/31/2018				12/31/2019				12/31/2020				12/31/2021				12/31/2022				12/31/2023
Summit Financial Group, Inc.			100.00				143.47				121.68				155.57				145.18				185.62
NASDAQ Composite			100.00				136.69				198.10				242.03				163.28				236.17
S&P U.S. SmallCap Banks Index			100.00				125.46				113.94				158.62				139.85				140.55

TheStock Performance Graph and related information shall not be deemed “soliciting material”“soliciting material” or to be “filed”“filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that Summit specifically incorporates it by reference into such filing.

Item 6.Reserved

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

This annual report 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.  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.  In order to comply with the terms of the safe harbor, we note that a variety of factors could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in those forward-looking statements.

Although we believe the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially. Factors that might cause such a difference include: the effect of the COVID-19 crisis, including the negative impacts and disruptions on the communities we serve, and the domestic and global economy, which may have an adverse effect on our business;  current and future economic and market conditions, including the effects of declines in housing prices, high unemployment rates, U.S. fiscal debt, budget and tax matters, geopolitical matters, and any slowdown in global economic growth; 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 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.

DESCRIPTION OF BUSINESS

We are a $3.58$4.63 billion community-based financial services company providing a full range of banking and other financial services to individuals and businesses through our our community bank, Summit Community Bank, Inc., which has a total of 4554 banking offices located in West Virginia,Virginia, Kentucky, Maryland, and Kentucky.Delaware.  We have a trust and wealth management division offering trust services and other non-bank financial products principally within our community bank's market area.

OVERVIEW

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.

Key Items in 2021

•Our earnings per diluted share increased from $2.41 in 2020 to $3.47 in 2021.

•Our return on average equity increased to 14.76% from 11.80% and return on average tangible common equity increased from 14.73% to 19.29%.

•2021 net income applicable to common shares was $45.15 million ($3.47 per diluted share) compared to $31.33 million ($2.41 per diluted share) in 2020.

•Net interest margin decreased 17 basis points in 2021, principally due to a 44 basis point decrease in cost of interest bearing funds compared to a 52 basis point decrease in our yield on interest earning assets.

•Net revenues increased $14.6 million, or 12.6 percent during 2021 primarily as result of increased interest income related to loan growth and the MVB Bank branches and WinFirst Financial Corp. ("WinFirst") acquisitions and reduced deposit interest costs.

•We achieved loan growth, excluding mortgage warehouse lines of credit, acquired loans and PPP loans, of 18.3 percent, or $382.1 million during 2021.

•Nonperforming assets declined to their lowest level since 2008, representing 0.63 percent of total assets at year end 2021 compared to 1.16 percent at the prior year end.

2023

•

Our earnings per diluted share decreased from $4.08 in 2022 to $3.81 in 2023.

•

Our return on average equity decreased to 13.69% from 15.83% and return on average tangible common equity decreased from 21.03% to 18.34%.

•

2023net income applicable to common shares was $54.3 million ($3.81 per diluted share) compared to $52.3 million ($4.08 per diluted share) in 2022.

•

On April 1, 2023, we completed our acquisition of PSB.  Accordingly, PSB’s results of operations are included in our consolidated results of operation from the date of acquisition.  Upon acquisition, PSB had total assets of $568.3 million, loans amounting to $381.5 million, and deposits totaling $498.0 million.

•

In August 2023, we entered into an Agreement and Plan of Reorganization with Burke & Herbert, a $3.6 billion asset bank holding company headquartered in Alexandria, Virginia, pursuant to which Summit will merge with and into Burke & Herbert, with Burke & Herbert as the surviving entity. Immediately following the Merger, Summit Community will be merged with Burke & Herbert’s wholly-owned banking subsidiary, Burke & Herbert Bank & Trust Company, with Burke & Herbert Bank the surviving bank. The transaction is expected to close in second quarter 2024.

•

We incurred acquisition-related expenses totaling $6.4 million in 2023 as result of the PSB and Burke & Herbert transaction

•

Net interest margin increased 11 basis points in 2023, principally due to our loan growth and PSB's favorable deposit mix.

•

Net revenues increased $30.3 million, or 20.6 percent during 2023 primarily as result of increased interest income related to loan growth and the PSB acquisition.

•

We achieved loan growth, excluding mortgage warehouse lines of credit and PPP loans, of 21.0 percent, or $620.3 million during2023.

•

Nonperforming assets remained relatively stable, representing 0.35 percent of total assets at year end 2023 compared to 0.33 percent at the prior year end.

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•During 2021, provisions for credit losses decreased by $10.5 million, which reflects credit loss accounting rules adopted in 2020 which required us to record all estimated future losses in our loan portfolio, and this contributed significantly to our credit loss provision for 2020 as we recorded our estimate of credit losses expected to result from the COVID-19 pandemic.

•Cash dividends paid on our common stock in 2021 totaled $0.70 per share compared to $0.68 paid per share in 2020.

•We completed the acquisition of substantially all of MVB Bank’s southern West Virginia community banking operations, including four full-service branches and two drive-up locations in and around the state’s largest cities of Charleston and Huntington during third quarter 2021. These branches had total loans of $54.3 million and deposits of $164.0 million.

•

Cash dividends paid on our common stock in 2023 totaled $0.84 per share compared to $0.76 paid per share in2022.

OUTLOOK

The year just concluded represents another significant milestone relative to Summit’s goal to be a consistent growth, high-performing community banking institution. While we expect the B&H merger to close in second quarter 2024, if in the unlikely event that merger would not happen to occur, we are positioned well going forward. Our solid lending activity and strong core operating performance of the past year offer significant evidence of our progress. In addition, our acquisition strategy continued to present us with significant opportunities for ongoing performance enhancement. Looking forward to 2022,2024, while we could be challenged by a variety of potential economic uncertainties, we anticipate sustaining our recent positive trends with respect to:  revenue growth, loan portfolio growth, a relatively stable net interest margin, low overhead, and stability in overall levels of problem assets.

COVID-19 IMPACTS

Overview

During 2020 and to a lesser extent in 2021, our business has been, and continues to be somewhat impacted by the ongoing COVID-19 pandemic. As further discussed in “Results of Operations,” the current interest rate environment, borrower credit quality and market volatility, among other factors, continue to impact our performance. Although we are unable to estimate the magnitude, we expect the pandemic and the resulting economic environment will continue to affect our future operating results. The longer-term potential impact on our business could depend to a large extent on future developments and actions taken by authorities and other entities to contain COVID-19 and its economic impact. Furthermore, the sustainability of the economic recovery observed in 2021 remains unclear and significant volatility could continue for a prolonged period as the potential exists for additional variants of COVID-19, including the recent Omicron variant, to impede the global economic recovery and exacerbate geographic differences in the spread of, and response to, COVID-19.

Impact on our Operations 

Summit continues to address the issues arising as a result of COVID-19 as we have implemented various plans, strategies and protocols to protect our employees, maintain services for clients, assure the functional continuity of our operating systems, controls and processes, and mitigate financial risks posed by changing market conditions. While governmental entities have generally eased temporary business closures and all of our offices are now open as normal without restriction and approved vaccines are being administered throughout our footprint, it remains unknown when, or if, there will be a return to historical norms of economic and social activity.

Impact on our Financial Position and Results of Operations

Lending and Credit Risks: While we have not experienced any material charge-offs related to COVID-19, our allowance for credit losses ACL computation and resulting provision for credit losses are significantly impacted by the estimated potential future economic impact of the COVID-19 crisis. Refer to the Asset Quality section of this Management's Discussion and Analysis of Financial Condition and Results of Operations for further details regarding provision for credit losses.

We took actions to identify and assess our COVID-19 related credit exposures by asset classes and borrower types. Depending on the demonstrated need of the client, in certain cases, we either modified to interest only or deferred the full loan payment. The aggregate balances of loans the Company had modified as result of COVID-19 at December 31, 2020 totaled $79.3 million. As of December 31, 2021, all modified loans had returned to normal status.

Capital and Liquidity: Our capital management activities, coupled with our historically strong earnings performance and prudent dividend practices, have allowed us to build and maintain strong capital reserves. At December 31, 2021, all of Summit’s regulatory capital ratios significantly exceeded well-capitalized standards. More specifically, the Company bank

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subsidiary’s Tier 1 Leverage Ratio, a common measure to evaluate a financial institutions capital strength, was 10.4% at December 31, 2021, which is well in excess of the well-capitalized regulatory minimum of 5.0%.

In addition, management believes the Company’s liquidity position is strong. The Company’s bank subsidiary maintains a funding base largely comprised of core noninterest bearing demand deposit accounts and low cost interest-bearing transactional deposit accounts with clients that operate or reside within the footprint of its branch bank network. At December 31, 2021, the Company’s cash and cash equivalent balances were $78.5 million. In addition, Summit maintains an available-for-sale securities portfolio, comprised primarily of highly liquid U.S. agency securities, highly-rated municipal securities and U.S. agency-backed mortgage backed securities, which serves as a ready source of liquidity. At December 31, 2021, the Company’s available-for-sale securities portfolio totaled $401.1 million, $257.0 million of which was unpledged as collateral. The Company bank subsidiary’s unused borrowing capacity at the Federal Home Loan Bank of Pittsburgh at December 31, 2021 was $982.2 million, and it maintained $279.5 million of borrowing availability at the Federal Reserve Bank of Richmond’s discount window.

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 accompanying consolidated financial statements.  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.

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 the allowance for credit losses, 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.

Allowance for Credit Losses:The allowance for credit losses represents our estimate of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because it requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on loans individually evaluated, estimated losses on pools of homogeneous loans based on historical loss experience and consideration of current and future economic trends and conditions, all of which may be susceptible to significant change.  The loan portfolio also represents the largest asset type on our consolidated balance sheet.  To the extent forecasted economic conditions change considerably and/or actual outcomes differ from our estimates, additional provisions for credit losses may be required that would negatively impact earnings in future periods.  Note 7 to the accompanying consolidated financial statements describes the methodology used to determine the allowance for credit losses for loans and a discussion of the factors driving changes in the amount of the allowance for credit losses for loans is included in the Asset Quality section of this financial review. Note 17 to the accompanying consolidated financial statements describes our policies and methodology used to calculate the allowance for credit losses for off-balance-sheet credit exposures.

Fair Value Measurements:Fair value is based upon the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants, including, but not limited to, property held for sale, individually evaluated collateral dependent loans and derivatives. Based on the observability of the inputs used in the valuation techniques, we classify our financial assets and liabilities measured and disclosed at fair value in accordance with a three-level hierarchy (e.g., Level 1, Level 2 and Level 3) . Fair value determination requires that we make a number of significant judgments. In determining the fair value of financial instruments, we use market prices of the same or similar instruments whenever such prices are available. We do not use prices involving distressed sellers in determining fair value. If observable market prices are unavailable or impracticable to obtain, then fair value is estimated using modeling techniques such as discounted cash flow analyses. These modeling techniques incorporate our assessments regarding assumptions that market participants would use in pricing the asset or the liability, including assumptions about the risks inherent in a particular valuation technique and the risk of nonperformance.

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Fair value is used on a recurring basis for certain assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a non-recurring basis to evaluate assets or liabilities for impairment or for disclosure purposes.

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Accounting for Acquired Loans: Loans acquired are initially recorded at their acquisition date fair values. The fair value of the acquired loans are based on the present value of the expected cash flows, including principal, interest and prepayments. Periodic principal and interest cash flows are adjusted for expected losses and prepayments, then discounted to determine the present value and summed to arrive at the estimated fair value. Fair value estimates involve assumptions and judgments as to credit risk, interest rate risk, prepayment risk, liquidity risk, default rates, loss severity, payment speeds, collateral values and discount rate.

Acquired loans are divided into loans with evidence of credit quality deterioration  (acquired impaired ("PCI") before adoption of ASC 326 and purchased credit deteriorated ("PCD") post adoption) and loans that do not meet this criteria (acquired performing). Acquired impaired loans (PCI) have experienced a deterioration of credit quality from origination to acquisition for which it is probable that we will be unable to collect all contractually required payments receivable, including both principal and interest. In the assessment of credit quality, numerous assumptions, interpretations and judgments must be made, based on internal and third-party credit quality information and ultimately the determination as to the probability that all contractual cash flows will not be able to be collected. This is a point in time assessment and inherently subjective due to the nature of the available information and judgment involved.

Subsequent to the acquisition date, we continue to estimate the amount and timing of cash flows expected to be collected on acquired impaired loans (PCI). Increases in expected cash flows will generally result in a recovery of any previously recorded allowance for credit losses, to the extent applicable, and/or a reclassification from the nonaccretable difference to accretable yield, which will be recognized prospectively. The present value of any decreases in expected cash flows after the acquisition date will generally result in an impairment charge recorded as a provision for credit losses, resulting in an increase to the allowance for credit losses.

ASC 326 replaced the concept of purchased credit impaired loans (PCI assets) with the concept of purchased financial assets with credit deterioration (PCD assets).

A PCD asset is recorded at the purchase price plus the allowance for credit losses expected at the time of acquisition. Under this method, there is no credit loss expense affecting net income on acquisition. Changes in estimates of expected credit losses after acquisition are recognized as credit loss expense (or reversal of credit loss expense) in subsequent periods as they arise.

An asset is considered a PCD asset if, on the acquisition date, it has experienced a more-than-insignificant deterioration in credit quality since loan origination. FASB did not define the term “more-than-insignificant deterioration in credit quality”. They did however, state that they did not intend for PCD accounting to be limited to financial assets that are considered nonaccrual or impaired under legacy US GAAP; instead, it intended the term to include additional assets that have experienced a more-than-insignificant deterioration in credit quality since loan origination. Therefore the determination of what constitutes a PCD asset is left to management judgement.

Summit Community Bank has determined the following would constitute a “more-than-insignificant deterioration in credit quality”:

•Nonaccrual status

•Greater than 60 days past due at any time since loan origination

•Risk rating of OLEM, Substandard, Doubtful or Loss

•

Nonaccrual status

•

Greater than 60 days past due at any time since loan origination

•

Risk rating of OLEM, Substandard, Doubtful or Loss

We established a materiality limit of $50,000 for evaluating loans for PCD status. Subsequent to the acquisition date of PCD assets, we continue to estimate the amount and timing of cash flows expected to be collected on these acquired loans. Increases in expected cash flows will generally result in a recovery of any previously recorded allowance for credit losses, to the extent applicable. The present value of any decreases in expected cash flows after the acquisition date will generally result in additional provision for expected credit losses, resulting in an increase to the allowance for credit losses.

For acquired performing loans, the difference between the acquisition date fair value and the contractual amounts due at the acquisition date represents the fair value adjustment. Fair value adjustments may be discounts (or premiums) to a loan’s cost basis and are accreted (or amortized) to interest income over the loan’s remaining life using the level yield method. Based on ASC 326, aA purchased financial asset that does not qualify as a PCD asset is accounted for similar to an originated financial asset. Generally, this means that an entity recognizes the allowance for credit losses for non-PCD assets through net income at acquisition. These purchased performing loans are accounted for through our CECL methodology as basically we would a new origination. Therefore, upon adoption of ASC 326, accounting for purchased performing acquired loans results in the bank

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recognizing a fair value adjustment to the loan at acquisition and also establishing a provision for excepted credit losses as in the same manner of an originated asset.

See Note 3 and Note 7 of the accompanying consolidated financial statements for additional information regarding our acquired loans.

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.

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RESULTS OF OPERATIONS

Earnings Summary

Net income applicable to common shares increased 44.1%3.9% during 20212023 to $45.1$54.3 million, compared to $31.3$52.3 million in 20202022 and $31.9$45.1 million in 2019.2021. Net income applicable to common shares was $3.47, $2.41$3.81, $4.08 and $2.53$3.47 per diluted share for 2021, 20202023, 2022 and 2019,2021, respectively, representing a 44.0%6.6% decrease in 2023 and a 17.6% increase in 2021 and a 4.7% decrease in 2020.2022. Return on average equity was 13.69% in 2023 compared to 15.83% in 2022 and 14.76% in 2021 compared to 11.80% in 2020 and 13.43% in 2019.2021. Return on average assets for the year ended December 31, 20212023 was 1.36%1.25% compared to 1.13%1.42% in 20202022 and 1.40%1.36% in 2019.

2021.

2021 2023net income applicable to common shares was positively impacted by higher net interest income of $27.6 million (or $1.94 per diluted share) and $2.7 million (or $0.19 per diluted share) increased noninterest revenue. Partially offsetting these positive impacts were $6.3 million (or $0.44 per diluted share) higher acquisition related expenses $5.8 million (or $0.41 per diluted share) higher salaries and employee benefits and $5.3 million (or $0.37 per diluted share) increased provision for credit losses.

2022 net income applicable to common shares was positively impacted by higher net interest income of $19.1 million (or $1.49 per diluted share), $1.5 million (or $0.12 per diluted share) lower net foreclosed properties expenses and $1.1 million (or $0.09 per diluted share) fewer acquisition related expenses. Partially offsetting these positive impacts were $708,000 (or $0.06 per diluted share) realized securities losses, $6.1 million (or $0.47 per diluted share) higher salaries and employee benefits and $2.5 million (or $0.20 per diluted share) decreased mortgage origination revenue.

2021 net income was positively impacted by higher net interest income of $14.5 million (or $1.11 per diluted share) and $10.5 million (or $0.81 per diluted share) lower provision for credit losses.  Partially offsetting these positive impacts were $3.0 million (or $0.23 per diluted share) fewer realized securities gains, $3.1 million (or $0.24 per diluted share) higher salaries and employee benefits and $1.3 million (or $0.10 per diluted share) increased other noninterest expenses.expense.

2020 net income was positively impacted by higher net interest income of $18.4 million (or $1.42 per diluted share), $1.5 million (or $0.12 per diluted share) higher realized securities gains and a $2.0 million increase (or $0.16 per diluted share) in mortgage origination revenue. The $13.0 million increase in provision for credit losses (or $1.00 per diluted share), lower insurance commission revenue of $1.7 million (or $0.13 per diluted share) as result of the sale of our former insurance subsidiary during 2019 (which generated a 2019 gain of $1.9 million pre-tax, or $0.15 per diluted share) and higher salaries and employee benefits of $3.1 million (or $0.24 per diluted share) partially offset these positive impacts.

2019 net income was positively impacted by higher net interest income of $7.3 million (or $0.58 per diluted share), $1.3 million (or $0.10 per diluted share) higher realized securities gains and the $1.9 million pre-tax (or $0.15 per diluted share) gain recognized on the sale of our former insurance subsidiary, Summit Insurance Services, LLC. Lower insurance commission revenue of $2.4 million (or $0.19 per diluted share) and higher writedowns of OREO properties of $1.3 million (or $0.10 per diluted share) partially offset these positive impacts.

Net Interest Income

The major component of our net earnings is net interest income, which is the excess of interest earned on earning assets over the interest expense incurred on interest bearing sources of funds.  Net interest income is affected by changes in volume, resulting from growth and alterations of the balance sheet's composition, fluctuations in interest rates and maturities of sources and uses of funds.  We seek to maximize net interest income through management of our balance sheet components.  This is accomplished by determining the optimal product mix with respect to yields on assets and costs of funds in light of projected economic conditions, while maintaining portfolio risk at an acceptable level.

The Federal Reserve influences the general market rates of interest, including the deposit and loan rates offered by many financial institutions. Our loan portfolio is significantly affected by changes in the target Federal funds rate set by the Federal Open Market Committee of the Federal Reserve. As of December 31, 2023, approximately36.7% of our loans had a fixed interest rate, while approximately 35.5% had adjustable rates and approximately 27.8% had floating interest rates. Our adjustable rate loans typically reprice every 1 to 5 years at rates tied to FHLB advance rate of the same term as each adjustable rate loan’s repricing period. Our floating rate loans reprice at periods ranging from daily to quarterly at rates primarily tied to or derived from the prime interest rate, the Secured Overnight Financing Rates ("SOFR").

Select average market rates for the periods indicated are presented in the table below.

		2023				2022				2021
Federal funds -- high target			5.20	%			1.87	%			0.25	%
Interest on reserve balances			5.10				1.76				0.13
Prime			8.20				4.86				3.25
SOFR			5.01				1.65				0.04

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As of December 31, 2023, the target range for the federal funds rate was 5.25% to 5.50%. In December 2023, the Federal Reserve released its Summary of Economic Projections wherein the midpoint of the projected appropriate target range for the federal funds rate would decline to 4.6% by the end of 2024 and subsequently decrease to 3.6% by the end of 2025. While there can be no such assurance that any increases and decreases in the Federal funds rate will occur, these projections imply up to a 75 basis point decrease in the Federal funds rate during 2024, followed by a 100 basis point decrease in 2025.

See Item 7A. Quantitative and Qualitative Disclosures About Market Risk elsewhere in this report for information about our sensitivity to interest rates. Further analysis of the components of our net interest margin is presented below.

Net interest income on a fully tax equivalent basis, average balance sheet amounts and corresponding average yields on interest earning assets and costs of interest bearing liabilities for the years 20172019 through 20212023 are presented in Table I.  Table II presents, for the periods indicated, the changes in interest income and expense attributable to (a) changes in volume (changes in volume multiplied by prior period rate) and (b) changes in rate (change in rate multiplied by prior period volume).  Changes in interest income and expense attributable to both rate and volume have been allocated between the factors in proportion to the relationship of the absolute dollar amounts of the change in each.

Net interest income on a fully tax equivalent basis totaled $111.0$158.1 million, $96.5$130.3 million and $78.0$111.0 million for the years ended December 31, 2021, 20202023, 2022 and 2019,2021, respectively, representing an increase of 15.0%21.3% in 20212023 and 23.7%17.4% in 2020.2022.  During 2021, 20202023, 2022 and 2019,2021, the volumes of both interest earning assets and interest bearing liabilities increased.

During

2023, our earnings on interest earning assets increased $84.1 million, primarily due to higher volumes while the cost of interest bearing liabilities increased $56.2 million primarily due to higher cost of funds.

During 2022, our earnings on interest earning assets increased $36.6 million, primarily due to higher volumes while the cost of interest bearing liabilities increased $17.3 million primarily due to higher cost of funds.

During 2021, our earnings on interest earning assets increased $7.5 million due to higher volumes while the cost of interest bearing liabilities decreased $7.0 million due to lower cost of funds.

During 2020, our earnings on interest earning assets increased $8.0 million due to higher volumes while the cost of interest bearing liabilities decreased $10.5 million due to lower cost of funds.

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During 2019, our earnings on interest earning assets increased $11.3 million due to both higher volumes and higher yields, while the cost of interest bearing liabilities increased $4.4 million due to higher cost of funds.

Total average earning assets increased 20.5%17.9% to $3.13$4.12 billion for 20212023 from $2.60$3.49 billion in 2020.2022.  Total average interest bearing liabilities increased 19.2%20.0% to $2.49$3.34 billion at December 31, 2021,2023, compared to $2.09$2.78 billion at December 31, 2020. 

2022. 

Our net interest margin was 3.84% for 2023 compared to 3.73% and 3.54% for 2022 and 2021, compared to 3.71% and 3.66% for 2020 and 2019, respectively. Our net interest margin decreased 17increased 11 basis points during 20212023 due to higher volumes of interest earning assets and lower cost of interest bearing funds.. Our net interest margin increased 519 basis points during 20202022 due to higher volumes of interest earning assets and lower cost of interest bearing funds..

Assuming no significant unanticipated changes in market interest rates, we expect growth in our net interest income to continue over the near term principally due to continuing expected growth in earning assets, primarily loans. We continue to monitor the net interest margin through net interest income simulation to minimize the potential for any significant negative impact.  

assets.

See the “Market Risk Management” section for discussion of the impact changes in market interest rates could have on us.  Further analysis of our yields on interest earning assets and interest bearing liabilities are presented in Tables I and II below.

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Table I - Average Balance Sheet and Net Interest Income Analysis
Interest Earnings & Expenses and Average Yields/Rates
Dollars in thousands			2021						2020						2019						2018						2017
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable			$	2,487,885					$	2,150,294					$	1,782,477					$	1,626,725					$	1,480,601
Tax-exempt (2)			9,681						15,352						15,315						15,776						14,899
Securities
Taxable			301,446						256,893						205,340						170,912						200,596
Tax-exempt (2)			159,266						122,386						90,823						136,913						129,342
Interest bearing deposits with other banks			175,615						56,399						39,408						38,148						43,400
			3,133,893						2,601,324						2,133,363						1,988,474						1,868,838
Noninterest earning assets
Cash and due from banks			19,582						16,139						12,939						9,517						8,492
Premises and equipment			54,762						50,418						41,778						36,025						31,750
Other assets			178,535						143,284						107,456						107,856						109,456
Allowance for credit losses on loans			(33,491)						(26,915)						(13,225)						(12,830)						(12,196)
Total assets			$	3,353,281					$	2,784,250					$	2,282,311					$	2,129,042					$	2,006,340
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits			$	1,044,817					$	789,064					$	586,938					$	471,725					$	358,225
Savings deposits			673,259						539,625						317,569						320,184						363,949
Time deposits			569,420						598,085						660,910						621,659						609,156
Short-term borrowings			140,146						130,411						194,450						228,142						205,743
Long-term borrowings and subordinated    debentures			58,974						28,396						20,315						44,132						65,629
			2,486,616						2,085,581						1,780,182						1,685,842						1,602,702
Noninterest bearing liabilities
Demand deposits			518,311						401,502						244,559						218,541						200,707
Other liabilities			38,545						31,712						20,341						15,574						16,669
Total liabilities			3,043,472						2,518,795						2,045,082						1,919,957						1,820,078
Shareholders' equity - preferred			10,327						—						—						—						—
Shareholders' equity - common			299,482						265,455						237,229						209,085						186,262
Total shareholders' equity			309,809						265,455						237,229						209,085						186,262
Total liabilities and shareholders' equity			$	3,353,281					$	2,784,250					$	2,282,311					$	2,129,042					$	2,006,340
Net Interest Income
Net Interest Margin

Table I - Average Balance Sheet and Net Interest Income Analysis
Interest Earnings & Expenses and Average Yields/Rates
Dollars in thousands		2023				2022				2021				2020				2019
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable		$	3,472,844			$	2,949,350			$	2,487,885			$	2,150,294			$	1,782,477
Tax-exempt (2)			4,618				4,961				9,681				15,352				15,315
Securities
Taxable			392,720				295,264				301,446				256,893				205,340
Tax-exempt (2)			210,945				195,558				159,266				122,386				90,823
Interest bearing deposits with other banks			34,948				46,248				175,615				56,399				39,408
			4,116,075				3,491,381				3,133,893				2,601,324				2,133,363
Noninterest earning assets
Cash and due from banks			21,948				17,473				19,582				16,139				12,939
Premises and equipment			60,123				55,219				54,762				50,418				41,778
Other assets			282,735				230,860				178,535				143,284				107,456
Allowance for credit losses on loans			(44,564	)			(34,630	)			(33,491	)			(26,915	)			(13,225	)
Total assets		$	4,436,317			$	3,760,303			$	3,353,281			$	2,784,250			$	2,282,311
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits		$	2,009,253			$	1,350,227			$	1,044,817			$	789,064			$	586,938
Savings deposits			490,219				627,630				673,259				539,625				317,569
Time deposits			479,573				479,545				569,420				598,085				660,910
Short-term borrowings			238,351				204,265				140,146				130,411				194,450
Long-term borrowings and subordinated debentures			123,777				123,331				58,974				28,396				20,315
			3,341,173				2,784,998				2,486,616				2,085,581				1,780,182
Noninterest bearing liabilities
Demand deposits			641,806				597,199				518,311				401,502				244,559
Other liabilities			49,966				42,005				38,545				31,712				20,341
Total liabilities			4,032,945				3,424,202				3,043,472				2,518,795				2,045,082
Shareholders' equity - preferred			14,920				14,920				10,327				—				—
Shareholders' equity - common			388,452				321,181				299,482				265,455				237,229
Total shareholders' equity			403,372				336,101				309,809				265,455				237,229
Total liabilities and shareholders' equity		$	4,436,317			$	3,760,303			$	3,353,281			$	2,784,250			$	2,282,311
Net Interest Income
Net Interest Margin

(1)For purposes of this table, nonaccrual loans are included in average loan balances. Included in interest and fees on loans are loan fees of $2,980,000, $1,980,000, $1,414,000, $1,210,000 $960,000, $839,000 and $998,000$960,000 for the years ended December 31, 2023, 2022, 2021, 2020 and 2019, 2018 and 2017, respectively.

(2)For purposes of this table, interest income on tax-exempt securities and loans has been adjusted assuming a Federal tax rate of 21% for 2021, 2020, 2019 and 2018 and 35% for 2017.. The taxable equivalent adjustment results in an increase in interest income of $1,539,000, $1,273,000, $1,050,000, $997,000 $922,000, $1,280,000 and $2,413,000$922,000 for the years ended December 31, 2023, 2022, 2021, 2020 and 2019, 2018 and 2017, respectively.

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		Interest Earnings/Expense																				Average Yield/Rate
Dollars in thousands		2023				2022				2021				2020				2019				2023				2022				2021				2020				2019
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable		$	217,615			$	145,188			$	112,268			$	104,986			$	96,499				6.27	%			4.92	%			4.51	%			4.88	%			5.41	%
Tax-exempt (2)			304				222				458				732				780				6.58	%			4.47	%			4.73	%			4.77	%			5.09	%
Securities
Taxable			18,412				8,442				5,884				5,996				6,511				4.69	%			2.86	%			1.95	%			2.33	%			3.17	%
Tax-exempt (2)			7,024				5,836				4,540				4,020				3,608				3.33	%			2.98	%			2.85	%			3.28	%			3.97	%
Interest bearing deposits with other banks			732				331				315				266				595				2.09	%			0.72	%			0.18	%			0.47	%			1.51	%
Total assets		$	244,087			$	160,019			$	123,465			$	116,000			$	107,993				5.93	%			4.58	%			3.94	%			4.46	%			5.06	%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits			55,471				13,863				1,408				2,187				6,394				2.76	%			1.03	%			0.13	%			0.28	%			1.09	%
Savings deposits			7,935				4,155				2,471				4,178				3,969				1.62	%			0.66	%			0.37	%			0.77	%			1.25	%
Time deposits			9,785				2,665				4,302				9,679				13,334				2.04	%			0.56	%			0.76	%			1.62	%			2.02	%
Short-term borrowings			6,816				3,786				1,768				2,330				5,303				2.86	%			1.85	%			1.26	%			1.79	%			2.73	%
Long-term borrowings and subordinated debentures			5,972				5,292				2,534				1,147				987				4.82	%			4.29	%			4.30	%			4.04	%			4.86	%
Total interest bearing liabilities		$	85,979			$	29,761			$	12,483			$	19,521			$	29,987				2.57	%			1.07	%			0.50	%			0.94	%			1.68	%
Net Interest Income		$	158,108			$	130,258			$	110,982			$	96,479			$	78,006
Net Interest Margin																							3.84	%			3.73	%			3.54	%			3.71	%			3.66	%

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									Interest Earnings/Expense																														Average Yield/Rate
Dollars in thousands			2021						2020						2019						2018						2017						2021						2020						2019						2018						2017
ASSETS
Interest earning assets
Loans, net of unearned interest (1)
Taxable			$	112,268					$	104,986					$	96,499					$	84,716					$	74,365					4.51		%				4.88		%				5.41		%				5.21		%				5.02		%
Tax-exempt (2)			458						732						780						718						835						4.73		%				4.77		%				5.09		%				4.55		%				5.60		%
Securities
Taxable			5,884						5,996						6,511						5,341						5,071						1.95		%				2.33		%				3.17		%				3.13		%				2.53		%
Tax-exempt (2)			4,540						4,020						3,608						5,375						6,060						2.85		%				3.28		%				3.97		%				3.93		%				4.69		%
Interest bearing deposits with other banks			315						266						595						539						609						0.18		%				0.47		%				1.51		%				1.41		%				1.40		%
Total assets			123,465						116,000						107,993						96,689						86,940						3.94		%				4.46		%				5.06		%				4.86		%				4.65		%
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Interest bearing liabilities
Interest bearing demand deposits			1,408						2,187						6,394						4,205						1,169						0.13		%				0.28		%				1.09		%				0.89		%				0.33		%
Savings deposits			2,471						4,178						3,969						3,233						2,563						0.37		%				0.77		%				1.25		%				1.01		%				0.70		%
Time deposits			4,302						9,679						13,334						10,237						7,478						0.76		%				1.62		%				2.02		%				1.65		%				1.23		%
Short-term borrowings			1,768						2,330						5,303						5,993						4,473						1.26		%				1.79		%				2.73		%				2.63		%				2.17		%
Long-term borrowings subordinated   debentures			2,534						1,147						987						1,944						2,697						4.30		%				4.04		%				4.86		%				4.40		%				4.11		%
Total interest bearing liabilities			12,483						19,521						29,987						25,612						18,380						0.50		%				0.94		%				1.68		%				1.52		%				1.15		%
Net Interest Income			$	110,982					$	96,479					$	78,006					$	71,077					$	68,560
Net Interest Margin																																	3.54		%				3.71		%				3.66		%				3.57		%				3.67		%

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Table II - Changes in Interest Margin Attributable to Rate and Volume
		2023 Versus 2022												2022 Versus 2021
		Increase (Decrease)												Increase (Decrease)
		Due to Change in:												Due to Change in:
Dollars in thousands		Volume				Rate				Net				Volume				Rate				Net
Interest earned on
Loans
Taxable		$	28,542			$	43,885			$	72,427			$	22,094			$	10,826			$	32,920
Tax-exempt			(16	)			98				82				(212	)			(24	)			(236	)
Securities
Taxable			3,393				6,577				9,970				(123	)			2,682				2,559
Tax-exempt			481				707				1,188				1,075				220				1,295
Interest bearing deposits with other banks			(99	)			500				401				(369	)			385				16
Total interest earned on interest earning assets			32,301				51,767				84,068				22,465				14,089				36,554
Interest paid on
Interest bearing demand deposits			9,328				32,280				41,608				527				11,928				12,455
Savings deposits			(1,083	)			4,863				3,780				(177	)			1,861				1,684
Time deposits			—				7,120				7,120				(612	)			(1,025	)			(1,637	)
Short-term borrowings			713				2,317				3,030				996				1,022				2,018
Long-term borrowings and subordinated debentures			19				661				680				2,761				(3	)			2,758
Total interest paid on interest bearing liabilities			8,977				47,241				56,218				3,495				13,783				17,278
Net interest income		$	23,324			$	4,526			$	27,850			$	18,970			$	306			$	19,276

Table II - Changes in Interest Margin Attributable to Rate and Volume
			2021 Versus 2020																		2020 Versus 2019
			Increase (Decrease)																		Increase (Decrease)
			Due to Change in:																		Due to Change in:
Dollars in thousands			Volume						Rate						Net						Volume						Rate						Net
Interest earned on
Loans
Taxable			$	15,641					$	(8,359)					$	7,282					$	18,589					$	(10,102)					$	8,487
Tax-exempt			(268)						(6)						(274)						2						(50)						(48)
Securities
Taxable			952						(1,064)						(112)						1,425						(1,940)						(515)
Tax-exempt			1,100						(580)						520						1,109						(697)						412
Interest bearing deposits with other banks			293						(244)						49						189						(518)						(329)
Total interest earned on interest earning assets			17,718						(10,253)						7,465						21,314						(13,307)						8,007
Interest paid on
Interest bearing demand deposits			568						(1,347)						(779)						1,683						(5,890)						(4,207)
Savings deposits			861						(2,568)						(1,707)						2,091						(1,882)						209
Time deposits			(444)						(4,933)						(5,377)						(1,187)						(2,468)						(3,655)
Short-term borrowings			164						(726)						(562)						(1,452)						(1,521)						(2,973)
Long-term borrowings and subordinated debentures			1,309						78						1,387						347						(187)						160
Total interest paid on interest bearing liabilities			2,458						(9,496)						(7,038)						1,482						(11,948)						(10,466)
Net interest income			$	15,260					$	(757)					$	14,503					$	19,832					$	(1,359)					$	18,473

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.

The following table summarizes the changes in the various factors that comprise the components of credit loss expense.

Table III - Provision for Credit Losses
Dollars in thousands		2023				2022
Provision for credit losses-loans
Due to changes in:
Volume and mix		$	5,805			$	8,971
Loss experience			(3,562	)			(2,703	)
Reasonable and supportable economic forecasts & other qualitative factors			2,159				1,727
Individually evaluated credits			4,048				(717	)
Acquired loans			3,005				—
Total provision for credit losses - loans			11,455				7,278
Provision for credit losses-unfunded commitments
Due to changes in:
Volume and mix			707				521
Loss experience			(313	)			(616	)
Reasonable and supportable economic forecasts & other qualitative factors			166				(233	)
Acquired loan commitments			235				—
Total provision for credit losses - unfunded commitments			795				(328	)
Total provision for credit losses - debt securities			—				—
Total provision for credit losses		$	12,250			$	6,950

Table III - Provision for Credit Losses
Dollars in thousands			2021						2020
Provision for credit losses-loans
Due to changes in:
Volume and mix			$	7,804					$	1,833
Loss experience			(2,137)						(1,183)
Reasonable and supportable economic forecasts			(3,916)						6,063
Individually evaluated credits			(1,629)						3,017
Acquired loans			793						3,013
Total provision for credit losses - loans			915						12,743
Provision for credit losses-unfunded commitments
Due to changes in:
Volume and mix			5,245						1,113
Loss experience			(587)						(616)
Reasonable and supportable economic forecasts			(1,713)						1,137
Acquired loan commitments			140						123
Total provision for credit losses - unfunded commitments			3,085						1,757
Total provision for credit losses - debt securities			—						—
Total provision for credit losses			$	4,000					$	14,500

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Our reasonable and supportable economic forecasts at December 31, 2021 compared to December 31, 2020 improved markedly as our forecasts for unemployment and GDP now reflect 2021's strengthening economic recovery while early 2020 economic forecasts were extraordinarily negative as result of the COVID-19 pandemic. Provision for credit losses during 2019 was calculated under the prior incurred loss accounting methodology. See the section captioned “Asset Quality” elsewhere in this discussion for further analysis of provision for credit losses related to loans and off-balance-sheet credit exposures.

Noninterest Income

Noninterest income totaled 0.60% 0.72%0.47%, 0.48% and 0.84%0.60% of average assets in 2021, 20202023, 2022 and 2019,2021, respectively.   Noninterest income totaled $20.9 million in 2023 compared to $18.2 million in 2022 and $20.2 million in 2021 compared to $20.1 million in 2020 and $19.2 million in 2019.2021. During 2021,2023, service charges on deposit accounts increased $827,000 while mortgage origination revenue decreased $903,000 and bank card revenue increased $1.2$1.0 million.  During 2022 , services charges on deposit accounts increased $1.1 million while mortgage origination revenue decreased $2.5 million and $1.4 million, respectively, whilewe recorded $708,000 realized gainslosses on debt securities decreased $3.0 million. However, most recently, mortgage origination volumes are lower as mortgage refinance opportunities have become more limited. The 2020 increase is primarily due to increased gains realized on debt securities and also increased mortgage origination revenue.securities. Further detail regarding noninterest income is reflected in the following table.

Table IV - Noninterest Income
Dollars in thousands		2023				2022				2021
Trust and wealth management fees		$	3,436			$	2,978			$	2,886
Mortgage origination revenue			577				1,480				3,999
Service charges on deposit accounts			6,977				6,150				5,032
Bank card revenue			7,299				6,261				5,896
Net gains on equity investments			740				265				202
Net realized (losses)/gains on debt securities			(266	)			(708	)			425
Bank owned life insurance and annuities income			1,576				1,211				1,026
Other			537				516				742
Total		$	20,876			$	18,153			$	20,208

Table IV - Noninterest Income
Dollars in thousands			2021						2020						2019
Trust and wealth management fees			$	2,886					$	2,495					$	2,564
Mortgage origination revenue			3,999						2,799						770
Service charges on deposit accounts			5,032						4,588						5,094
Bank card revenue			5,896						4,494						3,536
Gains on equity investments			202						—						—
Realized gains on debt securities, net			425						3,472						1,938
Gain on sale of Summit Insurance Services, LLC			—						—						1,906
Bank owned life insurance income			1,026						1,567						1,044
Other			742						668						2,351
Total			$	20,208					$	20,083					$	19,203

Noninterest Expense

Noninterest expense totaled $94.8 million, $72.9 million and $68.7 million, $62.3 million and $55.2 million, or 2.0%2.1%, 2.2%1.9%, and 2.4%2.0% of average assets for each of the years ended December 31, 2021, 20202023, 2022 and 2019.2021.  Total noninterest expense increased $6.4$21.9 million in 20212023 compared to 20202022 and increased $7.2$4.1 million in 20202022 compared to 2019.2021.  Our most notable changes in noninterest expense during 20212023 were increased salaries and employee benefits, increased equipmentacquisition related expense and increased other expenses and during 20202022 were increased salaries commissions and employee benefits, increased equipmentdecreased foreclosed properties expense increased FDIC premiums, increased acquisition-related expenses and increases in other expenses.decreased acquisition related expense.  Table V below presents a summary of our noninterest expenses for the past 3 years and the related year-over-year changes in each such expense.

Table V - Noninterest Expense
									Change																		Change
Dollars in thousands			2021						$						%						2020						$						%						2019
Salaries, commissions and employee benefits			$	34,386					$	3,106					9.9		%				$	31,280					$	2,953					10.4		%				$	28,327
Net occupancy expense			4,824						861						21.7		%				3,963						546						16.0		%				3,417
Equipment expense			6,990						1,225						21.2		%				5,765						793						15.9		%				4,972
Professional fees			1,578						40						2.6		%				1,538						(140)						(8.3)		%				1,678
Advertising and public relations			697						101						16.9		%				596						(102)						(14.6)		%				698
Amortization of intangibles			1,563						(96)						(5.8)		%				1,659						(42)						(2.5)		%				1,701
FDIC premiums			1,449						593						69.3		%				856						768						872.7		%				88
Bank card expense			2,668						443						19.9		%				2,225						405						22.3		%				1,820
Foreclosed properties expense, net of gains/losses			1,745						(745)						(29.9)		%				2,490						(8)						(0.3)		%				2,498
Acquisition-related expense			1,224						(447)						(26.8)		%				1,671						1,054						170.8		%				617
Other			11,615						1,347						13.1		%				10,268						930						10.0		%				9,338
Total			$	68,739					$	6,428					10.3		%				$	62,311					$	7,157					13.0		%				$	55,154

Table V - Noninterest Expense
						Change												Change
Dollars in thousands		2023				$				%				2022				$				%				2021
Salaries, commissions and employee benefits		$	46,296			$	5,844				14.4	%		$	40,452			$	6,066				17.6	%		$	34,386
Net occupancy expense			5,851				723				14.1	%			5,128				304				6.3	%			4,824
Equipment expense			9,094				1,841				25.4	%			7,253				263				3.8	%			6,990
Professional fees			1,775				147				9.0	%			1,628				50				3.2	%			1,578
Advertising and public relations			1,113				220				24.6	%			893				196				28.1	%			697
Amortization of intangibles			3,335				1,895				131.6	%			1,440				(123	)			(7.9	)%			1,563
FDIC premiums			2,458				1,234				100.8	%			1,224				(225	)			(15.5	)%			1,449
Bank card expense			3,429				501				17.1	%			2,928				260				9.7	%			2,668
Foreclosed properties expense, net of (gains)/losses			89				(147	)			(62.3	)%			236				(1,509	)			(86.5	)%			1,745
Acquisition-related expense			6,444				6,330				n/m				114				(1,110	)			(90.7	)%			1,224
Other			14,909				3,326				28.7	%			11,583				(32	)			(0.3	)%			11,615
Total		$	94,793			$	21,914				30.1	%		$	72,879			$	4,140				6.0	%		$	68,739

Salaries, commissions and employee benefits: These expenses are 9.9%14.4% higher in 20212023 compared to 20202022 primarily due to general merit increases, increased group health insurance premiums and the increased average number of annual full-time equivalent employees related to the southern West Virginia MVB branchesPSB acquisition in Q3 2021 and the WinFirst acquisition in Q4 2020.Q2 2023. These expenses were 10.4%17.6% higher in

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2020 2022 compared to 20192021 primarily due to general merit increases, increased group health insurance premiums and an increase in our average annual full-time equivalent employees, primarily those in conjunction with the Cornerstoneaccrued expenses related to employee bonus.

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Equipment: The 2023 and MVB Bank branches acquisitions in early 2020.

2022

Equipment: The 2021 and 2020 increases in equipment expense are primarily increased depreciation and amortization related to various technological upgrades, both hardware and software, including interactive teller machine upgrades made during the past three years and also recent acquisitions.

FDIC premiums: 2019 FDIC premiums were unusually lowacquisitions and increased rental expense due to the FDIC's Small Bank Assessment Credits resulting from the reserve ratio meeting the required 1.38 percent threshold. Balance sheet growth and the full utilization of this credit during 2020 resulted in increased recent acquisitions.

FDIC premiums for 2020. premiums:  The increase during 20212023 was primarily attributable to the higher assessment rate changed by the FDIC effective January 1, 2023. The decrease during 2022 was primarily due to a higherimproved quarterly assessment base resulting from our balance sheet growth.multipliers. 

Acquisition-related expense: Acquisition-related expenses increased during 2023 due to the PSB transaction which closed on April 1, 2023 and the pending merger with Burke & Herbert. These 2023 expenses are comprisedfor the year ended December 31, 2023 represent legal, due diligence and fairness opinion costs relative to the Burke & Herbert merger and included $4.16 million of data processing conversioncontract termination costs, executive and employee severance costs, write-downs of equipment and professionalbenefits and legal and consulting fees relatedassociated with the PSB acquisition.

Other: The increase in other expenses for the year ended December 31, 2023 compared to recent acquisitions.

Foreclosed properties expense, netthe same period of gains/losses:2022 are largely due to the following: 

•

Deferred director compensation plan-related income of $133,000 for the year ended December 31, 2023 compared to $612,000 in the comparable period of 2022. 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. During Q3 2022, we purchased investments to hedge the changes in the Plan participants' phantom investments which should serve to significantly reduce period-to-period volatility of the Plan's impact on our statements of income.

•	Internet banking expense totaled $1.7 million for the year ended December 31, 2023 compared to $1.4 million for the comparable period of 2022 due to increased customer usage.

•	Fraud losses increased from $450,000 for the year ended December 31, 2022 to $990,000 for the year ended December 31, 2023.

•	Data processing costs were $245,000 for the year ended December 31, 2023 compared to zero in 2022 due to the PSB data processing costs that continued until we merged our processing systems in third quarter 2023.
•	Telephone expense totaled $1.8 million for the year ended December 31, 2023 compared to $1.4 million for the comparable period of 2022.
•	Bank card losses totaled $825,000 for the year ended December 31, 2023 compared to $556,000 for the year ended December 31, 2022.

Foreclosed properties expense, net of gains/losses decreased for 2021 primarily as a result of lower writedowns of theses properties to their estimated fair values and fewer losses realized on sales of these properties.

Other:The 2021 increase2022 decrease in other expenses is primarily due to $259,000 increase$612,000 deferred director compensation plan-related income during 2022 compared to plan-related expense of $725,000 in internet banking expense due to increased internet activity2021 partially offset by customers, $306,000 increase in debit card costs due to increased usage by customers and $318,000$345,000 increased fraud losses. The 2020 increase in other expenses is primarily due to a $448,000 increase in service charges related to mortgage warehouse lineslosses, $304,000 increased Virginia franchise tax due to our balance sheet growth, $216,000 increased participationscurrency and $267,000 increase in debit card costs due tocoin delivery charges and $203,000 increased usage by customers.miscellaneous other taxes.

Income Tax Expense

Income tax expense for the years ended December 31, 2023, 2022 and 2021 2020 and 2019 totaled $11.7$15.2 million, $7.4$14.1 million and $7.7$11.7 million, respectively. Our effective tax rates (income tax expense as a percentage of income before taxes) for 2023, 2022 and 2021 2020were 21.5%, 20.9% and 2019 were 20.3%, 19.2% and 19.5%, respectively. Refer to Note 15 of the accompanying consolidated financial statements for further information and additional discussion of the significant components influencing our effective income tax rates.

CHANGES IN FINANCIAL POSITION

Our average assets increased during 20212023 to $3.35$4.44 billion, an increase of 20.4%17.9% above 2020's2022's average of $2.78$3.76 billion, and our year end December 31, 20212023 assets were $470.3$717.6 million more than December 31, 2020.2022.  Average assets increased 22.0%12.1% in 2020,2022 from 2019's2021's average of $2.28$3.35 billion.  

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Table VI - Summary of Significant Changes in Financial Position 2023 versus 2022
Dollars in thousands		December 31, 2022				Impact of PSB Acquisition				Increase (Decrease)				December 31, 2023
Assets
Cash and cash equivalents		$	44,717			$	14,364			$	(6,849	)		$	52,232
Debt securities available for sale			405,201				140,925				(43,364	)			502,762
Debt securities held to maturity			96,163				—				(1,936	)			94,227
Equity investments			29,494				63				(18,599	)			10,958
Other investments			16,029				554				4,547				21,130
Loans, net of unearned fees			3,082,818				363,006				235,788				3,681,612
Less: allowance for credit losses			(38,899	)			—				(9,191	)			(48,090	)
Loans, net			3,043,919				363,006				226,597				3,633,522
Property held for sale			5,067				—				(1,338	)			3,729
Premises and equipment			53,981				6,175				2,882				63,038
Accrued interest and fees receivable			15,866				1,500				2,638				20,004
Goodwill and other intangibles			62,150				15,615				(3,335	)			74,430
Cash surrender value of life insurance policies and annuities			71,640				12,290				1,749				85,679
Derivative financial instruments			40,506				—				(7,361	)			33,145
Other assets			31,959				6,775				732				39,466
Total assets		$	3,916,692			$	561,267			$	156,363			$	4,634,322
Liabilities
Non-interest bearing deposits		$	553,616			$	160,079			$	(120,119	)		$	593,576
Interest bearing deposits			2,616,263				337,474				167,835				3,121,572
Total deposits			3,169,879				497,553				47,716				3,715,148
Short-term borrowings			225,999				17,650				59,308				302,957
Long-term borrowings			658				5,143				(5,164	)			637
Subordinated debentures			103,296				—				486				103,782
Subordinated debentures owed to unconsolidated subsidiary trusts			19,589				—				—				19,589
Other liabilities			42,741				1,988				7,272				52,001
Shareholders' equity - preferred			14,920				—				—				14,920
Shareholders' equity - common			339,610				38,933				46,745				425,288
Total liabilities and shareholders' equity		$	3,916,692			$	561,267			$	156,363			$	4,634,322

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Table VI - Summary of Significant Changes in Financial Position 2021 versus 2020
						Balance December 31,						Impact of MVB Branches Acquisition (Southern WV)						Other Changes						Balance December 31,
Dollars in thousands						2020																		2021
Assets
Cash and cash equivalents						$	99,787					$	95,699					$	(117,028)					$	78,458
Debt securities available for sale						286,127						—						114,976						401,103
Debt securities held to maturity						99,914												(1,854)						98,060
Equity investments						—						—						20,202						20,202
Other investments						14,185						—						(2,881)						11,304
Loans, net						2,379,907						54,315						294,871						2,729,093
Property held for sale						15,588						—						(5,730)						9,858
Premises and equipment						52,537						3,302						532						56,371
Goodwill and other intangibles						55,123						10,509						(2,042)						63,590
Cash surrender value of life insurance policies and annuities						59,438						—						1,175						60,613
Other assets						43,778						260						4,029						48,067
Total assets						$	3,106,384					$	164,085					$	306,250					$	3,576,719
Liabilities
Deposits						$	2,595,651					$	164,040					$	183,398					$	2,943,089
Short-term borrowings						140,146						—						—						140,146
Long-term borrowings						699						—						(20)						679
Subordinated debentures						29,364												73,527						102,891
Subordinated debentures owed to unconsolidated subsidiary trusts						19,589						—						—						19,589
Other liabilities						39,355						45						3,452						42,852
Shareholders' equity - preferred						—						—						14,920						14,920
Shareholders' equity - common						281,580						—						30,973						312,553
Total liabilities and shareholders' equity						$	3,106,384					$	164,085					$	306,250					$	3,576,719

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Table VII - Summary of Significant Changes in Financial Position 2022 versus 2021
Dollars in thousands		December 31, 2021				Increase (Decrease)				December 31, 2022
Assets
Cash and cash equivalents		$	78,458			$	(33,741	)		$	44,717
Debt securities available for sale			401,103				4,098				405,201
Debt securities held to maturity			98,060				(1,897	)			96,163
Equity investments			20,609				8,885				29,494
Other investments			10,897				5,132				16,029
Loans, net of unearned fees			2,761,391				321,427				3,082,818
Less: allowance for credit losses			(32,298	)			(6,601	)			(38,899	)
Loans, net			2,729,093				314,826				3,043,919
Property held for sale			9,858				(4,791	)			5,067
Premises and equipment			56,371				(2,390	)			53,981
Accrued interest and fees receivable			10,578				5,288				15,866
Goodwill and other intangibles			63,590				(1,440	)			62,150
Cash surrender value of life insurance policies and annuities			60,613				11,027				71,640
Derivative financial instruments			11,187				29,319				40,506
Other assets			26,302				5,657				31,959
Total assets		$	3,576,719			$	339,973			$	3,916,692
Liabilities
Non-interest bearing deposits		$	568,986			$	(15,370	)		$	553,616
Interest bearing deposits			2,374,103				242,160				2,616,263
Total deposits			2,943,089				226,790				3,169,879
Short-term borrowings			140,146				85,853				225,999
Long-term borrowings			679				(21	)			658
Subordinated debentures			102,891				405				103,296
Subordinated debentures owed to unconsolidated subsidiary trusts			19,589				—				19,589
Other liabilities			42,852				(111	)			42,741
Shareholders' equity - preferred			14,920				—				14,920
Shareholders' equity - common			312,553				27,057				339,610
Total liabilities and shareholders' equity		$	3,576,719			$	339,973			$	3,916,692

Table VII - Summary of Significant Changes in Financial Position 2020 versus 2019
						Balance December 31,						Impact of Cornerstone Acquisition						Impact of MVB Branches Acquisition (Eastern Panhandle WV)						Impact of WinFirst Acquisition						Other Changes						Balance December 31,
Dollars in thousands						2019																														2020
Assets
Cash and cash equivalents						$	61,888					$	46,034					$	137,654					$	(8,675)					$	(137,114)					$	99,787
Debt securities available for sale						276,355						90,028						—						1,632						(81,888)						286,127
Debt securities held to maturity						—						—						—						—						99,914						99,914
Other investments						12,972						349						—						3,138						(2,274)						14,185
Loans, net						1,900,425						39,461						33,942						122,786						283,293						2,379,907
Property held for sale						19,276						10						—						146						(3,844)						15,588
Premises and equipment						44,168						664						2,334						144						5,227						52,537
Goodwill and other intangibles						23,022						11,539						14,790						7,287						(1,515)						55,123
Cash surrender value of life insurance     policies and annuities						43,603						2,715						—						2,072						11,048						59,438
Other assets						21,783						1,186						114						686						20,009						43,778
Total assets						$	2,403,492					$	191,986					$	188,834					$	129,216					$	192,856					$	3,106,384
Liabilities
Deposits						$	1,913,237					$	173,266					$	188,732					$	104,664					$	215,752					$	2,595,651
Short-term borrowings						199,345						—						—						3,000						(62,199)						140,146
Long-term borrowings						717						—						—						21,282						(21,300)						699
Subordinated debentures						—						—						—						—						29,364						29,364
Subordinated debentures owed to unconsolidated subsidiary trusts						19,589						—						—						—						—						19,589
Other liabilities						22,840						3,279						102						270						12,864						39,355
Shareholders' equity						247,764						15,441						—						—						18,375						281,580
Total liabilities and shareholders' equity						$	2,403,492					$	191,986					$	188,834					$	129,216					$	192,856					$	3,106,384

As highlighted in table VI, 2021's2023's balance sheet growth was primarily loans and debt securities available for sale.loans. As highlighted in table VII, the majority of the changes in our financial position in 20202022 versus 20192021 resulted from the acquisitions of Cornerstone, MVB branches, and WinFirst.growth in loans. Other changes in financial position are discussed below.

Cash and Cash Equivalents

The 20212022 net reduction of $117.0$33.7 million is primarily attributable to funding loan growth and the purchase of available for sale taxable and tax-exempt municipal securities with cash provided by increased customer deposits and the issuance of $75 million subordinated debentures. The 2020 net reduction of $137.1 million is primarily attributable to repayments of short-term Federal Home Loan Bank ("FHLB") advances, maturing brokered CDs, funding of $101.3 million of PPP loans and the cash consideration of $36.0 million paid in conjunction with the Cornerstone and WinFirst acquisitions.

growth.

Loan Portfolio

Table VIII depicts gross loan balances by type at December 31, as follows:

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Table VIII - Loans by Type
Dollars in thousands			2021						2020
Commercial			$	366,013					$	309,300
Commercial real estate			1,353,659						1,039,811
Construction and development			248,858						199,950
Residential mortgage			535,786						581,954
Mortgage warehouse lines			227,867						251,814
Consumer			32,053						33,572
Other			2,702						2,395
Total loans			$	2,766,938					$	2,418,796

Total loans averaged $2.5$3.5 billion in 2021,2023, which represented 74%78% of total average assets compared to $2.2$3.0 billion in 2020,2022, or 78%79% of total average assets. We experienced 17.3%$620.3 million or 21.0% loan growth in 2023, excluding mortgage warehouse lines, which increased $373.2 million (of which $54.3 million were acquired loans) in 2021, primarily as a result of our acquisition of PSB and an increase in the commercial real estate and construction and development portfolios, primarily due to additional commercial lending staff, following 2020's2022's growth of 20.9%$418.9 million or 16.5% and 2019's2021's growth of 7.9%$373.1 million or 17.3%.  Mortgage warehouse lines of credit declined $23.9$21.5 million in 20212023 and $97.5 million in 2022 due to a reduction in size of our participation arrangement with a regional bank to fund residential mortgage warehouse lines of medium- and large-sized mortgage originators located throughout the United StatesStates. 

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Table VIII presents contractual loan maturities at December 31, 2023  Table IX presents the portion of loans maturing after having grown $125.6 million in 2020 as we expanded our then existing line participations and established several new participations in light of strong mortgage refinance and home purchase activity nationally. Refer to Note 7one year that have fixed, floating or adjustable interest rates that fluctuate over the life of the accompanying consolidated financial statements for our loan maturities and a discussionloans in accordance with changes in an interest rate index.

Table VIII - Contractual Loan Maturities
Dollars in thousands		Within 1 Year				After 1 but within 5 Years				After 5 but within 15 Years				After 15 Years
Commercial		$	164,175			$	236,741			$	101,199			$	1,727
Commercial real estate - owner occupied
Professional & medical			4,636				46,767				62,912				42,626
Retail			4,266				40,749				92,229				33,147
Other			12,149				42,852				82,583				80,192
Commercial real estate - non-owner occupied
Hotels & motels			32,588				28,176				87,774				67,104
Mini-storage			260				2,009				27,498				38,750
Multifamily			15,940				97,912				52,965				135,481
Retail			10,208				85,631				94,675				63,732
Other			13,385				219,958				143,291				37,000
Construction and development
Land & land development			29,058				75,457				29,894				10,849
Construction			134,302				132,536				23,516				83,672
Residential 1-4 family real estate
Personal residence			881				8,312				65,344				288,196
Rental - small loan			11,042				19,448				43,538				68,637
Rental - large loan			10,577				10,304				33,611				62,122
Home equity			1,031				1,241				9,118				69,736
Mortgage warehouse lines			108,848				—				—				—
Consumer			5,763				28,390				9,422				181
Other
Credit cards			2,286				—				—				—
Overdrafts			1,013				—				—				—
		$	562,408			$	1,076,483			$	959,569			$	1,083,152

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Table IX - Loan Interest Rate Sensitivity
		Loans maturing after one year with:
Dollars in thousands		Fixed Interest Rates				Floating Interest Rates				Adjustable Interest Rates
Commercial		$	111,342			$	172,171			$	56,154
Commercial real estate - owner occupied
Professional & medical			37,710				48,386				66,209
Retail			72,908				11,230				81,987
Other			84,760				18,187				102,680
Commercial real estate - non-owner occupied
Hotels & motels			36,235				15,564				131,255
Mini-storage			6,118				13,721				48,418
Multifamily			71,964				85,562				128,832
Retail			95,841				10,615				137,582
Other			191,096				57,915				151,238
Construction and development (1)
Land & land development			71,155				17,890				27,155
Construction			87,769				62,651				89,304
Residential 1-4 family real estate
Personal residence			224,665				50				137,137
Rental - small loan			37,264				13,259				81,100
Rental - large loan			37,726				3,983				64,328
Home equity			142				79,953				-
Mortgage warehouse lines			-				-				-
Consumer			37,098				812				83
Other
Credit cards			-				-				-
Overdrafts			-				-				-
		$	1,203,793			$	611,949			$	1,303,462

(1) The majority of our adjustable rateconstruction loans as of December 31, 2021.

convert to permanent financings upon construction completion and stabilization which is typically a two to three year period and are reclassified to the appropriate loan category at that time.

In the normal course of business, we make various commitments and incur certain contingent liabilities, which are disclosed in Note 17 of the accompanying consolidated financial statements but not reflected in the accompanying consolidated financial statements.  There have been no significant changes in these types of commitments and contingent liabilities and we do not anticipate any material losses as a result of these commitments.

Debt Securities

Debt securities comprised approximately 14.0%12.9% of total assets at December 31, 20212023 compared to 12.4%12.8% at December 31, 2020.2022.  Average debt securities approximated $460.7$603.7 million for 20212023 or 21.5%23.0% more than 2020's2022's average of $379.3$490.8 million. At December 31, 2021, we did not own debt securities of any one issuer that were not issued by the U.S. Treasury or a U.S. Government agency that exceeded ten percent of shareholders’ equity.  Refer to Note 5 of the accompanying consolidated financial statements for details of amortized cost, the estimated fair values, unrealized gains and losses as well as the debt security classifications by type.  

Debt securities available for sale:sale: The 20212023 net increasedecrease (excluding acquired PSB debt securities) of $115.0$43.4 million is principally a result of purchasesa $4 million increase in the fair value of the portfolio, $135.7 million sales of securities (primarily taxable municipal securities and tax-exempt municipal securities), $40.7 million paydowns of mortgage-backed securities and $125.5 million purchases of securities, primarily mortgage-backed securities and municipal securities. The 20202022 net decreaseincrease of $81.9$4.1 million in securities available for sale is principally a result of sales of a large portion$52.3 million decrease in the fair value of the acquired Cornerstoneportfolio, $69.2 million sales of securities portfolio(primarily taxable and the salestax-exempt municipal securities), $37.9 million paydowns of a portionmortgage-backed securities and $168.9 million purchases of our tax-exempt municipals securities, whose proceeds were used to fund loan growthprimarily mortgage-backed securities and calls and maturities of brokered and direct CDs.

The maturity distribution of the available for salemunicipal securities portfolio at December 31, 2021, together with the weighted average yields for each range of maturity, is summarized in Table IX.  The stated weighted average yields have been computed on a fully taxable-equivalent basis using a tax rate of 21%.

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Table IX - Debt Securities Available for Sale Maturity Analysis
															After one												After five
			Within												but within												but within												After
			one year												five years												ten years												ten years
(At amortized cost, dollars in thousands)			Amount						Yield						Amount						Yield						Amount						Yield						Amount						Yield
U. S. Government agencies and corporations			$	1,074					4.1		%				$	4,833					2.2		%				$	17,587					0.9		%				$	13,326					2.0		%
Residential mortgage backed securities:
Government sponsored agencies			19,081						2.4		%				32,533						2.4		%				4,998						2.3		%				5,035						2.1		%
Nongovernment sponsored entities			10,699						2.3		%				11,661						1.8		%				2,511						(0.1)		%				1,969						(1.4)		%
State and political subdivisions			942						2.6		%				13,255						3.0		%				16,228						2.9		%				187,516						2.5		%
Corporate debt securities			—						—		%				6,024						2.4		%				14,402						2.0		%				10,098						3.6		%
Asset-backed securities			4,198						1.0		%				14,679						1.0		%				5,693						0.9		%				301						0.9		%
Total			$	35,994					2.2		%				$	82,985					2.1		%				$	61,419					1.8		%				$	218,245					2.5		%

Debt securities held to maturity: During second quarter 2020, weWe have invested in various municipal securities that we have classified as held to maturity as we have the positive intent and ability to hold them to maturity. Accordingly, they are carried at cost, adjusted for amortization of premiums and accretion of discounts.

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The maturity distribution of the held to maturity securities portfolio at December 31, 2021,2023, together with the weighted average yields for each range of maturity, is summarized in Table X.  The stated average yields are stated on a tax equivalent basis.

basis using a Federal tax rate of 21%.

Table X - Debt Securities Held to Maturity - Maturity Analysis
		Within one year								After one but within five years								After five but within ten years								After ten years
(At amortized cost, dollars in thousands)		Amount				Yield				Amount				Yield				Amount				Yield				Amount				Yield
State and political subdivisions		$	—				—	%		$	—				—	%		$	4,025				2.6	%		$	90,202				2.5	%
Total		$	—				—	%		$	—				—	%		$	4,025				2.6	%		$	90,202				2.5	%

Equity Investments

Table X - Debt Securities Held to Maturity - Maturity Analysis
															After one												After five
			Within												but within												but within												After
			one year												five years												ten years												ten years
(At amortized cost, dollars in      thousands)			Amount						Yield						Amount						Yield						Amount						Yield						Amount						Yield
State and political subdivisions			$	—					—		%				$	—					—		%				$	1,996					2.5		%				$	96,064					2.4		%
Total			$	—					—		%				$	—					—		%				$	1,996					2.5		%				$	96,064					2.4		%

- Equity investments decreased $18.6 million during 2023 due to our sale of a previous investment in a hedge fund that primarily traded S&P 500 index options.

Derivative financial instruments

The 2023 decrease in derivative financial instruments is due to the decrease in fair value of our cash flow and interest rate hedges as well as a maturity of a cashflow hedge. The 2022 increase in derivative financial instruments is due to the increase in the fair value of our cash flow and interest rate hedges.

Deposits

Total deposits at December 31, 20212023 increased $347.4$545.3 million or 13.4%17.2% compared to December 31, 2020.2022. Total deposits at December 31, 20202022 increased $682.4$226.8 million or 35.7%7.7% compared to December 31, 2019.2021. Deposits acquired in conjunction with the purchase of southern West Virginia MVB Bank branchesPSB in 20212023 totaled $164.0$498.0 million. Deposits acquired in conjunction with the purchases of Cornerstone, eastern panhandle West Virginia MVB Bank branches and WinFirst in 2020 totaled $466.7 million. We have increased new commercial account relationships as we have strengthened our focus on growing core transaction accounts.  Excluding acquired deposits, coreCore transaction accounts grew $226.3$461.2 million or 16.4%20.1% during 20212023 while our internet-only high yielding savings accountsproduct decreased $54.0 million, retail savings increased $60.9$7.8 million, and brokered CDs decreased $40.8 million due to maturities and calls.

Table XI - Deposits
Dollars in thousands			2021						2020
Noninterest bearing demand			$	568,986					$	440,818
Interest bearing demand			1,127,298						934,185
Savings			698,156						621,168
Time deposits			548,649						599,480
Total deposits			$	2,943,089					$	2,595,651

retail time deposits increased $130.3 million.

Table XI - Deposits
Dollars in thousands		2023				2022
Noninterest bearing demand		$	593,576			$	553,616
Interest bearing demand			2,164,522				1,743,299
Savings			450,527				496,751
Time deposits			506,523				376,213
Total deposits		$	3,715,148			$	3,169,879

See Table I for average deposit balance and rate information by deposit type for the past five years and Note 12 of the accompanying consolidated financial statements for a maturity distribution of time deposits as of December 31, 2021.

2023.

Borrowings

Borrowings

Lines of Credit:  We have a remaining available line of credit from the Federal Home Loan Bank of Pittsburgh (“FHLB”) totaling $982.2 million$1.3 billion at December 31, 2021.2023.  We use this line primarily to fund loans to customers.  Funds acquired through

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this program are reflected on the consolidated balance sheet in short-term borrowings or long-term borrowings, depending on the repayment terms of the debt agreement.  We also had $279.5$258.6 million available on a short term line of credit with the Federal Reserve Bank at December 31, 2021,2023, which is primarily secured by consumer loans, construction loans and commercial and industrial loans and a $6 million available line of credit with a correspondent bank.

Short-term Borrowings: Total short-term borrowings consisting primarily of advances from the FHLB having original maturities of 30 days or less were unchanged at $140.1$303.0 million at December 31, 2021.2023 compared to $226.0 million at December 31, 2022. See Note 13 of the accompanying consolidated financial statements for additional disclosures regarding our short-term borrowings.

Long-term Borrowings:  Long-term borrowings historically have been used to fund our loan growth, however, as a result of prolonged low short-term interest rates following the economic downturn of 2008, long-term borrowings have been reduced significantly as we have replaced maturing long-term borrowings with short-term funding.  Total long-term borrowings of $679,000$637,000 and $699,000$658,000 at December 31, 20212023 and 20202022 consisted of a long-term FHLB advance. Refer to Note 13 of the accompanying consolidated financial statements for additional information regarding our long-term borrowings.

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Subordinated debentures: We issued $75 million of subordinated debentures, net of $1.67$1.74 million debt issuance costs, during third quarter 2021 in a private placement transaction. 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. As provided in the Notes, the interest rate on the Notes during the applicable floating rate period may be determined based on a rate other than three-month term SOFR. This debt has a 10 yearsyear term and generally, is not prepayable by us within the first five years.

We issued $30 million of subordinated debentures, net of $664,000$681,000 debt issuance costs, in Q3 2020 in a private placement transaction. 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”),SOFR, as published by the Federal Reserve Bank of New York, plus 487 basis points, payable quarterly in arrears. As provided in the Notes, the interest rate on the Notes during the applicable floating rate period may be determined based on a rate other than three-month term SOFR. This debt has a 10 year term and generally, is not prepayable by us within the first five years.

Shareholders' equity

Preferred: In April 2021, we sold through private placement 1,500 shares of 6% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series 2021, $1.00 par value, with a liquidation preference of $10,000 per share for net proceeds of $14.9 million.

Common: Changes in common shareholders' equity are a result of net income, other comprehensive income, dividends and issuances of our stock in conjunction with acquisitions. During 2023, tangible book value per common share (“TBVPCS”) increased $2.19, or 10.1%,  to $23.89, which includes unrealized net gains on debt securities available for sale of $0.60 per common share (net of deferred income taxes) recorded in Other Comprehensive Income (“OCI”), partially offset by decreases in the fair values of derivative financial instruments hedging against higher interest rates totaling $0.33 per common share (net of deferred income taxes) also recorded in OCI.  Tangible book value per common share represents tangible common equity ("TCE") divided by common shares outstanding. Other companies may calculate these measures differently. While TCE and TBVPCS are non-GAAP financial measures, we believe TCE and TBVPCS provide alternative measures of capital strength and performance for investors, industry analysts and others.

Table XII - Book Value and Tangible Book Value Per Common Share
		December 31,
Dollars in thousands		2023				2022
Total shareholders' equity		$	440,208			$	354,530
Less preferred stock			14,920				14,920
Common shareholders' equity			425,288				339,610
Less goodwill and intangible assets			74,430				62,150
Tangible common equity (TCE)		$	350,858			$	277,460
Common shares outstanding			14,683,457				12,783,646
Book value per common share(1)		$	28.96			$	26.57
Tangible book value per common share(2)		$	23.89			$	21.70
(1) Common shareholders' equity divided by common shares outstanding
(2) TCE divided by common shares outstanding

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ASSET QUALITY

For purposes of this discussion, we define nonperforming assets to 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. Performing troubled debt restructurings ("TDRs") are excluded from nonperforming loans.

Table XIIXIII presents a summary of nonperforming assets at December 31, as follows:

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Table XII - Nonperforming Assets
Dollars in thousands			2021						2020
Accruing loans past due 90 days or more
Commercial			$	—					$	—
Commercial real estate			—						—
Residential construction & development			—						—
Residential real estate			—						—
Consumer			4						2
Other			—						—
Total accruing loans 90+ days past due			4						2
Nonaccrual loans
Commercial			740						525
Commercial real estate			4,603						14,237
Commercial construction & development			—						—
Residential construction & development			1,560						235
Residential real estate			5,772						5,264
Consumer			17						72
Other			—						—
Total nonaccrual loans			12,692						20,333
Foreclosed properties
Commercial			—						—
Commercial real estate			1,389						2,581
Commercial construction & development			2,332						4,154
Residential construction & development			5,561						7,791
Residential real estate			576						1,062
Total foreclosed properties			9,858						15,588
Repossessed assets			—						—
Total nonperforming assets			$	22,554					$	35,923
Total nonperforming loans as a percentage of total loans			0.46		%				0.84		%
Total nonperforming assets as a percentage of total assets			0.63		%				1.16		%
Allowance for credit losses on loans as a percentage of nonperforming loans			254.39		%				158.57		%
Allowance for credit losses on loans as a percentage of period end loans			1.17		%				1.34		%
Total nonaccrual loans as a percentage of total loans			0.46		%				0.84		%
Allowance for credit losses on loans as a percentage of nonaccrual loans			254.47		%				158.59		%

Table XIII - Nonperforming Assets
Dollars in thousands		2023				2022
Accruing loans past due 90 days or more
Commercial		$	—			$	—
Commercial real estate			—				—
Residential construction & development			—				—
Residential 1-4 family real estate			307				—
Consumer			5				—
Other			23				12
Total accruing loans 90+ days past due			335				12
Nonaccrual loans
Commercial			1,088				93
Commercial real estate			5,675				1,750
Commercial construction & development			—				—
Residential construction & development			708				851
Residential 1-4 family real estate			4,524				5,117
Consumer			109				—
Other			—				—
Total nonaccrual loans			12,104				7,811
Foreclosed properties
Commercial			—				—
Commercial real estate			297				297
Commercial construction & development			1,253				2,187
Residential construction & development			1,924				2,293
Residential 1-4 family real estate			255				290
Total foreclosed properties			3,729				5,067
Repossessed assets			—				—
Total nonperforming assets		$	16,168			$	12,890
Total nonperforming loans as a percentage of total loans			0.34	%			0.25	%
Total nonperforming assets as a percentage of total assets			0.35	%			0.33	%
Allowance for credit losses on loans as a percentage of period end loans			1.31	%			1.26	%
Total nonaccrual loans as a percentage of total loans			0.33	%			0.25	%
Allowance for credit losses on loans as a percentage of nonaccrual loans			397.31	%			498.00	%

Refer to Note 7 for information regarding our past due loans, loans individually evaluated, nonaccrual loans and troubled debt restructurings.

We monitor our concentrations in higher-risk lending areas in accordance with the Interagency Guidance for Concentrations in Commercial Real Estate Lending issued in 2006.2006 by the U.S. Federal bank regulatory agencies. This guidance establishesestablished two concentration guidelinesguideline limits applicable to banks:   1) total of construction, land development and other land loans limited to 100% of the Bank’s Tier 1 Capital plus the allowance for credit losses for lending in construction, land developmentlosses; and other land loans. It further establishes a guideline2) total of loans subject to the 100% limit plus loans secured by non-owner occupied, non-farm non-residential properties limited to 300% of the Bank’s Tier 1 Capital plus the allowance for credit losses for lending in construction, land development and other land loans plus loans secured by non-owner occupied non-farm non-residential properties. losses. As of December 31, 2021,2023, Summit Community BankCommunity’s percentage with respect to above Guideline 1 was 98.9%, within the recommended limits100% limit, and with respect to above Guideline 2, its percentage was 338.0%, exceeding the 300% level. The Bank’s loan policy requires more frequent monitoring and reporting to the Board of 100% and 300%, respectively.Directors when concentrations exceed these regulatory guidelines. 

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We maintain the allowance for credit losses on loans at a level considered adequate to cover an estimate of the full amount of expected credit losses relative to loans. The allowance is comprised of three distinct reserve components: (1) specific reserves related to loans individually evaluated, (2) quantitative reserves related to loans collectively evaluated and (3) qualitative reserves related to loans collectively evaluated. A summary of the methodology we employ on a quarterly basis with respect to each of these components in order to evaluate the overall adequacy of our allowance for credit losses on loans is provided in Note 7 of the accompanying financial statements.

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Relationship between Allowance for Credit Losses - Loans, Net Charge-offs and Nonperforming Loans

In analyzing the relationship among the allowance for credit losses, net loan charge-offs and nonperforming loans, it is helpful to understand the process of how loans are treated as the probability of collection changes over time. Allowances are established at origination through the allowance for credit losses to estimate the expected credit loss over the life of the financial assets based on risk characteristics inherent in the loan. (Please refer to Note 7 for detail on how allowance for credit losses are established.)

Generally, loans are placed on nonaccrual status (and become non-performing) when principal or interest is greater than 90 days past due based upon the loan’s contractual term. As a loan deteriorates in credit quality, if the loan balance is material the loan may be individually evaluated through the allowance for credit losses on loans (" ACLL") instead of on a collective basis with other loans as it may no longer have similar risk characteristics. The allowance for credit losses on an individually evaluated loan are established based on the fair value of the underlying collateral for collateral dependent loans or based on the present value of future cash flows for loans deemed not to be collateral dependent. Therefore, as loan credit quality deteriorates the allowance for credit loss may change.

Charge-offs, if necessary, are recognized as deemed appropriate based on loan-type. Commercial-related loans or portions thereof, are charged off to the ACLL when the loss has been confirmed. This determination is made on a case by case basis considering many factors, including the prioritization of our claim in bankruptcy, expectations of the workout/restructuring of the loan and valuation of the borrower’s equity. We deem a loss confirmed when a loan or a portion of a loan is classified “loss” in accordance with bank regulatory classification guidelines, which state, “Assets classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.”

Consumer loans are generally charged to the ACLL upon reaching specified stages of delinquency, in accordance with the Federal Financial Institutions Examination Council policy. For example, credit card loans are charged off by the end of the month in which the account becomes 180 days past due or within 60 days from receiving notification about a specified event (e.g., bankruptcy of the borrower), whichever is earlier. Residential mortgage loans are generally charged off to net realizable value no later than when the account becomes 180 days past due. Other consumer loans, if collateralized, are generally charged off to net realizable value at 120 days past due.

Expected credit losses are reflected in the ACLL through a charge to provision for credit losses. When we deem all or a portion of a financial asset to be uncollectible the appropriate amount is written off and the ACLL is reduced by the same amount. The Company applies judgement to determine when a financial asset is deemed uncollectible; however, generally speaking, an asset will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are creditcredited to the ACLL when received. The following tables summarizes the changes in the various factors that comprise the provisions for credit losses.

At December 31, 20212023 and 2020,2022, our allowance for credit losses on loans totaled $32.3$48.1 million, or 1.17%1.31% of total loans and $32.2$38.9 million, or 1.34%1.26% of total loans, respectively. The allowance for credit losses on loans is considered adequate to cover all estimated future losses in our loan portfolio. 

Table XIIIXIV presents an allocation of the allowance for credit losses on loans by loan type at each respective year end date, as follows:

Table XIII - Allocation of the Allowance for Credit Losses on Loans
			2021												2020
Dollars in thousands			Amount			Allowance as % of total loans			% of loans in each category to total loans						Amount			Allowance as % of total loans			% of loans in each category to total loans
Commercial			$	3,218		0.12		%	13.2		%				$	2,304		0.10		%	12.3		%
Commercial real estate			10,409			0.38		%	48.9		%				10,841			0.45		%	43.0		%
Construction and development			9,814			0.36		%	8.9		%				8,732			0.36		%	8.3		%
Residential real estate			8,470			0.31		%	19.4		%				10,015			0.42		%	24.1		%
Mortgage warehouse lines			—			—		%	8.3		%				—			—		%	10.4		%
Consumer			163			0.01		%	1.2		%				216			0.01		%	1.4		%
Other			224			0.01		%	0.1		%				138			0.01		%	0.5		%
Total			$	32,298		1.17		%	100.0		%				$	32,246		1.34		%	100.0		%

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Table XIV - Allocation of the Allowance for Credit Losses on Loans
		2023												2022
Dollars in thousands		Amount				Allowance as % of total loans				% of loans in each category to total loans				Amount				Allowance as % of total loans				% of loans in each category to total loans
Commercial		$	4,319				0.12	%			13.7	%		$	4,941				0.16	%			16.3	%
Commercial real estate			13,963				0.38	%			48.9	%			10,574				0.34	%			47.7	%
Construction and development			19,859				0.54	%			14.1	%			14,620				0.47	%			12.6	%
Residential 1-4 family real estate			9,464				0.26	%			19.1	%			8,219				0.27	%			17.9	%
Mortgage warehouse lines			—				—	%			3.0	%			—				—	%			4.2	%
Consumer			205				0.01	%			1.2	%			174				0.01	%			1.1	%
Other			280				0.01	%			0.1	%			371				0.01	%			0.1	%
Total		$	48,090				1.31	%			100.0	%		$	38,899				1.26	%			100.0	%

The following table details our provision for credit losses on loans and net charge-offs and recoveries.

Table XV - Provision for Credit Losses on Loans and Net Charge-offs and Recoveries
Dollars in thousands		Provision for Credit Loss - Loans Expense (Benefit)				(Net Charge-offs) Recoveries				Average Loans				Ratio of Net Charge-Offs (Recoveries) to Average Loans
2023
Commercial		$	(570	)		$	(52	)		$	510,832				0.01	%
Commercial real estate			5,777				(3,614	)			1,709,718				0.21	%
Construction and development			5,230				8				443,092				—	%
Residential 1-4 family real estate			353				624				660,379				(0.09	)%
Mortgage warehouse lines			—				—				108,599				—	%
Consumer			251				(220	)			40,699				0.54	%
Other			414				(505	)			4,143				12.19	%
Total		$	11,455			$	(3,759	)		$	3,477,462				0.11	%
2022
Commercial			1,774				(51	)			465,878				0.01	%
Commercial real estate			228				(63	)			1,427,845				—	%
Construction and development			4,868				(62	)			321,950				0.02	%
Residential 1-4 family real estate			(145	)			(106	)			534,763				0.02	%
Mortgage warehouse lines			—				—				166,879				—	%
Consumer			70				(59	)			33,647				0.18	%
Other			483				(336	)			3,349				10.03	%
Total		$	7,278			$	(677	)		$	2,954,311				0.02	%
2021
Commercial			1,112				(198	)
Commercial real estate			(278	)			(225	)
Construction and development			1,070				12
Residential 1-4 family real estate			(1,210	)			(355	)
Mortgage warehouse lines			—				—
Consumer			(44	)			(9	)
Other			265				(179	)
Total		$	915			$	(954	)		$	2,497,566				0.04	%

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Table XIV - Provision for Credit Losses on Loans and Net Charge-offs and Recoveries
Dollars in thousands			Provision for Credit Loss - Loans Expense (Benefit)						(Net Charge-offs) Recoveries						Average Loans						Ratio of Net Charge-Offs (Recoveries) to Average Loans
2021
Commercial			$	1,112					$	(198)
Commercial real estate			(278)						(225)
Construction and development			1,070						—
Residential real estate			(1,210)						(355)
Mortgage warehouse lines			—						—
Consumer			(44)						(9)
Other			265						(179)
Total			915						(966)						2,497,566						0.04		%
2020
Commercial			85						$	(66)
Commercial real estate			5,904						(1,098)
Construction and development			4,361						35
Residential real estate			1,941						(141)
Mortgage warehouse lines			—						—
Consumer			166						(91)
Other			286						(342)
Total			12,743						(1,703)						2,165,646						0.08		%
2019
Commercial									(264)
Commercial real estate									(150)
Construction and development									106
Residential real estate									(859)
Mortgage warehouse lines									—
Consumer									(117)
Other									(239)
Total			1,550						(1,523)						1,797,792						0.08		%

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At December 31, 20212023 and 2020,2022, we had approximately $9.9$3.7 million and $15.6$5.1 million, respectively, in property held for sale which was 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 loss. Refer to Note 8 of the accompanying consolidated financial statements for additional information regarding our property held for sale.

LIQUIDITY AND CAPITAL RESOURCES

Bank Liquidity: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 excess funds at correspondent banks, non-pledged securities and available lines of credit with the FHLB, Federal Reserve Bank of Richmond and correspondent banks, which totaled approximately $1.6 $1.8 billion or 43.4%38.36% of total consolidated assets at December 31, 2021.

2023.

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 borrow approximately $1.12$1.6 billion, which is collateralized by $1.60$2.3 billion of residential mortgage loans, commercial loans, mortgage backed securities and securities of U. S. Government agencies and corporations.  At December 31, 2021,2023, we had available borrowing capacity of $982.2 million$1.3 billion on our FHLB line.  We also maintain a credit line with the Federal Reserve Bank of Richmond as a contingency liquidity vehicle.  The amount available on this line at December 31, 20212023 was approximately $279$258.6 million, which is secured by a pledge of $514.5$520.6 million of our consumer loans, construction loans and commercial and industrial loan portfolios.  We have a $6 million unsecured line of credit with a correspondent bank.  Also, we classify nearly 80% of our securities as available for sale to enable us to liquidate them if the need arises.  During 2021,2023, our

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loan growth was funded primarily by sales and maturities of investments, deposits and short-term borrowings as our loans increased approximately $349.2$235.8 million, while investments decreased by $59.4 million, total deposits increased $347.4$47.7 million and short-term borrowings increased $59.3 million. 

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, 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.

One aspect of our liquidity management process is establishing contingent liquidity funding plans under various scenarios in order to prepare for unexpected liquidity shortages or events.  The following represents three “stressed” liquidity circumstances and our related contingency plans with respect to each.

Scenario 1 – Summit Community’sCommunity’s capital status becomes less than “well capitalized”“well capitalized”.  Banks which are less than “well capitalized” in accordance with regulatory capital guidelines are prohibited from issuing new brokered deposits without first obtaining a waiver from the FDIC to do so.  In the event Summit Community’s capital status were to fall below well capitalized and was not successful in obtaining the FDIC’s waiver to issue new brokered deposits, Summit Community:

•

•

Would have limited amounts of maturing brokered deposits to replace in the short-term, as we have limited our brokered deposits maturing in any one quarter to no more than $50 million.

•

Presently has $1.8 billion in available sources of liquid funds which could be drawn upon to fund maturing brokered deposits until Summit Community had restored its capital to well capitalized status.

•

Would first seek to restore its capital to well capitalized status through capital contributions from Summit, its parent holding company.

•

Would generally have no more than $100 million in brokered deposits maturing in any one year time frame, which is well within its presently available sources of liquid funds, if in the event Summit does not have the capital resources to restore Summit Community’s capital to well capitalized status.  One year would give Summit Community ample time to raise alternative funds either through retail deposits or the sale of assets and obtain capital resources to restore it to well capitalized status.

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Table of maturing brokered deposits to replace in the short-term, as we have limited our brokered deposits maturing in any one quarter to no more than $50 million.Contents

•Presently has $1.6 billion in available sources of liquid funds which could be drawn upon to fund maturing brokered deposits until Summit Community had restored its capital to well capitalized status.

•Would first seek to restore its capital to well capitalized status through capital contributions from Summit, its parent holding company.

•Would generally have no more than $100 million in brokered deposits maturing in any one year time frame, which is well within its presently available sources of liquid funds, if in the event Summit does not have the capital resources to restore Summit Community’s capital to well capitalized status.  One year would give Summit Community ample time to raise alternative funds either through retail deposits or the sale of assets and obtain capital resources to restore it to well capitalized status.

Scenario 2 – Summit Community’sCommunity’s credit quality deteriorates such that the FHLB restricts further advances.  If in the event that the Bank’s credit quality deteriorated to the point that further advances under its line with the FHLB were restricted, Summit Community:

•Would severely curtail lending and other growth activities until such time as access to this line could be restored, thus eliminating the need for net new advances.

•Would still have available current liquid funding sources secured by unemcumbered

•

Would severely curtail lending and other growth activities until such time as access to this line could be restored, thus eliminating the need for net new advances.

•

Would still have available current liquid funding sources secured by unencumbered loans and securities totaling $769 million aside from its FHLB line, which would result in a funding source of approximately $506 million. $758 million aside from its FHLB line, which would result in a funding source of approximately $471 million.

Scenario 3 – A competitive financial institution offers a retail deposit program at interest rates significantly above current market rates in Summit Community’sCommunity’s market areas.  If a competitive financial institution offered a retail deposit program at rates well in excess of current market rates in Summit Community’s market area, the Bank:

•Presently has $1.6 billion in available sources of liquid funds which could be drawn upon immediately to fund any “net run off” of deposits from this activity.

•Would severely curtail lending and other growth activities so as to preserve the availability of as much contingency funds as possible.

•Would begin offering its own competitive deposit program when deemed prudent so as to restore the retail deposits lost to the competition.

•

Presently has $1.6 billion in available sources of liquid funds which could be drawn upon immediately to fund any “net run off” of deposits from this activity.

•

Would severely curtail lending and other growth activities so as to preserve the availability of as much contingency funds as possible.

•

Would begin offering its own competitive deposit program when deemed prudent so as to restore the retail deposits lost to the competition.

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. Refer to page 13 of Item 1A. Risk Factors for further discussion of our liquidity risk.

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Growth and Expansion:During 2021,2023, we spent approximately $4.5$7.1 million on capital expenditures for premises and equipment.  We expect our capital expenditures to approximate $4.5$3.0 - $5.0$4.0 million in 2022,2024, primarily for new branch site construction and equipment and technological upgrades.

Capital Compliance:  Our capital position is strong. Stated as a percentage of total assets, our equity ratio was 9.2%9.5% at December 31, 20212023 compared to 9.1% at December 31, 2020.2022. Our subsidiary bank, Summit Community Bank, had Tier 1 risk-based, Total risk-based and Tier 1 leverage capital in excess of the minimum “well capitalized” levels of $119.3$150.2 million, $85.4$117.8 million and $189.1$243.2 million, respectively.  We intend to maintain Summit Community Bank's capital ratios at levels that would be considered to be “well capitalized” in accordance with regulatory capital guidelines.  See Note 19 of the accompanying consolidated financial statements for further discussion of our regulatory capital.

During 2021,2023, we retained $36.1$42.3 million of earnings and the net change in accumulated other comprehensive incomeloss was $37,000,$4 million, principally resulting from $5.4$8.7 million unrealized net lossesgains on securities available for sale and $5.1$4.7 million unrealized net gainslosses on cashflow hedges.

On July 30, 2015, our Employee Stock Ownership Plan ("ESOP") purchased 225,000 shares of Summit Financial Group Inc. common stock, which is shown as a reduction of shareholders' equity, similar to a purchase of treasury stock. When the shares are committed to be released and become available for allocation to plan participants, the then fair value of such shares will be charged to compensation expense.  Unallocated shares owned by the Company’s ESOP are not considered to be outstanding for the purpose of computing earnings per share.

hedges.

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. Summit contributed the proceeds of this issuance to the capital of SCB to support its lending, investing and other financial activities.

Dividends:Cash dividends per share totaled $0.70$0.84 and $0.68$0.76 during 20212023 and 2020,2022, respectively, representing dividend payout ratios of 19.9%21.6% and 28.2%18.2%, respectively. It is our intention to continue to pay dividends on a quarterly basis during 2022.2024. Future dividend amounts will depend on the earnings and financial condition of our subsidiary bank as well as general economic conditions.

The primary source of funds for the dividends paid to our shareholders is dividends received from our subsidiary bank.  Dividends paid by our subsidiary bank are subject to restrictions by banking law and regulations and require approval by the bank’s regulatory agency if dividends declared in any year exceed the bank’s current year's net income, as defined, plus its retained net profits of the two preceding years. In addition, cash dividends depend on the earnings and financial condition of our subsidiary bank and our capital adequacy as well as general economic conditions. During 2022,2024, the net retained profits available for distribution to Summit as dividends without regulatory approval are approximately $70.8$90.1 million.

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Contractual Cash Obligations:During our normal course of business, we incur contractual cash obligations.   Refer to Note 10 of the accompanying consolidated financial statements for further discussion of our lease commitments and Note 13 for information regarding debt obligations.

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 December 31, 2021 are presented in the following table.  Refer to Note 17 of the accompanying consolidated financial statements for further discussion of our off-balance sheet arrangements.

LIBOR AND OTHER BENCHMARK RATES

Following the announcement by the U.K.’s Financial Conduct Authority in July 2017 that it will no longer persuade or require banks to submit rates for the London InterBank Offered Rate (LIBOR) after 2021, central banks and regulators around the world have commissioned working groups to find suitable replacements for Interbank Offered Rates ("IBOR") and other benchmark rates and to implement financial benchmark reforms more generally. These actions have resulted in uncertainty regarding the use of alternative reference rates ("ARRs") and could cause disruptions in a variety of markets. We will continue to monitor developments related to ARRs, however at this time, we do not anticipate any material adverse impact to our business operation or financial results during the period of transition from IBORs to ARRs.

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QUARTERLY FINANCIAL DATA

A summary of our selected quarterly financial data is as follows:

		2023
		First				Second				Third				Fourth
Dollars in thousands, except per share amounts		Quarter				Quarter				Quarter				Quarter
Interest income		$	50,475			$	60,863			$	64,694			$	66,516
Net interest income			34,189				40,313				41,273				40,793
Net income			14,101				8,209				16,332				16,597
Basic earnings per share		$	1.09			$	0.54			$	1.10			$	1.12
Diluted earnings per share		$	1.08			$	0.54			$	1.09			$	1.11

		2022
		First				Second				Third				Fourth
Dollars in thousands, except per share amounts		Quarter				Quarter				Quarter				Quarter
Interest income		$	32,893			$	35,563			$	42,451			$	47,840
Net interest income			29,554				30,965				34,113				34,353
Net income			11,693				12,014				14,423				15,086
Basic earnings per share		$	0.90			$	0.92			$	1.11			$	1.16
Diluted earnings per share		$	0.90			$	0.92			$	1.11			$	1.16

			2021
			First						Second						Third						Fourth
Dollars in thousands, except per share amounts			Quarter						Quarter						Quarter						Quarter
Interest income			$	29,762					$	29,955					$	30,882					$	31,817
Net interest income			26,252						26,811						28,037						28,832
Net income			10,360						10,560						12,238						12,580
Basic earnings per share			$	0.80					$	0.80					$	0.93					$	0.96
Diluted earnings per share			$	0.80					$	0.80					$	0.92					$	0.95

			2020
			First						Second						Third						Fourth
Dollars in thousands, except per share amounts			Quarter						Quarter						Quarter						Quarter
Interest income			$	27,643					$	27,937					$	29,246					$	30,176
Net interest income			21,443						23,066						24,766						26,206
Net income			4,506						6,949						9,620						10,251
Basic earnings per share			$	0.35					$	0.54					$	0.74					$	0.79
Diluted earnings per share			$	0.35					$	0.54					$	0.74					$	0.79

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Item 7A.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 embedded options.  Accordingly, our net income is affected by changes in the absolute level of interest rates.  

Some amount of interest rate risk is inherent and appropriate to the banking business.  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”).  The ALCO is comprised of members of the Board of Directors and of members of senior management.  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 at December 31, 2021 is asset2023 was liability sensitive. That is, absent any changes in the volumes of our interest earning assets or interest bearing liabilities, assetsliabilities are likely to reprice faster than liabilities,assets, resulting in an increase in net income in a risingfalling rate environment. Net income would decrease in a fallingrising interest rate environment.

Net interest income is also subject to changes in the shape of the yield curve.   Prior to the Federal Reserve’s actions in 2022 to rapidly raise short-term interest rates, the yield curve was very low but gradually upward sloping. The recent rate increases resulted in a steepening of the yield curve on the short end (within 1 year), while the longer end of the curve is inverted between 1 and 10 years -- meaning that the yield on short-term instruments are higher than longer-term instruments. A flat or inverted interest rate curve is an unfavorable interest rate environment for many financial institutions, including Summit, as short-term interest rates generally drive our deposit pricing while longer-term interest rates generally impact our loan and investment pricing. 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 result in increased earnings as margins widen.

Several techniques are available to monitor and control the level of interest rate risk.  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 rates is assumed to gradually take place over a 12 month period and then remain stable, except for the up 400 scenario, which assumes a gradual increase in rates over 24 months.  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 December 31, 2021.2023.  The sensitivity is measured as a percentage change in net interest income given the stated changes in interest rates (gradual change over 12 months, stable thereafter) compared to net interest income with rates unchanged in the same period.  The estimatedThese changes set forth below are dependent onin interest rates assume parallel shifts in the assumptions discussed above.

			Estimated % Change in Net Interest Income over:
Change in Interest Rates			0 - 12 Months						13 - 24 Months
Down 100  basis points (1)			-0.8		%				-5.7		%
Up 200 basis points (1)			-1.1		%				2.8		%
Up 200 basis points (2)			-0.6		%				0.8		%
(1) assumes a parallel shift in the yield curve over 12 months, with no change thereafter
(2) assumes a parallel shift in the yield curve over 24 months, with no change thereafter

yield curve and do not take into account changes in the slope of the yield curve, unless otherwise indicated.

		Estimated % Change in Net Interest Income over:
Change in Interest Rates		0 - 12 Months				13 - 24 Months
Down 100 basis points (1)			0.7	%			5.6	%
Down 200 basis points (1)			1.8	%			4.7	%
Down 200 basis points - steepening curve (2)			6.1	%			18.7	%
Up 200 basis points (1)			-2.1	%			4.2	%

(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

Over the next 12 months, we project that our net interest income, absent any changes in: 1) the volumes of interest earning assets and interest bearing liabilities or 2) the shape of the yield curve, would likely increase in a falling rate environment, and would likely decline in a rising interest rate environment.

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REPORT OF MANAGEMENT’SMANAGEMENT’S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING

Summit Financial Group, Inc. is responsible for the preparation, integrity and fair presentation of the consolidated financial statements included in this annual report.  The consolidated financial statements and notes included in this annual report have been prepared in conformity with United States generally accepted accounting principles and necessarily include some amounts that are based on management’s best estimates and judgments.

We, as management of Summit Financial Group, Inc., are responsible for establishing and maintaining effective internal control over financial reporting that is designed to produce reliable financial statements in conformity with United States generally accepted accounting principles and in conformity with the Federal Financial Institutions Examination Council instructions for consolidated Reports of Condition and Income (call report instructions).  The system of internal control over financial reporting as it relates to the financial statements is evaluated for effectiveness by management and tested for reliability through a program of internal audits.  Actions are taken to correct potential deficiencies as they are identified.  Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected.  Also, because of changes in conditions, internal control effectiveness may vary over time.  Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

The Audit Committee, consisting entirely of independent directors, meets regularly with management, internal auditors and the independent registered public accounting firm and reviews audit plans and results, as well as management’s actions taken in discharging responsibilities for accounting, financial reporting and internal control.  Our independent registered public accounting firm and the internal auditors have direct and confidential access to the Audit Committee at all times to discuss the results of their examinations.

Management assessed the Corporation’s system of internal control over financial reporting as of December 31, 2021.2023.  In making this assessment, we used the criteria for effective internal control over financial reporting set forth in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO) in 2013.  Based on this assessment, management concludes that, as of December 31, 2021,2023, its system of internal control over financial reporting is effective and meets the criteria of the Internal Control-Integrated Framework.  Yount, Hyde & Barbour, P.C., Winchester, Virginia (U.S. PCAOB Auditor Firm I.D.: 613), independent registered public accounting firm that audited our consolidated financial statements, has issued an attestation report on the Corporation’s internal control over financial reporting.

Management is also responsible for compliance with the federal and state laws and regulations concerning dividend restrictions and federal laws and regulations concerning loans to insiders designated by the FDIC as safety and soundness laws and regulations.

/s/ H. Charles Maddy, III

/s/ Robert S. Tissue

/s/ Julie R. Markwood

President and Chief Executive Officer

Executive Vice President and Chief Financial Officer

Senior Executive Vice President and Chief Accounting Officer

Moorefield, West Virginia

March 4, 2022

12, 2024

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Summit Financial Group, Inc.

Opinion on the Internal Control over Financial Reporting

We have audited Summit Financial Group, Inc. and its subsidiary’ssubsidiaries (the Company) internal control over financial reporting as of December 31, 2021,2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021,2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 20212023 and 2020,2022, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021,2023, and the related notes to the consolidated financial statements of the Company and our report dated March 4, 202212, 2024 expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Report of Management’sManagement’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ YOUNT, HYDE & BARBOUR, P.C.

Winchester, Virginia

March 4, 2022

12, 2024

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Item 8.Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Summit Financial Group, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Summit Financial Group, Inc. and its subsidiarysubsidiaries (the Company) as of December 31, 20212023 and 2020,2022, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021,2023, and the related notes to the consolidated financial statements (collectively, the financial statements).  In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021,2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021,2023, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 4, 202212, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.  Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical AuditMatters

The critical audit mattermatters communicated below is a matterare matters arising from the current period audit of the financial statements that waswere communicated or required to be communicated to the audit committee and that: (1) relatesrelate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit mattermatters below, providing separate opinions on the critical audit mattermatters or on the accounts or disclosures to which it relates.

they relate.

Allowance for Credit Losses (ACL) – Loans Collectively Evaluated & Off-Balance-Sheet Credit Exposures

Description of the Matter

As discussed in Note 7 (Loans and Allowance for Credit Losses on Loans) and Note 17 (Commitments and Contingencies) to the financial statements, the Company is subject to  Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.  Accounting Standards Codification Topic 326 (ASC 326) requires, among other provisions, the measurement of all expected credit losses for loans and off-balance sheet exposures based on historical experience, current conditions, and reasonable and supportable forecasts. The ACL is a valuation allowance that represents management’s current best estimate of expected credit losses considering available information, from

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internal and external sources, relevant to assessing collectability of loans over the loans’ contractual terms (“life of loan” concept).

The Company’s ACL for loans collectively evaluated for impairment was $30.20$45.8 million, the total ACL for loans was $32.30$48.1 million and total loans, net of unearned fees, were $2.76$3.7 billion as of December 31, 2021.2023. The ACL on off-balance sheet credit exposures totaled $7.28$7.7 million with related unfunded commitments totaling $711.35$891.3 million as of December 31, 2021.2023. The Company’s methodology applies historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual life of the loans that are reasonable and supportable, to the identified pools of loans with similar risk characteristics.  Loans are segmented into pools based upon similar characteristics and risk profiles and based on the degree of correlation of how loans within each pool respond to various economic conditions. The Company uses a loss-rate, or cohort, method to estimate expected credit losses for the identified loan pools.  The cohort method tracks respective losses generated by that cohort of loans over their remaining lives.  Loss rates are adjusted for qualitative factors that are not otherwise considered.  The qualitative factors considered by management include reasonable and supportable forecasts of economic conditions; trends in credit quality; volume and concentrations of credit; and changes in lending policy, underwriting standards, and management.  Management exercised significant judgment when assessing the qualitive factors in estimating the ACL.

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We identified the measurement of the ACL as a critical audit matter as auditing this estimate involved especially complex and subjective auditor judgment in evaluating and testing management’s assertions over an inherently complex estimation process that requires significant management judgment.

How We Addressed the Matter in Our Audit

The primary audit procedures we performed to address this critical audit matter included:

•

●

Obtaining an understanding and testing the design and operating effectiveness of the Company’s ACL methodology, internal controls, and management review controls related to collectively evaluated loans, including the process of:

o

The continued usage of the cohort method as the expected loss model, including assessment and reasonableness of loan pools, analysis of delay period, model validation, monitoring, and the completeness and accuracy of key data inputs and assumptions.

o

Qualitative factors, including sources of reasonable and supportable economic forecasts and other key inputs.

o

Governance and management review processes.

●

Substantively testing management’s process for measuring the ACL related to collectively evaluated loans and off-balance sheet credit exposures, including:

o

Evaluating the conceptual soundness, assumptions, and key data inputs of the Company’s ACL expected loss rate methodology, including the reasonableness of loan pools and related cohort loss rates.

o

Evaluating the methodology’s qualitative factors, including:

■

The completeness and accuracy of the data inputs used as a basis for the qualitative factors.

■

The reasonableness of management’s judgments related to the determination of qualitative factors.

■

The directional consistency and reasonableness of the qualitative factor adjustments in accordance with ranges established in management’s methodology.

o

Testing the mathematical accuracy of the calculation, including the application of the cohort loss rates and qualitative factors.

Business Combinations – Fair Value of Acquired Loans

Description of the Company’s ACL methodology, internal controls,Matter

As described in Note 3 (Mergers and Acquisitions) to the financial statements, the Company completed its acquisition of PSB Holding Corp. (PSB) on April 1, 2023 for total consideration of $39.6 million. The transaction was accounted for as a business combination using the acquisition method of accounting. Accordingly, assets acquired and liabilities assumed were recorded at fair value on the acquisition date, including acquired loans with an aggregate fair value of $363.0 million. Determining the acquired fair values, particularly in relation to the loan portfolio, is inherently subjective and involves significant judgment regarding the methods and assumptions used to estimate fair value. In determining the fair value of loans acquired, management review controls relatedmust determine whether or not acquired loans have evidence of more-than-insignificant credit deterioration at acquisition, the amount and timing of cash flows expected to collectively evaluated loans, includingbe collected, and market discount rates, among other assumptions. Changes in these assumptions could have a significant impact on the process of:

◦The continued usagefair value of the cohort method as the expected loss model, including assessment and reasonableness of loan pools, analysis of delay period, model validation, monitoring,loans acquired and the completenessamount of goodwill recorded.

We identified the acquisition date fair value of acquired loans as a critical audit matter as auditing this estimate is especially complex and accuracyrequires subjective auditor judgment. Auditing this estimate required a high level of key data inputsjudgment in evaluating management’s identification of loans with evidence of credit deterioration, the need for specialized skill in development and assumptions.

◦Qualitative factors, including sourcesapplication of reasonablesubjective assumptions in estimated cash flows, and supportable economic forecasts and other key inputs.

◦Governance and management review processes.

•Substantively testing management’s process for measuring the ACL related to collectively evaluated loans and off-balance sheet credit exposures, including:

◦Evaluating the conceptual soundness, assumptions, and key data inputssize of the Company’s ACL expected loss rate methodology, includingacquired loan portfolio.

How We Addressed the reasonableness of loan pools and related cohort loss rates.

◦EvaluatingMatter in Our Audit

The primary audit procedures we performed to address this critical audit matter included the methodology’s qualitative factors, including:

▪The completeness and accuracy of the data inputs used as a basis for the qualitative factors.

▪The reasonableness of management’s judgments related to the determination of qualitative factors.

▪The directional consistency and reasonableness of the qualitative factor adjustments in accordance with ranges established in management’s methodology.

◦Testing the mathematical accuracy of the calculation, including the application of the cohort loss rates and qualitative factors.

following:

●

Obtaining an understanding and testing the design and operating effectiveness of the Company’s business combination accounting practices, internal controls, and related management review controls, including the process of:

o

The appropriateness of the valuation approach and methodology.

o

Review of valuation specialist valuation, including financial information, data, assumptions utilized and key inputs, specifically as it relates to the valuation for acquired loans.

●

Substantively testing management’s process, including the use of our own valuation specialist to assess the Company’s methods and significant assumptions utilized in determining the fair value of the acquired loan portfolio and evaluating whether the assumptions used were reasonable with respect to market participant views and other factors.

●

Testing the completeness and accuracy of loans determined to have credit deterioration at acquisition and evaluating the reasonableness of the criteria utilized by management in making the determination.

●

Testing the accuracy of the data utilized in the development of acquisition date fair values by confirming, on a sample basis, select data.

/s/ YOUNT, HYDE & BARBOUR, P.C.

We have served as the Company’s auditor since 2016.

Winchester, Virginia

March 4, 2022

12, 2024

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Consolidated Balance Sheets

			December 31,
Dollars in thousands			2021						2020
ASSETS
Cash and due from banks			$	21,006					$	19,522
Interest bearing deposits with other banks			57,452						80,265
Cash and cash equivalents			78,458						99,787
Debt securities available for sale (at fair value)			401,103						286,127
Debt securities held to maturity (at amortized cost; estimated fair value - $101,242 - 2021, $103,157 - 2020)			98,060						99,914
Less: allowance for credit losses			—						—
Debt securities held to maturity, net			98,060						99,914
Equity investments (at fair value)			20,202						—
Other investments			11,304						14,185
Loans held for sale			227						1,998
Loans net of unearned fees			2,761,391						2,412,153
Less: allowance for credit losses			(32,298)						(32,246)
Loans, net			2,729,093						2,379,907
Property held for sale			9,858						15,588
Premises and equipment, net			56,371						52,537
Accrued interest and fees receivable			10,578						11,989
Goodwill and other intangible assets, net			63,590						55,123
Cash surrender value of life insurance policies and annuities			60,613						59,438
Other assets			37,262						29,791
Total assets			$	3,576,719					$	3,106,384
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing			$	568,986					$	440,818
Interest bearing			2,374,103						2,154,833
Total deposits			2,943,089						2,595,651
Short-term borrowings			140,146						140,146
Long-term borrowings			679						699
Subordinated debentures, net			102,891						29,364
Subordinated debentures owed to unconsolidated subsidiary trusts			19,589						19,589
Other liabilities			42,852						39,355
Total liabilities			3,249,246						2,824,804
Commitments and Contingencies			0						0
Shareholders' Equity
Preferred stock, $1.00 par value, authorized 250,000 shares; issued: 2021 - 1,500 shares			14,920						—
Common stock and related surplus, $2.50 par value; authorized 20,000,000 shares; issued: 2021 - 12,763,827 shares, 2020 - 12,985,708 shares; outstanding: 2021 - 12,743,125 shares, 2020 - 12,942,004 shares			89,525						94,964
Unallocated common stock held by Employee Stock Ownership Plan -         2021 - 20,702 shares, 2020 - 43,704 shares			(224)						(472)
Retained earnings			217,770						181,643
Accumulated other comprehensive income			5,482						5,445
Total shareholders' equity			327,473						281,580
Total liabilities and shareholders' equity			$	3,576,719					$	3,106,384

		December 31,
Dollars in thousands		2023				2022
ASSETS
Cash and due from banks		$	21,834			$	16,469
Interest bearing deposits with other banks			30,398				28,248
Cash and cash equivalents			52,232				44,717
Debt securities available for sale (at fair value)			502,762				405,201
Debt securities held to maturity (at amortized cost; estimated fair value - $88,319 - 2023, $86,627 - 2022)			94,227				96,163
Less: allowance for credit losses			—				—
Debt securities held to maturity, net			94,227				96,163
Equity investments (at fair value)			10,958				29,494
Other investments			21,130				16,029
Loans net of unearned fees			3,681,612				3,082,818
Less: allowance for credit losses			(48,090	)			(38,899	)
Loans, net			3,633,522				3,043,919
Property held for sale			3,729				5,067
Premises and equipment, net			63,038				53,981
Accrued interest and fees receivable			20,004				15,866
Goodwill and other intangible assets, net			74,430				62,150
Cash surrender value of life insurance policies and annuities			85,679				71,640
Derivative financial instruments			33,145				40,506
Other assets			39,466				31,959
Total assets		$	4,634,322			$	3,916,692
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits
Non-interest bearing		$	593,576			$	553,616
Interest bearing			3,121,572				2,616,263
Total deposits			3,715,148				3,169,879
Short-term borrowings			302,957				225,999
Long-term borrowings			637				658
Subordinated debentures, net			103,782				103,296
Subordinated debentures owed to unconsolidated subsidiary trusts			19,589				19,589
Other liabilities			52,001				42,741
Total liabilities			4,194,114				3,562,162
Commitments and Contingencies
Shareholders' Equity
Preferred stock, $1.00 par value, authorized 250,000 shares; issued: 2023 and 2022 - 1,500 shares			14,920				14,920
Common stock and related surplus, $2.50 par value; authorized 20,000,000 shares; issued and oustanding: 2023 - 14,683,457 shares, 2022 - 12,783,646 shares			129,990				90,696
Retained earnings			302,783				260,393
Accumulated other comprehensive loss			(7,485	)			(11,479	)
Total shareholders' equity			440,208				354,530
Total liabilities and shareholders' equity		$	4,634,322			$	3,916,692

See Notes to Consolidated Financial Statements

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Consolidated Statements of Income

		For the Year Ended December 31,
Dollars in thousands (except per share amounts)		2023				2022				2021
Interest income
Loans, including fees
Taxable		$	217,615			$	145,188			$	112,268
Tax-exempt			240				176				362
Securities
Taxable			18,412				8,442				5,884
Tax-exempt			5,549				4,610				3,586
Interest on interest bearing deposits with other banks			732				331				315
Total interest income			242,548				158,747				122,415
Interest expense
Deposits			73,191				20,683				8,181
Short-term borrowings			6,816				3,786				1,768
Long-term borrowings and subordinated debentures			5,972				5,292				2,534
Total interest expense			85,979				29,761				12,483
Net interest income			156,569				128,986				109,932
Provision for credit losses			12,250				6,950				4,000
Net interest income after provision for credit losses			144,319				122,036				105,932
Noninterest income
Trust and wealth management fees			3,436				2,978				2,886
Mortgage origination revenue			577				1,480				3,999
Service charges on deposit accounts			6,977				6,150				5,032
Bank card revenue			7,299				6,261				5,896
Net realized (losses)/gains on debt securities			(266	)			(708	)			425
Net gains on equity investments			740				265				202
Bank owned life insurance and annuities income			1,576				1,211				1,026
Other			537				516				742
Total noninterest income			20,876				18,153				20,208
Noninterest expenses
Salaries, commissions and employee benefits			46,296				40,452				34,386
Net occupancy expense			5,851				5,128				4,824
Equipment expense			9,094				7,253				6,990
Professional fees			1,775				1,628				1,578
Advertising and public relations			1,113				893				697
Amortization of intangibles			3,335				1,440				1,563
FDIC premiums			2,458				1,224				1,449
Bank card expense			3,429				2,928				2,668
Foreclosed properties expense, net of (gains)/losses			89				236				1,745
Acquisition-related expenses			6,444				114				1,224
Other			14,909				11,583				11,615
Total noninterest expenses			94,793				72,879				68,739
Income before income tax expense			70,402				67,310				57,401
Income tax expense			15,163				14,094				11,663
Net income		$	55,239			$	53,216			$	45,738
Preferred stock dividends			900				900				589
Net income applicable to common shares		$	54,339			$	52,316			$	45,149
Basic earnings per common share		$	3.82			$	4.10			$	3.49
Diluted earnings per common share		$	3.81			$	4.08			$	3.47

			For the Year Ended December 31,
Dollars in thousands (except per share amounts)			2021						2020						2019
Interest income
Loans, including fees
Taxable			$	112,268					$	104,986					$	96,500
Tax-exempt			362						578						615
Securities
Taxable			5,884						5,997						6,511
Tax-exempt			3,586						3,176						2,850
Interest on interest bearing deposits with other banks			315						266						595
Total interest income			122,415						115,003						107,071
Interest expense
Deposits			8,181						16,044						23,697
Short-term borrowings			1,768						2,330						5,303
Long-term borrowings and subordinated debentures			2,534						1,147						987
Total interest expense			12,483						19,521						29,987
Net interest income			109,932						95,482						77,084
Provision for credit losses			4,000						14,500						1,550
Net interest income after provision for credit losses			105,932						80,982						75,534
Noninterest income
Trust and wealth management fees			2,886						2,495						2,564
Mortgage origination revenue			3,999						2,799						770
Service charges on deposit accounts			5,032						4,588						5,094
Bank card revenue			5,896						4,494						3,536
Realized gains on debt securities, net			425						3,472						1,938
Gain on equity investments			202						—						—
Gain on sale of Summit Insurance Services, LLC			—						—						1,906
Bank owned life insurance and annuities income			1,026						1,567						1,044
Other			742						668						2,351
Total noninterest income			20,208						20,083						19,203
Noninterest expenses
Salaries, commissions and employee benefits			34,386						31,280						28,327
Net occupancy expense			4,824						3,963						3,417
Equipment expense			6,990						5,765						4,972
Professional fees			1,578						1,538						1,678
Advertising and public relations			697						596						698
Amortization of intangibles			1,563						1,659						1,701
FDIC premiums			1,449						856						88
Bank card expense			2,668						2,225						1,820
Foreclosed properties expense			1,745						2,490						2,498
Acquisition-related expenses			1,224						1,671						617
Other			11,615						10,268						9,338
Total noninterest expenses			68,739						62,311						55,154
Income before income tax expense			57,401						38,754						39,583
Income tax expense			11,663						7,428						7,717
Net income			$	45,738					$	31,326					$	31,866
Preferred stock dividends			589						—						—
Net income applicable to common shares			$	45,149					$	31,326					$	31,866
Basic earnings per common share			$	3.49					$	2.42					$	2.55
Diluted earnings per common share			$	3.47					$	2.41					$	2.53

See Notes to Consolidated Financial Statements

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Consolidated Statements of Comprehensive Income

		For the Year Ended December 31,
Dollars in thousands		2023				2022				2021
Net income		$	55,239			$	53,216			$	45,738
Other comprehensive income (loss):
Net unrealized (loss) gain on cashflow hedges of:
2023 - $(6,641), net of deferred taxes of $1,594; 2022 - $22,203, net of deferred taxes of $(5,329); 2021 - $6,743, net of deferred taxes of $(1,618)			(5,047	)			16,874				5,125
Net unrealized gain (loss) on fair value hedge of available for sale securities of:
2023 - $439, net of deferred taxes of $(105); 2022 - $7,663, net of deferred taxes of $(1,839); 2021 - $(550), net of deferred taxes of $132			334				5,824				(418	)
Net unrealized gain (loss) on debt securities available for sale of:
2023 - $11,434, net of deferred taxes of $(2,744) and reclassification adjustment for net realized losses included in net income of $(266), net of tax of $64			8,690
2022 - $(52,327) net of deferred taxes of $12,558 and reclassification adjustment for net realized losses included in net income of $(708), net of tax of $170							(39,769	)
2021 - $(6,510), net of deferred taxes of $1,562 and reclassification adjustment for net realized gains included in net income of $425, net of tax of $(102)											(4,948	)
Net change in actuarial (loss) gain on post-retirement benefits plan of:
2023 - $(33), net of deferred taxes of $8; 2022 - $214, net of deferred taxes of $(51); 2021- $64, net of deferred taxes of $(15)			(25	)			163				49
Net change in actuarial gain (loss) on defined-benefit pension plan of:
2023 - $55, net of deferred taxes of $(13); 2022 - $(70), net of deferred taxes of $17; 2021 - $301, net of deferred taxes of $(72)			42				(53	)			229
Total other comprehensive income (loss)			3,994				(16,961	)			37
Total comprehensive income		$	59,233			$	36,255			$	45,775

			For the Year Ended December 31,
Dollars in thousands			2021						2020						2019
Net income			$	45,738					$	31,326					$	31,866
Other comprehensive income:
Net unrealized gain (loss) on cashflow hedges of:
2021 - $6,743, net of deferred taxes of $1,618; 2020 - $(808), net of deferred taxes of $(194); 2019 - $(268), net of deferred taxes of $(64)			5,125						(614)						(204)
Net unrealized loss on fair value hedge of available for sale securities of:
2021 - $(550), net of deferred taxes of $(132)			(418)						—						—
Net unrealized (loss) gain on debt securities available for sale of:
2021 - $(6,510), net of deferred taxes of $(1,562) and reclassification adjustment for net realized gains included in net income of $425, net of tax of $102			(4,948)
2020 - $4,830 net of deferred taxes of $1,159 and reclassification adjustment for net realized gains included in net income of $3,472, net of tax of $833									3,671
2019 - $5,244, net of deferred taxes of $1,258 and reclassification adjustment for net realized gains included in net income of $1,938, net of tax of $465															3,986
Net change in actuarial gain (loss) on post-retirement benefits plan of:
2021 - $64, net of deferred taxes of $15; 2020 - $(116), net of deferred taxes of $(28); 2019- $(120), net of deferred taxes of $(29)			49						(88)						(91)
Net change in actuarial gain (loss) on defined-benefit pension plan of:
2021 - $301, net of deferred taxes of $72; 2020 - $(78), net of deferred taxes of $(19); 2019 - $(184), net of deferred taxes of $(44)			229						(59)						(140)
Total other comprehensive income			37						2,910						3,551
Total comprehensive income			$	45,775					$	34,236					$	35,417

See Notes to Consolidated Financial Statements

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Consolidated Statements of Shareholders’Shareholders’ Equity

For the Years Ended December 31, 2021, 20202023, 2022 and 20192021

Dollars in thousands (except per share amounts)		Preferred Stock and Related Surplus				Common Stock and Related Surplus				Unallocated Common Stock Held by ESOP				Retained Earnings				Accumulated Other Comprehensive (Loss) Income				Total Shareholders' Equity
Balance, December 31, 2020		$	—			$	94,964			$	(472	)		$	181,643			$	5,445			$	281,580
Net income			—				—				—				45,738				—				45,738
Other comprehensive income																			37				37
Exercise of stock options and SARs - 10,604 shares			—				16				—				—				—				16
Vesting of RSUs - 4,171 shares			—				—				—				—				—				—
Share-based compensation expense			—				646				—				—				—				646
Issuance of 1,500 shares of preferred stock, net of issuance costs			14,920				—				—				—				—				14,920
Unallocated ESOP shares committed to be released - 23,002 shares			—				315				248				—				—				563
Purchase and retirement of 248,244 shares of common stock			—				(6,710	)			—				—				—				(6,710	)
Common stock issuances from reinvested dividends - 11,588 shares			—				294				—				—				—				294
Preferred stock cash dividends declared			—				—				—				(589	)							(589	)
Common stock cash dividends declared ($0.70 per share)			—				—				—				(9,022	)			—				(9,022	)
Balance, December 31, 2021			14,920				89,525				(224	)			217,770				5,482				327,473
Net income			—				—				—				53,216				—				53,216
Other comprehensive loss																			(16,961	)			(16,961	)
Exercise of SARs - 5,841 shares			—				—				—				—				—				—
Vesting of RSUs - 6,205 shares			—				—				—				—				—				—
Share-based compensation expense			—				624				—				—				—				624
Unallocated ESOP shares committed to be released - 20,702 shares			—				344				224				—				—				568
Common stock issuances from reinvested dividends - 7,773 shares			—				203				—				—				—				203
Preferred stock cash dividends declared			—				—				—				(900	)			—				(900	)
Common stock cash dividends declared ($0.76 per share)			—				—				—				(9,693	)			—				(9,693	)
Balance, December 31, 2022			14,920				90,696				—				260,393				(11,479	)			354,530
Net income			—				—				—				55,239				—				55,239
Other comprehensive income																			3,994				3,994
Exercise of SARs - 5,470 shares			—				—				—				—				—				—
Vesting of RSUs - 3,484 shares			—				—				—				—				—				—
Share-based compensation expense			—				739				—				—				—				739
Common stock issuances from reinvested dividends - 10,124 shares			—				249				—				—				—				249
Acquisition of PSB Holding Corp. - 1,880,732 shares, net of issuance costs			—				39,020				—				—				—				39,020
Purchase of minority interest			—				(714	)			—				—				—				(714	)
Preferred stock cash dividends declared			—				—				—				(900	)			—				(900	)
Common stock cash dividends declared ($0.84 per share)			—				—				—				(11,949	)			—				(11,949	)
Balance, December 31, 2023		$	14,920			$	129,990			$	—			$	302,783			$	(7,485	)		$	440,208

Dollars in thousands (except per share    amounts)									Preferred Stock and Related Surplus			Common Stock and Related Surplus			Unallocated Common Stock Held by ESOP			Retained Earnings			Accumulated Other Compre- hensive Income			Total Share- holders' Equity
Balance, December 31, 2018									$	—		$	80,431		$	(939)		$	141,354		$	(1,016)		$	219,830
Net income									—			—			—			31,866			—			31,866
Other comprehensive income																					3,551			3,551
Exercise of stock options and SARs -   17,366 shares									—			7			—			—			—			7
Share-based compensation expense									—			590			—			—			—			590
Unallocated ESOP shares committed to be   released - 20,855 shares									—			305			225			—			—			530
Purchase and retirement of 417,577 shares   of common stock									—			(10,405)			—			—			—			(10,405)
Acquisition of Peoples Bankshares, Inc. - 465,931 share, net of issuance costs												8,918			—			—			—			8,918
Common stock issuances from reinvested dividends - 9,034 shares									—			238			—			—			—			238
Common stock cash dividends declared ($0.59 per share)									—			—			—			(7,361)			—			(7,361)
Balance, December 31, 2019									—			80,084			(714)			165,859			2,535			247,764
Impact of adoption of ASC 326									—			—			—			(6,756)			—			(6,756)
Net income									—			—			—			31,326			—			31,326
Other comprehensive income																					2,910			2,910
Exercise of SARs - 499 shares									—			—			—			—			—			—
Vesting of RSUs - 964 shares									—			—			—			—			—			—
Share-based compensation expense									—			527			—			—			—			527
Unallocated ESOP shares committed to be released - 22,395 shares									—			178			242			—			—			420
Purchase and retirement of 75,333 shares of common stock									—			(1,444)			—			—			—			(1,444)
Acquisition of Cornerstone Financial Services, Inc. - 570,000 shares, net of issuance costs												15,354			—			—			—			15,354
Common stock issuances from reinvested dividends - 14,937 shares									—			265			—			—			—			265
Common stock cash dividends declared ($0.68 per share)									—			—			—			(8,786)			—			(8,786)
Balance, December 31, 2020									—			94,964			(472)			181,643			5,445			281,580
Net income									—			—			—			45,738			—			45,738
Other comprehensive income																					37			37
Exercise of stock options and SARs -   10,604 shares									—			16			—			—			—			16
Vesting of RSUs - 4,171 shares												—			—			—			—			—
Share-based compensation expense									—			646			—			—			—			646
Issuance of 1,500 shares of preferred stock, net of issuance costs									14,920			—			—			—			—			14,920
Unallocated ESOP shares committed to be released - 23,002 shares									—			315			248			—			—			563
Purchase and retirement of 248,244 shares of common stock									—			(6,710)			—			—			—			(6,710)
Common stock issuances from reinvested dividends - 11,588 shares									—			294			—			—			—			294
Preferred stock cash dividends declared									—			—			—			(589)			—			(589)
Common stock cash dividends declared ($0.70 per share)									—			—			—			(9,022)			—			(9,022)
Balance, December 31, 2021									$	14,920		$	89,525		$	(224)		$	217,770		$	5,482		$	327,473

See Notes to Consolidated Financial Statements

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Consolidated Statements of Cash Flows

		For the Year Ended December 31,
Dollars in thousands		2023				2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	55,239			$	53,216			$	45,738
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			3,848				3,608				3,587
Provision for credit losses			12,250				6,950				4,000
Share-based compensation expense			739				624				646
Deferred income tax (benefit) expense			(303	)			218				264
Loans originated for sale			(4,383	)			(19,158	)			(107,097	)
Proceeds from sale of loans			4,460				19,712				111,020
Gains on loans held for sale			(77	)			(327	)			(2,153	)
Realized losses (gains) on debt securities, net			266				708				(425	)
Gains on equity investments			(740	)			(265	)			(202	)
Gain on disposal of assets			(71	)			(21	)			(108	)
Write-downs of foreclosed properties			132				187				1,417
Amortization of securities premiums, net			1,118				4,746				4,348
Accretion related to acquisition adjustments, net			(3,899	)			(1,111	)			(1,583	)
Amortization of intangibles			3,335				1,440				1,563
Earnings on bank owned life insurance and annuities			(1,715	)			(993	)			(1,140	)
(Increase) decrease in accrued interest receivable			(2,638	)			(5,288	)			1,563
Decrease in other assets			1,878				434				139
Increase in other liabilities			4,290				3,264				269
Net cash provided by operating activities			73,729				67,944				61,846
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and calls of debt securities available for sale			4,492				1,875				8,070
Proceeds from sales of debt securities available for sale			135,701				69,211				64,932
Principal payments received on debt securities available for sale			40,702				37,860				29,869
Purchases of debt securities available for sale			(125,547	)			(168,928	)			(226,427	)
Purchase of equity investments			(744	)			(8,619	)			(20,000	)
Purchases of other investments			(28,860	)			(24,797	)			(1,152	)
Proceeds from redemptions of equity investments			21,413				—				—
Proceeds from redemptions of other investments			23,233				18,489				3,139
Net loan originations			(234,696	)			(323,320	)			(296,679	)
Purchases of premises and equipment			(7,087	)			(1,346	)			(4,537	)
Proceeds from disposal of premises and equipment			116				85				558
Improvements to property held for sale			(2	)			(36	)			100
Proceeds from sale of repossessed assets and property held for sale			1,531				4,732				4,715
Cash and cash equivalents from acquisitions, net of cash consideration paid - 2023 - $595; 2021 - $48,920			14,364				—				95,699
Purchases of life insurance contracts and annuities			(34	)			(10,034	)			(34	)
Net cash used in investing activities			(155,418	)			(404,828	)			(341,747	)

			For the Year Ended December 31,
Dollars in thousands			2021						2020						2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income			$	45,738					$	31,326					$	31,866
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			3,587						3,223						2,614
Provision for credit losses			4,000						14,500						1,550
Share-based compensation expense			646						527						590
Deferred income tax expense (benefit)			264						(4,201)						103
Loans originated for sale			(107,097)						(97,805)						(22,518)
Proceeds from sale of loans			111,020						98,933						22,004
Gains on loans held for sale			(2,153)						(1,806)						(405)
Realized gains on debt securities, net			(425)						(3,472)						(1,938)
Gains on equity investments			(202)						—						—
(Gain) loss on disposal of assets			(108)						221						(236)
Gain on sale of Summit Insurance Services, LLC			—						—						(1,906)
Write-downs of foreclosed properties			1,417						1,783						2,075
Amortization of securities premiums, net			4,348						3,024						2,263
Accretion related to acquisition adjustments, net			(1,583)						(1,571)						(998)
Amortization of intangibles			1,563						1,659						1,701
Earnings on bank owned life insurance and annuities			(1,140)						(1,716)						(1,148)
Decrease (increase) in accrued interest receivable			1,563						(1,996)						699
Decrease in other assets			139						314						133
Increase in other liabilities			269						1,738						4,478
Net cash provided by operating activities			61,846						44,681						40,927
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities and calls of debt securities available for sale			8,070						3,525						1,871
Proceeds from maturities and calls of debt securities held to maturity			—						1,000						—
Proceeds from sales of debt securities available for sale			64,932						124,809						142,423
Principal payments received on debt securities available for sale			29,869						24,654						22,870
Purchases of debt securities available for sale			(226,427)						(64,740)						(90,341)
Purchases of debt securities held to maturity			—						(101,994)						—
Purchase of equity investments			(20,000)						—						—
Purchases of other investments			(1,152)						(14,700)						(18,228)
Proceeds from redemptions of other investments			3,139						16,461						21,412
Net loan originations			(296,679)						(301,654)						(181,615)
Purchases of premises and equipment			(4,537)						(8,637)						(9,218)
Proceeds from disposal of premises and equipment			558						293						860
Improvements to property held for sale			100						(1,352)						(512)
Proceeds from sale of repossessed assets and property held for sale			4,715						4,191						5,271
Proceeds from sale of Summit Insurance Services, LLC			—						—						7,117
Cash and cash equivalents from acquisitions, net of cash consideration paid - 2021 - $9,807; 2020 - $48,920; 2019 - $12,740			95,699						175,013						20,589
Purchases of life insurance contracts and annuities			(34)						(9,332)						(69)
Net cash used in investing activities			(341,747)						(152,463)						(77,570)

See Notes to Consolidated Financial Statements

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Consolidated Statements of Cash Flows - continued

		For the Year Ended December 31,
Dollars in thousands		2023				2022				2021
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposit, NOW and savings accounts			41,045				399,225				279,913
Net increase (decrease) in time deposits			7,335				(171,524	)			(95,230	)
Net increase in short-term borrowings			59,308				85,853				—
Repayment of long-term borrowings			(5,165	)			(21	)			(20	)
Proceeds from subordinated debt			—				—				75,000
Proceeds from issuance of common stock, net of issuance costs			244				203				294
Proceeds from issuance of preferred stock, net of issuance costs			—				—				14,920
Purchase and retirement of common stock			—				—				(6,710	)
Purchase of minority interest			(714	)			—				—
Exercise of stock options			—				—				16
Dividends paid on common stock			(11,949	)			(9,693	)			(9,022	)
Dividends paid on preferred stock			(900	)			(900	)			(589	)
Net cash provided by financing activities			89,204				303,143				258,572
Increase (decrease) in cash and cash equivalents			7,515				(33,741	)			(21,329	)
Cash and cash equivalents
Beginning			44,717				78,458				99,787
Ending		$	52,232			$	44,717			$	78,458
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest		$	82,482			$	27,034			$	12,425
Income taxes		$	13,264			$	12,566			$	10,257
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Real property and other assets acquired in settlement of loans		$	217			$	6			$	532
Right of use assets obtained in exchange for lease obligations		$	3,950			$	370			$	2,023
SUPPLEMENTAL DISCLOSURES OF NONCASH TRANSACTIONS INCLUDED IN ACQUISITION
Assets acquired		$	546,216			$	—			$	58,054
Liabilities assumed		$	522,242			$	—			$	164,085

			For the Year Ended December 31,
Dollars in thousands			2021						2020						2019
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposit, NOW and savings accounts			279,913						376,704						204,757
Net decrease in time deposits			(95,230)						(160,373)						(38,409)
Net decrease in short-term borrowings			—						(62,199)						(109,739)
Repayment of long-term borrowings			(20)						(21,301)						(18)
Proceeds from subordinated debt			75,000						30,000						—
Purchase of interest rate caps			—						(7,098)						—
Proceeds from issuance of common stock, net of issuance costs			294						178						159
Proceeds from issuance of preferred stock, net of issuance costs			14,920						—						—
Purchase and retirement of common stock			(6,710)						(1,444)						(10,405)
Exercise of stock options			16						—						7
Dividends paid on common stock			(9,022)						(8,786)						(7,361)
Dividends paid on preferred stock			(589)						—						—
Net cash provided by financing activities			258,572						145,681						38,991
(Decrease) increase in cash and cash equivalents			(21,329)						37,899						2,348
Cash and cash equivalents
Beginning			99,787						61,888						59,540
Ending			$	78,458					$	99,787					$	61,888
SUPPLEMENTAL DISCLOSURES OF CASH FLOW    INFORMATION
Cash payments for:
Interest			$	12,425					$	19,975					$	29,855
Income taxes			$	10,257					$	11,440					$	7,850
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Real property and other assets acquired in settlement of loans			$	532					$	1,146					$	4,600
Right of use assets obtained in exchange for lease obligations			$	2,023					$	5,147					$	902
SUPPLEMENTAL DISCLOSURES OF NONCASH TRANSACTIONS INCLUDED IN ACQUISITION
Assets acquired			$	58,054					$	302,333					$	100,377
Liabilities assumed			$	164,085					$	494,596					$	114,151

See Notes to Consolidated Financial Statements

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NOTE 1.BASIS OF PRESENTATION

We are a financial holding company headquartered in Moorefield, West Virginia.  We offer community banking and trust and wealth management services through our community bank subsidiary, Summit Community Bank (“Summit Community”). We provide commercial and retail banking services primarily in the Eastern Panhandle, Southern and North Central regions of West Virginia, the Northern, Shenandoah Valley and Southwestern regions of Virginia, and the Central region of Kentucky.  

Kentucky, the Eastern Shore of Maryland and Delaware.  

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry.

Use of estimates:  We must make estimates and assumptions that affect the reported amounts and disclosures in preparing our financial statements in conformity with accounting principles generally accepted in the United States of America.  Actual results could differ significantly from those estimates.

Principles of consolidation:  The accompanying consolidated financial statements include the accounts of Summit and its wholly-owned subsidiary.  All significant accounts and transactions among these entities have been eliminated.

Comprehensive incomeincome/loss: Comprehensive incomeincome/loss consists of net income and other comprehensive income.income/loss. Other comprehensive incomeincome/loss includes unrealized gains and losses on securities available for sale, cash flow hedges, fair value hedges of available for sale securities, other post-retirement benefits and pension plans, which are recognized as separate components of equity.

Cash and cash equivalents:Cash and cash equivalents includes cash on hand, amounts due from banks (including cash items in process of clearing), interest bearing deposits with other banks and federal funds sold.

Loans held for sale: Loans held for sale are valued at the lower of aggregate carrying cost or fair value. Gains or losses realized on the sales of loans are recognized in othernoninterest income at the time of sale.

Cash surrender value of life insurance policies: We have purchased life insurance policies on certain employees. Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Presentation of cash flows:  For purposes of reporting, cash flows from demand deposits, NOW accounts, savings accounts and short-term borrowings are reported on a net basis, since their original maturities are less than three months.  Cash flows from loans and certificates of deposit and other time deposits are reported net.

Advertising:  Advertising costs are expensed as incurred.

Trust services:  Assets held in an agency or fiduciary capacity are not our assets and are not included in the accompanying consolidated balance sheets.  Trust services income is recognized on the cash basis in accordance with customary banking practice.  Reporting such income on a cash basis does not produce results that are materially different from those that would result from use of the accrual basis.

Transfer of Financial Assets:Transfers of financial assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from us, the transferee obtains the right (free of condition that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and we do not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity date.

Unconsolidated subsidiary trusts:In accordance with accounting principles generally accepted in the United States, we do not consolidate subsidiary trusts which issue guaranteed preferred beneficial interests in subordinated debentures (Trust Preferred Securities).  The Trust Preferred Securities qualify as Tier 1 capital for regulatory purposes. See Note 13 of our Notes to Consolidated Financial Statements for a discussion of our subordinated debentures owed to unconsolidated subsidiary trusts.

Significant accounting policies:  The following table identifies our other significant accounting policies and the Note and page where a detailed description of each policy can be found.

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Mergers and Acquisitions	Note 3							Page 62
Acquisitions	Note 3			Page 62
Fair Value Measurements			Note 4	Page 6865
Debt Securities	Note 5	Page 7369
Equity and Other Investments	Note 6	Page 7974
Loans and Allowance for Credit Losses on Loans	Note 7	Page 8074
Property Held for Sale	Note 8	Page 9889
Premises and Equipment	Note 9	Page 9889
Lease Commitments	Note 10	Page 9889
Goodwill and Other Intangible Assets	Note 11	Page 9990
Borrowed Funds	Note 13	Page 10192
Derivative Financial Instruments	Note 14	Page 10293
Income Taxes	Note 15	Page 10495
Employee Benefits	Note 16	Page 10697
Share-Based Compensation	Note 16	Page 10697
Earnings Per Share	Note 20	Page 111101
Accumulated Other Comprehensive (Loss) Income	Note 21	Page 112102
Revenue RecognitionFrom Contracts with Customers	Note 22	Page 113103

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NOTE 2.SIGNIFICANT NEW AUTHORITATIVE ACCOUNTING GUIDANCE

Recently Adopted

In December 2019, July 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12,No.2023-03,Presentation of Financial Statements (Topic 205), Income TaxesStatement—Reporting Comprehensive Income (Topic 740)220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. ASU 2023-03 amends the ASC for SEC updates pursuant to SEC Staff Accounting Bulletin No.120; SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force (“EITF”) Meeting; and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - Simplifying General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. These updates were immediately effective and did not have a significant impact on our consolidated financial statements.

In March 2022, the AccountingFASB issued ASU 2022-02,Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminates the accounting guidance for Income Taxestroubled debt restructurings in ASC Subtopic 310-40,Receivables - Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, ASU 2022-02 requires entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of ASC Subtopic 326-20,Financial Instruments - Credit Losses - Measured at Amortized Cost. The ASU 2022-02 was effective for us on January 1, 2023 and its adoption did not have a significant impact on our consolidated financial statements.

In March 2022, the FASB issued ASU No.2022-01,Derivatives and Hedging (Topic 815), Fair Value Hedging—Portfolio Layer Method. ASU 2022-01 clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets and is intended to better align hedge accounting with an organization’s risk management strategies. In 2017, FASB issued ASU 2017-12 to better align the economic results of risk management activities with hedge accounting. One of the major provisions of that standard was the addition of the last-of-layer hedging method. For a closed portfolio of fixed-rate prepayable financial assets or one or more beneficial interests secured by a portfolio of prepayable financial instruments, such as mortgages or mortgage-backed securities, the last-of-layer method allows an entity to hedge its exposure to fair value changes due to changes in interest rates for a portion of the portfolio that is not expected to reduce costbe affected by prepayments, defaults, and complexity related toother events affecting the accounting for income taxes by removing specific exceptions to general principles in Topic 740 (eliminatingtiming and amount of cash flows. ASU 2022-01 renames that method the need for an organization to analyze whether certain exceptions apply in a given period) portfolio layer method. ASU 2022-01 was effective January 1, 2023 and improving financial statement preparers’ application of certain income tax-related guidance. This ASU is part of the FASB’s simplification initiative to make narrow-scope simplifications and improvements to accounting standards through a series of short-term projects. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Theits adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements.

In January 2020, October 2021, the FASB issued ASU 2020-01, Investments 2021- Equity Securities08Business Combinations (Topic 321), Investments - Equity Method805): Accounting for Contract Assets and Joint Ventures (Topic 323),Contract Liabilities from Contracts with Customers. The ASU requires entities to apply Topic 606 to recognize and Derivativesmeasure contract assets and Hedging (Topic 815) - Clarifyingcontract liabilities in a business combination. The amendments improve comparability after the Interactions between Topic 321, Topic 323,business combination by providing consistent recognition and Topic 815. For publicmeasurement guidance for revenue contracts with customers acquired in a business entities, the amendmentscombination and revenue contracts with customers not acquired in thea business combination. The ASU arewas effective for fiscal years beginning after December 15, 2020, January 1, 2023 and interim periods within those fiscal years. Theits adoption of ASU 2020-01 did not have a material impact on our consolidated financial statements.

In OctoberMarch 2020, the FASB issued ASU 2020-08 Codification Improvements to Subtopic 310-20, Receivables – Nonrefundable fees and Other Costs which clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. For public business entities, the ASU is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is not permitted. All entities should apply ASU No. 2020-08 on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. The adoption of ASU 2020-08 did not have a material impact on our consolidated financial statements.

In August 2021, the FASB issued ASU 2021-06, Presentation of Financial Statements (Topic 205), Financial Services—Depository and Lending (Topic 942), and Financial Services—Investment Companies (Topic 946): Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. This ASU incorporates recent SEC rule changes into the FASB Codification, including SEC Final Rule Releases No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. The ASU was effective December 15, 2021 and did not have a material impact on our consolidated financial statements.

Pending Adoption

In March 2020 the FASB issued ASU 2020-04 -04Reference Rate Reform (Topic 848)848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides temporary optional guidance to ease the potential burden in accounting for

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reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. The guidance iswas effective for all entities as of March 12, 2020 through December 31, 2022. At this time, we do January 1, 2023 and its adoption did not anticipate have any material adverse impact to our business operation or financial results during the period of transition.

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 2023-06 to have a material impact on our consolidated financial statements.

In October 2021, 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.

In March 2023, the FASB issued ASU 2021-08 Business Combinations2023-02,Investments—Equity Method and Joint Ventures (Topic 805)323): Accounting for Contract Assets and Contract Liabilities from Contracts with CustomersInvestments 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 requiresis effective for public business entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for all entities in any interim period. We do not expect the adoption of ASU 2023-02to apply Topic 606have 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 recognizeContractual 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, measure contract assets and contract liabilitiestherefore, is not considered in a business combination. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination.measuring fair value. The ASU is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2022. Entities should apply the amendments prospectively and early2023. Early adoption is permitted. We do not expect the adoption of ASU 2021-082022-03 to have a material impact on our consolidated financial statements.

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NOTE 3. MERGERS AND ACQUISITIONS

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. 

We anticipate the merger will close in the second quarter of 2024, subject to customary closing conditions, including regulatory approval. 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 Form 8-K filed with the SEC on August 24, 2023 for further details. 

PSB Holding Corp. Merger

On April 1, 2023, Summit acquired 100% of the ownership of PSB Holding Corp. ("PSB"), headquartered in Preston, Maryland. PSB merged with and into Summit, with Summit as the surviving entity (the "Merger"). Immediately following the Merger, Provident State Bank, Inc., PSB's wholly owned banking subsidiary, merged with and into Summit's wholly owned banking subsidiary, Summit Community Bank, Inc., ("Summit Community Bank"). Each PSB shareholder received 1.2347 shares of Summit common stock for each outstanding share of PSB common stock representing $39.0 million stock consideration, or 1,880,732 shares of Summit common stock. In addition, cash consideration of $595,000 was paid for settlement of outstanding stock options and payments for fractional shares. At consummation, PSB's assets and liabilities approximated $568 million and $528 million respectively. 

We accounted for the acquisition using the acquisition method of accounting in accordance with ASC 805,Business Combinations and accordingly, the assets and liabilities of PSB were recorded at their respective acquisition date fair values. The fair values of assets and liabilities were preliminary and subject to refinement for up to one year after acquisition date as additional information relative to the acquisition date fair values becomes available. We recognized preliminary goodwill of $687,000 in connection with the acquisition (not deductible for income tax purposes), which is not amortized for financial reporting purposes, but is subject to annual impairment testing. The core deposit intangible represents the value of long-term deposit relationships acquired in this transaction and will be amortized over an estimated weighted average life of 10 years using an accelerated method which approximates the estimated run-off of the acquired deposits. The following table details the total consideration paid on April 1, 2023 in connection with the acquisition of PSB, the fair values of the assets acquired and liabilities assumed and the resulting preliminary goodwill. 

(Dollars in thousands)		As Recorded by Provident				Estimated Fair Value Adjustments				Estimated Fair Values as Recorded by Summit
Cash consideration										$	595
Stock consideration											39,025
Total consideration											39,620
Identifiable assets acquired:
Cash and cash equivalents		$	14,959			$	—			$	14,959
Securities available for sale, at fair value			122,734				—				122,734
Securities held to maturity			20,466				(2,275	)			18,191
Loans
Purchased performing			363,446				(17,418	)			346,028
Purchased credit deteriorated			18,473				(1,495	)			16,978
Allowance for credit losses on loans			(3,341	)			3,341				—
Premises and equipment			6,600				(425	)			6,175
Core deposit intangibles			—				14,928				14,928
Other assets			24,981				(3,799	)			21,182
Total identifiable assets acquired		$	568,318			$	(7,143	)		$	561,175
Identifiable liabilities assumed:
Deposits			497,802				(249	)			497,553
Short-term borrowings			17,650				—				17,650
Long-term borrowings			5,209				(66	)			5,143
Other liabilities			7,284				(5,388	)			1,896
Total identifiable liabilities assumed		$	527,945			$	(5,703	)		$	522,242
Net identifiable assets acquired		$	40,373			$	(1,440	)		$	38,933
Preliminary goodwill resulting from acquisition										$	687

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NOTE 3. ACQUISITIONS

MVB Bank Branches Acquisition

On July 10, 2021, Summit Community Bank, Inc. ("SCB"), a wholly-owned subsidiary of Summit, acquired four MVB Bank locations located in southern West Virginia: one in Kanawha County, one in Putnam County, and two in Cabell County. In addition, SCB acquired two MVB Bank drive-up banking locations in Cabell County. SCB assumed certain deposits and loans totaling approximately $164 million and $54 million, respectively. The purchase price was $9.8 million equaling the average daily closing balance of the deposits for the thirty (30) day period prior to the closing multiplied by 6.00%.

This acquisition was determined to constitute a business combination in accordance with ASC 805,Business Combinations,and accordingly, we accounted for the acquisition using the acquisition method of accounting, recording the assets and liabilities of MVB Bank at their acquisition date respective fair values. Determining the fair value of assets and liabilities, particularly related to the loan portfolio, is a complicated process involving significant judgment regarding methods and assumptions used to calculate the estimated fair values. The fair values arewere preliminary and subject to refinement for up to one year after the acquisition date as additional information relative to the acquisition date fair values becomesbecame available. We recognized preliminary goodwill of $10.33 million in connection with the acquisition (deductible for income tax purposes), which is not amortized for financial reporting purposes, but is subject to annual impairment testing. The core deposit intangible represents the value of long-term deposit relationships acquired in this transaction and will be amortized over an estimated weighted average life of 10 years using an accelerated method which approximates the estimated run-off of the acquired deposits. The following table details the total consideration paid on July 10, 2021 in connection with the acquisition of the MVB Bank branches, the fair values of the assets acquired and liabilities assumed and the resulting preliminary goodwill.

(Dollars in thousands)		As Recorded by MVB				Estimated Fair Value Adjustments				Estimated Fair Values as Recorded by Summit
Cash consideration										$	9,807
Total consideration											9,807
Identifiable assets acquired:
Cash and cash equivalents		$	946			$	—			$	946
Loans
Purchased performing			53,440				478				53,918
Purchased credit deteriorated			488				(91	)			397
Premises and equipment			3,431				(129	)			3,302
Core deposit intangibles			—				178				178
Other assets			260				—				260
Total identifiable assets acquired		$	58,565			$	436			$	59,001
Identifiable liabilities assumed:
Deposits			163,081				959				164,040
Other liabilities			45				—				45
Total identifiable liabilities assumed		$	163,126			$	959			$	164,085
Net liabilities assumed		$	(104,561	)		$	(523	)		$	(105,084	)
Net cash received from MVB											94,753
Goodwill resulting from acquisition										$	10,331

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(Dollars in thousands)						As Recorded by MVB						Estimated Fair Value Adjustments						Estimated Fair Values as Recorded by Summit
Cash consideration																		$	9,807
Total consideration																		9,807
Identifiable assets acquired:
Cash and cash equivalents						$	946					$	—					$	946
Loans
Purchased performing						53,440						478						53,918
Purchased credit deteriorated						488						(91)						397
Premises and equipment						3,431						(129)						3,302
Core deposit intangibles						—						178						178
Other assets						260						—						260
Total identifiable assets acquired						$	58,565					$	436					$	59,001
Identifiable liabilities assumed:
Deposits						163,081						959						164,040
Other liabilities						45						—						45
Total identifiable liabilities assumed						$	163,126					$	959					$	164,085
Net liabilities assumed						$	(104,561)					$	(523)					$	(105,084)
Net cash received from MVB																		94,753
Preliminary goodwill resulting from acquisition																		$	10,331

WinFirst Financial Corp. Acquisition

On December 15, 2020, SCB acquired 100% of the ownership of WinFirst Financial Corp. ("WinFirst") and its subsidiary WinFirst Bank, headquartered in Winchester, Kentucky. Pursuant to the Agreement and Plan of Merger dated September 28, 2020, WinFirst's shareholders received $328.05 for each share of WinFirst common stock they owned, or approximately $21.7 million in the aggregate. With this transaction, Summit expanded its footprint into Kentucky. At acquisition, WinFirst's assets and liabilities approximated $143 million and $127 million, respectively.

We accounted for the acquisition using the acquisition method of accounting in accordance with ASC 805, Business Combinations and accordingly, the assets and liabilities of WinFirst were recorded at their respective acquisition date fair values. The fair values of assets and liabilities are preliminary and subject to refinement for up to one year after the acquisition date as additional information relative to the acquisition date fair values becomes available. We recognized goodwill of $6.73 million in connection with the acquisition (not deductible for income tax purposes), which is not amortized for financial reporting purposes, but is subject to annual impairment testing. The core deposit intangible represents the value of long-term deposit relationships acquired in this transaction and will be amortized over an estimated weighted average life of 10 years using an accelerated method which approximates the estimated run-off of the acquired deposits. The following table details the total consideration paid on December 15, 2020 in connection with the acquisition of WinFirst, the fair values of the assets acquired and liabilities assumed and the resulting preliminary goodwill.

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(Dollars in thousands)						As Recorded by WinFirst						Estimated Fair Value Adjustments						Estimated Fair Values as Recorded by Summit
Cash consideration																		$	21,705
Total consideration																		21,705
Identifiable assets acquired:
Cash and cash equivalents						$	13,030					$	—					$	13,030
Securities available for sale, at fair value						1,613						19						1,632
Loans
Purchased performing						123,754						(968)						122,786
Purchased credit deteriorated						—						—						—
Allowance for credit losses on loans						(1,227)						1,227						—
Premises and equipment						171						(27)						144
Property held for sale						196						(50)						146
Core deposit intangibles						—						81						81
Other assets						5,898						477						6,375
Total identifiable assets acquired						$	143,435					$	759					$	144,194
Identifiable liabilities assumed:
Deposits						103,599						1,065						104,664
Short-term borrowings						3,000						—						3,000
Long-term borrowings						20,585						697						21,282
Other liabilities						270						—						270
Total identifiable liabilities assumed						$	127,454					$	1,762					$	129,216
Net identifiable assets acquired						$	15,981					$	(1,003)					$	14,978
Goodwill resulting from acquisition																		$	6,727

MVB Bank Branches Acquisition

On April 24, 2020, SCB expanded its presence in the Eastern Panhandle of West Virginia by acquiring three MVB Bank locations in Berkeley County, West Virginia and one MVB Bank location in Jefferson County, West Virginia. Summit assumed certain deposit liabilities and other liabilities and acquired certain assets totaling approximately $188.2 million and $38.4 million, respectively. The purchase price, equaling the average daily closing balance of the deposits for the thirty (30) day period prior to the closing multiplied by 8.00%, totaled $13.0 million.

This acquisition was determined to constitute a business combination in accordance with ASC 805, Business Combinations,and accordingly we accounted for the acquisition using the acquisition method of accounting, recording the assets and liabilities of MVB Bank at their acquisition date respective fair values. The fair values of assets and liabilities are preliminary and subject to refinement for up to one year after the acquisition date as additional information relative to the acquisition date fair values becomes available. We recognized goodwill of $14.7 million in connection with the acquisition (deductible for income tax purposes), which is not amortized for financial reporting purposes, but is subject to annual impairment testing. The core deposit intangible represents the value of long-term deposit relationships acquired in this transaction and will be amortized over an estimated weighted average life of 10 years using an accelerated method which approximates the estimated run-off of the acquired deposits. The following table details the total consideration paid on April 24, 2020 in connection with the acquisition of the MVB Bank branches, the fair values of the assets acquired and liabilities assumed and the resulting preliminary goodwill.

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(Dollars in thousands)						As Recorded by MVB Bank						Estimated Fair Value Adjustments						Estimated Fair Values as Recorded by Summit
Cash consideration																		$	12,965
Total consideration																		12,965
Identifiable assets acquired:
Cash and cash equivalents						$	800					$	—					$	800
Loans
Purchased performing						35,127						(1,185)						33,942
Premises and equipment						2,376						(42)						2,334
Core deposit intangibles						—						125						125
Other assets						114						—						114
Total identifiable assets acquired						$	38,417					$	(1,102)					$	37,315
Identifiable liabilities assumed:
Deposits						188,134						598						188,732
Other liabilities						102						—						102
Total identifiable liabilities assumed						$	188,236					$	598					$	188,834
Net liabilities assumed						$	(149,819)					$	(1,700)					$	(151,519)
Net cash received from MVB Bank																		136,854
Goodwill resulting from acquisition																		$	14,665

Cornerstone Financial Services Inc. Acquisition

On January 1, 2020, SCB acquired 100% of the ownership of Cornerstone Financial Services Inc. ("Cornerstone") and its subsidiary Cornerstone Bank, headquartered in West Union, West Virginia. With this transaction, Summit further expands its footprint into the central region of West Virginia. Pursuant to the Agreement and Plan of Merger dated September 17, 2019, Cornerstone's shareholders received cash in the amount of $5,700.00 per share or 228 shares of Summit common stock, or a combination of cash and Summit stock, subject to proration to result in approximately 50% cash and 50% stock consideration in the aggregate. Total stock consideration was $15.4 million or 570,000 shares of Summit common stock and cash consideration was $14.3 million. Cornerstone's assets and liabilities approximated $195 million and $176 million, respectively, at December 31, 2019.

We accounted for the acquisition using the acquisition method of accounting in accordance with ASC 805, Business Combinations and accordingly, the assets and liabilities of Cornerstone were recorded at their acquisition date respective fair values. Determining the fair value of assets and liabilities, particularly related to the loan portfolio, is a complicated process involving significant judgment regarding methods and assumptions used to calculate the estimated fair values. We recognized goodwill of $10.82 million in connection with the acquisition (not deductible for income tax purposes), which is not amortized for financial reporting purposes, but is subject to annual impairment testing or upon a triggering event. The core deposit intangible represents the value of long-term deposit relationships acquired in this transaction and will be amortized over an estimated weighted average life of 10 years using an accelerated method which approximates the estimated run-off of the acquired deposits. The following table details the total consideration paid on January 1, 2020 in connection with the acquisition of Cornerstone, the fair values of the assets acquired and liabilities assumed and the resulting preliminary goodwill.

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(Dollars in thousands)						As Recorded by Cornerstone						Estimated Fair Value Adjustments						Estimated Fair Values as Recorded by Summit
Cash consideration																		$	14,250
Stock consideration																		15,441
Total consideration																		29,691
Identifiable assets acquired:
Cash and cash equivalents						$	60,284					$	—					$	60,284
Securities available for sale, at fair value						90,075						(47)						90,028
Loans
Purchased performing						37,965						188						38,153
Purchased credit deteriorated						1,877						(569)						1,308
Allowance for credit losses on loans						(312)						312						—
Premises and equipment						806						(142)						664
Property held for sale						10						—						10
Core deposit intangibles						—						717						717
Other assets						4,324						(74)						4,250
Total identifiable assets acquired						$	195,029					$	385					$	195,414
Identifiable liabilities assumed:
Deposits						173,027						239						173,266
Other liabilities						3,286						(7)						3,279
Total identifiable liabilities assumed						$	176,313					$	232					$	176,545
Net identifiable assets acquired						$	18,716					$	153					$	18,869
Goodwill resulting from acquisition																		$	10,822

The following is a description of the methods used to determine the fair values of significant assets and liabilities presented for each transaction above.

Cash and cash equivalents: The carrying amount of these assets approximates their fair value based on the short-term nature of these assets, with the exception of certificates of deposits held at other banks, which were adjusted to fair value based upon current interest rates.

Securities: Fair values for securities are based on quoted market prices, where available. If quoted market prices are not available, fair value estimates are based on observable inputs including quoted market prices for similar instruments, quoted market prices that are not in an active market or other inputs that are observable in the market.

Loans: Fair values for loans are based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, collectibility,collectability, fixed or variable interest rate, term of loan, amortization status and current market rates. Loans were grouped together according to similar characteristics and were treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns, if any.

Premises and equipment: The fair value real property was determined based upon appraisals by licensed appraisers. The fair value of tangible personal property, which is not material, was assumed to equal the carrying value.

Core deposit intangible: This intangible asset represents the value of the relationships with deposit customers. The fair value was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, reserve requirements and the net maintenance cost attributable to customer deposits.

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Deposits: The fair values of the demand and savings deposits by definition equal the amount payable on demand at the acquisition date. The fair values for time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered to the contractual interest rates on such time deposits.

Long-term borrowings: The fair value of long-term fixed-rate borrowings was estimated using by discounting future cash flows using current interest rates for similar financial instruments.

Loans acquired in a business combination are recorded at estimated fair value on the date of acquisition without the carryover of the related allowance for credit losses on loans.

Prior to adoption of

In accordance with ASC 326, on January 1, 2020, loans acquired in a business combination that had evidence of credit deterioration since origination and for which it was probable at the date of acquisition that we would not collect all contractually required principal and interest payments were considered purchased credit-impaired (PCI) loans. When determining fair value, PCI loans were identified as of the date of acquisition based upon evidence of credit quality such as internal risk grades and past due and nonaccrual status. The difference between contractually required payments of principal and interest at acquisition and the cash flows expected to be collected at acquisition was accounted for as a"nonaccretable difference," and was available to absorb future credit losses on those loans. For purposes of determining the nonaccretable difference, no prepayments were generally assumed in determining contractually required payments of principal and interest or cash flows expected to be collected. Subsequent decreases to the expected cash flows generally resulted in a provision for credit losses. Subsequent significant increases in cash flows could have resulted in a reversal of the provision for credit losses to the extent of prior charges, or a transfer from nonaccretable difference to accretable yield. Further, any excess of cash flows expected at acquisition over the estimated fair value was accounted for as accretable yield and was recognized as interest income over the remaining life of the loan when there was a reasonable expectation about the amount and timing of such cash flows.

Subsequent to adoption of ASC 326 on January 1, 2020, loans acquired in a business combination that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans. As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan. Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium. Discounts and premiums are recognized through interest income on a level-yield method over the life of the loans. All loans considered to be PCI prior to January 1, 2020 were converted to PCD on that date.

Loans not designated PCD loans as of the acquisition date are designated purchased performing loans. We account for purchased performing loans using the contractual cash flows method of recognizing discount accretion based on the acquired loans’ contractual cash flows. Purchased performing loans are recorded at fair value, including a credit discount. The fair value discount is accreted as an adjustment to yield over the estimated lives of the loans. There is no allowance for credit losses established at the acquisition date for purchased performing loans. A provision for credit losses is recorded for any deterioration in these loans subsequent to the acquisition.

The revenues and earnings of our acquired entities during 20212023 and 2020,2021, as if the business combinations occurred as of the beginning of the comparable prior annual reporting period, are impracticable to provide because each acquisition was integrated into our existing operations and financial information relative to the acquired entities is not maintained.

During 20212023 and 2020,2021, we purchased loans, for which there was, at the time of acquisition, more than significant deterioration of credit quality since origination (PCD loans). The carrying amount of these loans at acquisition is as follows:

						For the Year Ended
						December 31,
Dollars in thousands						2021			2020
Purchase price of PCD loans at acquisition						$	488		$	12,649
Allowance for credit losses - loans at acquisition						91			796
Non-credit discount at acquisition						(2)			568
Par value of PCD loans at acquisition						399			11,285

		For the Year Ended December 31,
Dollars in thousands		2023				2021
Purchase price of PCD loans at acquisition		$	18,473			$	488
Allowance for credit losses - loans at acquisition			1,495				91
Non-credit discount at acquisition			729				(2	)
Par value of PCD loans at acquisition			16,249				399

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NOTE 4.FAIR VALUE MEASUREMENTS

In accordance with ASC 820Fair Value Measurements, fair value is based upon the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  A fair value hierarchy is utilized to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  The three levels of inputs used to measure fair value are as follows:

Level 1: Quoted prices (unadjusted) or identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and our creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. Our valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes our valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. A more detailed description of the valuation methodologies used for assets and liabilities measured at fair value is set forth below. Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with our monthly and/or quarterly valuation process.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis include the following:

Debt Securities Available for Sale:  Debt Securitiessecurities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available.  If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions.  Level 1 debt securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds.markets.  Level 2 debt securities include U.S. agency securities, mortgage-backed securities, issued by government sponsored entities, municipal bonds and corporate debt securities. Certain trust preferred securities classified as corporate debt securities are Level 3 due to limited market trades of these classes of securities.

Equity Investments: Equity investments are recorded at fair value on a recurring basis, with changes in fair value reported in net income. In At December 2021,31, 2023 and 2022, we invested as a limited partnerheld an investment in a hedge fund that primarily tradesan S&P 500 index options. The average duration of the option positions employed by themutual fund ranges 14 to 17 business days. Investors may withdraw funds at the end of any month with 30 calendar days prior written notice. As permitted by ASC 820, as a practical expedient, we estimate the fair value of this investment$6.6 million and $5.2 million, respectively. The mutual fund is actively traded on an exchange, and we classify it as Level 1.

We purchased perpetual preferred stock of a bank holding company issued in October 2022 in a private offering. The perpetual preferred stock does not trade on an exchange or in an active over-the-counter market; therefore, we estimate its fair value using the net assetpresent value ("NAV") per share of its future cash flows using observed discount rates of similar publicly-traded securities, adjusted for a liquidity premium. We classify the investmentperpetual preferred stock as of the reporting entity's measurement date. This investment is reflectedLevel 2, and its fair value at December 31, 2023 and 2022 was $2.8 million and $2.9 million, respectively.

Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment. Such equity securities totaled $1.6 million and $800,000 at December 31, 2023 and 2022 respectively and are included in Equity Investments on the accompanying consolidated balance sheet as Equity Investments at a fair value of $20.2 million.

sheets.

Derivative Financial Instruments:  Derivative financial instruments are recorded at fair value on a recurring basis. Fair value measurement is based on pricing models run by a third-party,third-party, utilizing observable market-based inputs.  All future floating cash flows are projected and both floating and fixed cash flows are discounted to the valuation date.  As a result, we classify interest rate swaps and caps as Level 2.

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Assets and Liabilities Recorded at Fair Value on a Recurring Basis

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

			Balance at						Fair Value Measurements Using:
Dollars in thousands			December 31, 2021						Level 1						Level 2						Level 3
Debt securities available for sale
U.S. Government sponsored agencies			$	36,629					$	—					$	36,629					$	—
Mortgage backed securities:
Government sponsored agencies			62,211						—						62,211						—
Nongovernment sponsored entities			26,586						—						26,586						—
State and political subdivisions			137,786						—						137,786						—
Corporate debt securities			30,278						—						30,278						—
Asset-backed securities			24,883						—						24,883						—
Tax-exempt state and political subdivisions			82,730						—						82,730						—
Total debt securities available for sale			$	401,103					$	—					$	401,103					$	—
Derivative financial assets
Interest rate caps			$	11,187					$	—					$	11,187					$	—
Derivative financial liabilities
Interest rate swaps			$	1,124					$	—					$	1,124					$	—

			Balance at						Fair Value Measurements Using:
Dollars in thousands			December 31, 2020						Level 1						Level 2						Level 3
Debt securities available for sale
U.S. Government sponsored agencies			$	35,157					$	—					$	35,157					$	—
Mortgage backed securities:
Government sponsored agencies			59,046						—						59,046						—
Nongovernment sponsored entities			16,687						—						16,687						—
State and political subdivisions			50,905						—						50,905						—
Corporate debt securities			26,427						—						26,427						—
Asset-backed securities			46,126						—						46,126						—
Tax-exempt state and political subdivisions			51,779						—						51,779						—
Total debt securities available for sale			$	286,127					$	—					$	286,127					$	—
Derivative financial assets
Interest rate caps			$	6,653					$	—					$	6,653					$	—
Derivative financial liabilities
Interest rate swaps			$	2,747					$	—					$	2,747					$	—

		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		$	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				—

		Balance at				Fair Value Measurements Using:
Dollars in thousands		December 31, 2022				Level 1				Level 2				Level 3
Debt securities available for sale
U.S. Government sponsored agencies		$	20,219			$	—			$	20,219			$	—
Residential mortgage-backed securities:
Government sponsored agencies			51,456				—				51,456				—
Nongovernment sponsored entities			61,617				—				61,617				—
State and political subdivisions			93,067				—				93,067				—
Corporate debt securities			31,628				—				29,788				1,840
Asset-backed securities			19,476				—				19,476				—
Tax-exempt state and political subdivisions			127,738				—				127,738				—
Total debt securities available for sale		$	405,201			$	—			$	403,361			$	1,840
Equity investments		$	29,494			$	25,766			$	3,728			$	—
Derivative financial assets
Interest rate caps		$	30,601			$	—			$	30,601			$	—
Interest rate swaps			9,905				—				9,905				—

Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis

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.  

Loans Held for Sale:Loans held for sale are carried at the lower of cost or fair value.  The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics.  As such, we classify loans subject to nonrecurring fair value adjustments as Level 2.

Collateral Dependent Loans with an ACLL:In accordance with ASC 326, effective January 1, 2020, we may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance

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for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the

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collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice.

Prior to adoption of ASC 326, we did not record loans at fair value on a recurring basis. However, from time to time, a loan was considered impaired and an allowance for credit loss was established.  Loans for which it is probable that payment of interest and principal will not be made in accordance with the original contractual terms of the loan agreement were considered impaired.  Once a loan was identified as individually impaired, management measured impairment using one of several methods, including collateral value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the discounted cash flows or collateral value exceeded the recorded investments in such loans. These loans were carried at recorded loan investment and therefore are not included in the following tables of loans measured at fair value. Impaired loans internally graded as substandard or doubtful were evaluated using the fair value of collateral method.  All other impaired loans were measured for impairment using the discounted cash flows method. Impaired loans where an allowance is established based on the fair value of collateral were included in the fair value hierarchy. When the fair value of the collateral was based on an observable market price or a current appraised value, we recorded the impaired loan as nonrecurring Level 2. When a current appraised value was not available and there was no observable market price, we recorded the impaired loan as nonrecurring Level 3.  

When impaired loans were deemed required to be included in the fair value hierarchy, management immediately began the process of evaluating the estimated fair value of the underlying collateral to determine if a related specific allowance for credit losses or charge-off is necessary.  Current appraisals were ordered once a loan was deemed impaired if the existing appraisal was more than twelve months old, or more frequently if there was known deterioration in value. For recently identified impaired loans, a current appraisal may not have been available at the financial statement date. Until the current appraisal was obtained, the original appraised value was discounted, as appropriate, to compensate for the estimated depreciation in the value of the loan’s underlying collateral since the date of the original appraisal.  Such discounts were generally estimated based upon management’s knowledge of sales of similar collateral within the applicable market area and its knowledge of other real estate market-related data as well as general economic trends.  When a new appraisal was received (which was generally within 3 months of a loan being identified as impaired), management then re-evaluated the fair value of the collateral and adjusted any specific allocated allowance for credit losses on loans, as appropriate.  In addition, management also assigned a discount of 7–10% for the estimated costs to sell the collateral.

Property Held for Sale:  Property held for sale consists of real estate acquired in foreclosure or other settlement of loans. Foreclosed assets are initially recorded at fair value, less estimated selling costs, when acquired establishing a new cost basis. Such assets are carried on the balance sheet at the lower of the investment in the real estate or its fair value less estimated selling costs.  The fair value of foreclosed properties is determined on a nonrecurring basis generally utilizing current appraisals performed by an independent, licensed appraiser applying an income or market value approach using observable market data (Level 2)2).  Updated appraisals of foreclosed properties are generally obtained if the existing appraisal is more than 18 months old or more frequently if there is a known deterioration in value.  However, if a current appraisal is not available, the original appraised value is discounted, as appropriate, to compensate for the estimated depreciation in the value of the real estate since the date of its original appraisal.  Such discounts are generally estimated based upon management’s knowledge of sales of similar property within the applicable market area and its knowledge of other real estate market-related data as well as general economic trends (Level 3)3).  Upon foreclosure, any fair value adjustment is charged against the allowance for credit losses on loans.  Subsequent fair value adjustments are recorded in the period incurred and included in other noninterest expense in the consolidated statements of income.

Assets measured at fair value on a nonrecurring basis are included in the tables below.

		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			$	—

		Balance at				Fair Value Measurements Using:
Dollars in thousands		December 31, 2022				Level 1				Level 2				Level 3
Collateral-dependent loans with an ACLL
Commercial real estate		$	3,051			$	—			$	3,051			$	—
Construction and development			350				—				350				—
Residential real estate			182				—				182				—
Total collateral-dependent loans with an ACLL		$	3,583			$	—			$	3,583			$	—
Property held for sale
Commercial real estate		$	297			$	—			$	297			$	—
Construction and development			4,480				—				4,480				—
Total property held for sale		$	4,777			$	—			$	4,777			$	—

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			Balance at						Fair Value Measurements Using:
Dollars in thousands			December 31, 2021						Level 1						Level 2						Level 3
Residential mortgage loans held for sale			$	227					$	—					$	227					$	—
Collateral-dependent loans with an ACLL
Commercial real estate			$	2,417					$	—					$	2,417					$	—
Construction and development			693						—						693						—
Residential real estate			528						—						528						—
Total collateral-dependent loans with an ACLL			$	3,638					$	—					$	3,638					$	—
Property held for sale
Commercial real estate			$	1,170					$	—					$	1,170					$	—
Construction and development			7,893						—						7,893						—
Residential real estate			27						—						27						—
Total property held for sale			$	9,090					$	—					$	9,090					$	—

			Balance at						Fair Value Measurements Using:
Dollars in thousands			December 31, 2020						Level 1						Level 2						Level 3
Residential mortgage loans held for sale			$	1,998					$	—					$	1,998					$	—
Collateral-dependent impaired loans
Commercial			$	8					—						$	8					$	—
Commercial real estate			9,914						—						9,914						—
Construction and development			1,576						—						1,576						—
Residential real estate			597						—						597						—
Total collateral-dependent impaired loans			$	12,095					$	—					$	12,095					$	—
Property held for sale
Commercial real estate			$	1,557					$	—					$	1,557					$	—
Construction and development			11,595						—						10,974						621
Residential real estate			476						—						476						—
Total property held for sale			$	13,628					$	—					$	13,007					$	621

ASC Topic 825,Financial InstrumentsInstruments, requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The estimated fair value approximates carrying value for cash and cash equivalents, accrued interest and the cash surrender value of life insurance policies and annuities. The methodologies for other financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis are discussed below:

Loans: The estimated fair value approximates carrying value for variable-rate loans that reprice frequently and with no significant change in credit risk. The fair value of fixed-rate loans and variable-rate loans which reprice on an infrequent basis is estimated by discounting future cash flows using the current interest rates at which similar loans with similar terms would be made to borrowers of similar credit quality. An overall valuation adjustment is made for specific credit risks as well as general portfolio credit risk.

Other Investments: The carrying value of other investments, consisting principally of Federal Home Loan Bank stock, is a reasonable estimate of fair value of this stock. This stock is non-transferable and can only be redeemed at its par value by FHLB.

Deposits: The estimated fair value approximates carrying value for demand deposits. The fair value of fixed-rate deposit liabilities with defined maturities is estimated by discounting future cash flows using the interest rates currently offered for deposits of similar remaining maturities. The estimated fair value of deposits does not take into account the value of our long-term relationships with depositors, commonly known as core deposit intangibles, which are separate intangible assets, and not considered financial instruments. Nonetheless, we would likely realize a core deposit premium if our deposit portfolio were sold in the principal market for such deposits.

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Borrowed Funds: The estimated fair value approximates carrying value for short-term borrowings. The fair value of long-term fixed-rate borrowings is estimated using quoted market prices, if available, or by discounting future cash flows using current interest rates for similar financial instruments.

Subordinated debentures:  The fair value of subordinated debentures is estimated by discounting future cash flows using current interest rates.

The following tables present the carrying amount, fair value, and placement in the fair value hierarchy of our financial instruments as of December 31, 20212023 and December 31, 2020.

						At December 31,
						2021												Fair Value Measurements Using:
Dollars in thousands						Carrying Value						Estimated Fair Value						Level 1			Level 2			Level 3
Financial assets
Cash and cash equivalents						$	78,458					$	78,458					$	21,006		$	57,452		$	—
Debt securities available for sale						401,103						401,103						—			401,103			—
Debt securities held to maturity						98,060						101,242						—			101,242			—
Equity investments						20,202						20,202						—			20,202			—
Other investments						11,304						11,304						—			11,304			—
Loans held for sale, net						227						227						—			227			—
Loans, net						2,729,093						2,726,959						—			3,638			2,723,321
Accrued interest receivable						10,578						10,578						—			10,578			—
Cash surrender value of life insurance policies and   annuities						60,613						60,613						—			60,613			—
Derivative financial assets						11,187						11,187						—			11,187			—
						$	3,420,825					$	3,421,873					$	21,006		$	677,546		$	2,723,321
Financial liabilities
Deposits						$	2,943,089					$	2,944,722					$	—		$	2,944,722		$	—
Short-term borrowings						140,146						140,146						—			140,146			—
Long-term borrowings						679						795						—			795			—
Subordinated debentures						102,891						103,623						—			—			103,623
Subordinated debentures owed to unconsolidated subsidiary trusts						19,589						19,589						—			19,589			—
Accrued interest payable						788						788						—			788			—
Derivative financial liabilities						1,124						1,124						—			1,124			—
						$	3,208,306					$	3,210,787					$	—		$	3,107,164		$	103,623

2022.

		At December 31, 2023								Fair Value Measurements Using:
Dollars in thousands		Carrying Value				Estimated Fair 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			$	—

		At December 31, 2022								Fair Value Measurements Using:
Dollars in thousands		Carrying Value				Estimated Fair Value				Level 1				Level 2				Level 3
Financial assets
Cash and cash equivalents		$	44,717			$	44,717			$	16,469			$	28,248			$	—
Debt securities available for sale			405,201				405,201				—				403,361				1,840
Debt securities held to maturity			96,163				86,627				—				86,627				—
Equity investments			29,494				29,494				25,766				3,728				—
Other investments			16,029				16,029				—				16,029				—
Loans, net			3,043,919				2,966,814				—				3,583				2,963,231
Accrued interest receivable			15,866				15,866				—				15,866				—
Cash surrender value of life insurance policies and annuities			71,640				71,640				—				71,640				—
Derivative financial assets			40,506				40,506				—				40,506				—
		$	3,763,535			$	3,676,894			$	42,235			$	669,588			$	2,965,071
Financial liabilities
Deposits		$	3,169,879			$	3,155,725			$	—			$	3,155,725			$	—
Short-term borrowings			225,999				225,999				—				225,999				—
Long-term borrowings			658				667				—				667				—
Subordinated debentures			103,296				91,801				—				91,801				—
Subordinated debentures owed to unconsolidated subsidiary trusts			19,589				19,589				—				19,589				—
Accrued interest payable			2,357				2,357				—				2,357				—
		$	3,521,778			$	3,496,138			$	—			$	3,496,138			$	—

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						At December 31
									2020												Fair Value Measurements Using:
Dollars in thousands									Carrying Value						Estimated Fair Value						Level 1			Level 2			Level 3
Financial assets
Cash and cash equivalents									$	99,787					$	99,787					$	19,522		$	80,265		$	—
Debt securities available for sale									286,127						286,127						—			286,127			—
Debt securities held to maturity									99,914						103,157						—			103,157			—
Other investments									14,185						14,185						—			14,185			—
Loans held for sale, net									1,998						1,998						—			1,998			—
Loans, net									2,379,907						2,384,275						—			12,095			2,372,180
Accrued interest receivable									11,989						11,989						—			11,989			—
Cash surrender value of life insurance policies and   annuities									59,438						59,438						—			59,438			—
Derivative financial assets									6,653						6,653						—			6,653			—
									$	2,959,998					$	2,967,609					$	19,522		$	575,907		$	2,372,180
Financial liabilities
Deposits									$	2,595,651					$	2,597,326					$	—		$	2,597,326		$	—
Short-term borrowings									140,146						140,146						—			140,146			—
Long-term borrowings									699						866						—			866			—
Subordinated debentures									29,364						29,364						—			29,364			—
Subordinated debentures owed to unconsolidated subsidiary trusts									19,589						19,589						—			19,589			—
Accrued interest payable									745						745						—			745			—
Derivative financial liabilities									2,747						2,747						—			2,747			—
									$	2,788,941					$	2,790,783					$	—		$	2,790,783		$	—

NOTE 5.DEBT SECURITIES

We classify debt securities as held to maturity, available for sale or trading according to management’s intent.  The appropriate classification is determined at the time of purchase of each security and re-evaluated at each reporting date.

Debt securities held to maturity: Certain debt securities for which we have the positive intent and ability to hold to maturity are reported at cost, adjusted for amortization of premiums and accretion of discounts.

Debt securities available for sale: Debt securities not classified as "held to maturity" or as "trading" are classified as "available for sale."  Securities classified as "available for sale" are those securities that we intend to hold for an indefinite period of time, but not necessarily to maturity.  "Available for sale" securities are reported at estimated fair value net of unrealized gains or losses, which are adjusted for applicable income taxes and reported as a separate component of shareholders' equity.

Debt trading securities: There are no securities classified as "trading" in the accompanying financial statements.

Allowance for Credit Losses – Debt Securities Available for Sale: For debt securities available for sale in an unrealized loss position, we first assess whether (i) we intend to sell or (ii) it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the security's amortized cost is written down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported in our income statement as a component of the provision for credit losses. We have elected to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Debt securities available for sale are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible or when either of the aforementioned criteria regarding intent or requirement to sell is met.

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Allowance for Credit Losses – Debt Securities Held to Maturity: The allowance for credit losses on debt securities held to maturity is a contra-asset valuation account, calculated in accordance with ASC 326, that is deducted from the amortized cost basis of debt securities held to maturities to present our best estimate of the net amount expected to be collected. Debt securities held to maturity are charged-off against the allowance when deemed uncollectible. Adjustments to the allowance are reported in our income statement as a component of the provision for credit losses. We measure expected credit losses on debt securities held to maturity on a collective basis by major security type with each type sharing similar risk characteristics and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. We made the accounting policy election to exclude accrued interest receivable on debt securities held to maturity from the estimate of credit losses.

Prior to the adoption of ASC 326, declines in the fair value of debt securities held to maturity and available for sale below their cost that were deemed to be other than temporary were reflected in earnings as realized losses. In estimating other-than-temporary impairment losses prior to January 1, 2020, management considered, among other things, (i) the length of time and the extent to which the fair value had been less than cost, (ii) the financial condition and near-term prospects of the issuer and (iii) the intent and our ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Realized gains and losses on sales of securities are recognized on the specific identification method.  Amortization of premiums and accretion of discounts are computed using the interest method.

Debt Securities Available for Sale

The amortized cost, unrealized gains, unrealized losses and estimated fair values of debt securities available for sale at December 31, 2021 2023 and 2020,2022, are summarized as follows:

			December 31, 2021
			Amortized						Unrealized
Dollars in thousands			Cost						Gains						Losses						Fair Value
Debt Securities Available for Sale
Taxable debt securities
U.S. Government and agencies and corporations			$	36,820					$	169					$	360					$	36,629
Residential mortgage-backed securities:
Government-sponsored agencies			61,646						1,153						588						62,211
Nongovernment-sponsored entities			26,839						26						279						26,586
State and political subdivisions
General obligations			78,627						377						1,323						77,681
Water and sewer revenues			9,839						294						—						10,133
Lease revenues			6,401						215						26						6,590
Income tax revenues			6,487						250						3						6,734
Sales tax revenues			6,909						19						99						6,829
Various tax revenues			13,031						218						203						13,046
Utility revenues			7,153						137						130						7,160
Other revenues			9,291						331						9						9,613
Corporate debt securities			30,524						78						324						30,278
Asset-backed securities			24,873						97						87						24,883
Total taxable debt securities			318,440						3,364						3,431						318,373
Tax-exempt debt securities
State and political subdivisions
General obligations			47,583						1,526						270						48,839
Water and sewer revenues			10,618						375						15						10,978
Lease revenues			7,974						553						31						8,496
Other revenues			14,028						405						16						14,417
Total tax-exempt debt securities			80,203						2,859						332						82,730
Total debt securities available for sale			$	398,643					$	6,223					$	3,763					$	401,103

		December 31, 2023
						Unrealized
Dollars in thousands		Amortized Cost				Gains				Losses				Fair Value
Debt Securities Available for Sale
Taxable debt securities
U.S. Government and 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

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			December 31, 2020
			Amortized						Unrealized
Dollars in thousands			Cost						Gains						Losses						Fair Value
Debt Securities Available for Sale
Taxable debt securities
U.S. Government and agencies and corporations			$	35,190					$	361					$	394					$	35,157
Residential mortgage-backed securities:
Government-sponsored agencies			57,399						1,996						349						59,046
Nongovernment-sponsored entities			16,799						132						244						16,687
State and political subdivisions
General obligations			15,065						804						4						15,865
Water and sewer revenues			10,176						620						—						10,796
Lease revenues			4,825						341						—						5,166
College and university revenues			3,022						315						—						3,337
Income tax revenues			5,052						376						—						5,428
Other revenues			9,406						907						—						10,313
Corporate debt securities			26,483						56						112						26,427
Asset-backed securities			46,579						172						625						46,126
Total taxable debt securities			229,996						6,080						1,728						234,348
Tax-exempt debt securities
State and political subdivisions
General obligations			22,213						2,416						9						24,620
Water and sewer revenues			8,266						709						—						8,975
Lease revenues			7,195						799						—						7,994
Other revenues			9,487						711						8						10,190
Total tax-exempt debt securities			47,161						4,635						17						51,779
Total debt securities available for sale			$	277,157					$	10,715					$	1,745					$	286,127

 

		December 31, 2022
						Unrealized
Dollars in thousands		Amortized Cost				Gains				Losses				Fair Value
Debt Securities Available for Sale
Taxable debt securities
U.S. Government and agencies and corporations		$	20,446			$	83			$	310			$	20,219
Residential mortgage-backed securities:
Government-sponsored agencies			55,184				80				3,808				51,456
Nongovernment-sponsored entities			65,860				48				4,291				61,617
State and political subdivisions
General obligations			82,410				9				19,924				62,495
Various tax revenues			10,699				—				2,591				8,108
Other revenues			29,044				—				6,580				22,464
Corporate debt securities			33,409				44				1,825				31,628
Asset-backed securities			20,009				—				533				19,476
Total taxable debt securities			317,061				264				39,862				277,463
Tax-exempt debt securities
State and political subdivisions
General obligations			93,910				281				6,719				87,472
Water and sewer revenues			17,560				120				1,154				16,526
Lease revenues			7,411				47				411				7,047
Various tax revenues			7,851				—				1,115				6,736
Other revenues			11,274				9				1,326				9,957
Total tax-exempt debt securities			138,006				457				10,725				127,738
Total debt securities available for sale		$	455,067			$	721			$	50,587			$	405,201

Accrued interest receivable on debt securities available for sale totaled $2.3$3.1 million and $1.7$3.0 million at December 31, 2021 2023 and 2020,2022, respectively and is included in accrued interest and fees receivable in the accompanying consolidated balance sheets.

The below information is relative to the 5five states where issuers with the highest volume of state and political subdivision securities held in our portfolio are located.  We own no such securities of any single issuer which we deem to be a concentration.

		December 31, 2023
						Unrealized
Dollars in thousands		Amortized Cost				Gains				Losses				Fair Value
California		$	43,903			$	—			$	8,423			$	35,480
Texas			29,284				220				3,604				25,900
Michigan			18,749				8				1,481				17,276
Oregon			14,719				—				3,006				11,713
Pennsylvania			11,214				19				1,231				10,002

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			December 31, 2021
			Amortized						Unrealized
Dollars in thousands			Cost						Gains						Losses						Fair Value
California			$	48,491					$	772					$	752					$	48,511
Texas			23,343						437						379						23,401
Pennsylvania			14,144						553						51						14,646
Oregon			14,756						—						242						14,514
Washington			12,801						286						87						13,000

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Management performs pre-purchase and ongoing analysis to confirm that all investment securities meet applicable credit quality standards.  We principally use credit ratings from Nationally Recognized Statistical Rating Organizations (“NRSROs”) to support analyses of our portfolio of securities issued by state and political subdivisions, as we generally do not purchase securities that are rated below the six highest NRSRO rating categories.  In addition to considering a security’s NRSRO rating, we also assess or confirm through an internal review of an issuer’s financial information and other applicable information that:  1)1) the issuer’s risk of default is low; 2)2) the characteristics of the issuer’s demographics and economic environment are satisfactory; and 3)3) the issuer’s budgetary position and stability of tax or other revenue sources are sound.

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

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Dollars in thousands						Proceeds from																		Gross realized
												Calls and						Principal
Years ended December 31,						Sales						Maturities						Payments						Gains						Losses
2021						$	64,932					$	8,070					$	29,869					$	1,210					$	785
2020						124,809						3,525						24,654						3,489						17
2019						142,423						1,871						22,870						2,270						332

Dollars in thousands		Proceeds from												Gross realized
						Calls and				Principal
Years ended December 31,		Sales				Maturities				Payments				Gains				Losses
2023		$	135,701			$	4,492			$	40,702			$	1,254			$	1,520
2022			69,211				1,875				37,860				288				996
2021			64,932				8,070				29,869				1,210				785

Residential mortgage-backed obligations having contractual maturities ranging from 31 to 49 years are included in the following maturity distribution schedules based on their anticipated average life to maturity, which ranges from 1 month2 months to 17 years.  Accordingly, discounts are accreted and premiums are amortized over the anticipated average life to maturity of the specific obligation.

The maturities, amortized cost and estimated fair values of securities available for sale at December 31, 2021,2023, are summarized as follows:

Dollars in thousands						Amortized Cost						Fair Value
Due in one year or less						$	35,994					$	36,145
Due from one to five years						82,985						84,082
Due from five to ten years						61,419						61,702
Due after ten years						218,245						219,174
Total						$	398,643					$	401,103

Dollars in thousands		Amortized Cost				Fair Value
Due in one year or less		$	61,455			$	59,934
Due from one to five years			161,414				156,157
Due from five to ten years			112,930				105,048
Due after ten years			205,397				181,623
Total		$	541,196			$	502,762

At December 31, 2021 2023 and 2020,2022, securities with estimated carrying values of $234.3$349.4 million and $162.8$238.6 million respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

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Provided below is a summary of debt securities available for sale which were in an unrealized loss position and for which an allowance for credit losses has not been recorded at December 31, 2021 2023 and 2020.2022.

		2023
						Less than 12 months								12 months or more								Total
Dollars in thousands		# of securities in loss position				Fair Value				Unrealized Loss				Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
Taxable debt securities
U.S. Government 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

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			2021
						Less than 12 months												12 months or more												Total
Dollars in thousands			# of securities in loss position			Fair Value						Unrealized Loss						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss
Taxable debt securities
U.S. Government agencies and corporations			41			$	6,630					$	23					$	21,061					$	337					$	27,691					$	360
Residential mortgage-backed     securities:
Government-sponsored agencies			19			19,828						376						6,886						212						26,714						588
Nongovernment-sponsored entities			6			4,345						61						7,591						218						11,936						279
State and political subdivisions:
General obligations			41			62,543						1,286						1,055						37						63,598						1,323
Lease revenues			2			1,564						14						494						12						2,058						26
Income tax revenues			1			721						3						—						—						721						3
Sales tax revenues			2			6,052						99						—						—						6,052						99
Various tax revenues			5			8,389						203						—						—						8,389						203
Utility revenues			3			5,175						130						—						—						5,175						130
Other revenues			1			744						9						—						—						744						9
Corporate debt securities			10			10,534						314						990						10						11,524						324
Asset-backed securities			8			10,522						86						751						1						11,273						87
Tax-exempt debt securities
State and political subdivisions:
General obligations			13			25,555						261						853						9						26,408						270
Water and sewer revenues			1			904						15						—						—						904						15
Lease revenues			1			2,396						31						—						—						2,396						31
Other revenues			3			3,558						15						156						1						3,714						16
Total			157			$	169,460					$	2,926					$	39,837					$	837					$	209,297					$	3,763

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			2020
						Less than 12 months												12 months or more												Total
Dollars in thousands			# of securities in loss position			Fair Value						Unrealized Loss						Fair Value						Unrealized Loss						Fair Value						Unrealized Loss
Taxable debt securities
U.S. Government agencies and corporations			36			$	12,611					$	54					$	14,384					$	340					$	26,995					$	394
Residential mortgage-backed     securities:
Government-sponsored agencies			10			3,127						34						8,593						315						11,720						349
Nongovernment-sponsored entities			6			6,770						35						2,751						209						9,521						244
State and political subdivisions:
General obligations			1			362						4						—						—						362						4
Corporate debt securities			6			3,952						16						1,904						96						5,856						112
Asset-backed securities			16			2,010						2						31,862						623						33,872						625
Tax-exempt debt securities
State and political subdivisions:
General obligations			1			924						9						—						—						924						9
Other revenues			2			415						1						151						7						566						8
Total			78			$	30,171					$	155					$	59,645					$	1,590					$	89,816					$	1,745

 

		2022
						Less than 12 months								12 months or more								Total
Dollars in thousands		# of securities in loss position				Fair Value				Unrealized Loss				Fair Value				Unrealized Loss				Fair Value				Unrealized Loss
Taxable debt securities
U.S. Government agencies and corporations			28			$	8,012			$	99			$	9,577			$	211			$	17,589			$	310
Residential mortgage-backed securities:
Government-sponsored agencies			58				21,831				1,104				19,459				2,704				41,290				3,808
Nongovernment-sponsored entities			27				35,727				2,974				10,041				1,317				45,768				4,291
State and political subdivisions:
General obligations			56				11,258				1,476				49,858				18,448				61,116				19,924
Various tax revenues			7				1,352				276				6,756				2,315				8,108				2,591
Other revenues			23				6,361				1,040				16,103				5,540				22,464				6,580
Corporate debt securities			20				8,308				591				13,072				1,234				21,380				1,825
Asset-backed securities			13				11,680				277				7,796				256				19,476				533
Tax-exempt debt securities
State and political subdivisions:
General obligations			52				50,671				1,823				26,062				4,896				76,733				6,719
Water and sewer revenues			13				8,800				403				4,471				751				13,271				1,154
Lease revenues			2				3,330				11				1,985				400				5,315				411
Various tax revenues			4				3,597				439				3,139				676				6,736				1,115
Other revenues			7				2,900				393				4,812				933				7,712				1,326
Total			310			$	173,827			$	10,906			$	173,131			$	39,681			$	346,958			$	50,587

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

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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 December 31, 2021 2023 and 20202022 are summarized as follows:

		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

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			December 31, 2021
			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			$	71,807					$	2,583					$	—					$	74,390
Water and sewer revenues			8,192						210						—						8,402
Lease revenues			4,316						74						—						4,390
Sales tax revenues			4,582						106						—						4,688
Other revenues			9,163						214						5						9,372
Total Debt Securities Held to Maturity			$	98,060					$	3,187					$	5					$	101,242

			December 31, 2020
			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			$	73,179					$	2,524					$	—					$	75,703
Water and sewer revenues			8,375						256						—						8,631
Lease revenues			4,395						88						—						4,483
Sales tax revenues			4,649						94						3						4,740
Other revenues			9,316						309						25						9,600
Total Debt Securities Held to Maturity			$	99,914					$	3,271					$	28					$	103,157

 

		December 31, 2022
		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		$	70,401			$	—			$	6,480			$	63,921
Water and sewer revenues			8,006				—				672				7,334
Lease revenues			4,234				—				534				3,700
Sales tax revenues			4,515				—				689				3,826
Various tax revenues			5,511				—				871				4,640
Other revenues			3,496				—				290				3,206
Total Debt Securities Held to Maturity		$	96,163			$	—			$	9,536			$	86,627

Accrued interest receivable on debt securities held to maturity totaled $1.1 million and $1.2 million at December 31, 2021 2023 and 20202022 respectively, and is included in accrued interest and fees receivable in the accompanying consolidated balance sheets.

The below information is relative to the 5five 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.

			December 31, 2021
			Amortized						Unrealized												Estimated
Dollars in thousands			Cost						Gains						Losses						Fair Value
Texas			$	15,400					$	551					$	—					$	15,951
California			9,875						344						—						10,219
Pennsylvania			8,634						332						—						8,966
Florida			7,596						212						—						7,808
Michigan			7,034						181						4						7,211

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		December 31, 2023
		Amortized				Unrealized								Estimated
Dollars in thousands		Cost				Gains				Losses				Fair Value
Texas		$	14,795			$	—			$	854			$	13,941
California			9,450				—				454				8,996
Pennsylvania			8,322				—				439				7,883
Florida			7,331				—				637				6,694
Michigan			6,772				—				503				6,269

The following table displays the amortized cost of held to maturity securities by credit rating at December 31, 2021 2023 and 2020.

			December 31, 2021
Dollars in thousands			AAA			AA			A			BBB			Below Investment Grade
Tax-exempt state and political subdivisions			$	15,450		$	75,119		$	7,491		$	—		$	—

			December 31, 2020
Dollars in thousands			AAA			AA			A			BBB			Below Investment Grade
Tax-exempt state and political subdivisions			$	15,735		$	76,585		$	7,594		$	—		$	—

2022.

		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			$	—			$	—

		December 31, 2022
Dollars in thousands		AAA				AA				A				BBB				Below Investment Grade
Tax-exempt state and political subdivisions		$	12,846			$	75,932			$	7,385			$	—			$	—

We owned no past due or nonaccrual held to maturity debt securities at December 31, 20212023 or 2020.

2022.

The maturities, amortized cost and estimated fair values of debt securities held to maturity at December 31, 2021,2023, are summarized as follows:

Dollars in thousands						Amortized Cost						Estimated Fair Value
Due in one year or less						$	—					$	—
Due from one to five years						—						—
Due from five to ten years						1,996						2,024
Due after ten years						96,064						99,218
Total						$	98,060					$	101,242

Dollars in thousands		Amortized Cost				Estimated Fair Value
Due in one year or less		$	—			$	—
Due from one to five years			—				—
Due from five to ten years			4,025				3,856
Due after ten years			90,202				84,463
Total		$	94,227			$	88,319

There were no proceeds from the calls and maturities of debt securities held to maturity for the year ended Dececmber 31, 2021. The proceeds from calls and maturities of debt securities held to maturity totaled $1.0 million for the year ended December 31, 2020.2023 , 2022, or 2021.

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NOTE 6. EQUITY AND OTHER INVESTMENTS

Equity investments are carried at fair value, with changes in fair value reported in net income.  In December 2021, we invested as a limited partner in a hedge fund that primarily trades S&P 500 index options. The average durationSee Note 4.Fair Value Measurements for information regarding the nature and fair values of the option positions employed by the fund ranges 14 to 17 business days. Investors may withdraw funds at the end of any month with 30 calendar days prior written notice. This investment isinvestments reflected on the accompanying consolidated balance sheetsheets as Equity Investments.

Equity securities without readily determinable fair values are carried at cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment. Our equity securities totaled $407,000 at December 31, 2021 and 2020 respectively and are included in Other Investments on the accompanying consolidated balance sheets.

We are a member bank of the Federal Home Loan Bank ("FHLB") system. Members are required to own a certain amount of stock based on the level of borrowings from FHLB and other factors. FHLB stock is carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. Dividends are reported as income as earned. This stock totaled $6.8$14.4 million and $9.8$11.3 million at December 31, 2021 2023 and 2020.

2022 and is included in Other Investments on the accompanying consolidated balance sheets.

We have invested in 4four limited partnerships which own interests in diversified portfolios of qualified affordable housing projects. Also, we have purchased substantially all the interest in a limited liability company owning a qualified rehabilitated multi-family housing project. As result of these investments, Summit is allocated its proportional share of each investees’ operating losses and Federal Low-Income Housing and Rehabilitation Tax Credits. We use the proportional amortization method to account for each of these investments, whereby the cost of the investment is amortized in proportion to the amount of tax credits and other tax benefits received, and the net investment performance is recognized in the consolidated statements of income as a component of the provision for current income taxes. As of December 31, 2021 2023 and 2020,2022, our carrying value of these investments totaled $4.1$6.6 million and $3.9$4.8 million, respectively.respectively, and is included in Other Investments on the accompanying consolidated balance sheets. For the years ended December 31, 2021, 20202023, 2022 and 2019,2021, we realized $1,590,000, $1,309,000 and $1,087,000, $746,000 and $669,000, respectively, in tax credits and other tax benefits on these investments, against

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which we amortized these investments $1,162,000, $1,177,000 and $877,000 $549,000 and $552,000 and recognized income tax benefits of $206,000, $248,000$200,000, $214,000 and $177,000.$206,000.

NOTE 7.LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS

Loans are generally stated at the amount of unpaid principal, reduced by unearned discount and the ACLL. Interest on loans is accrued daily on the outstanding balances.  Loan origination fees and certain direct loan origination costs are deferred and amortized as adjustments of the related loan yield over its contractual life.

Loans

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

Dollars in thousands						2021						2020
Commercial						$	365,301					$	306,885
Commercial real estate - owner occupied
Professional & medical						150,759						107,151
Retail						190,304						126,451
Other						143,645						118,258
Commercial real estate - non-owner occupied
Hotels & motels						128,450						121,502
Mini-storage						59,045						60,550
Multifamily						233,157						175,988
Retail						162,758						135,405
Other						282,621						192,120
Construction and development
Land & land development						100,805						107,342
Construction						146,038						91,100
Residential 1-4 family real estate
Personal residence						262,805						305,093
Rental - small loan						121,989						120,426
Rental - large loan						79,108						74,185
Home equity						72,112						81,588
Mortgage warehouse lines						227,869						251,810
Consumer						31,923						33,906
Other
Credit cards						1,891						1,855
Overdrafts						811						538
Total loans, net of unearned fees						2,761,391						2,412,153
Less allowance for credit losses - loans						32,298						32,246
Loans, net						$	2,729,093					$	2,379,907

Dollars in thousands		2023				2022
Commercial		$	503,842			$	501,844
Commercial real estate - owner occupied
Professional & medical			156,941				120,872
Retail			170,391				188,196
Other			217,776				157,982
Commercial real estate - non-owner occupied
Hotels & motels			215,642				141,042
Mini-storage			68,517				51,109
Multifamily			302,298				272,705
Retail			254,246				192,270
Other			413,634				347,242
Construction and development
Land & land development			145,258				106,362
Construction			374,026				282,935
Residential 1-4 family real estate
Personal residence			362,733				265,326
Rental - small loan			142,665				121,548
Rental - large loan			116,614				92,103
Home equity			81,126				71,986
Mortgage warehouse lines			108,848				130,390
Consumer			43,756				35,372
Other
Credit cards			2,286				2,182
Overdrafts			1,013				1,352
Total loans, net of unearned fees			3,681,612				3,082,818
Less allowance for credit losses - loans			48,090				38,899
Loans, net		$	3,633,522			$	3,043,919

Accrued interest and fees receivable on loans totaled $7.2$14.1 million and $9.1$10.4 million at December 31, 2021 2023 and 2020,2022, respectively and is included in accrued interest and fees receivable in the accompany consolidated balance sheets. Included in the totals above are net unamortized loan fees of $4.0$5.6 million and $4.4$4.6 million at December 31, 2021 2023 and 2020,2022, respectively.

The following presents loan maturities at December 31, 2021:

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			Within						After 1 but						After 5 but						After
Dollars in thousands			1 Year						within 5 Years						within 15 Years						15 Years
Commercial			$	140,478					$	144,002					$	75,250					$	5,571
Commercial real estate - owner occupied
Professional & medical			2,728						55,306						53,762						38,963
Retail			6,802						17,896						123,837						41,769
Other			3,597						15,537						44,704						79,807
Commercial real estate - non-owner occupied
Hotels & motels			7,531						24,698						34,939						61,282
Mini-storage			21						1,244						19,327						38,453
Multifamily			4,384						67,778						56,538						104,457
Retail			6,933						34,230						72,054						49,541
Other			2,766						102,906						126,530						50,419
Construction and development
Land & land development			34,242						32,108						18,318						16,137
Construction			31,665						47,437						32,279						34,657
Residential 1-4 family real estate
Personal residence			2,437						9,146						67,853						183,369
Rental - small loan			7,101						8,163						42,477						64,248
Rental - large loan			4,302						9,828						16,520						48,458
Home equity			141						3,239						13,269						55,463
Mortgage warehouse lines			227,869						—						—						—
Consumer			2,861						22,768						6,100						194
Other
Credit cards			1,891						—						—						—
Overdrafts			811						—						—						—
			$	488,560					$	596,286					$	803,757					$	872,788
Loans due after one year with:
Variable rates									$	1,439,286
Fixed rates									833,545
									$	2,272,831

Past Due Loans and Non-Accrual Loans. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, we consider the borrower’s debt service capacity through the analysis of current financial information, if available, and/or current information with regards to our collateral position. Regulatory provisions would typically require the placement of a loan on non-accrual status if (i) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or (ii) full payment of principal and interest is not expected. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on non-accrual loans is recognized only to the extent that cash payments are received in excess of principal due. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period (at least six months) of repayment performance by the borrower.

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The following tables present the contractual aging of the amortized cost basis of past due loans by class.

			At December 31, 2021
			Past Due															90 days or more and Accruing
Dollars in thousands			30-59 days			60-89 days			90 days or more			Total			Current
Commercial			$	736		$	15		$	613		$	1,364		$	363,937		$	—
Commercial real estate - owner occupied
Professional & medical			409			—			—			409			150,350			—
Retail			—			405			144			549			189,755			—
Other			208			—			150			358			143,287			—
Commercial real estate - non-owner occupied
Hotels & motels			—			—			—			—			128,450			—
Mini-storage			2			—			—			2			59,043			—
Multifamily			—			—			55			55			233,102			—
Retail			66			—			338			404			162,354			—
Other			—			—			—			—			282,621			—
Construction and development
Land & land development			38			7			962			1,007			99,798			—
Construction			—			—			—			—			146,038			—
Residential 1-4 family real estate
Personal residence			2,283			1,211			1,384			4,878			257,927			—
Rental - small loan			429			247			1,093			1,769			120,220			—
Rental - large loan			—			—			—			—			79,108			—
Home equity			236			80			175			491			71,621			—
Mortgage warehouse lines			—			—			—			—			227,869			—
Consumer			98			101			7			206			31,717			—
Other
Credit cards			12			10			4			26			1,865			4
Overdrafts			—			—			—			—			811			—
Total			$	4,517		$	2,076		$	4,925		$	11,518		$	2,749,873		$	4

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			At December 31, 2020
			Past Due															90 days or more and Accruing
Dollars in thousands			30-59 days			60-89 days			90 days or more			Total			Current
Commercial			$	60		$	—		$	318		$	378		$	306,507		$	—
Commercial real estate - owner occupied
Professional & medical			220			—			457			677			106,474			—
Retail			54			—			2,259			2,313			124,138			—
Other			—			—			150			150			118,108			—
Commercial real estate - non-owner occupied
Hotels & motels			—			—			—			—			121,502			—
Mini-storage			—			—			—			—			60,550			—
Multifamily			—			—			—			—			175,988			—
Retail			—			—			657			657			134,748			—
Other			—			—			315			315			191,805			—
Construction and development
Land & land development			47			—			70			117			107,225			—
Construction			—			—			—			—			91,100			—
Residential 1-4 family real estate
Personal residence			3,750			1,071			1,656			6,477			298,616			—
Rental - small loan			1,129			487			719			2,335			118,091			—
Rental - large loan			769			—			—			769			73,416			—
Home equity			758			—			197			955			80,633			—
Mortgage warehouse lines			—			—			—			—			251,810			—
Consumer			190			44			72			306			33,600			—
Other
Credit cards			5			—			2			7			1,848			2
Overdrafts			—			—			—			—			538			—
Total			$	6,982		$	1,602		$	6,872		$	15,456		$	2,396,697		$	2

		At December 31, 2023
		Past Due
Dollars in thousands		30-59 days				60-89 days				90 days or more				Total				Current				90 days or more and 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

		At December 31, 2022
		Past Due
Dollars in thousands		30-59 days				60-89 days				90 days or more				Total				Current				90 days or more and Accruing
Commercial		$	2,982			$	201			$	34			$	3,217			$	498,627			$	—
Commercial real estate - owner occupied
Professional & medical			100				—				—				100				120,772				—
Retail			—				—				221				221				187,975				—
Other			376				135				37				548				157,434				—
Commercial real estate - non-owner occupied
Hotels & motels			—				—				—				—				141,042				—
Mini-storage			—				—				—				—				51,109				—
Multifamily			—				—				58				58				272,647				—
Retail			165				—				438				603				191,667				—
Other			—				—				—				—				347,242				—
Construction and development
Land & land development			317				852				—				1,169				105,193				—
Construction			—				—				—				—				282,935				—
Residential 1-4 family real estate
Personal residence			3,768				741				1,969				6,478				258,848				—
Rental - small loan			1,093				582				816				2,491				119,057				—
Rental - large loan			—				—				—				—				92,103				—
Home equity			1,401				105				52				1,558				70,428				—
Mortgage warehouse lines			—				—				—				—				130,390				—
Consumer			182				71				—				253				35,119				—
Other
Credit cards			9				13				12				34				2,148				12
Overdrafts			—				—				—				—				1,352				—
Total		$	10,393			$	2,700			$	3,637			$	16,730			$	3,066,088			$	12

The amount of interest recognized on nonaccrual loans during the periods presented is immaterial.

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The following tables present the nonaccrual loans included in the net balance of loans.

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						December 31,									December 31,
						2021									2020
Dollars in thousands						Nonaccrual			Nonaccrual with No Allowance for Credit Losses - Loans						Nonaccrual			Nonaccrual with No Allowance for Credit Losses - Loans
Commercial						$	740		$	96					$	525		$	—
Commercial real estate - owner occupied
Professional & medical						—			—						536			—
Retail						775			—						12,193			2,258
Other						341			—						384			—
Commercial real estate - non-owner occupied
Hotels & motels						3,085			—						—			—
Mini-storage						—			—						—			—
Multifamily						55			—						—			—
Retail						338			—						809			657
Other						9			—						315			—
Construction and development
Land & land development						1,560			—						70			—
Construction						—			—						165			—
Residential 1-4 family real estate
Personal residence						2,504			—						3,424			—
Rental - small loan						3,094			—						1,603			108
Rental - large loan						—			—						—			—
Home equity						174			—						236			—
Mortgage warehouse lines						—			—						—			—
Consumer						17			—						73			—
Other
Credit cards						—			—						—			—
Overdrafts						—			—						—			—
Total						$	12,692		$	96					$	20,333		$	3,023

		December 31, 2023								December 31, 2022
Dollars in thousands		Nonaccrual				Nonaccrual with No Allowance for Credit Losses - Loans				Nonaccrual				Nonaccrual with No Allowance for Credit Losses - Loans
Commercial		$	1,088			$	2			$	93			$	48
Commercial real estate - owner occupied
Professional & medical			395				—				—				—
Retail			525				—				350				—
Other			236				—				423				—
Commercial real estate - non-owner occupied
Hotels & motels			—				—				—				—
Mini-storage			—				—				—				—
Multifamily			446				—				538				—
Retail			4,073				3,520				439				—
Other			—				—				—				—
Construction and development
Land & land development			708				—				852				—
Construction			—				—				—				—
Residential 1-4 family real estate
Personal residence			1,879				—				2,892				—
Rental - small loan			1,922				245				2,066				—
Rental - large loan			410				—				—				—
Home equity			313				—				158				—
Mortgage warehouse lines			—				—				—				—
Consumer			109				—				—				—
Other
Credit cards			—				—				—				—
Overdrafts			—				—				—				—
Total		$	12,104			$	3,767			$	7,811			$	48

Modifications to Borrowers Experiencing Financial Difficulty

We adopted ASU 2022-02,Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings. Restructurings and Vintage Disclosures effective January 1, 2023. The restructuringamendments 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 is consideredby providing principal forgiveness. In some cases, we will modify a troubled debt restructuring (“TDR”) if both (i)loan by providing multiple types, or combinations, of concessions.

The following table presents the borrower isamortized cost basis of loans as December 31, 2023 made to borrowers experiencing financial difficulties and (ii)difficulty that were modified during the creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules, payment deferrals, reductions in collateral and other actions intended to minimize potential losses.

At year ended December 31, 2021, we had TDRs2023 and the percentage of $20.9 million, of which $18.7 million were current with respectthose such loans to restructured contractual payments. At December 31, 2020, our TDRs totaled $24.5 million, of which $20.5 million were current with respect to restructured contractual payments.total loans in their respective loan classes. There were no commitments to lend additional funds under these restructuringsmodifications as of December 31, 2023. 

		For the Year Ended
		December 31, 2023
										Combination
										Term Extension								% of Total
		Payment				Term				and								Class of
Dollars in thousands		Delay				Extension				Payment Delay				Total				Loans
Commercial		$	—			$	307			$	—			$	307				0.1	%
Commercial real estate - owner occupied
Other			—				35				—				35				0.0	%
Commercial real estate - non-owner occupied
Multifamily			—				9,760				—				9,760				3.2	%
Retail			—				387				—				387				0.2	%
Residential 1-4 family real estate
Personal residence			107				—				66				173				0.0	%
Rental - small loan			—				345				—				345				0.2	%
Total		$	107			$	10,834			$	66			$	11,007				0.3	%

The ACLL incorporates an estimate of lifetime extended credit losses and is recorded on each loan upon origination or acquisition. We use a loss-rate, or cohort, method to estimate expected credit losses. The starting point for the estimate of the ACLL is historical loss information, which includes losses from modifications to borrowers experiencing financial difficulty. The assessment of whether a borrower is experiencing financial difficulty is made at either balance sheet date.the time of the modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the ACLL because of the measurement methodologies used to estimate the allowance, a change to the ACLL is generally not recorded upon modification. When principal forgiveness is granted, the amortized cost basis of the loan is written off against the ACLL.

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The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty for the year ended December 31, 2023.

		For the Year Ended
		December 31, 2023
		Weighted-Average				Weighted-Average
		Payment Delay				Term Extension
Dollars in thousands		in Months				in Months
Commercial			—				12
Commercial real estate - owner occupied
Other			—				12
Commercial real estate - non-owner occupied
Multifamily			—				6
Retail			—				20
Residential 1-4 family real estate
Personal residence			8				5
Rental - small loan			—				16

The following table presents the amortized cost basis of loans that were modified during the year ended December 31, 2023 and subsequently defaulted. For purposes of this table, a default represents any loan that was more than 30 days past due at any time during the period or the loan was fully or partially charged off during the period. 

		December 31, 2023
						Combination
						Term Extension
						and
Dollars in thousands		Term Extension				Payment Delay
Commercial		$	278			$	—
Residential 1-4 family real estate
Personal residence			—				66
Rental - small loan			160				—
Total		$	438			$	66

Upon determination that a modified loan, or a portion of a loan, has subsequently been deemed uncollectible, the loan, or a portion of the loan, is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACLL is adjusted by the same amount.

The following table depicts an age analysis of loans that have been modified during the year ended December 31, 2023 on an amortized costs basis.

		December 31, 2023
						Past Due
														90 Days
Dollars in thousands		Current				30-59 Days				60-89 Days				or More				Total
Commercial		$	307			$	—			$	—			$	—			$	307
Commercial real estate - owner occupied
Other			35				—				—				—				35
Commercial real estate - non-owner occupied
Multifamily			9,760				—				—				—				9,760
Retail			387				—				—				—				387
Residential 1-4 family real estate
Personal residence			173				—				—				—				173
Rental - small loan			345				—				—				—				345
Total		$	11,007			$	—			$	—			$	—			$	11,007

Troubled Debt Restructurings Prior to the Adoption of ASU 2022-02

The following table presents by class the TDRs that were restructured during the years ended December 31, 2021 2022 and 2020.2021. Generally, the modifications were extensions of term, modifying the payment terms from principal and interest to interest only for an extended period, or reduction in interest rate.  TDRs are evaluated individually for allowance for credit loss purposes if the loan balance exceeds $500,000, otherwise, smaller balance TDR loans are included in the pools to determine ACLL.

			2021																		2020
Dollars in thousands			Number of Modifications						Pre-modification Recorded Investment						Post-modification Recorded Investment						Number of Modifications						Pre-modification Recorded Investment						Post-modification Recorded Investment
Commercial real estate - owner occupied
Other			—						$	—					$	—					1						$	361					$	361
Residential 1-4 family real estate
Personal residence			4						294						294						1						48						48
Rental - small loan			—						—						—						1						399						399
Total			4						$	294					$	294					3						$	808					$	808

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		2022												2021
Dollars in thousands		Number of Modifications				Pre- modification Recorded Investment				Post- modification Recorded Investment				Number of Modifications				Pre- modification Recorded Investment				Post- modification Recorded Investment
Residential 1-4 family real estate
Personal residence			9			$	692			$	692				4			$	294			$	294
Rental - large loan			1				671				671				—				—				—
Home equity			2				158				158				—				—				—
Total			12			$	1,521			$	1,521				4			$	294			$	294

The following tables present defaults during the stated period of TDRs that were restructured during the prior 12 months. For purposes of these tables, a default is considered as either the loan was past due 30 days or more at any time during the period, or the loan was fully or partially charged off during the period.

			2021												2020
Dollars in thousands			Number of Defaults						Recorded Investment at Default Date						Number of Defaults						Recorded Investment at Default Date
Commercial real estate - owner occupied
Other			—						$	—					1						$	361
Residential 1-4 family real estate
Personal residence			1						44						1						48
Rental - small loan			—						—						1						399
Total			1						$	44					3						$	808

		2022								2021
Dollars in thousands		Number of Defaults				Recorded Investment at Default Date				Number of Defaults				Recorded Investment at Default Date
Residential 1-4 family real estate
Personal residence			1			$	22				1			$	44
Home equity			1				107				—				—
Total			2			$	129				1			$	44

Credit Quality Indicators:We categorizeanalyze loans intoindividually by classifying the loans as to credit risk.  The appropriate risk categoriesgrades are determined 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  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   Loans categorized as Substandard are inadequately protected by the borrower’s ability to repay 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  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.

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We internally grade all loans at the time of loan origination. 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.  In addition, during the renewal process of any loan, as well as if a loan becomes past due or if other relevant information becomes available, we will re-evaluate the loan risk grade.

Management considers the guidance in ASC 310-20310-20 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  December 31, 2021 2023 and 2020,2022, based on the most recent analysis performed, the risk category of loans based on year of origination is as follows:

									December 31, 2021
Dollars in thousands									Risk Rating			2021			2020			2019			2018			2017			Prior			Revolvi- ng			Revolving- Term			Total
Commercial									Pass			$	123,890		$	36,339		$	31,116		$	5,549		$	8,831		$	14,061		$	141,003		$	—		$	360,789
									Special Mention			693			279			69			41			60			539			1,984			—			3,665
									Substandard			135			45			110			48			18			7			484			—			847
Total Commercial												124,718			36,663			31,295			5,638			8,909			14,607			143,471			—			365,301

	December 31, 2023
Dollars in thousands	Risk Rating		2023				2022				2021				2020				2019				Prior				Revolving				Revolving - 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
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
	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
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
	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	)

 

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

85

80

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									December 31, 2021
Dollars in thousands									Risk Rating			2021			2020			2019			2018			2017			Prior			Revolvi- ng			Revolving- Term			Total
Commercial Real Estate    - Owner Occupied
Professional & medical									Pass			72,417			11,869			7,046			4,595			22,939			27,905			2,366			—			149,137
									Special Mention			—			1,146			—			—			—			187			—			—			1,333
									Substandard			—			72			—			—			217			—			—			—			289
Total Professional & Medical												72,417			13,087			7,046			4,595			23,156			28,092			2,366			—			150,759
Retail									Pass			78,780			29,749			33,114			8,813			9,318			25,296			2,464			—			187,534
									Special Mention			—			—			—			—			—			671			—			—			671
									Substandard			—			—			1,324			—			549			226			—			—			2,099
Total Retail												78,780			29,749			34,438			8,813			9,867			26,193			2,464			—			190,304
Other									Pass			32,805			30,897			13,216			16,716			7,501			38,796			2,782			—			142,713
									Special Mention			59			—			—			—			—			532			—			—			591
									Substandard			—			—			—			—			—			303			38			—			341
Total Other												32,864			30,897			13,216			16,716			7,501			39,631			2,820			—			143,645
Total Commercial Real Estate -    Owner Occupied												184,061			73,733			54,700			30,124			40,524			93,916			7,650			—			484,708
Commercial Real Estate    - Non-Owner Occupied
Hotels & motels									Pass			1,736			3,313			32,634			15,949			6,953			20,308			7,531			—			88,424
									Special Mention			—			—			36,941			—			—			—			—			—			36,941
									Substandard			—			2,830			—			—			—			255			—			—			3,085
Total Hotels & Motels												1,736			6,143			69,575			15,949			6,953			20,563			7,531			—			128,450
Mini-storage									Pass			13,294			7,641			9,218			14,209			4,506			10,109			21			—			58,998
									Special Mention			—			—			—			—			—			47			—			—			47
Total Mini-storage												13,294			7,641			9,218			14,209			4,506			10,156			21			—			59,045
Multifamily									Pass			55,367			39,105			45,016			23,665			14,629			51,155			3,372			—			232,309
									Special Mention			—			582			—			—			—			43			169			—			794
									Substandard			—			—			—			—			—			54			—			—			54
Total Multifamily												55,367			39,687			45,016			23,665			14,629			51,252			3,541			—			233,157
Retail									Pass			52,533			42,177			20,763			7,653			6,778			24,958			6,586			—			161,448
									Special Mention			—			—			—			—			—			972			—			—			972
									Substandard			—			—			—			—			—			338			—			—			338
Total Retail												52,533			42,177			20,763			7,653			6,778			26,268			6,586			—			162,758
Other									Pass			107,962			82,846			14,211			8,443			11,421			51,587			2,620			—			279,090
									Special Mention			—			—			—			572			—			—			—			—			572
									Substandard			—			—			—			—			—			2,959			—			—			2,959
Total Other												107,962			82,846			14,211			9,015			11,421			54,546			2,620			—			282,621
Total Commercial Real Estate -    Non-Owner Occupied												230,892			178,494			158,783			70,491			44,287			162,785			20,299			—			866,031

Table of Contents

 

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

	December 31, 2022
Dollars in thousands	Risk Rating		2022				2021				2020				2019				2018				Prior				Revolving				Revolving - Term				Total
Commercial	Pass		$	145,996			$	73,702			$	27,247			$	20,300			$	3,056			$	10,429			$	194,641			$	—			$	475,371
	Special Mention			689				23,055				267				51				17				149				2,010				—				26,238
	Substandard			52				56				—				48				24				—				55				—				235
Total Commercial				146,737				96,813				27,514				20,399				3,097				10,578				196,706				—				501,844
Commercial Real Estate - Owner Occupied
Professional & medical	Pass			13,750				47,010				10,312				6,621				3,981				35,476				2,090				—				119,240
	Special Mention			—				—				1,119				—				—				233				—				—				1,352
	Substandard			—				—				72				—				—				208				—				—				280
Total Professional & Medical				13,750				47,010				11,503				6,621				3,981				35,917				2,090				—				120,872
Retail	Pass			23,604				70,257				28,128				28,327				8,163				26,538				2,226				—				187,243
	Special Mention			—				—				—				—				—				603				—				—				603
	Substandard			—				—				—				—				—				350				—				—				350
Total Retail				23,604				70,257				28,128				28,327				8,163				27,491				2,226				—				188,196
Other	Pass			43,811				27,174				24,870				7,778				15,346				34,720				3,412				—				157,111
	Special Mention			—				56				—				—				—				392				—				—				448
	Substandard			—				—				—				—				107				316				—				—				423
Total Other				43,811				27,230				24,870				7,778				15,453				35,428				3,412				—				157,982
Total Commercial Real Estate - Owner Occupied				81,165				144,497				64,501				42,726				27,597				98,836				7,728				—				467,050
Commercial Real Estate - Non-Owner Occupied
Hotels & motels	Pass			32,059				1,695				3,192				32,688				15,358				12,899				4,081				—				101,972
	Special Mention			—				—				—				36,131				—				—				—				—				36,131
	Substandard			—				—				2,716				—				—				223				—				—				2,939
Total Hotels & Motels				32,059				1,695				5,908				68,819				15,358				13,122				4,081				—				141,042
Mini-storage	Pass			2,868				13,191				7,679				3,776				13,017				10,419				115				—				51,065
	Special Mention			—				—				—				—				—				44				—				—				44
Total Mini-storage				2,868				13,191				7,679				3,776				13,017				10,463				115				—				51,109
Multifamily	Pass			57,727				56,073				53,558				29,479				21,359				53,244				646				—				272,086
	Special Mention			—				—				81				—				—				—				—				—				81
	Substandard			—				—				480				—				—				58				—				—				538
Total Multifamily				57,727				56,073				54,119				29,479				21,359				53,302				646				—				272,705
Retail	Pass			46,278				52,387				39,609				5,449				6,999				25,315				7,053				—				183,090
	Special Mention			—				—				—				—				—				964				—				—				964
	Substandard			—				—				—				7,778				—				438				—				—				8,216
Total Retail				46,278				52,387				39,609				13,227				6,999				26,717				7,053				—				192,270

86

81

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									December 31, 2021
Dollars in thousands									Risk Rating			2021			2020			2019			2018			2017			Prior			Revolvi- ng			Revolving- Term			Total
Construction and Development
Land & land development									Pass			26,671			14,050			20,275			5,627			2,927			21,875			6,721			—			98,146
									Special Mention			—			155			117			—			—			591			—			—			863
									Substandard			—			—			—			—			—			1,796			—			—			1,796
Total Land & land development												26,671			14,205			20,392			5,627			2,927			24,262			6,721			—			100,805
Construction									Pass			64,352			64,022			7,438			1,407			—			—			8,320			—			145,539
									Substandard			—			—			—			329			—			170			—			—			499
Total Construction												64,352			64,022			7,438			1,736			—			170			8,320			—			146,038
Total Construction and    Development												91,023			78,227			27,830			7,363			2,927			24,432			15,041			—			246,843
Residential 1-4 Family Real Estate
Personal residence									Pass			39,637			34,962			18,974			18,784			14,597			115,384			—			—			242,338
									Special Mention			—			—			184			62			534			10,377			—			—			11,157
									Substandard			—			—			475			847			456			7,532			—			—			9,310
Total Personal Residence												39,637			34,962			19,633			19,693			15,587			133,293			—			—			262,805
Rental - small loan									Pass			30,342			13,990			14,093			11,524			6,567			33,936			4,630			—			115,082
									Special Mention			229			107			57			250			1			1,579			9			—			2,232
									Substandard			—			132			133			374			513			3,388			135			—			4,675
Total Rental - Small Loan												30,571			14,229			14,283			12,148			7,081			38,903			4,774			—			121,989
Rental - large loan									Pass			34,558			14,069			5,971			5,283			2,790			11,776			1,078			—			75,525
									Special Mention			—			—			—			—			—			29			—			—			29
									Substandard			—			—			—			—			—			3,554			—			—			3,554
Total Rental - Large Loan												34,558			14,069			5,971			5,283			2,790			15,359			1,078			—			79,108
Home equity									Pass			27			115			11			50			78			1,380			68,293			—			69,954
									Special Mention			—			—			—			—			—			94			1,399			—			1,493
									Substandard			—			—			—			—			—			407			258			—			665
Total Home Equity												27			115			11			50			78			1,881			69,950			—			72,112
Total Residential 1-4 Family Real    Estate												104,793			63,375			39,898			37,174			25,536			189,436			75,802			—			536,014
Mortgage warehouse lines									Pass			—			—			—			—			—			—			227,869			—			227,869
Total Mortgage Warehouse Lines												—			—			—			—			—			—			227,869			—			227,869
Consumer									Pass			14,134			6,333			4,444			1,767			540			1,691			902			—			29,811
									Special Mention			904			381			210			66			87			53			11			—			1,712
									Substandard			199			96			40			11			3			22			29			—			400
Total Consumer												15,237			6,810			4,694			1,844			630			1,766			942			—			31,923

Table of Contents

 

	December 31, 2022
Dollars in thousands	Risk Rating		2022				2021				2020				2019				2018				Prior				Revolving				Revolving - Term				Total
Other	Pass			94,765				123,551				52,592				12,281				5,444				47,752				1,953				—				338,338
	Special Mention			5,465				—				—				—				538				—				—				—				6,003
	Doubtful			—				—				—				—				—				2,901				—				—				2,901
Total Other				100,230				123,551				52,592				12,281				5,982				50,653				1,953				—				347,242
Total Commercial Real Estate - Non-Owner Occupied				239,162				246,897				159,907				127,582				62,715				154,257				13,848				—				1,004,368
Construction and Development
Land & land development	Pass			27,857				23,490				10,670				13,395				5,142				15,859				7,484				—				103,897
	Special Mention			—				—				149				109				—				473				—				—				731
	Substandard			—				—				—				—				—				1,734				—				—				1,734
Total Land & land development				27,857				23,490				10,819				13,504				5,142				18,066				7,484				—				106,362
Construction	Pass			82,650				140,764				54,584				317				1,355				—				2,940				—				282,610
	Substandard			—				—				—				—				325				—				—				—				325
Total Construction				82,650				140,764				54,584				317				1,680				—				2,940				—				282,935
Total Construction and Development				110,507				164,254				65,403				13,821				6,822				18,066				10,424				—				389,297
Residential 1-4 Family Real Estate
Personal residence	Pass			38,783				39,416				30,297				16,003				16,581				105,822				—				—				246,902
	Special Mention			—				53				—				180				74				9,074				—				—				9,381
	Substandard			—				68				—				620				901				7,454				—				—				9,043
Total Personal Residence				38,783				39,537				30,297				16,803				17,556				122,350				—				—				265,326
Rental - small loan	Pass			22,692				26,654				11,609				10,995				8,103				30,508				5,784				—				116,345
	Special Mention			—				224				103				—				—				1,100				—				—				1,427
	Substandard			—				—				—				156				239				3,269				112				—				3,776
Total Rental - Small Loan				22,692				26,878				11,712				11,151				8,342				34,877				5,896				—				121,548
Rental - large loan	Pass			28,090				31,401				11,033				3,631				3,932				9,045				894				—				88,026
	Special Mention			—				—				—				—				—				26				—				—				26
	Substandard			670				—				—				—				—				3,381				—				—				4,051
Total Rental - Large Loan				28,760				31,401				11,033				3,631				3,932				12,452				894				—				92,103
Home equity	Pass			65				219				55				50				192				2,118				67,155				—				69,854
	Special Mention			—				—				—				—				125				626				757				—				1,508
	Substandard			51				—				—				—				58				461				54				—				624
Total Home Equity				116				219				55				50				375				3,205				67,966				—				71,986
Total Residential 1-4 Family Real Estate				90,351				98,035				53,097				31,635				30,205				172,884				74,756				—				550,963
Mortgage warehouse lines	Pass			—				—				—				—				—				—				130,390				—				130,390
Total Mortgage Warehouse Lines				—				—				—				—				—				—				130,390				—				130,390
Consumer	Pass			17,594				7,620				3,066				1,806				749				1,221				889				—				32,945
	Special Mention			1,332				362				179				83				18				102				6				—				2,082
	Substandard			207				75				31				—				3				1				28				—				345
Total Consumer				19,133				8,057				3,276				1,889				770				1,324				923				—				35,372
Other
Credit cards	Pass			2,182				—				—				—				—				—				—				—				2,182
Total Credit Cards				2,182				—				—				—				—				—				—				—				2,182

87

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									December 31, 2021
Dollars in thousands									Risk Rating			2021			2020			2019			2018			2017			Prior			Revolvi- ng			Revolving- Term			Total
Other
Credit cards									Pass			1,891			—			—			—			—			—			—			—			1,891
Total Credit Cards												1,891			—			—			—			—			—			—			—			1,891
Overdrafts									Pass			811			—			—			—			—			—			—			—			811
Total Overdrafts												811			—			—			—			—			—			—			—			811
Total Other												2,702			—			—			—			—			—			—			—			2,702
Total												$	753,426		$	437,302		$	317,200		$	152,634		$	122,813		$	486,942		$	491,074		$	—		$	2,761,391

									December 31, 2020
Dollars in thousands									Risk Rating			2020			2019			2018			2017			2016			Prior			Revolvi- ng			Revolving- Term			Total
Commercial									Pass			$	112,335		$	46,323		$	20,936		$	16,723		$	11,087		$	12,336		$	78,107		$	—		$	297,847
									Special Mention			9			38			1,956			77			201			909			407			—			3,597
									Substandard			1,039			177			215			29			40			56			3,885			—			5,441
Total Commercial												113,383			46,538			23,107			16,829			11,328			13,301			82,399			—			306,885
Commercial Real Estate    - Owner Occupied
Professional & medical									Pass			19,454			16,414			2,540			26,578			3,322			28,905			3,079			—			100,292
									Special Mention			1,171			—			—			—			—			5,152			—			—			6,323
									Substandard			79			321			—			—			136			—			—			—			536
Total Professional & Medical												20,704			16,735			2,540			26,578			3,458			34,057			3,079			—			107,151
Retail									Pass			28,351			28,547			5,238			10,288			6,041			31,087			2,199			—			111,751
									Special Mention			—			—			—			432			3			824			—			—			1,259
									Substandard			—			10,524			—			157			—			2,360			400			—			13,441
Total Retail												28,351			39,071			5,238			10,877			6,044			34,271			2,599			—			126,451
Other									Pass			28,712			13,722			17,699			9,845			13,119			32,486			1,496			—			117,079
									Special Mention			—			—			—			—			—			694			—			—			694
									Substandard			—			—			—			—			—			444			41			—			485
Total Other												28,712			13,722			17,699			9,845			13,119			33,624			1,537			—			118,258
Total Commercial Real Estate -    Owner Occupied												77,767			69,528			25,477			47,300			22,621			101,952			7,215			—			351,860
Commercial Real Estate    - Non-Owner Occupied
Hotels & motels									Pass			3,428			23,821			18,894			9,880			7,389			14,252			3,160			—			80,824
									Special Mention			2,994			37,398			—			—			—			286			—			—			40,678
Total Hotels & Motels												6,422			61,219			18,894			9,880			7,389			14,538			3,160			—			121,502

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									December 31, 2020
Dollars in thousands									Risk Rating			2020			2019			2018			2017			2016			Prior			Revolvi- ng			Revolving- Term			Total
Mini-storage									Pass			10,159			19,022			15,046			3,986			6,228			4,780			170			—			59,391
									Special Mention			—			—			—			—			—			50			—			—			50
									Substandard			—			—			—			—			—			1,109			—			—			1,109
Total Mini-storage												10,159			19,022			15,046			3,986			6,228			5,939			170			—			60,550
Multifamily									Pass			39,814			27,090			27,198			19,294			10,762			47,751			2,844			—			174,753
									Special Mention			—			—			—			—			—			48			—			—			48
									Substandard			—			1,187			—			—			—			—			—			—			1,187
Total Multifamily												39,814			28,277			27,198			19,294			10,762			47,799			2,844			—			175,988
Retail									Pass			44,359			27,357			11,169			9,361			4,414			30,381			6,502			—			133,543
									Special Mention			—			—			—			—			446			540			—			—			986
									Substandard			—			—			—			152			—			724			—			—			876
Total Retail												44,359			27,357			11,169			9,513			4,860			31,645			6,502			—			135,405
Other									Pass			75,272			20,483			24,663			10,626			26,989			28,293			1,794			—			188,120
									Special Mention			—			—			—			—			—			142			—			—			142
									Doubtful			—			—			576			—			—			3,282			—			—			3,858
Total Other												75,272			20,483			25,239			10,626			26,989			31,717			1,794			—			192,120
Total Commercial Real Estate -    Non-Owner Occupied												176,026			156,358			97,546			53,299			56,228			131,638			14,470			—			685,565
Construction and Development
Land & land development									Pass			27,084			25,468			10,943			4,149			6,370			21,882			9,320			—			105,216
									Special Mention			—			70			12			—			—			644			—			—			726
									Substandard			—			—			6			—			11			1,383			—			—			1,400
Total Land & land development												27,084			25,538			10,961			4,149			6,381			23,909			9,320			—			107,342
Construction									Pass			50,060			34,480			2,833			885			—			—			1,325			—			89,583
									Substandard			—			1,352			—			—			—			165			—			—			1,517
Total Construction												50,060			35,832			2,833			885			—			165			1,325			—			91,100
Total Construction and    Development												77,144			61,370			13,794			5,034			6,381			24,074			10,645			—			198,442
Residential 1-4 Family Real Estate
Personal residence									Pass			51,120			31,415			27,052			23,069			23,759			126,293			—			—			282,708
									Special Mention			—			242			131			267			254			12,020			—			—			12,914
									Substandard			—			46			849			540			126			7,910			—			—			9,471
Total Personal Residence												51,120			31,703			28,032			23,876			24,139			146,223			—			—			305,093

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									December 31, 2020
Dollars in thousands									Risk Rating			2020			2019			2018			2017			2016			Prior			Revolvi- ng			Revolving- Term			Total
Rental - small loan									Pass			18,762			20,113			14,512			10,705			10,941			34,643			4,047			—			113,723
									Special Mention			110			253			251			3			192			1,749			62			—			2,620
									Substandard			—			1,163			—			—			46			2,874			—			—			4,083
Total Rental - Small Loan												18,872			21,529			14,763			10,708			11,179			39,266			4,109			—			120,426
Rental - large loan									Pass			16,926			5,484			9,456			5,323			9,133			20,515			2,188			—			69,025
									Special Mention			—			1,430			—			—			—			32			—			—			1,462
									Substandard			—			—			—			—			—			3,698			—			—			3,698
Total Rental - Large Loan												16,926			6,914			9,456			5,323			9,133			24,245			2,188			—			74,185
Home equity									Pass			429			565			347			502			89			2,174			74,974			—			79,080
									Special Mention			—			—			—			40			—			96			1,596			—			1,732
									Substandard			—			—			32			28			—			424			292			—			776
Total Home Equity												429			565			379			570			89			2,694			76,862			—			81,588
Total Residential 1-4 Family Real    Estate												87,347			60,711			52,630			40,477			44,540			212,428			83,159			—			581,292
Mortgage warehouse lines									Pass			—			—			—			—			—			—			251,810			—			251,810
Total Mortgage Warehouse Lines												—			—			—			—			—			—			251,810			—			251,810
Consumer									Pass			12,785			9,257			4,239			1,609			1,237			1,516			822			—			31,465
									Special Mention			991			454			214			155			70			49			18			—			1,951
									Substandard			245			127			31			6			51			4			26			—			490
Total Consumer												14,021			9,838			4,484			1,770			1,358			1,569			866			—			33,906
Other
Credit cards									Pass			1,855			—			—			—			—			—			—			—			1,855
Total Credit Cards												1,855			—			—			—			—			—			—			—			1,855
Overdrafts									Pass			538			—			—			—			—			—			—			—			538
Total Overdrafts												538			—			—			—			—			—			—			—			538
Total Other												2,393			—			—			—			—			—			—			—			2,393
Total												$	548,081		$	404,343		$	217,038		$	164,709		$	142,456		$	484,962		$	450,564		$	—		$	2,412,153

 

	December 31, 2022
Dollars in thousands	Risk Rating		2022				2021				2020				2019				2018				Prior				Revolving				Revolving - Term				Total
Overdrafts	Pass			1,352				—				—				—				—				—				—				—				1,352
Total Overdrafts				1,352				—				—				—				—				—				—				—				1,352
Total Other				3,534				—				—				—				—				—				—				—				3,534
Total			$	690,589			$	758,553			$	373,698			$	238,052			$	131,206			$	455,945			$	434,775			$	—			$	3,082,818

Industry concentrations:At December 31, 2021 2023 and 2020,2022, we had no concentrations of loans to any single industry in excess of 10% of total loans.

Loans to related parties:  We have had, and may be expected to have in the future, banking transactions in the ordinary course of business with our directors, principal officers, their immediate families and affiliated companies in which they are principal shareholders (commonly referred to as related parties).  These transactions have been, in our opinion, on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with others.

The following presents the activity with respect to related party loans aggregating $60,000 or more to any one related party (other changes represent additions to and changes in director and executive officer status):

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Dollars in thousands			2021						2020
Balance, beginning			$	55,092					$	51,292
Additions			2,677						17,641
Amounts collected			(4,557)						(13,992)
Other changes, net			—						151
Balance, ending			$	53,212					$	55,092

Dollars in thousands		2023				2022
Balance, beginning		$	49,309			$	53,212
Additions			1,417				516
Amounts collected			(3,648	)			(4,419	)
Other changes, net			(7,882	)			—
Balance, ending		$	39,196			$	49,309

Allowance for Credit Losses - Loans

The ACLL is a valuation allowance, estimated at each balance sheet date in accordance with ASC 326, that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the ACLL represents our best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans’ contractual terms, adjusted for expected prepayments when appropriate (the “life-of-loan” concept). The contractual term excludes expected extensions, renewals and modifications unless (i) management has a reasonable expectation that a troubled debt restructuring will be executed with an individual borrower or (ii) such extension or renewal options are not unconditionally cancellable by us and, in such cases, the borrower is likely to meet applicable conditions and likely to request extension or renewal. Relevant available information includes historical credit loss experience, current conditions and reasonable and supportable forecasts. While historical credit loss experience provides the basis for the estimation of expected credit losses, adjustments to historical loss information may be made for differences in current portfolio-specific risk characteristics, environmental conditions or other relevant factors. The ACLL losses is measured on a collective basis for portfolios of loans when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Expected credit losses for collateral dependent loans, including loans where the borrower is experiencing financial difficulty, but foreclosure is not probable, are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Expected credit losses are reflected in the ACLL through a charge to provision for credit losses. When we deem all or a portion of a financial asset to be uncollectible the appropriate amount is written off and the ACLL is reduced by the same amount. The Company applies judgment to determine when a financial asset is deemed uncollectible; however, generally speaking, an asset will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACLL when received.

Loan Pools. In calculating the ACLL, most loans are segmented into pools based upon similar characteristics and risk profiles. Common characteristics and risk profiles include the type/purpose of loan, underlying collateral, geographical similarity and historical/expected credit loss patterns. In developing these loan pools for the purposes of modeling expected credit losses, we also analyzed the degree of correlation in how loans within each portfolio respond when subjected to varying economic conditions and scenarios as well as other portfolio stress factors. We have identified the pools of financial assets with similar risk characteristics for measuring expected credit losses as presented in the table of amortized cost of loans held for investment above.

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We periodically reassess each pool to ensure the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary.

Residential 1-41-4 family rentals are classified as small loan if the original loan amount is less than $600,000 and classified as large loan if the original loan amount equals or exceeds $600,000.

The Company’s methodology for estimating the ACLL considers available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodology applies historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical loss experience was observed. Our methodology reverts to historical loss information immediately when it can no longer develop reasonable and supportable forecasts.

Loss-Rate Method. We use a loss-rate (“cohort”) method to estimate expected credit losses for all loan pools. The cohort method identifies and captures the balances of pooled loans with similar risk characteristics, as of a point in time to form a cohort, then tracks the respective losses generated by that cohort of loans over their remaining lives, or until the loans are “exhausted” (reached an acceptable stage at which a significant majority of all losses are expected to have been recognized).

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This method encompasses loan balances for as long as the loans are outstanding, so while significant history is required to represent the life-of-loan concept, this method does not require as much history due to its inclusion of loan balances in multiple cohort periods.

Qualitative Factors. We qualitatively adjust our loan loss rates for risk factors that are not otherwise considered within our model but are nonetheless relevant in assessing the expected credit losses within our loan pools. These qualitative factor (“Q-Factor”) adjustments may increase or decrease our estimate of expected credit losses by a calculated percentage or amount based upon the estimated level of risk.

One Q-Factor adjustment to our loss rates is consideration of reasonable and supportable forecasts of economic conditions. In arriving at a reasonable and supportable economic forecast, we primarily consider the forecasted unemployment rates for the U.S., West Virginia and Virginia as loss drivers for each segmented loan pool. Secondarily, we consider the following forecasted economic data for one or more of our segmented loan pools depending on the nature of the underlying loan pool: housing price indices (U.S., West Virginia & Virginia), single-family housing starts (West Virginia & Virginia), multi-family housing starts (West Virginia & Virginia), personal income growth (U.S., West Virginia & Virginia), U.S. consumer confidence, rental vacancy rates (U.S.), and U.S. percentage change in gross domestic product.

Other risks that we may consider in making Q-Factor adjustments include, among other things, the impact of (i) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries, (ii) changes in the nature and volume of the loan pools and in the terms of the underlying loans, (iii) changes in the experience, ability, and depth of our lending management and staff, (iv) changes in volume and severity of past due financial assets, the volume of non-accrual assets, and the volume and severity of adversely classified or graded assets, (v) changes in the quality of our credit review function, (vi) changes in the value of the underlying collateral for loans that are non-collateral dependent, (vii) the existence, growth, and effect of any concentrations of credit and (viii) other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters or health pandemics.

Collateral Dependent Loans. We may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. We reevaluate the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice.

The following table presents the activity in the ACLL by portfolio segment during 20212023 and 2020:

2022:

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		For the Year Ended December 31, 2023
		Allowance for Credit Losses - Loans
Dollars in thousands		Beginning Balance				Provision for Credit Losses - Loans				Adjustment for PCD Acquired Loans				Charge-offs				Recoveries				Ending 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

		For the Year Ended December 31, 2022
		Allowance for Credit Losses - Loans
Dollars in thousands		Beginning Balance				Provision for Credit Losses - Loans				Charge-offs				Recoveries				Ending Balance
Commercial		$	3,218			$	1,774			$	(237	)		$	186			$	4,941
Commercial real estate - owner occupied
Professional & medical			1,092				(126	)			—				—				966
Retail			1,362				(79	)			(108	)			1				1,176
Other			575				(88	)			(61	)			—				426
Commercial real estate - non-owner occupied
Hotels & motels			2,532				(1,329	)			—				—				1,203
Mini-storage			133				(51	)			—				—				82
Multifamily			1,821				1,080				—				6				2,907
Retail			1,074				228				—				60				1,362
Other			1,820				593				—				39				2,452
Construction and development
Land & land development			3,468				76				(71	)			9				3,482
Construction			6,346				4,792				—				—				11,138
Residential 1-4 family real estate
Personal residence			2,765				230				(112	)			56				2,939
Rental - small loan			2,834				(848	)			(211	)			132				1,907
Rental - large loan			2,374				294				—				—				2,668
Home equity			497				179				(8	)			37				705
Mortgage warehouse lines			—				—				—				—				—
Consumer			163				70				(174	)			115				174
Other
Credit cards			17				7				(24	)			17				17
Overdrafts			207				476				(433	)			104				354
Total		$	32,298			$	7,278			$	(1,439	)		$	762			$	38,899

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			For the Year Ended December 31, 2021
			Allowance for Credit Losses - Loans
Dollars in thousands			Beginning Balance						Provision for Credit Losses - Loans			Adjustment for PCD Acquired Loans			Charge- offs			Recoveries			Ending Balance
Commercial			$	2,304					$	1,112		$	—		$	(222)		$	24		$	3,218
Commercial real estate - owner occupied
Professional & medical			954						71			71			(4)			—			1,092
Retail			3,173						(1,812)			—			—			1			1,362
Other			610						(35)			—			—			—			575
Commercial real estate - non-owner occupied
Hotels & motels			2,135						397			—			—			—			2,532
Mini-storage			337						(204)			—			—			—			133
Multifamily			1,547						265			—			—			9			1,821
Retail			981						93			—			—			—			1,074
Other			1,104						947			—			(233)			2			1,820
Construction and development
Land & land development			4,084						(628)			—			—			12			3,468
Construction			4,648						1,698			—			—			—			6,346
Residential 1-4 family real estate
Personal residence			3,559						(548)			—			(365)			119			2,765
Rental - small loan			2,736						177			20			(189)			90			2,834
Rental - large loan			3,007						(633)			—			—			—			2,374
Home equity			713						(206)			—			(26)			16			497
Mortgage warehouse lines			—						—			—			—			—			—
Consumer			216						(44)			—			(131)			122			163
Other
Credit cards			17						10			—			(16)			6			17
Overdrafts			121						255			—			(321)			152			207
Total			$	32,246					$	915		$	91		$	(1,507)		$	553		$	32,298

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			For the Year Ended December 31, 2020
			Allowance for Credit Losses - Loans
Dollars in thousands			Beginning Balance Prior to Adoption of ASC 326			Impact of Adoption of ASC 326			Provision for Credit Losses - Loans			Adjustment for PCD Acquired Loans			Charge- offs			Recoveries			Ending Balance
Commercial			$	1,221		$	1,064		$	85		$	—		$	(99)		$	33		$	2,304
Commercial real estate - owner occupied
Professional & medical			1,058			(390)			1,290			1			(1,005)			—			954
Retail			820			(272)			2,311			152			—			162			3,173
Other			821			(137)			(104)			1			—			29			610
Commercial real estate - non-owner occupied
Hotels & motels			1,235			(936)			1,836			—			—			—			2,135
Mini-storage			485			(311)			48			115			—			—			337
Multifamily			1,534			8			(155)			122			—			38			1,547
Retail			964			279			(22)			101			(343)			2			981
Other			1,721			(1,394)			700			58			—			19			1,104
Construction and development
Land & land development			600			2,136			1,202			111			(7)			42			4,084
Construction			242			996			3,159			251			—			—			4,648
Residential 1-4 family real estate
Personal residence			1,275			1,282			980			182			(252)			92			3,559
Rental - small loan			532			1,453			657			96			(140)			138			2,736
Rental - large loan			49			2,884			58			16			—			—			3,007
Home equity			138			308			246			—			(24)			45			713
Mortgage warehouse lines			—			—			—			—			—			—			—
Consumer			379			(238)			166			—			(239)			148			216
Other
Credit cards			—			12			35			—			(40)			10			17
Overdrafts			—			182			251			—			(460)			148			121
Total			$	13,074		$	6,926		$	12,743		$	1,206		$	(2,609)		$	906		$	32,246

The following tables presents, as of December 31, 2021 2023 and 20202022 segregated by loan portfolio segment, details of the loan portfolio and the ACLL calculated in accordance with our credit loss accounting methodology for loans described above.

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			December 31, 2021
			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			$	177		$	365,124		$	365,301					$	—		$	3,218		$	3,218
Commercial real estate - owner occupied
Professional & medical			2,073			148,686			150,759						199			893			1,092
Retail			5,559			184,745			190,304						—			1,362			1,362
Other			—			143,645			143,645						—			575			575
Commercial real estate - non-owner occupied
Hotels & motels			3,085			125,365			128,450						669			1,863			2,532
Mini-storage			1,058			57,987			59,045						—			133			133
Multifamily			—			233,157			233,157						—			1,821			1,821
Retail			2,693			160,065			162,758						—			1,074			1,074
Other			5,726			276,895			282,621						69			1,751			1,820
Construction and development
Land & land development			2,004			98,801			100,805						723			2,745			3,468
Construction			—			146,038			146,038						—			6,346			6,346
Residential 1-4 family real estate
Personal residence			—			262,805			262,805						—			2,765			2,765
Rental - small loan			1,463			120,526			121,989						436			2,398			2,834
Rental - large loan			3,162			75,946			79,108						—			2,374			2,374
Home equity			523			71,589			72,112						—			497			497
Mortgage warehouse lines			—			227,869			227,869						—			—			—
Consumer			—			31,923			31,923						—			163			163
Other
Credit cards			—			1,891			1,891						—			17			17
Overdrafts			—			811			811						—			207			207
Total			$	27,523		$	2,733,868		$	2,761,391					$	2,096		$	30,202		$	32,298

1)

		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 $19.8$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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		December 31, 2022
		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		$	104			$	501,740			$	501,844			$	—			$	4,941			$	4,941
Commercial real estate - owner occupied
Professional & medical			1,969				118,903				120,872				212				754				966
Retail			4,544				183,652				188,196				—				1,176				1,176
Other			—				157,982				157,982				—				426				426
Commercial real estate - non-owner occupied
Hotels & motels			2,939				138,103				141,042				—				1,203				1,203
Mini-storage			—				51,109				51,109				—				82				82
Multifamily			—				272,705				272,705				—				2,907				2,907
Retail			9,906				182,364				192,270				95				1,267				1,362
Other			5,551				341,691				347,242				287				2,165				2,452
Construction and development
Land & land development			1,398				104,964				106,362				502				2,980				3,482
Construction			—				282,935				282,935				—				11,138				11,138
Residential 1-4 family real estate
Personal residence			—				265,326				265,326				—				2,939				2,939
Rental - small loan			1,159				120,389				121,548				282				1,625				1,907
Rental - large loan			3,675				88,428				92,103				—				2,668				2,668
Home equity			—				71,986				71,986				—				705				705
Mortgage warehouse lines			—				130,390				130,390				—				—				—
Consumer			—				35,372				35,372				—				174				174
Other
Credit cards			—				2,182				2,182				—				17				17
Overdrafts			—				1,352				1,352				—				354				354
Total		$	31,245			$	3,051,573			$	3,082,818			$	1,378			$	37,521			$	38,899

1) Included in the loans collectively evaluated are $8.5 million in fully guaranteed or cash secured loans, which are excluded from the pools collectively evaluated and carry no allowance.

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			December 31, 2020
			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			$	4,851		$	302,034		$	306,885					$	8		$	2,296		$	2,304
Commercial real estate - owner occupied
Professional & medical			2,171			104,980			107,151						223			731			954
Retail			17,458			108,993			126,451						2,258			915			3,173
Other			—			118,258			118,258						—			610			610
Commercial real estate - non-owner occupied
Hotels & motels			—			121,502			121,502						—			2,135			2,135
Mini-storage			1,109			59,441			60,550						111			226			337
Multifamily			1,187			174,801			175,988						135			1,412			1,547
Retail			3,473			131,932			135,405						—			981			981
Other			5,857			186,263			192,120						129			975			1,104
Construction and development
Land & land development			1,891			105,451			107,342						623			3,461			4,084
Construction			1,352			89,748			91,100						135			4,513			4,648
Residential 1-4 family real estate
Personal residence			—			305,093			305,093						—			3,559			3,559
Rental - small loan			1,300			119,126			120,426						102			2,634			2,736
Rental - large loan			3,288			70,897			74,185						—			3,007			3,007
Home equity			523			81,065			81,588						—			713			713
Mortgage warehouse lines			—			251,810			251,810						—			—			—
Consumer			—			33,906			33,906						—			216			216
Other
Credit cards			—			1,855			1,855						—			17			17
Overdrafts			—			538			538						—			121			121
Total			$	44,460		$	2,367,693		$	2,412,153					$	3,724		$	28,522		$	32,246

1) Included in the loans collectively evaluated are $83.9 million in fully guaranteed or cash secured loans, which are excluded from the pools collectively evaluated and carry no allowance.

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

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		December 31, 2023
Dollars in thousands		Real Estate Secured Loans				Non-Real Estate Secured Loans				Total Loans				Allowance for Credit Losses - Loans
Commercial		$	—			$	92			$	92			$	—
Commercial real estate - owner occupied
Professional & medical			—				—				—				—
Retail			572				—				572				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

		December 31, 2022
Dollars in thousands		Real Estate Secured Loans				Non-Real Estate Secured Loans				Total Loans				Allowance for Credit Losses - Loans
Commercial		$	—			$	104			$	104			$	—
Commercial real estate - owner occupied
Professional & medical			1,969				—				1,969				212
Retail			4,544				—				4,544				—
Other			—				—				—				—
Commercial real estate - non-owner occupied
Hotels & motels			2,939				—				2,939				—
Mini-storage			—				—				—				—
Multifamily			—				—				—				—
Retail			9,906				—				9,906				95
Other			5,551				—				5,551				287
Construction and development
Land & land development			1,398				—				1,398				502
Construction			—				—				—				—
Residential 1-4 family real estate
Personal residence			—				—				—				—
Rental - small loan			1,159				—				1,159				282
Rental - large loan			3,675				—				3,675				—
Home equity			—				—				—				—
Consumer			—				—				—				—
Other
Credit cards			—				—				—				—
Overdrafts			—				—				—				—
Total		$	31,141			$	104			$	31,245			$	1,378

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			December 31, 2021
Dollars in thousands			Real Estate Secured Loans			Non-Real Estate Secured Loans			Total Loans			Allowance for Credit Losses - Loans
Commercial			$	—		$	177		$	177		$	—
Commercial real estate - owner occupied
Professional & medical			2,073			—			2,073			199
Retail			5,559			—			5,559			—
Other			—			—			—			—
Commercial real estate - non-owner occupied
Hotels & motels			3,085			—			3,085			669
Mini-storage			1,058			—			1,058			—
Multifamily			—			—			—			—
Retail			2,693			—			2,693			—
Other			5,726			—			5,726			69
Construction and development
Land & land development			2,004			—			2,004			723
Construction			—			—			—			—
Residential 1-4 family real estate
Personal residence			—			—			—			—
Rental - small loan			1,463			—			1,463			436
Rental - large loan			3,162			—			3,162			—
Home equity			523			—			523			—
Consumer			—			—			—			—
Other
Credit cards			—			—			—			—
Overdrafts			—			—			—			—
Total			$	27,346		$	177		$	27,523		$	2,096

			December 31, 2020
Dollars in thousands			Real Estate Secured Loans			Non-Real Estate Secured Loans			Total Loans			Allowance for Credit Losses - Loans
Commercial			$	—		$	4,851		$	4,851		$	8
Commercial real estate - owner occupied
Professional & medical			2,171			—			2,171			223
Retail			17,458			—			17,458			2,258
Other			—			—			—			—
Commercial real estate - non-owner occupied
Hotels & motels			—			—			—			—
Mini-storage			1,109			—			1,109			111
Multifamily			1,187			—			1,187			135
Retail			3,473			—			3,473			—
Other			5,857			—			5,857			129
Construction and development
Land & land development			1,891			—			1,891			623
Construction			1,352			—			1,352			135
Residential 1-4 family real estate
Personal residence			—			—			—			—
Rental - small loan			1,300			—			1,300			102
Rental - large loan			3,288			—			3,288			—
Home equity			523			—			523			—
Consumer			—			—			—			—
Other
Credit cards			—			—			—			—
Overdrafts			—			—			—			—
Total			$	39,609		$	4,851		$	44,460		$	3,724

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NOTE 8.PROPERTY HELD FOR SALE

Property held for sale consists of premises held for sale (if any) and real estate acquired through foreclosure on loans secured by such real estate.  Qualifying premises are transferred to property held for sale at estimated fair value less anticipated selling costs, establishing a new cost basis.  Foreclosed properties are recorded at the estimated fair value less anticipated selling costs based upon the property’s appraised value at the date of foreclosure, with any difference between the fair value of foreclosed property and the carrying value of the related loan charged to the allowance for credit losses.  We perform periodic valuations of property held for sale subsequent to transfer.  Changes in value subsequent to transfer are recorded in noninterest expense.  Gains or losses resulting from the sale of property held for sale is recognized on the date of sale and is included in noninterest expense.  Depreciation is not recorded on property held for sale.  Expenses incurred in connection with operating foreclosed properties are charged to noninterest expense.

The following table presents the activity of property held for sale during 2021, 20202023, 2022 and 2019.

Dollars in thousands			2021						2020						2019
Beginning balance			$	15,588					$	19,276					$	21,432
Acquisitions			532						1,132						4,549
Acquisition of WinFirst			—						146						—
Capitalized improvements			—						1,352						512
Dispositions			(4,845)						(4,535)						(5,142)
Valuation adjustments			(1,417)						(1,783)						(2,075)
Balance at year end			$	9,858					$	15,588					$	19,276

2021.

Dollars in thousands		2023				2022				2021
Beginning balance		$	5,067			$	9,858			$	15,588
Acquisitions			217				6				532
Capitalized improvements			2				36				—
Dispositions			(1,425	)			(4,646	)			(4,845	)
Valuation adjustments			(132	)			(187	)			(1,417	)
Balance at year end		$	3,729			$	5,067			$	9,858

At December 31, 2021,2023, our foreclosed properties of consumer residential real estate totaled $576,000.$255,000.

NOTE 9.PREMISES AND EQUIPMENT

Land is carried at cost, while premises and equipment are stated at cost less accumulated depreciation.  Depreciation is computed primarily by the straight-line method for premises and equipment over the estimated useful lives of the assets.  The estimated useful lives employed are on average 30 years for premises and 3 to 10 years for furniture and equipment.  Repairs and maintenance expenditures are charged to operating expenses as incurred.  Major improvements and additions to premises and equipment, including construction period interest costs, are capitalized.  No interest was capitalized during 20212023 or 2020.

2022.

The major categories of premises and equipment and accumulated depreciation at December 31, 2021 2023 and 20202022 are summarized as follows:

Dollars in thousands			2021						2020
Land			$	13,786					$	12,172
Buildings and improvements			44,121						41,602
Furniture and equipment			31,188						28,768
			89,095						82,542
Less accumulated depreciation			(32,724)						(30,005)
Total premises and equipment, net			$	56,371					$	52,537

Dollars in thousands		2023				2022
Land		$	14,708			$	13,729
Buildings and improvements			53,370				44,620
Furniture and equipment			33,900				31,827
			101,978				90,176
Less accumulated depreciation			(38,940	)			(36,195	)
Total premises and equipment, net		$	63,038			$	53,981

Depreciation expense for the years ended December 31, 2021, 20202023, 2022 and 20192021 approximated $3.85 million, $3.61million and $3.59 million, $3.22 million and $2.61 million, respectively.

NOTE 10. LEASE COMMITMENTS

We lease certain office facilities and office equipment under operating leases. Rent expense for all operating leases totaled $1.4 million in 2023, $999,000 in 2022 and $904,000 in 2021 $606,000 in 2020 and $306,000 in 2019.. In accordance with ASU No. 2016-02, 2016-02,Leases (Topic 842) 842) and its related amendments we recognize certain operating leases on our balance sheet as lease right-of-use assets (reported as a component of other assets) and related lease liabilities (reported as a component of other liabilities).

The components of total lease expense in 2021, 20202023, 2022 and 20192021 were as follows:

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Dollars in thousands			2021						2020						2019
Amortization of lease right-of-use assets			$	858					$	540					$	130
Short-term lease expense			46						66						176
Total			$	904					$	606					$	306

 

Dollars in thousands		2023				2022				2021
Amortization of lease right-of-use assets		$	1,245			$	961			$	858
Short-term lease expense			110				38				46
Total		$	1,355			$	999			$	904

Right-of-use lease assets totaled $6.4$8.7 million and $5.5$6.0 million at December 31, 2021 2023 and 2020,2022, respectively, and are reported as a component of other assets on our accompanying consolidated balance sheets. The related lease liabilities totaled $6.6$8.9 million and $5.6$6.1 million at December 31, 2021 2023 and 2020,2022, respectively, and are reported as a component of other liabilities in the accompanying consolidated balance sheets. Lease payments under operating leases that were applied to our operating lease liability totaled $988,000, $859,000 and $732,000 $358,000during 2023, 2022 and $95,000 during 2021 2020 and 2019,, respectively. The following table reconciles future undiscounted lease payments due under non-cancelable operating leases (those amounts subject to recognition) to the aggregate operating lessee lease liability as of December 31, 2021:

Future Lease Payments
Dollars in thousands
2022			$	948
2023			829
2024			808
2025			756
2026			714
Thereafter			2,965
Total undiscounted operating lease liability			$	7,020
Imputed interest			(453)
Total operating lease liability included in the accompanying balance sheet			$	6,567

2023:

Future Lease Payments
Dollars in thousands
2024		$	1,309
2025			1,266
2026			1,202
2027			1,073
2028			948
Thereafter			4,562
Total undiscounted operating lease liability		$	10,360
Imputed interest			(1,439	)
Total operating lease liability included in the accompanying balance sheet		$	8,921

The weighted average remaining lease term was 99.2 years and 128.6 years at December 31, 2021 2023 and 2020,2022, respectively, and the weighted average discount rate was 1.463.07 percent and 1.571.71 percent at December 31, 2021 2023 and 2020,2022, respectively.

NOTE 11.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 million and $55.3 million at December 31, 2023 and 2022, respectively.

In accordance with ASU No. 2017-04, 2017-04,Intangibles - Goodwill and Other (Topic 350)350): Simplifying the Test for Goodwill Impairment, during third quarter 2021,2023, we performed the qualitative assessment of goodwill and determined that the fair value was more likely than not greater than its carrying value. In performing the qualitative assessment, we considered certain events and circumstances such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors when evaluating whether it is more likely than not that the fair value is less than the carrying value. No indicators of impairment were noted as of September 30, 2021.

The following table presents our goodwill activity by reporting unit for 2021.

Dollars in thousands																		Goodwill Activity
Balance, January 1, 2021																		$	45,495
Reclassifications to goodwill																		(479)
Acquired goodwill, net																		10,331
Balance, December 31, 2021																		$	55,347

In addition, at 2023.

At December 31, 20212023 and December 31, 2020,2022, we had $8.24$18.40 million and $9.63$6.80 million in unamortized identified intangible assets comprised of core deposit intangibles.

		Other Intangible Assets
Dollars in thousands		December 31, 2023				December 31, 2022
Identified intangible assets
Gross carrying amount		$	30,755			$	15,828
Less: accumulated amortization			12,359				9,025
Net carrying amount		$	18,396			$	6,803

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																		Other Intangible Assets
Dollars in thousands																		December 31, 2021																		December 31, 2020
Identified intangible assets
Gross carrying amount																		$	15,828																	$	15,650
Less: accumulated amortization																		7,585																		6,022
Net carrying amount																		$	8,243																	$	9,628

Amortization relative to our identified intangible assets is as follows:

		Core Deposit
Dollars in thousands		Intangible
Actual:
2021		$	1,563
2022			1,440
2023			3,335
Expected:
2024			3,669
2025			3,258
2026			2,846
2027			2,433
2028			2,021
Thereafter			4,099

						Core Deposit						Customer
Dollars in thousands						Intangible						Intangible
Actual:
2019						$	1,634					$	67
2020						1,659						—
2021						1,563						—
Expected:
2022						1,440						—
2023						1,299						—
2024						1,158						—
2025						1,019						—
2026						878						—
Thereafter						2,379						—

NOTE 12.DEPOSITS

The following is a summary of interest bearing deposits by type as of December 31, 2021 2023 and 2020:

Dollars in thousands						2021						2020
Demand deposits, interest bearing						$	1,127,298					$	934,185
Savings deposits						698,156						621,168
Time deposits						548,649						599,480
Total						$	2,374,103					$	2,154,833

2022:

Dollars in thousands		2023				2022
Demand deposits, interest bearing		$	2,164,522			$	1,743,299
Savings deposits			450,527				496,751
Time deposits			506,523				376,213
Total		$	3,121,572			$	2,616,263

Included in time deposits are deposits acquired through a third party (“brokered deposits”) totaling $14.7 million and $55.5$32.8 million at December 31, 2021 2023 and 2020, respectively.

2022.

A summary of the scheduled maturities for all time deposits as of December 31, 20212023 is as follows:

Dollars in thousands			Amount
2022			$	388,387
2023			99,843
2024			24,228
2025			14,329
2026			14,371
Thereafter			7,491
Total			$	548,649

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Dollars in thousands		Amount
2024		$	404,391
2025			57,841
2026			22,335
2027			9,842
2028			7,313
Thereafter			4,801
Total		$	506,523

Time certificates of deposit in denominations of $250,000$250,000 or more totaled $98.9$138.1 million at December 31, 2021.2023. The following is a summary of the maturity distribution of such deposits.

Dollars in thousands			Amount
Three months or less			$	22,387
Three through six months			15,553
Six through twelve months			27,206
Over twelve months			33,789
Total			$	98,935

Dollars in thousands		Amount
Three months or less		$	35,791
Three through six months			25,165
Six through twelve months			49,596
Over twelve months			27,593
Total		$	138,145

At December 31, 2021 2023 and 2020,2022, our deposits of related parties including directors, executive officers and their related interests approximated $63.9$71.9 million and $51.7$59.2 million.

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NOTE 13.BORROWED FUNDS

Our subsidiary bank is a member of the Federal Home Loan Bank (“FHLB”).  Membership in the FHLB makes available short-term and long-term advances under collateralized borrowing arrangements with each subsidiary bank.  All FHLB advances are collateralized by a blanket lien of $1.60$2.30 billion of residential mortgage loans, certain commercial loans, mortgage backed securities and securities of U. S. Government agencies and corporations.  We had $279.5$258.6 million available on a short term line of credit with the Federal Reserve Bank at December 31, 2021,2023, which is primarily secured by a pledge of $514.0$520.6 million of our consumer loans, construction loans and commercial and industrial loan portfolios. We also had $6 million available on an unsecured line of credit with a correspondent bank.

At December 31, 2021,2023, our subsidiary bank had additional borrowings availability of $982.2 million$1.30 billion from the FHLB.  Short-term FHLB advances are granted for terms of 1 to 365 days and bear interest at a fixed or variable rate set at the time of the funding request.

Short-term borrowings:  At December 31, 2021,2023, we had $285.5$264.6 million borrowing availability through credit lines and Federal funds purchased agreements.  Federal funds purchased mature the next business day and totaled $146,000 at December 31, 2021 and 2020.  A summary of short-term FHLB advancesborrowing agreements is presented below.

			December 31,
			2021																		2020
Dollars in thousands			Short-term FHLB Advances
Balance at December 31			$	140,000																	$	140,000
Average balance outstanding for the period			140,000																		130,241
Maximum balance outstanding at any month end during period			140,000																		215,700
Weighted average interest rate for the period			0.33		%																0.67		%
Weighted average interest rate for balances
outstanding at December 31			0.26		%																0.35		%

		December 31,
		2023								2022
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 December 31		$	302,800			$	157			$	225,850			$	149
Average balance outstanding for the period			229,850				8,502				204,118				147
Maximum balance outstanding at any month end during period			355,100				20,533				298,900				149
Weighted average interest rate for the period			5.53	%			2.37	%			2.37	%			1.87	%
Weighted average interest rate for balances outstanding at December 31			5.64	%			5.50	%			4.47	%			4.50	%

Long-term borrowings:  Our long-term borrowings of $679,000$637,000 and $699,000$658,000 at December 31, 2021 2023 and 2020,2022, respectively, consisted of a fixed rate advance from the Federal Home Loan Bank (“FHLB”) maturing in 2026. The average interest rate paid on long-term borrowings during 20212023 and 20202022 was 5.34%.

Subordinated debentures:We issued $75 million of subordinated debentures, net of $1.67$1.74 million debt issuance costs, during fourth quarter 2021 in a private placement transaction, which had a net balance of  $73.4$74.0 million at December 31, 2021. 2023 and $73.7 million at December 31, 2022. 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-monththree-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 years term and generally, is not prepayable by us within the firstfive years.

We issued $30 million of subordinated debentures, net of $664,000$681,000 debt issuance costs, during third quarter 2020 in a private placement transaction, with a net balance of $29.5$29.8 million at December 31, 20212023 and $29.4$29.6 million at December 31, 2020.The2022.The subordinated debt qualifies as Tier 2 capital under Federal Reserve Board guidelines, until the debt is within 5 years of its

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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-monththree-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 years term and generally, is not prepayable by us within the firstfive years.

Subordinated debentures owed to unconsolidated subsidiary trusts:  We have 3three 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.  Our subordinated debentures totaled $19.6$19.6 million at December 31, 2021 2023 and 2020.2022.

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In October 2002, we sponsored SFG Capital Trust I, in March 2004, we sponsored SFG Capital Trust II and in December 2005, we sponsored SFG Capital Trust III, of which 100% of the common equity of each trust is owned by us.  SFG Capital Trust I issued $3.5 million in capital securities and $109,000 in common securities and invested the proceeds in $3.61 million of debentures. SFG Capital Trust II issued $7.5 million in capital securities and $232,000 in common securities and invested the proceeds in $7.73 million of debentures. SFG Capital Trust III issued $8.0 million in capital securities and $248,000 in common securities and invested the proceeds in $8.25 million of debentures.  Distributions on the capital securities issued by the trusts are payable quarterly at a variable interest rate equal to 3 month LIBOR plus 345 basis points for SFG Capital Trust I, 3 month LIBOR plus 280 basis points for SFG Capital Trust II and 3 month LIBOR plus 145 basis points for SFG Capital Trust III and equals the interest rate earned on the debentures held by the trusts and is recorded as interest expense by us.  The capital securities are subject to mandatory redemption in whole or in part, upon repayment of the debentures.  We have entered into agreements which, taken collectively, fully and unconditionally guarantee the capital securities subject to the terms of the guarantee.  The debentures of each Capital Trust are redeemable by us quarterly.

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:

Dollars in thousands		Long-term borrowings				Subordinated debentures				Subordinated debentures owed to unconsolidated subsidiary trusts
2024		$	23			$	—			$	—
2025			24				—				—
2026			590				—				—
2027			—				—				—
2028			—				—				—
Thereafter			—				105,000				19,589
Total		$	637			$	105,000			$	19,589

Dollars in thousands						Long-term borrowings						Subordinated debentures						Subordinated debentures owed to unconsolidated subsidiary trusts
2022						$	21					$	—					$	—
2023						22						—						—
2024						23						—						—
2025						24						—						—
2026						589						—						—
Thereafter						—						105,000						19,589
Total						$	679					$	105,000					$	19,589

NOTE14.DERIVATIVE FINANCIAL INSTRUMENTS

We use derivative instruments primarily to protect against the risk of adverse interest rate movements on the cash flows of certain assets and liabilities.  Derivative instruments represent contracts between parties that usually require little or no initial net investment and result in one party delivering cash or another type of asset to the other party based upon a notional amount and an underlying as specified in the contract.  A notional amount represents the number of units of a specific item, such as currency units.  An underlying represents a variable, such as an interest rate or price index.  The amount of cash or other asset delivered from one party to the other is determined based upon the interaction of the notional amount of the contract with the underlying.  Derivatives can also be implicit in certain contracts and commitments.

As with any financial instrument, derivative instruments have inherent risks, primarily market and credit risk.  Market risk associated with changes in interest rates is managed by establishing and monitoring limits as to the degree of risk that may be undertaken as part of our overall market risk monitoring process.  Credit risk occurs when a counterparty to a derivative

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contract with an unrealized gain fails to perform according to the terms of the agreement.  Credit risk is managed by monitoring the size and maturity structure of the derivative portfolio and applying uniform credit standards to all activities with credit risk.

All derivative instruments are recorded on the balance sheet at fair value in either other assets or other liabilities.  Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction.

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Fair Value Hedges: For transactions in which we are hedging changes in fair value of an asset, liability, or a firm commitment, changes in the fair value of the derivative instrument are generally offset in the income statement by changes in the hedged item’s fair value.

Cash Flow Hedges: For transactions in which we are hedging the variability of cash flows related to a variable-rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument are reported in other comprehensive income. The gains and losses on the derivative instrument, which are reported in comprehensive income, are reclassified to earnings in the periods in which earnings are impacted by the variability of cash flows of the hedged item.

The ineffective portion of all hedges is recognized in current period earnings as a component of the interest income section of the related hedged item.

Our derivatives are governed by the terms of ISDA Master netting agreements and Credit Support Annexes. The ISDA Master agreements allow counterparties to offset trades in a gain against trades in a loss to determine net exposure and allow for the right of offset in the event of either a default or an additional termination event. Credit Support Annexes govern the terms of daily collateral posting practices. Collateral practices mitigate the potential loss impact to affected parties by requiring liquid collateral to be posted on a scheduled basis to secure the aggregate net unsecured exposure. In addition to collateral, the right of offset allows counterparties to offset net derivative values with a defaulting party against certain other contractual receivables from other obligations due to the defaulting party in determining the net termination amount.

Cash Flow Hedges

We have entered into 3three pay-fixed/receive LIBOR 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, 2023, was designated as a cash flow hedge of $20 million of variable rate Federal Home Loan Bank advances. Under the terms of this swap we will pay a fixed rate of 1.07% and receive a variable rate equal to three month LIBOR.

•A $20 million notional interest rate swap with an effective date of October 18, 2021 and expiring on October 18, 2024, was designated as a cash flow hedge of $20 million of variable rate Federal Home Loan Bank advances. Under the terms of this swap we will pay a fixed rate of 1.11% and receive a variable rate equal to three month LIBOR.

•A $40 million notional interest rate swap that expired on October 18, 2021, was designated as a cash flow hedge of $40 million of variable rate Federal Home Loan Bank advances. Under the terms of this swap we paid a fixed rate of 2.19% and received a variable rate equal to one month LIBOR.

•

A $20 million notional interest rate swap with an effective date of October 18, 2021and 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 May 18, 2023and 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, 2023and 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 entered into 2purchased 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, was designated as a cash flow hedge of $100 million of fixed rate Federal Home Loan Bank advances. Under the terms of this cap we will hedge the variability of cash flows when three month LIBOR is above .75%.

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

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•

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 forecasted series of 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, 2020and 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 2 pay fixed/three pay-fixed/receive variable interest rate swaps to hedge fair valueas follows:

•

An original $9.95 million (current $6.6 million) notional amortizing interest rate swap with an effective date of January 15, 2015and 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 $9.6 million) notional amortizing interest rate swap with an effective date of December 18, 2015and 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 $71.5 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, 2031to 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 Federal funds.

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Table of two commercial fixed rate loans with the same principal, amortization, and maturity terms of the underlying loans, which are designated as fair value hedges with a total original notional amount of $21.3 million.Contents

We have also entered into a pay fixed/receive variable interest rate swap to hedge fair value variability of certain available for sale taxable municipal securities, which is designated as a fair value hedge with a total original notional amount of $71.2 million.

A summary of our derivative financial instruments as of December 31, 2021 2023 and 20202022 follows:

		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 hedging:
Short term borrowings		$	120,000			$	1,059			$	375			$	—
Interest rate caps 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 hedging:
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

		December 31, 2022
						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 hedging:
Short term borrowings		$	40,000			$	1,871			$	—			$	—
Interest rate caps hedging:
Short term borrowings		$	100,000			$	20,554			$	—			$	—
Indexed interest bearing demand deposit accounts			100,000				10,047				—				—
FAIR VALUE HEDGES
Pay-fixed/receive-variable interest rate swaps hedging:
Commercial real estate loans		$	16,876			$	911			$	—			$	—
Available for sale taxable municipal securities			71,245				7,123				—				(12	)
Total		$	328,121			$	40,506			$	—			$	(12	)

			December 31, 2021
									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 hedging:
Short term borrowings			$	40,000					$	—					$	83					$	—
Interest rate caps hedging :
Short term borrowings			$	100,000					$	8,336					$	—					$	—
Indexed interest bearing demand deposit accounts			100,000						2,851						—						—
FAIR VALUE HEDGES
Pay-fixed/receive-variable interest rate swaps hedging:
Commercial real estate loans			$	17,548					$	—					$	512					$	—
Available for sale taxable municipal securities			71,245						—						529						22

			December 31, 2020
									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 hedging:
Short term borrowings			$	80,000					$	—					$	1,457					$	—
Interest rate caps hedging:
Short term borrowings			$	100,000					$	5,652					$	—					$	—
Indexed interest bearing demand deposit accounts			100,000						1,001						—						—
FAIR VALUE HEDGES
Pay-fixed/receive-variable interest rate swaps hedging:
Commercial real estate loans			$	18,192					$	—					$	1,290					$	—

NOTE 15.INCOME TAXES

Income taxes, computed on the separate return basis with the benefit of filing a consolidated return being recorded at the holding company, include Federal and state income taxes and are based on pretax net income reported in the consolidated financial statements, adjusted for transactions that may never enter into the computation of income taxes payable (permanent differences).  Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.  Valuation allowances are established, when deemed necessary, to reduce deferred tax assets to the amount expected to be realized.

A tax position that meets a "probable recognition threshold" for the benefit of the uncertain tax position is recognized in the financial statements. A tax position that fails to meet the probable recognition threshold will result in either reduction of a

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current or deferred tax asset or receivable, or recording a current or deferred tax liability.  We concluded that there were no significant uncertain tax positions requiring recognition in the consolidated financial statements. The evaluation was performed for the years ended 20182020 through 2021,2023, the tax years which remain subject to examination by major tax jurisdictions.

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The components of applicable income tax expense (benefit) for the years ended December 31, 2021, 20202023, 2022 and 2019,2021, are as follows:

Dollars in thousands			2021						2020						2019
Current
Federal			$	10,189					$	10,189					$	6,676
State			1,210						1,440						938
			11,399						11,629						7,614
Deferred
Federal			231						(3,673)						88
State			33						(528)						15
			264						(4,201)						103
Total			$	11,663					$	7,428					$	7,717

Dollars in thousands		2023				2022				2021
Current
Federal		$	13,432			$	12,222			$	10,189
State			2,034				1,654				1,210
			15,466				13,876				11,399
Deferred
Federal			(265	)			191				231
State			(38	)			27				33
			(303	)			218				264
Total		$	15,163			$	14,094			$	11,663

Reconciliation between the amount of reported income tax expense and the amount computed by multiplying the statutory income tax rates by book pretax income for the years ended December 31, 2021, 20202023, 2022 and 20192021 is as follows:

			2021												2020												2019
Dollars in thousands			Amount						Percent						Amount						Percent						Amount						Percent
Computed tax at applicable statutory rate			$	12,054					21						$	8,138					21						$	8,313					21
Increase (decrease) in taxes resulting from:
Tax-exempt interest
and dividends, net			(829)						(1)						(788)						(2)						(728)						(2)
Low-income housing and rehabilitation tax credits			(206)						—						(248)						(1)						(177)						—
State income taxes, net
of Federal income tax benefit			982						2						720						2						753						2
Other, net			(338)						(1)						(394)						(1)						(444)						(1)
Applicable income taxes			$	11,663					21						$	7,428					19						$	7,717					20

		2023								2022								2021
Dollars in thousands		Amount				Percent				Amount				Percent				Amount				Percent
Computed tax at applicable statutory rate		$	14,784				21			$	14,135				21			$	12,054				21
Increase (decrease) in taxes resulting from:
Tax-exempt interest and dividends, net			(1,216	)			(2	)			(1,005	)			(2	)			(829	)			(1	)
Low-income housing and rehabilitation tax credits			(200	)			—				(214	)			—				(206	)			—
State income taxes, net of Federal income tax benefit			1,577				2				1,328				2				982				2
Other, net			218				—				(150	)			—				(338	)			(1	)
Applicable income taxes		$	15,163				21			$	14,094				21			$	11,663				21

Deferred income taxes reflect the impact of "temporary differences" between amounts of assets and liabilities for financial reporting purposes and such amounts as measured for tax purposes.  Deferred tax assets and liabilities represent the future tax return consequences of temporary differences, which will either be taxable or deductible when the related assets and liabilities are recovered or settled.   

The tax effects of temporary differences, which give rise to our deferred tax assets and liabilities as of December 31, 2021 2023 and 2020,2022, are as follows:

Dollars in thousands			2021						2020
Deferred tax assets
Allowance for credit losses			$	9,497					$	8,553
Foreclosed properties			2,089						2,703
Deferred compensation			4,803						4,384
Other deferred costs and accrued expenses			970						1,053
Net unrealized loss on derivative financial instruments			—						357
Total			17,359						17,050
Deferred tax liabilities
Depreciation			630						288
Accretion on tax-exempt securities			9						19
Net unrealized gain on debt securities available for sale			590						2,153
Net unrealized gain on interest rate swaps			1,136						—
Other post-retirement benefits			12						—
Acquisition accounting adjustments and goodwill			2,440						2,241
Total			4,817						4,701
Net deferred tax assets			$	12,542					$	12,349

Dollars in thousands		2023				2022
Deferred tax assets
Allowance for credit losses		$	13,400			$	11,003
Foreclosed properties			504				789
Deferred compensation			5,156				4,830
Other deferred costs and accrued expenses			1,343				1,096
Lease liability			2,141				—
Net unrealized loss on debt securities available for sale			9,224				11,968
Net unrealized loss on equity investments			49				17
Acquisition accounting adjustments and goodwill			434				—
Total			32,251				29,703
Deferred tax liabilities
Depreciation			627				726
Accretion on tax-exempt securities			73				8
Right of use asset			2,088				—
Net unrealized gain on interest rate swaps			6,811				8,299
Other post-retirement benefits			52				46
Acquisition accounting adjustments and goodwill			—				2,944
Total			9,651				12,023
Net deferred tax assets		$	22,600			$	17,680

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We may from time to time be assessed interest or penalties associated with tax liabilities by major tax jurisdictions, although any such assessments are estimated to be minimal and immaterial.  To the extent we have received an assessment for interest and/or penalties; it has been classified in the consolidated statements of income as a component of other noninterest expense.

We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2018 2020 through 2020.  Tax years 2019 through 2020 remain subject to West Virginia State examination.2022.

NOTE 16.EMPLOYEE BENEFITS

Retirement Plans:  We have defined contribution profit-sharing plans with 401(k)401(k) provisions covering substantially all employees.  Contributions to the plans are at the discretion of the Board of Directors.  Contributions made to the plans and charged to expense were $792,000, $678,000$981,000, $829,000 and $616,000$792,000 for the years ended December 31, 2021, 20202023, 2022 and 2019,2021, respectively.

Employee Stock Ownership Plan:We have an Employee Stock Ownership Plan (“ESOP”), which enables eligible employees to acquire shares of our common stock.  The cost of the ESOP is borne by us through annual contributions to an Employee Stock Ownership Trust in amounts determined by the Board of Directors.

The expense recognized by us is based on cash contributed or committed to be contributed by us to the ESOP during the year.  Contributions to the ESOP for the years ended December 31, 2021, 20202023, 2022 and 20192021 were $882,000, $816,000$1.04 million, $1.2 million and $721,000$882,000 respectively.  Dividends paid by us to the ESOP are reported as a reduction of retained earnings.  The ESOP owned 547,858560,914 shares of our common stock at  December 31, 2021 2023and 514,457549,330 shares of common stock at  December 31, 2020,2022, all of which were purchased at the prevailing market price. All but 20,702 unallocated shares at December 31, 2021price and are considered outstanding for earnings per share computations.

The purchase of unallocated ESOP shares is shown as a reduction of shareholders' equity, similar to a purchase of treasury stock. The loan receivable from the ESOP to the Company is not reported as an asset nor is the debt of the ESOP reported as a liability on the Company's Consolidated Balance Sheets. Cash dividends on allocated shares (those credited to ESOP participants' accounts) are recorded as a reduction of shareholders' equity and distributed directly to participants' accounts.  Cash dividends on unallocated shares (those held by the ESOP not yet credited to participants' accounts) are used to pay a portion of the ESOPs debt service requirements.  

Unallocated ESOP shares will be allocated to ESOP participants ratably as the ESOP's loan is repaid. When the shares are committed to be released and become available for allocation to plan participants, the then fair value of such shares will be charged to compensation expense. 

The ESOP shares as of December 31 are as follows:

			At December 31,
			2021						2020
Allocated shares			504,154						448,358
Shares committed to be released			23,002						22,395
Unallocated shares			20,702						43,704
Total ESOP shares			547,858						514,457
Market value of unallocated shares (in thousands)			$	568					$	965

		At December 31,
		2023				2022
Allocated shares			560,914				528,628
Shares committed to be released			—				20,702
Unallocated shares			—				—
Total ESOP shares			560,914				549,330

Supplemental Executive Retirement Plans:We have certain non-qualified Supplemental Executive Retirement Plans (“SERP”) with certain senior officers, which provide participating officers with an income benefit payable at retirement age or death.  The liabilities accrued for the SERP’s at December 31, 2021 2023 and 20202022 were $10.3$12.3 million and $9.6$11.3 million, respectively, which are included in other liabilities.  Included in salaries, commissions and employee benefits was $967,000, $787,000$1.2 million, $1.2 million and $712,000$967,000 expense related to these SERPs for the years December 31, 2021, 20202023, 2022 and 2019,2021, respectively.

Share-Based Compensation:  The 2014 Long-Term Incentive Plan (“(“2014 LTIP”) was adopted by our shareholders in May 2014 to enhance the ability of the Company to attract and retain exceptionally qualified individuals to serve as key employees. The LTIP provides for the issuance of up to 800,000 shares of common stock, in the form of equity awards including stock options, restricted stock, restricted stock units ("RSUs"), stock appreciation rights ("SARs"), performance units, other share-based awards or any combination thereof, to our key employees.

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Stock options awarded under the 2009 Officer Stock Option Plan and the 1998 Officer Stock Option Plan (collectively, the “Plans”) were not altered by the 2014 LTIP and remain subject to the

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terms of the Plans.  However, under the terms of the 2014 LTIP, all shares of common stock remaining issuable under the Plans at the time the 2014 LTIP was adopted ceased to be available for future issuance.

Under the 2014 LTIP and the Plans, stock options, 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 share based compensation to individual employees.

During 2021,first quarter 2023, we granted 54,94767,637 SARs with a $9.44an $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 2021,2023, we granted 122,542108,747 SARs with a $9.34an $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 of SARS or stock options during 2022.During 2019,2021, we granted 28,30654,947 SARs with a $9.74$8.97 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 2019,2021, we granted 109,819122,542 SARs with a $8.41$8.40 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 of SARs or stock options in 2020.

The fair value of our employee stock options and 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 employee stock options and SARs granted but are not considered by the model. Because our employee stock options and 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 employee stock options and SARs at the time of grant. The assumptions used to value SARs granted in 20212023 and 2019 are2021 is as follows:

			2021 Grants									2019 Grants
			7 year expiration			5 year expiration						7 year expiration			5 year expiration
Risk-free interest rate			1.06		%	0.74		%				2.51		%	2.43		%
Expected dividend yield			3.00		%	3.00		%				2.30		%	2.30		%
Expected common stock volatility			55.59		%	55.59		%				40.84		%	35.71		%
Expected life			7 years			5.5 years						7 years			5.5 years

		2023 Grants								2021 Grants
		7 year expiration				5 year expiration				7 year expiration				5 year expiration
Risk-free interest rate			3.79	%			3.87	%			1.06	%			0.74	%
Expected dividend yield			3.00	%			3.00	%			3.00	%			3.00	%
Expected common stock volatility			40.76	%			40.76	%			55.59	%			55.59	%
Expected life (in years)			7				6.5				7				5.5

A summary of SAR and option activity during 2019, 20202021, 2022 and 20212023 is as follows:

										Weighted Average
Dollars in thousands, except per share amounts		SARs/Options				Aggregate Intrinsic Value				Remaining Contractual Term (Yrs.)				Exercise Price
Outstanding, December 31, 2020			329,203											$	20.47
Granted			177,489												21.85
Exercised			(14,900	)											8.92
Forfeited			—												—
Expired			—												—
Outstanding, December 31, 2021			491,792											$	21.32
Granted			—												—
Exercised			(18,580	)											20.21
Forfeited			—												—
Expired			—												—
Outstanding, December 31, 2022			473,212											$	21.36
Granted			176,384												26.37
Exercised			(10,000	)											12.01
Forfeited			(45,035	)											23.99
Expired			—												—
Outstanding, December 31, 2023			594,561			$	4,686				6.17			$	22.81
Exercisable Options/SARs:
December 31, 2023			290,418			$	2,839				4.12			$	20.92
December 31, 2022			259,037				1,262				4.57				20.33
December 31, 2021			204,116				1,683				4.81				19.20

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															Weighted Average
Dollars in thousands, except per share amounts			SARs/Options						Aggregate Intrinsic Value						Remaining Contractual Term (Yrs.)						Exercise Price
Outstanding, December 31, 2018			232,091																		$	17.36
Granted			138,125																		23.94
Exercised			(31,613)																		11.83
Forfeited			—																		—
Expired			(7,900)																		25.83
Outstanding, December 31, 2019			330,703																		$	20.44
Granted			—																		—
Exercised			(1,400)																		12.01
Forfeited			—																		—
Expired			(100)																		18.26
Outstanding, December 31, 2020			329,203																		$	20.47
Granted			177,489																		21.85
Exercised			(14,900)																		8.92
Forfeited			—																		—
Expired			—																		—
Outstanding, December 31, 2021			491,792						$	3,014					6.94						$	21.32
Exercisable Options/SARs:
December 31, 2021			204,116						$	1,683					4.81						$	19.20
December 31, 2020			177,875						1,118						5.27						$	17.07
December 31, 2019			104,889						1,203						5.74						$	15.62

The total intrinsic value of options and SARs exercised in 2021, 20202023, 2022 and 20192021 was $255,000, $9,000$145,000, $172,000 and $442,000,$255,000, respectively. The total fair value of options and SARs vested during 2021, 20202023, 2022 and 20192021 was $396,000, $596,000$524,000, $672,000 and $396,000, respectively.

Grants of RSUs include time-based vesting conditions that generally vest ratably over a period of 3 to 5 years. There were no grants of RSUs during 2023.During 2021,2022, we granted 1,500707 RSUs which will vest ratably over 3 years. During 2020,2021, we granted 2,763 RSUs which will fully vest on the two years anniversary of the grant date and 10,995 RSUs which will vest ratably over 4 years. During 2019, we granted 2,8921,500 RSUs which will vest ratably over 3 years. A summary of our RSU activity and related information is as follows.

Dollars in thousands, except per share amounts			RSUs						Weighted Average Grant Date Fair Value
Nonvested, December 31, 2019			2,892						$	25.93
Granted			13,758						19.63
Forfeited			—						—
Vested			(964)						25.93
Nonvested, December 31, 2020			15,686						20.40
Granted			1,500						27.63
Forfeited			—						—
Vested			(4,171)						20.38
Nonvested, December 31, 2021			13,015						$	21.24

Dollars in thousands, except per share amounts		RSUs				Weighted Average Grant Date Fair Value
Nonvested, December 31, 2020			15,686			$	20.40
Granted			1,500				27.63
Forfeited			—				—
Vested			(4,171	)			20.38
Nonvested, December 31, 2021			13,015			$	21.24
Granted			707				28.28
Forfeited			(313	)			26.63
Vested			(6,205	)			22.65
Nonvested, December 31, 2022			7,204			$	20.49
Granted			—				—
Forfeited			(1,321	)			18.93
Vested			(3,484	)			20.23
Nonvested, December 31, 2023			2,399			$	21.73

Total stock compensation expense for all share-based arrangements totaled $646,000, $527,000$739,000, $624,000 and $590,000$646,000 for the years ended December 31, 2021, 20202023, 2022 and 2019,2021, respectively, and the related income tax benefits recognized in 2021, 20202023, 2022 and 20192021 were $155,000, $127,000$177,000, $150,000 and $142,000$155,000 respectively. We recognize compensation expense based on the estimated number of stock awards expected to actually vest, exclusive of the awards expected to be forfeited. At December 31, 2021,2023, our total unrecognized compensation expense related to all nonvested awards not yet recognized totaled $2.22$2.3 million and on a weighted- average basis, will be recognized over the next 2.212.04 years.

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NOTE 17.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:

Dollars in thousands		December 31, 2023				December 31, 2022
Commitments to extend credit:
Revolving home equity and credit card lines		$	118,742			$	104,475
Construction loans			283,842				271,062
Other loans			488,734				493,592
Standby letters of credit			58,683				56,528
Total		$	950,001			$	925,657

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Dollars in thousands						December 31, 2021						December 31, 2020
Commitments to extend credit:
Revolving home equity and credit card lines						$	97,540					$	90,125
Construction loans						265,056						135,841
Other loans						325,897						308,290
Standby letters of credit						22,859						15,124
Total						$	711,352					$	549,380

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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 and generally are of a term of no greater than one year.

Our exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of 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 ACL on off-balance-sheet credit exposures is a liability account, calculated in accordance with ASC 326, representing expected credit losses over the contractual period for which we are exposed to credit risk resulting from a contractual obligation to extend credit. No allowance is recognized if we have the unconditional right to cancel the obligation. Off-balance-sheet credit exposures primarily consist of amounts available under outstanding lines of credit and letters of credit detailed in the table above. For the period of exposure, the estimate of expected credit losses considers both the likelihood that funding will occur and the amount expected to be funded over the estimated remaining life of the commitment or other off-balance-sheet exposure. The likelihood and expected amount of funding are based on historical utilization rates. The amount of the allowance represents management's best estimate of expected credit losses on commitments expected to be funded over the contractual life of the commitment. Estimating credit losses on amounts expected to be funded uses the same methodology as described for loans in Note 7.

The provision for credit losses on unfunded commitments was $3.09 million$795,000 and $1.76 million$(328,000) for the years ended December 31, 2021 2023 and 2020.2022. The ACL on off-balance sheet credit exposures totaled $7.28$7.74 million and $4.19$6.95 million for the year ended December 31, 2021 2023 and 2020. The impact to2022 and is included in other liabilities on the ACL on off-balance sheet credit exposures upon adoption of ASC 326

effective January 1, 2020 was $2.43 million.

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accompanying consolidated balance sheets.

Employment Agreements

We have various employment agreements with our executive officers and other key employees.  These agreements contain change in control provisions that would entitle the officers to receive compensation in the event there is a change in control in the Company (as defined) and a termination of their employment without cause (as defined).

Legal Contingencies

We are not a party to any other 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, the outcome of these matters will not have a significant adverse effect on the consolidated financial statements.

NOTE 18. PREFERRED STOCK

In April 2021, we sold through a private placement 1,500 shares or $15.0 million of Series 20216% 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 19.REGULATORY MATTERS

The primary source of funds for our dividends paid to our shareholders is dividends received from our subsidiaries.  Dividends paid by the subsidiary bank are subject to restrictions by banking law and regulations and require approval by the Bank’s regulatory agency if dividends declared in any year exceed the bank’s current year's net income, as defined, plus its retained net profits of the two preceding years.  During 2022,2023, the Bank will have $70.8$90.1 million plus net income for the interim periods through the date of declaration, available for dividends for distribution to us.  

Our subsidiary bank may be required to maintain reserve balances with the Federal Reserve Bank.  The required reserve balance was zero at December 31, 2021 2023 and 2020.

2022.

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("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 December 31, 2021,2023, 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-oneday-one regulatory capital effects of the implementation of ASU No. 2016-13, 2016-13,Financial Instruments - Credit Losses (Topic 326)326) - Measurement of Credit Losses on Financial Instruments. We elected to this optional phase-in period upon adoption of the ASU effective January 1, 2020. 

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The following tables present Summit's, as well as Summit Community's, actual and required minimum regulatory capital amounts and ratios as of December 31, 20212023 and December 31, 2020.2022. 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 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	%
As of December 31, 2022
CET1 (to risk weighted assets)
Summit		$	299,993				8.6	%		$	245,141				7.0	%			N/A				N/A
Summit Community			405,430				11.6	%			244,502				7.0	%			227,038				6.5	%
Tier I Capital (to risk weighted assets)
Summit			333,913				9.5	%			297,672				8.5	%			N/A				N/A
Summit Community			405,430				11.6	%			296,896				8.5	%			279,431				8.0	%
Total Capital (to risk weighted assets)
Summit			472,955				13.5	%			367,712				10.5	%			N/A				N/A
Summit Community			441,177				12.6	%			366,754				10.5	%			349,289				10.0	%
Tier I Capital (to average assets)
Summit			333,913				8.5	%			156,852				4.0	%			N/A				N/A
Summit Community			405,430				10.4	%			156,338				4.0	%			195,422				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, 2021
CET1 (to risk weighted assets)
Summit						$	257,122					8.4		%				$	214,268					7.0		%				N/A						N/A
Summit Community						364,125						11.9		%				214,191						7.0		%				198,892						6.5		%
Tier I Capital (to risk weighted assets)
Summit						291,042						9.5		%				260,406						8.5		%				N/A						N/A
Summit Community						364,125						11.9		%				260,089						8.5		%				244,790						8.0		%
Total Capital (to risk weighted assets)
Summit						420,045						13.8		%				319,599						10.5		%				N/A						N/A
Summit Community						390,236						12.8		%				320,115						10.5		%				304,872						10.0		%
Tier I Capital (to average assets)
Summit						291,042						8.3		%				140,261						4.0		%				N/A						N/A
Summit Community						364,125						10.4		%				140,048						4.0		%				175,060						5.0		%
As of December 31, 2020
CET1 (to risk weighted assets)
Summit						233,768						9.3		%				N/A						N/A						N/A						N/A
Summit Community						279,540						11.1		%				176,286						7.0		%				163,695						6.5		%
Tier I Capital (to risk weighted assets)
Summit						252,768						10.0		%				N/A						N/A						N/A						N/A
Summit Community						279,540						11.1		%				214,062						8.5		%				201,470						8.0		%
Total Capital (to risk weighted assets)
Summit						305,309						12.1		%				N/A						N/A						N/A						N/A
Summit Community						302,716						12.0		%				264,877						10.5		%				252,263						10.0		%
Tier I Capital (to average assets)
Summit						252,768						8.6		%				N/A						N/A						N/A						N/A
Summit Community						279,540						9.5		%				117,701						4.0		%				147,126						5.0		%

NOTE 20.EARNINGS PER SHARE

The computations of basic and diluted earnings per share follow:

		For the Year Ended December 31,
		2023												2022												2021
						Common												Common												Common
Dollars in thousands,		Income				Shares				Per				Income				Shares				Per				Income				Shares				Per
except per share amounts		(Numerator)				(Denominator)				Share				(Numerator)				(Denominator)				Share				(Numerator)				(Denominator)				Share
Net income		$	55,239											$	53,216											$	45,738
Less preferred stock dividends			(900	)											(900	)											(589	)
Basic EPS		$	54,339				14,206,811			$	3.82			$	52,316				12,760,649			$	4.10			$	45,149				12,943,883			$	3.49
Effect of dilutive securities:
Stock options							—												—												44
SARs							39,847												56,616												53,964
RSUs							2,471												4,268												5,537
Diluted EPS		$	54,339				14,249,129			$	3.81			$	52,316				12,821,533			$	4.08			$	45,149				13,003,428			$	3.47

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			For the Year Ended December 31,
			2021												2020												2019
						Common												Common												Common
Dollars in thousands,			Income			Shares			Per						Income			Shares			Per						Income			Shares			Per
except per share amounts			(Numerator)			(Denominator)			Share						(Numerator)			(Denominator)			Share						(Numerator)			(Denominator)			Share
Net income			$	45,738											$	31,326											$	31,866
Less preferred stock dividends			(589)												—												—
Basic EPS			$	45,149		12,943,883			$	3.49					$	31,326		12,935,430			$	2.42					$	31,866		12,516,474			$	2.55
Effect of dilutive securities:
Stock options						44												4,320												4,935
SARs						53,964												34,785												53,737
RSUs						5,537												850												—
Diluted EPS			$	45,149		13,003,428			$	3.47					$	31,326		12,975,385			$	2.41					$	31,866		12,575,146			$	2.53

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Stock option and SAR grants are disregarded in this computation if they are determined to be anti-dilutive. At December 31, 2023, anti-dilutive SARs totaled 518,902 need to confirm.  At December 31, 2022, our anti-dilutive SARs totaled 224,424. At December 31, 2021,our anti-dilutive SARs totaled 400,229. At December 31, 2020, our anti-dilutive options were 200 and our anti-dilutive SARs totaled 222,740. All outstanding stock optionsRSUs were dilutive and our anti-dilutive SARs totaled 222,740 at December 31, 2019.for all periods presented.

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NOTE 21. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (LOSS)

The following are the changes in accumulated other comprehensive (loss) income (loss) by component, net of tax, for the years ended December 31, 2021, 20202023, 2022 and 2019.

			December 31, 2021
Dollars in thousands			Gains and Losses on Pension Plan						Gains on Other Post-Retirement Benefits						Gains and Losses on Cash Flow Hedges						Unrealized Gains and Losses on Debt Securities Available for Sale						Unrealized Losses on Securities Fair Value Hedge						Total
Beginning balance			$	(199)					$	(40)					$	(1,132)					$	6,816					$	—					$	5,445
Other comprehensive income (loss) before reclassification, net of tax			229						49						5,125						(4,625)						(418)						360
Amounts reclassified from accumulated other comprehensive income, net of tax			—						—						—						(323)						—						(323)
Net current period other comprehensive income (loss)			229						49						5,125						(4,948)						(418)						37
Ending balance			$	30					$	9					$	3,993					$	1,868					$	(418)					$	5,482

						December 31, 2020
Dollars in thousands						Gains and Losses on Pension Plan						Gains on Other Post-Retirement Benefits						Gains and Losses on Cash Flow Hedges						Unrealized Gains and Losses on Debt Securities Available for Sale						Total
Beginning balance						$	(140)					$	48					$	(518)					$	3,145					$	2,535
Other comprehensive income (loss) before reclassification, net of tax						(59)						(88)						(614)						6,310						5,549
Amounts reclassified from accumulated other comprehensive income (loss), net of tax						—						—						—						(2,639)						(2,639)
Net current period other comprehensive income (loss)						(59)						(88)						(614)						3,671						2,910
Ending balance						$	(199)					(40)						$	(1,132)					$	6,816					$	5,445

						December 31, 2019
Dollars in thousands						Gains and Losses on Pension Plan						Gains on Other Post-Retirement Benefits						Gains and Losses on Cash Flow Hedges						Unrealized Gains and Losses on Available-for-Sale Securities						Total
Beginning balance						$	—					$	139					$	(314)					$	(841)					$	(1,016)
Other comprehensive income (loss) before reclassification, net of tax						(140)						(91)						(204)						5,459						5,024
Amounts reclassified from accumulated other comprehensive income (loss), net of tax						—						—						—						(1,473)						(1,473)
Net current period other comprehensive income (loss)						(140)						(91)						(204)						3,986						3,551
Ending balance						$	(140)					$	48					$	(518)					$	3,145					$	2,535

2021.

		December 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 and Losses on Debt Securities Available for Sale				Unrealized Gains on Securities Fair Value Hedge				Total
Beginning balance		$	(23	)		$	172			$	20,867			$	(37,901	)		$	5,406			$	(11,479	)
Other comprehensive income (loss) before reclassification, net of tax			42				(25	)			(5,047	)			8,488				334				3,792
Amounts reclassified from accumulated other comprehensive loss, net of tax			—				—				—				202				—				202
Net current period other comprehensive income (loss)			42				(25	)			(5,047	)			8,690				334				3,994
Ending balance		$	19			$	147			$	15,820			$	(29,211	)		$	5,740			$	(7,485	)

		December 31, 2022
Dollars in thousands		Gains and Losses on Pension Plan				Gains on Other Post-Retirement Benefits				Gains and Losses on Cash Flow Hedges				Unrealized Gains and Losses on Debt Securities Available for Sale				Unrealized Gains and Losses on Securities Fair Value Hedge				Total
Beginning balance		$	30			$	9			$	3,993			$	1,868			$	(418	)		$	5,482
Other comprehensive (loss) income before reclassification, net of tax			(53	)			163				16,874				(40,307	)			5,824				(17,499	)
Amounts reclassified from accumulated other comprehensive loss, net of tax			—				—				—				538				—				538
Net current period other comprehensive (loss) income			(53	)			163				16,874				(39,769	)			5,824				(16,961	)
Ending balance		$	(23	)		$	172			$	20,867			$	(37,901	)		$	5,406			$	(11,479	)

		December 31, 2021
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 and Losses on Debt Securities Available for Sale				Unrealized Losses on Securities Fair Value Hedge				Total
Beginning balance		$	(199	)		$	(40	)		$	(1,132	)		$	6,816			$	—			$	5,445
Other comprehensive income (loss) before reclassification, net of tax			229				49				5,125				(4,625	)			(418	)			360
Amounts reclassified from accumulated other comprehensive income, net of tax			—				—				—				(323	)			—				(323	)
Net current period other comprehensive income (loss)			229				49				5,125				(4,948	)			(418	)			37
Ending balance		$	30			$	9			$	3,993			$	1,868			$	(418	)		$	5,482

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NOTE 22. REVENUE FROM CONTRACTS WITH CUSTOMERS

Interest

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.

A description of our significant sources of revenue accounted for under ASC 606 follows:

Service fees on deposit accounts are fees we charge our deposit customers for transaction-based, account maintenance and overdraft services. Transaction-based fees, which are earned based on specific transactions or customer activity within a customer’s deposit account, are recognized at the time the related transaction or activity occurs, as it is at this point when we fulfill the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which Summit satisfied the performance obligation. Overdraft fees are recognized when the overdraft occurs. Service fees on deposit accounts are paid through a direct charge to the customer’s account.

Bank card revenue is comprised of interchange revenue and ATM fees. Interchange revenue is earned when Summit’s debit and credit cardholders conduct transactions through Mastercard and other payment networks. Interchange fees represent a percentage of the underlying cardholder’s transaction value and are generally recognized daily, concurrent with the transaction processing services provided to the cardholder. ATM fees are earned when a non-Summit cardholder uses a Summit ATM. ATM fees are recognized daily, as the related ATM transactions are settled.

Trust and wealth management fees consist of 1)1) trust fees and 2)2) commissions earned from an independent, third-partythird-party broker-dealer. We earn trust fees from our contracts with trust clients to administer or manage assets for investment. Trust fees are earned over time (generally monthly) as Summit provides the contracted services and are assessed based on the value of assets under management at each month-end. We earn commissions from investment brokerage services provided to our clients by an independent, third-partythird-party broker-dealer. We receive monthly commissions from the third-partythird-party broker-dealer based upon client activity for the previous month.

Insurance commissions principally consisted of commissions we earned as agents of insurers for selling group employee benefit and property and casualty insurance products to clients. Group employee benefit insurance commissions were recognized over time (generally monthly) as the related customary implied servicing obligations of group policyholders were fulfilled. Property and casualty insurance commissions were recognized using methods which approximated the time of placement of the underlying policy. We were paid insurance commissions ratably as the related policy premiums were paid by clients and they are included on the line item Other in Noninterest income of consolidated statements of income.

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: 

						For the Year Ended December 31,
Dollars in thousands						2021						2020						2019
Service fees on deposit accounts						$	5,032					$	4,588					$	5,094
Bank card revenue						5,896						4,494						3,536
Trust and wealth management fees						2,886						2,495						2,564
Other						626						567						2,203
Net revenue from contracts with customers						14,440						12,144						13,397
Non-interest income within the scope of other ASC topics						5,768						7,939						5,806
Total noninterest income						$	20,208					$	20,083					$	19,203

		For the Year Ended December 31,
Dollars in thousands		2023				2022				2021
Service fees on deposit accounts		$	6,977			$	6,150			$	5,032
Bank card revenue			7,299				6,261				5,896
Trust and wealth management fees			3,436				2,978				2,886
Other			552				516				626
Net revenue from contracts with customers			18,264				15,905				14,440
Non-interest income within the scope of other ASC topics			2,612				2,248				5,768
Total noninterest income		$	20,876			$	18,153			$	20,208

Gain or loss on sale of foreclosed properties is recorded when control of the property transfers to the buyer, which generally occurs at the time of transfer of the deed. If Summit finances the sale of a foreclosed property to the buyer, we assess whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the foreclosed property is derecognized and the gain or loss on sale is recorded upon transfer of control of the property to the buyer. For the years ended December 31, 2021, 20202023, 2022 and 20192021 net gains/(losses)/gains on sales of foreclosed properties were ($7,000)$106,000, $64,000 and $(7,000), ($323,000) and $88,000, respectively.

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NOTE 23.CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY

Information relative to our parent company balance sheets at December 31, 2021 2023 and 20202022 and the related statements of income and cash flows for the years ended December 31, 2021, 20202023, 2022 and 2019,2021, are presented as follows:

Balance Sheets
			December 31,
Dollars in thousands			2021						2020
Assets
Cash			$	14,279					$	5,937
Investment in subsidiaries			419,557						327,354
Equity investments (at fair value)			20,202						—
Other investments			7						7
Premises and equipment			129						97
Other assets			1,971						1,837
Total assets			$	456,145					$	335,232
Liabilities and Shareholders' Equity
Subordinated debentures, net			$	102,891					$	29,364
Subordinated debentures owed to unconsolidated subsidiary trusts			19,589						19,589
Other liabilities			6,192						4,699
Total liabilities			128,672						53,652
Preferred stock, $1.00 par value, authorized 250,000 shares; issued: 2021 - 1,500 shares			14,920						—
Common stock and related surplus, $2.50 par value, authorized
20,000,000 shares; issued: 12,763,827 shares 2021, 12,985,708 shares 2020; outstanding: 12,743,125 shares 2021, 12,942,004 shares 2020			89,525						94,964
Unallocated common stock held by Employee Stock Ownership Plan - 2021 - 20,702 shares, 2020 - 43,704 shares			(224)						(472)
Retained earnings			217,770						181,643
Accumulated other comprehensive income			5,482						5,445
Total shareholders' equity			327,473						281,580
Total liabilities and shareholders' equity			$	456,145					$	335,232

Statements of Income
			For the Year Ended December 31,
Dollars in thousands			2021						2020						2019
Income
Dividends from subsidiaries			$	12,100					$	10,000					$	16,757
Other dividends and interest income			16						33						54
Gain on equity investments			202						—						—
Management and service fees from subsidiaries			1,920						1,856						1,542
Total income			14,238						11,889						18,353
Expense
Interest expense			2,497						1,109						949
Operating expenses			3,736						3,306						3,755
Total expenses			6,233						4,415						4,704
Income before income taxes and equity in
undistributed income of subsidiaries			8,005						7,474						13,649
Income tax (benefit)			(830)						(519)						(276)
Income before equity in undistributed income of subsidiaries			8,835						7,993						13,925
Equity in undistributed income of subsidiaries			36,903						23,333						17,941
Net income			$	45,738					$	31,326					$	31,866
Preferred stock dividends			589						—						—
Net income applicable to common shares			$	45,149					$	31,326					$	31,866

Balance Sheets
		December 31,
Dollars in thousands		2023				2022
Assets
Cash		$	31,459			$	11,043
Investment in subsidiaries			531,138				445,048
Equity investments (at fair value)			6,436				25,858
Other investments			82				—
Premises and equipment			115				92
Other assets			1,905				1,802
Total assets		$	571,135			$	483,843
Liabilities and Shareholders' Equity
Subordinated debentures, net		$	103,782			$	103,296
Subordinated debentures owed to unconsolidated subsidiary trusts			19,589				19,589
Other liabilities			7,556				6,428
Total liabilities			130,927				129,313
Preferred stock, $1.00 par value, authorized 250,000 shares; issued: 2023 and 2022 - 1,500 shares			14,920				14,920
Common stock and related surplus, $2.50 par value; authorized 20,000,000 shares; issued and oustanding: 2023 - 14,683,457 shares, 2022 - 12,783,646 shares			129,990				90,696
Retained earnings			302,783				260,393
Accumulated other comprehensive loss			(7,485	)			(11,479	)
Total shareholders' equity			440,208				354,530
Total liabilities and shareholders' equity		$	571,135			$	483,843

Statements of Income
		For the Year Ended December 31,
Dollars in thousands		2023				2022				2021
Income
Dividends from subsidiaries		$	17,300			$	15,800			$	12,100
Other dividends and interest income			500				26				16
Net gains on equity investments			740				265				202
Management and service fees from subsidiaries			1,776				2,088				1,920
Total income			20,316				18,179				14,238
Expense
Interest expense			5,937				5,256				2,497
Operating expenses			3,812				3,283				3,736
Total expenses			9,749				8,539				6,233
Income before income taxes and equity in undistributed income of subsidiaries			10,567				9,640				8,005
Income tax (benefit)			(1,345	)			(1,251	)			(830	)
Income before equity in undistributed income of subsidiaries			11,912				10,891				8,835
Equity in undistributed income of subsidiaries			43,327				42,325				36,903
Net income		$	55,239			$	53,216			$	45,738
Preferred stock dividends			900				900				589
Net income applicable to common shares		$	54,339			$	52,316			$	45,149

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Statements of Cash Flows
		For the Year Ended December 31,
Dollars in thousands		2023				2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	55,239			$	53,216			$	45,738
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries			(43,327	)			(42,325	)			(36,903	)
Deferred tax benefit			(112	)			(14	)			(164	)
Depreciation			39				37				46
Gain on equity investments			(740	)			(265	)			(202	)
Share-based compensation expense			274				231				244
Earnings on bank owned life insurance			10				17				4
Decrease in other assets			131				432				163
Increase in other liabilities			1,614				1,209				584
Net cash provided by operating activities			13,128				12,538				9,510
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equity investments			(744	)			(5,384	)			(20,000	)
Redemption of equity investments			21,413				—				—
Investment in bank subsidiary			—				—				(55,000	)
Purchases of premises and equipment			(62	)			—				(124	)
Proceeds from transfer of premises and equipment			—				—				47
Net cash provided by (used in) investing activities			20,607				(5,384	)			(75,077	)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid on preferred stock			(900	)			(900	)			(589	)
Dividends paid on common stock			(11,949	)			(9,693	)			(9,022	)
Exercise of stock options			—				—				16
Proceeds from issuance of subordinated debt			—				—				75,000
Purchase and retirement of common stock			—				—				(6,710	)
Purchase of minority interest			(714	)			—				—
Proceeds from issuance of preferred stock, net of issuance costs			—				—				14,920
Proceeds from issuance of common stock, net of issuance costs			244				203				294
Net cash (used in) provided by financing activities			(13,319	)			(10,390	)			73,909
Increase (decrease) in cash			20,416				(3,236	)			8,342
Cash:
Beginning			11,043				14,279				5,937
Ending		$	31,459			$	11,043			$	14,279
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest		$	5,048			$	4,786			$	2,195

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Statements of Cash Flows
			For the Year Ended December 31,
Dollars in thousands			2021						2020						2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income			$	45,738					$	31,326					$	31,866
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries			(36,903)						(23,333)						(17,941)
Deferred tax benefit			(164)						(141)						(18)
Depreciation			46						57						50
Gain on equity investments			(202)						—						—
Share-based compensation expense			244						211						274
Earnings on bank owned life insurance			4						1						—
Decrease (increase) in other assets			163						(285)						491
Increase in other liabilities			584						977						807
Net cash provided by operating activities			9,510						8,813						15,529
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equity investments			(20,000)						—						—
Investment in bank subsidiary			(55,000)						(25,000)						—
Purchases of premises and equipment			(124)						(9)						(123)
Proceeds from transfer of premises and equipment			47						—						53
Net cash used in investing activities			(75,077)						(25,009)						(70)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid on preferred stock			(589)						—						—
Dividends paid on common stock			(9,022)						(8,786)						(7,361)
Exercise of stock options			16						—						7
Proceeds from issuance of subordinated debt			75,000						30,000						—
Purchase and retirement of common stock			(6,710)						(1,444)						(10,405)
Proceeds from issuance of preferred stock, net of issuance costs			14,920						—						—
Proceeds from issuance of common stock, net of issuance costs			294						178						159
Net cash provided by (used in) financing activities			73,909						19,948						(17,600)
Increase (decrease) in cash			8,342						3,752						(2,141)
Cash:
Beginning			5,937						2,185						4,326
Ending			$	14,279					$	5,937					$	2,185
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest			$	2,195					$	1,145					$	961

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Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

None.

Item 9A.Controls and Procedures

Disclosure Controls and Procedures:Our management, including the Chief Executive Officer and Chief Financial Officer, have conducted as of December 31, 2021,2023, 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 December 31, 20212023 were effective.

Management’s

Management’s Report on Internal Control Over Financial Reporting:Information required by this item is set forth on page 50.

Attestation Report of the Registered Public Accounting Firm:   Information required by this item is set forth on page 51.

Changes in Internal Control Over Financial Reporting:There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021,2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.Other Information

(a)  None

(b)  Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements.

None

None

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

None

None

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PART III.

Item 10.Directors, Executive Officers and Corporate Governance

Information required by this item is set forth under the caption “Delinquent Section 16(a) Reports”, under the headings "Nominees for the Class Expiring in 2025", “Continuing Directors Whose Term Expire in 2023", “Continuing Directors Whose Term Expire in 2024”"Item 1 - ELECTION OF DIRECTORS" and “EXECUTIVE OFFICERS” and under the captions “Family Relationships”, “Director Qualifications and Review of Director Nominees”"Delinquent Section 16(a) Reports", “Compensation and Nominating Committee” and “Audit and Compliance Committee” in our 20222024 Proxy Statement and is incorporated herein by reference.

We have adopted a Code of Ethics that applies to our chief executive officer, chief financial officer, chief accounting officer and all directors, officers and employees.  We have posted this Code of Ethics on our internet website at www.summitfgi.com under “Governance Documents”.  Any amendments to or waivers from any provision of the Code of Ethics applicable to the chief executive officer, chief financial officer, or chief accounting officer will be disclosed by timely posting such information on our internet website.

There have been no material changes to the procedures by which shareholders may recommend nominees since the disclosure of the procedures in our 20212023 proxy statement.

Item 11.Executive Compensation

Information required by this item is set forth under the headingheadings "COMPENSATION DISCUSSION AND ANALYSIS", “EXECUTIVE COMPENSATION” and "COMPENSATION AND NOMINATING COMMITTEE REPORT" in our 20222024 Proxy Statement and is incorporated herein by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table provides information on our equity compensation plans as ofDecember 31, 2021.

Plan Category			Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) (1)						Weighted-average exercise price of outstanding options, warrants and rights ($)						Number of securities remaining available for future issuance under equity compensation plans (#) (2)
Equity compensation plans approved by stockholders			109,811						$	21.32					214,904
Equity compensation plans not approved by stockholders			—						—						—
Total			109,811						$	21.32					214,904

2023
.

Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) (1)				Weighted-average exercise price of outstanding options, warrants and rights ($)				Number of securities remaining available for future issuance under equity compensation plans (#) (2)
Equity compensation plans approved by stockholders			155,102			$	22.81				39,446
Equity compensation plans not approved by stockholders			—				—				—
Total			155,102			$	22.81				39,446

(1) The number of securities issuable upon exercise of currently outstanding SARs includes 109,811152,703 shares issuable, based upon our December 31, 20212023 closing stock price of $27.45,$30.69, relative to 491,792594,561 SARs issued under the Summit Financial Group, Inc. 2014 Long-Term Incentive Plan and 13,0152,399 shares issuable pursuant to outstanding RSUs. Since RSUs have no exercise price, they are not included in the weighted average exercise price calculation.

(2) Under the Amended and Restated Summit Financial Group, Inc. 2014 Long-Term Incentive Plan, approved by our shareholders on May 20, 2021, we may make equity awards up to 800,000 shares of common stock.  During 2023, we issued 176,384 SARs with an exercise price of $26.37 and no RSUs.  During 2022, we issued 707 RSUs and no SARs.  During 2021, we issued 177,489 stock appreciation rightsSARs with an exercise price of $21.85 and 1,500 RSUs. During 2020, we issued 13,758 RSUs. During 2019, we issued 138,125 stock appreciation rightsSARs with an exercise price of $23.94 and 2,892 RSUs. During 2017, we issued 87,615 stock appreciation rightsSARs with an exercise price of $26.01. During 2015, we issued 166,717 stock appreciation rightsSARs with an exercise price of $12.01.

$12.01

.

The remaining information required by this item is set forth under the headings “OWNERSHIP OF SECURITIES BY DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS” and “PRINCIPAL SHAREHOLDERS” in our 20222024 Proxy Statement and is incorporated herein by reference.

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Item 13.Certain Relationships and Related Transactions and Director Independence

Information required by this item is set forth under the captions “Transactions with Related Persons” and “Independence of Directors and Nominees” in our 20222024 Proxy Statement and is incorporated herein by reference.

Item 14.Principal Accounting Fees and Services

Information required by this item is set forth under the caption “Fees to Independent Registered Public Accounting Firm” in our 20222024 Proxy Statement and is incorporated herein by reference.

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PART IV.

Item 15.Exhibits, Financial Statement Schedules

All financial statements and financial statement schedules required to be filed by this Form or by Regulation S-X, which are applicable to the Registrant, have been presented in the financial statements and notes thereto in Item 8 in Management’s Discussion and Analysis of Financial Condition and Results of Operation in Item 7 or elsewhere in this filing where appropriate.  The listing of exhibits follows:

Exhibit Number

Exhibit Description

Incorporated by Reference*

Filed HerewithExhibit Number

FormExhibit Description

Exhibit Filed Herewith

Form

Exhibit

Filing Date

(2)Plan of acquisition, reorganization, arrangement, liquidation or succession:

(i)

Agreement and Plan of Merger dated as of September 17, 2019 by and between Summit Financial Group, Inc. and Cornerstone Financial Services, Inc.

8-K

2.1

9/18/2019

(ii)

Purchase and Assumption Agreement dated as of November 21, 2019 by and between Summit Community Bank, Inc. and MVB Bank, Inc.

8-K

2.1

11/22/2019

(iii)

Agreement and Plan of Merger dated as of September 28, 2020 by and between Summit Community Bank, Inc. SMMF Thoroughbred Opportunities, Inc. and WinFirst Financial Corp.

8-K

2.1

9/28/2020

(iv)

Purchase and Assumption Agreement dated April 22, 2021 by and between Summit Community Bank Inc. and MVB Bank, Inc.

8-K

2.1

4/23/2021

(v)

Agreement and Plan of Merger, dated as of December 9, 2022, by and between Summit Financial Group, Inc. and PSB Holding Corp.

8-K

2.1

12/9/2022

(vi)

Agreement and Plan of Reorganization, dated as of August 24, 2023, by and between Burke & Herbert Financial Services Corp. and Summit Financial Group, Inc.

8-K

2.1

8/25/2023

(3)Articles of Incorporation and By-Laws:

(i)

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

8-K

3.2

4/30/2021

(ii)

Articles of Amendment 2009

8-K

3.1

9/30/2009

(iii)

Articles of Amendment 2011

8-K

3.1

11/4/3/2011

(iv)

Articles of Amendment 2021

8-K

3.1

4/30/2021

(v)

Amended and Restated By-laws of Summit Financial Group, Inc.

8-K

3.1

3/2/2022

(4) Instruments Defining the Rights of Securities Holders, Including Indentures

(i)

Description of Registrant's Securities Registered Registered Pursuant to Section 12 of the Securities and Exchange Act of 1934

10-K

4.1

3/6/2020

(ii)

Specimen stock certificate representing Summit Financial Group, Inc. Common Stock

S-3

4.1

5/7/2010

(iii)

Form of 5.00% Fixed-to-Floating Rate Subordinated Notes due 2030 (included as Exhibit A to the Form of Subordinated Note Purchase Agreement dated as of September 22, 2020, by and between Summit Financial Group, Inc. and each of the Purchasers)

8-K

10.1

9/23/2020

(iv)

Forms of 3.25% Fixed-to-Floating Rate Subordinated Note due 2031 (included as Exhibit A-1 and Exhibit A-2 to the Indenture, dated as of November 16, 2021, by and between Summit Financial Group, Inc. and UMB Bank, N.A., as Trustee)

8-K

4.1

11/17/2021

(v)

Indenture, dated as of November 16, 2021, by and between Summit Financial Group, Inc. and UMB Bank, N.A., as Trustee Indenture, dated as of November 16, 2021, by and between Summit Financial Group, Inc. and UMB Bank, N.A., as Trustee

8-K

4.1

11/17/2021

(10)Material Contracts

(i)

Amended and Restated Employment Agreement with H. Charles Maddy, III

10-K

10.1

3/16/2009

(ii)

First Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/4/2010

(iii)

Second Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

12/14/2010

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				Incorporated by Reference*
	(iv)		Filed
Exhibit Number		Exhibit Description	Herewith	Form	Exhibit	Filing Date
	(iv)	Third Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III		8-K	10.1	2/23/2012
	(v)	Fourth Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III		8-K	10.1	2/21/2013
	(vi)	Fifth Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III		8-K	10.1	2/25/2014

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Exhibit Number

Exhibit Description (vii)

Incorporated by Reference*

Filed Herewith

Form

Exhibit

Filing Date

(vii)

Sixth Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/23/2015

(viii)

Seventh Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/17/2016

(ix)

Eighth Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/15/2017

(x)

Ninth Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/9/2018

(xi)

Tenth Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/7/2019

(xii)

Eleventh Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/12/2020

(xiii)

Twelfth Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/17/2021

(xiv)

ThirteenthThirteenth Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/18/2022

(xv)

Fourteenth Amendment to Amended and Restated Employment Agreement with H. Charles Maddy, III

8-K

10.1

2/13/2023

(xvi)

Change in Control Agreement with H. Charles Maddy, III

10-K

10.2

3/16/2009

(xvi) (xvii)

Executive Salary Continuation Agreement with H. Charles Maddy, III

10-K

10.3

3/16/2009

(xvii) (xviii)

Form of Amended and Restated Employment Agreement entered into with Robert S. Tissue, Patrick N. Frye and Scott C. Jennings

10-K

10.4

3/16/2009

(xviii) (xix)

First Amendment to Amended and Restated Employment Agreement with Patrick N. Frye

10-K

10.8

3/1/2012

(xix) (xx)

Form of Executive Salary Continuation Agreement entered into with Robert S. Tissue, Patrick N. Frye and Scott C. Jennings

10-K

10.5

3/16/2009

(xx) (xxi)

Amended and Restated Employment Agreement with Bradford E. Ritchie

10-K

10.12

3/1/2012

(xxi) (xxii)

Executive Salary Continuation Agreement with Bradford E. Ritchie

10-K

10.13

3/1/2012

(xxii) (xxiii)

Form of Indemnification Agreement between Summit and each Director of Summit

8-K

1.01

2/12/2009

(xxiii) (xxiv)

1998 Officers Stock Option Plan

10-QSB

10

8/17/1998

(xxiv) (xxv)

Summit Financial Group, Inc. Directors Deferral Plan

10-K

10.10

3/14/2006

(xxv) (xxvi)

Amendment No. 1 to Directors Deferral Plan

10-K

10.11

3/14/2006

(xxvi) (xxvii)

Amendment No. 2 to Directors Deferral Plan

10-K

10.14

3/16/2009

(xxvii) (xxviii)

Summit Community Bank, Inc. Amended and Restated Directors Deferral Plan

10-K

10.15

3/16/2009

(xxviii) (xxix)

Rabbi Trust for The Summit Financial Group, Inc. Directors Deferral Plan

10-K

10.16

3/16/2009

(xxix) (xxx)

Amendment No. One to Rabbi Trust for Summit Financial Group, Inc. Directors Deferral Plan

10-K

10.2

3/16/2009

(xxx) (xxxi)

Amendment No. One to Rabbi Trust for Summit Community Bank, Inc. (successor in interest to Capital State Bank, Inc.) Directors Deferral Plan

10-K

10.2

3/16/2009

(xxxi) (xxxii)

Amendment No. One to Rabbi Trust for Summit Community Bank, Inc. (successor in interest to Shenandoah Valley National Bank, Inc.) Directors Deferral Plan

10-K

10.2

3/16/2009

(xxxii)

Amendment No. One to Rabbi Trust for Summit Community Bank, Inc. (successor in interest to South Branch Valley National Bank) Directors Deferral Plan

10-K

10.2

3/16/2009

(xxxiii)

Form of Non-Qualified Stock Option Grant Agreement

10-Q

10.3

5/10/2006

(xxxiv)

Form of First Amendment to Non-Qualified Stock Option Grant Agreement

10-Q

10.4

5/10/2006

(xxxv)

2009 Officer Stock Option Plan

8-K

10.1

5/14/2009

(xxxvi)

SFGI 2014 Long-Term Incentive Plan

S-8

4

9/25/2014

(xxxvii)

Form of Summit Financial Group, Inc. 2014 Long-Term Incentive Plan Stock-Settled Stock Appreciation Rights Agreement 2015 award

8-K

10.1

4/29/2015

(xxxviii)

Form of Summit Financial Group, Inc. 2014 Long-Term Incentive Plan Stock-Settled Stock Appreciation Rights Agreement 2017 award

8-K/A

10.3

2/15/2017

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				Incorporated by Reference*
			Filed
Exhibit Number		Exhibit Description	Herewith	Form	Exhibit	Filing Date
	(xxxiii)	Amendment No. One to Rabbi Trust for Summit Community Bank, Inc. (successor in interest to South Branch Valley National Bank) Directors Deferral Plan		10-K	10.2	3/16/2009
	(xxxiv)	Form of Non-Qualified Stock Option Grant Agreement		10-Q	10.3	5/10/2006
	(xxxv)	Form of First Amendment to Non-Qualified Stock Option Grant Agreement		10-Q	10.4	5/10/2006
	(xxxvi)	2009 Officer Stock Option Plan		8-K	10.1	5/14/2009
	(xxxvii)	SFGI 2014 Long-Term Incentive Plan		S-8	4	9/25/2014
	(xxxviii)	Form of Summit Financial Group, Inc. 2014 Long-Term Incentive Plan Stock-Settled Stock Appreciation Rights Agreement 2015 award		8-K	10.1	4/29/2015
	(xxxix)	Form of Summit Financial Group, Inc. 2014 Long-Term Incentive Plan Stock-Settled Stock Appreciation Rights Agreement 2017 award		8-K/A	10.3	2/15/2017
	(xl)	Form of Summit Financial Group, Inc. 2014 Long-Term Incentive Plan Stock-Settled Stock Appreciation Rights Agreement 2019 award		8-K	10.3	2/7/2019
	(xli)	Form of Summit Financial Group, Inc. 2014 Long-Term Incentive Plan Stock-Settled Stock Appreciation Rights Agreement 2021 award		8-K	10.2	7/21/2021
	(xlii)	Securities Purchase Agreement with Castle Creek Capital Partners V, LP		8-K	10.1	8/25/2014
	(xliii)	Executive Officer Management Incentive Plan for 2023		8-K	10.2	2/13/2023
(10.1)	Board Attendance and Compensation Policy, as amended			8-K	10.1	3/2/2022
(21)	Subsidiaries of Registrant		X
(23)	Consent of Yount, Hyde & Barbour, P.C.		X
(24)	Power of Attorney		X
(31.1)	Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer		X
(31.2)	Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer		X
(32.1)**	Sarbanes-Oxley Act Section 906 Certification of Chief Executive Officer		X
(32.2)**	Sarbanes-Oxley Act Section 906 Certification of Chief Financial Officer		X
(97.1)	Summit Financial Group, Inc. Compensation Recoupment Policy		X
(101)	Interactive data file (Inline XBRL)		X
(104)	Cover Page  Interactive Data File (formatted as inline XBRL and contained in the Exhibit 101)		X

*			The SEC reference number for all exhibits incorporated by reference is 0-16587.
**			Furnished, not filed.

Exhibit Number

Exhibit Description

Incorporated by Reference*

Filed Herewith

Form

Exhibit

Filing Date

(xxxix)

Form of Summit Financial Group, Inc. 2014 Long-Term Incentive Plan Stock-Settled Stock Appreciation Rights Agreement 2019 award

8-K

10.3

2/7/2019

(xxxx)

Securities Purchase Agreement with Castle Creek Capital Partners V, LP

8-K

10.1

8/25/2014

(xxxxi)

Executive Officer Management Incentive Plan 2022

8-K

10.2

2/18/2022

(10.1)

Board Attendance and Compensation Policy, as amended

8-K

10.1

3/2/2022

(21)

Subsidiaries of Registrant

10-K

21

3/16/2009

(23)

Consent of Yount, Hyde & Barbour, P.C.

X

(24)

Power of Attorney

X

(31.1)

Sarbanes-Oxley Act Section 302 Certification of Chief Executive Officer

X

(31.2)

Sarbanes-Oxley Act Section 302 Certification of Chief Financial Officer

X

(32.1)**

Sarbanes-Oxley Act Section 906 Certification of Chief Executive Officer

X

(32.2)**

Sarbanes-Oxley Act Section 906 Certification of Chief Financial Officer

X

(101)

Interactive Date file (XBRL)

X

(104)

Cover Page Interactive Data File (formatted as inline XBRL and contained in the Exhibit 101)

X

* The SEC reference number for all exhibits incorporated by reference is 0-16587.

**  Furnished, not filed.

Item 16.Form 10-K Summary

Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. We have elected not to include such summary information.

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SIGNATURES

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

a West Virginia Corporation (registrant)

By:

/s/ H. Charles Maddy, III

3/4/202212/2024

By:

/s/ Julie R. Markwood

3/4/202212/2024

H. Charles Maddy, III

Date

Julie R. Markwood

Date

President & Chief Executive Officer

Senior Executive Vice President & Chief Accounting Officer

By:

/s/ Robert S. Tissue

3/4/202212/2024

Robert S. Tissue

Date

Executive Vice President & Chief Financial Officer

The Directors of Summit Financial Group, Inc. executed a power of attorney appointing Robert S. Tissue and/or Julie R. Markwood their attorneys-in-fact, empowering them to sign this report on their behalf.

The Directors of Summit Financial Group, Inc. executed a power of attorney appointing Robert S. Tissue and/or Julie R. Markwood their attorneys-in-fact, empowering them to sign this report on their behalf.

By:			/s/ Robert S. Tissue			3/4/202212/2024
	Robert S. Tissue	Date
	Attorney-in-fact

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