Summit(SMMF) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flows Consolidated Balance Sheets Consolidated Balance Sheets (Dollars in thousands) | Metric (Dollars in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------------- | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $63,243 | $44,717 | | Debt securities available for sale | $512,038 | $405,201 | | Loans, net | $3,506,880 | $3,043,919 | | Total assets | $4,552,270 | $3,916,692 | | LIABILITIES | | | | Total deposits | $3,735,034 | $3,169,879 | | Total liabilities | $4,139,096 | $3,562,162 | | SHAREHOLDERS' EQUITY | | | | Total shareholders' equity | $413,174 | $354,530 | - Total assets increased by $635.58 million from December 31, 2022, to June 30, 2023, primarily driven by growth in loans and debt securities available for sale[8] - Total deposits increased by $565.15 million, with interest-bearing deposits showing a significant rise[8] Consolidated Statements of Income Consolidated Statements of Income (Dollars in thousands, except per share) | Metric (Dollars in thousands, except per share) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest income | $60,863 | $35,563 | $111,338 | $68,456 | | Total interest expense | $20,550 | $4,598 | $36,835 | $7,936 | | Net interest income | $40,313 | $30,965 | $74,503 | $60,520 | | Provision for credit losses | $8,000 | $2,000 | $9,500 | $3,950 | | Total noninterest income | $5,423 | $3,856 | $9,809 | $8,401 | | Total noninterest expenses | $27,324 | $17,609 | $46,723 | $34,809 | | Net income | $8,209 | $12,014 | $22,310 | $23,707 | | Net income applicable to common shares | $7,984 | $11,789 | $21,860 | $23,257 | | Basic earnings per common share | $0.54 | $0.92 | $1.59 | $1.82 | | Diluted earnings per common share | $0.54 | $0.92 | $1.59 | $1.82 | - Net interest income increased significantly year-over-year for both the three-month and six-month periods, driven by higher interest income from loans and securities, despite a substantial rise in interest expense[10] - Net income and EPS decreased for the three-month period ended June 30, 2023, compared to the prior year, primarily due to a higher provision for credit losses and increased noninterest expenses, including acquisition-related costs[10] Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income (Dollars in thousands) | Metric (Dollars in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $8,209 | $12,014 | $22,310 | $23,707 | | Total other comprehensive loss | $(710) | $(6,401) | $2,744 | $(12,956) | | Total comprehensive income | $7,499 | $5,613 | $25,054 | $10,751 | - Total comprehensive income for the six months ended June 30, 2023, significantly increased to $25.05 million from $10.75 million in the prior year, largely due to a positive shift in other comprehensive income from a loss to a gain, primarily driven by unrealized gains on debt securities available for sale[11] Consolidated Statements of Shareholders' Equity Consolidated Statements of Shareholders' Equity (Dollars in thousands) | Metric (Dollars in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------------- | :------------ | :---------------- | | Total Shareholders' Equity | $413,174 | $354,530 | | Common Stock and Related Surplus | $130,227 | $90,696 | | Retained Earnings | $276,762 | $260,393 | | Accumulated Other Comprehensive Loss | $(8,735) | $(11,479) | - Total shareholders' equity increased by $58.64 million from December 31, 2022, to June 30, 2023, primarily due to net income, common stock issuance for the PSB acquisition ($39.02 million), and other comprehensive income[13] - Common stock and related surplus increased significantly due to the issuance of 1,880,732 shares for the acquisition of PSB Holding Corp[12][13] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Dollars in thousands) | Metric (Dollars in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :---------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $31,877 | $29,373 | | Net cash used in investing activities | $(58,793) | $(237,396) | | Net cash provided by financing activities | $45,442 | $179,166 | | Increase (decrease) in cash and cash equivalents | $18,526 | $(28,857) | | Ending cash and cash equivalents | $63,243 | $49,601 | - Cash and cash equivalents increased by $18.53 million for the six months ended June 30, 2023, a significant turnaround from a decrease of $28.86 million in the prior year, primarily driven by increased net cash provided by financing activities and a reduced net cash outflow from investing activities[15] - Investing activities saw a substantial reduction in net cash used, from $(237.40) million in H1 2022 to $(58.79) million in H1 2023, partly due to cash and cash equivalents from acquisitions ($14.36 million) and higher proceeds from sales of debt securities available for sale[15] NOTE 1. BASIS OF PRESENTATION - The consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations, not including all annual year-end footnotes[18] - Management's estimates and assumptions are crucial, and actual results may differ materially; readers are advised to consider risk factors from the Annual Report on Form 10-K[19] NOTE 2. SIGNIFICANT NEW AUTHORITATIVE ACCOUNTING GUIDANCE - Recently adopted ASUs, including ASU 2023-03, ASU 2022-02, ASU 2022-01, ASU 2021-08, and ASU 2020-04, did not have a significant or material impact on the company's financial statements[22][23][24][25][26] - Pending adoption of ASU 2023-02 and ASU 2022-03 is not expected to have a material impact[27][28] NOTE 3. FAIR VALUE MEASUREMENTS Fair Value Measurements (Dollars in thousands) | Asset/Liability (Dollars in thousands) | June