Summit State Bank Reports Second Quarter Earnings and Declaration of Dividend


SANTA ROSA, Calif., July 30, 2007 (PRIME NEWSWIRE) -- Summit State Bank (Nasdaq:SSBI) today reported net income of $400,000 or $0.08 per diluted share for the quarter ended June 30, 2007 compared to net income of $683,000 or $0.20 per diluted share for the second quarter of 2006. Net income for the six months ended June 30, 2007 was $992,000 or $0.20 per diluted share compared to net income of $1,433,000 or $0.42 per diluted share in 2006. Also the Board of Directors declared a dividend of nine cents per share on the Company's common stock. Earnings and dividends per share information for all periods presented give effect to the 2-for-1 stock split issued in June 2006.

Dividend

On July 30, 2007, the Board of Directors declared a quarterly cash dividend of $.09 per share on the Company's common Stock. The dividend is payable August 21, 2007 to shareholders of record as of the close of business on August 10, 2007.

Net Income

The Bank had net income of $400,000 or $0.08 per diluted share for the quarter ended June 30, 2007. This compares to net income of $683,000 or $0.20 per diluted share for the second quarter of 2006. Net income for the six months ended June 30, 2007 was $992,000 or $0.20 per diluted share compared to net income of $1,433,000 or $0.42 per diluted share in 2006.

On August 16, 2006, SSB completed an underwritten public offering of 1,432,700 shares of common stock. These shares increased the weighted average shares outstanding for the second quarter and six months ending June 30, 2007 over the second quarter and six month period in 2006 by 43%. The diluted earnings per share decline in the second quarter of 2007 of $0.12 per share as compared to the prior year second quarter was comprised of a decline of $0.08 per share attributable to the decline in net income and $0.04 per share decline attributable to the increase in weighted average shares outstanding. The diluted earnings per share decline for the first six months of 2007 of $0.22 per share as compared to the same period in the prior year was comprised of a decline of $0.13 per share attributable to the decline in net income and $0.09 per share decline attributable to the increase in weighted average shares outstanding.

Total shareholder equity was $47,868,000 at June 30, 2007 compared to $27,670,000 at June 30, 2006. At June 30, 2007 there were 4,844,720 common shares outstanding with a per share book value of $9.88 compared to 3,362,020 shares outstanding at June 30, 2006 with a per share book value of $8.23.

Annualized return on average assets and annualized return on average equity was 0.49% and 3.32% for the three months ended June 30, 2007, as compared to 0.94% and 9.93% for the same period one year ago. Annualized return on average assets and return on equity for the six months period was 0.62% and 4.15% for 2007, as compared to 0.96% and 10.50% for 2006. Annualized return on average tangible equity was 3.63% for the three months ended June 30, 2007, as compared to 11.67% for the same quarter one year ago. Annualized return on average tangible equity was 4.54% for the six months ended June 30, 2007 compared to 12.35% for the six months ended June 30, 2006.

The Bank experienced a decline in net income during the second quarter of 2007 as compared to the second quarter of 2006, primarily due to an increased provision for loan losses, and increased operating expenses, and to a lesser extent, a reduction in revenue.

Net Interest Income

Net interest income declined $57,000 or 2% to $2,635,000 during the second quarter of 2007 compared to $2,692,000 for the same quarter of 2006. The annualized net interest margin declined to 3.43% for the three months ended June 30, 2007, compared to 3.94% for the three months ended June 30, 2006. The net interest margin continues to be negatively impacted as rates on deposits continue to reprice upward while the change in yields on earning assets have slowed as the Federal Reserve stopped increasing short-term rates, and the growth in loans has been funded through time deposits or FHLB advances.

Average earning assets were $307,893,000 for the second quarter of 2007, as compared to $273,804,000 for the second quarter of 2006. The annualized yield on average earning assets was 7.30% and the annualized cost of average interest-bearing liabilities was 4.48% for the second quarter of 2007, as compared to the annualized yield on average earning assets of 7.21% and annualized cost of interest-bearing liabilities of 3.57% for the second quarter of 2006.

Net interest income declined $95,000 or 2% to $5,399,000 during the first six months of 2007 compared to $5,494,000 for the same period in 2006. The net interest margin declined to 3.59% for the six months ended June 30, 2007, compared to 3.92% for the six months ended June 30, 2006.

Non-interest Income

For the second quarter 2007, total non-interest income was $313,000, as compared to $334,000 for the second quarter of 2006. Non-interest income in 2006 included the recovery of $34,000 in loan collection legal expenses included in other income in the second quarter of 2006. For the six month periods, non-interest income was $607,000 at June 30, 2007 and $656,000 at June 30, 2006.

Non-interest Expense

For the second quarter 2007, non-interest expense increased $277,000 or 16% to $2,002,000, compared to the same quarter in 2006. Salaries and employee benefits expense increased $67,000 or 7.5% to $957,000. Occupancy and equipment expenses increased $51,000 or 15% and other operating expenses increased $159,000 or 32% for the second quarter of 2007 as compared to the second quarter of 2006. Part of the increase in salaries and employee benefits expense and occupancy and equipment expense were attributable to personnel hired and space leased in the first quarter of 2007 for the new regional office in Petaluma which was opened in July 2007. The increase in other operating expense was partially due to increased loan collection expenses.

Loan and Deposit Activity

Total loans as of June 30, 2007 were $266,219,000, an increase of $15,870,000 or 6%, compared to total loans of $250,349,000 at June 30, 2006.

Total deposits were $245,270,000 at June 30, 2007, compared to $236,394,000 at June 30, 2006, a 4% increase.

Total assets were $330,732,000 at June 30, 2007, an increase of $31,386,000 or 10%, compared to $299,346,000 at June 30, 2006.

Nonperforming Assets, Allowance and Provision For Loan Losses

Nonperforming assets at June 30, 2007 include loans on nonaccrual of $341,000 or 0.13% of gross loans and other real estate owned ("OREO") of $921,000. This is a decline as compared to the non performing asset total at March 31, 2007 which was $2,110,000. The nonaccrual amount at June 30, 2007 consists of one loan restructured in 2006 and this loan is current with the restructured terms. The OREO at June 30, 2007 consists of one commercial property from a loan foreclosure recorded at estimated market value, net of estimated sales commission.

The provision for loan losses was $260,000 for the second quarter ended June 30, 2007 as compared to $111,000 in the second quarter of 2006. The increase reflects the growth in loan totals and loan charge-offs. Loans charged-off for the second quarter of 2007 were $642,000. At June 30, 2007, the allowance for loan losses was $3,175,000 and represented a ratio to gross loans of 1.19% and to nonaccrual loans of 931%. These ratios compare to 1.48% and 387% at June 30, 2006.

About Summit State Bank

Summit State Bank has total assets of $331 million and total equity of $48 million at June 30, 2007. It provides diverse financial products and services which are marketed through Sonoma County, California with offices located in Santa Rosa, Rohnert Park, Petaluma and Windsor. Summit State Bank stock is traded on the Nasdaq Global Market under the symbol SSBI.

Forward-looking Statements

Except for historical information contained herein, the statements contained in this news release, are forward-looking statements within the meaning of the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those set forth in or implied by forward-looking statements. These risks are described from time to time in Summit State Bank's filings with the Federal Deposit Insurance Corporation, including its Registration Statement on Form 10, Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Summit State Bank disclaims any intent or obligation to update these forward-looking statements.



                  SUMMIT STATE BANK AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF INCOME
         (In thousands except for earnings per share data)

                          Three Months Ended       Six Months Ended
                        ----------------------  ----------------------
                         June 30,    June 30,    June 30,    June 30,
                           2007        2006        2007        2006
                        ----------  ----------  ----------  ----------
                       (Unaudited) (Unaudited) (Unaudited) (Unaudited)

 Interest income:
  Interest and fees on
   loans                $    4,986  $    4,554  $    9,948  $    8,824
  Interest on Federal
   funds sold                    2           4           2         244
  Interest on
   investment securities
   and deposits in
   banks                       589         337       1,132         677
  Dividends on FHLB
   stock                        30          25          58          46
                        ----------  ----------  ----------  ----------

   Total interest income     5,607       4,920      11,140       9,791
                        ----------  ----------  ----------  ----------

 Interest expense:
  Deposits                   2,426       1,759       4,771       3,625
  Securities sold under
   repurchase agreements         1           6           2           6
  FHLB Advances                545         463         968         666
                        ----------  ----------  ----------  ----------

   Total interest
    expense                  2,972       2,228       5,741       4,297
                        ----------  ----------  ----------  ----------

   Net interest income
    before provision for
    loan losses              2,635       2,692       5,399       5,494

 Provision for loan
  losses                       260         111         331         222
                        ----------  ----------  ----------  ----------

   Net interest income
    after provision for
    loan losses              2,375       2,581       5,068       5,272
                        ----------  ----------  ----------  ----------

 Non-interest income:
  Service charges               95          78         181         162
  Office leases                166         167         332         318
  Gains on sales of loans       27           5          41          22
  Real estate exchange
   fees                          2           7           7          23
  Loan servicing, net           19          13          29          31
  Other income                   4          64          17         100
                        ----------  ----------  ----------  ----------

   Total non-interest
    income                     313         334         607         656
                        ----------  ----------  ----------  ----------

 Non-interest expense:
  Salaries and employee
   benefits                    957         890       1,956       1,767
  Occupancy and
   equipment                   390         339         757         661
  Other expenses               655         496       1,269       1,030
                        ----------  ----------  ----------  ----------

   Total non-interest
    expense                  2,002       1,725       3,982       3,458
                        ----------  ----------  ----------  ----------

   Income before
    provision for
    income taxes               686       1,190       1,693       2,470

 Provision for Income
  taxes                        286         507         701       1,037
                        ----------  ----------  ----------  ----------

   Net income           $      400  $      683  $      992  $    1,433
                        ==========  ==========  ==========  ==========

 Basic earnings per
  share                 $     0.08  $     0.20  $     0.21  $     0.43
                        ==========  ==========  ==========  ==========

 Diluted earnings per
  share                 $     0.08  $     0.20  $     0.20  $     0.42
                        ==========  ==========  ==========  ==========

 Basic weighted average
  shares of common
  stock outstanding      4,844,720   3,361,579   4,836,985   3,361,505
                        ==========  ==========  ==========  ==========

 Diluted weighted
  average shares of
  common stock
  outstanding            4,856,609   3,393,798   4,848,874   3,377,530
                        ==========  ==========  ==========  ==========

                     SUMMIT STATE BANK AND SUBSIDIARY
                      CONSOLIDATED BALANCE SHEETS
                             (In thousands)

                                               June 30,     June 30,
                                                 2007         2006
                                              ---------    ---------
                                             (Unaudited)  (Unaudited)

 ASSETS

 Cash and due from banks                      $   5,932    $   5,950
 Federal funds sold                                 690           --
                                              ---------    ---------
   Total cash and cash equivalents                6,622        5,950

 Time deposits in banks                             160          652
 Available-for-sale investment securities -
  amortized cost of $35,317 in 2007 and
  $26,104 in 2006                                34,502       21,671
 Held-to-maturity investment securities -
  market value of $4,820 in 2007 and $4,868
  in 2006                                         5,000        5,000
 Loans, less allowance for loan losses of
  $3,175 in 2007 and $3,704 in 2006             263,044      246,645
 Bank premises and equipment, net                 8,482        8,406
 Other real estate owned                            921           --
 Investment in Federal Home Loan Bank stock,
  at cost                                         3,305        2,609
 Goodwill                                         4,119        4,119
 Accrued interest receivable and other
  assets                                          4,577        4,294
                                              ---------    ---------

   Total assets                               $ 330,732    $ 299,346
                                              =========    =========

  LIABILITIES AND SHAREHOLDERS' EQUITY

 Deposits:

  Demand - non interest-bearing               $  11,701    $  10,490
  Demand - interest-bearing                      11,724       13,168
  Savings                                        12,296       42,666
  Money market                                   37,624       37,855
  Time deposits, $100 thousand and over          85,396       76,305
  Other time deposits                            86,529       55,910
                                              ---------    ---------
   Total deposits                               245,270      236,394

 Securities sold under repurchase agreements        101          911
 Federal Home Loan Bank (FHLB) advances          36,620       33,755
 Accrued interest payable and other
  liabilities                                       873          616
                                              ---------    ---------

   Total liabilities                            282,864      271,676
                                              ---------    ---------

 Shareholders' equity

  Preferred stock, no par value; 20,000
   shares authorized; none issued
  Common stock, no par value; shares
   authorized - 30,000; shares issued and
   outstanding 4,845 at June 30, 2007
   and 3,362 outstanding at June 30, 2006        36,956       17,402
  Retained earnings                              11,376       10,743
  Accumulated other comprehensive loss, net
   of taxes                                        (464)        (475)
                                              ---------    ---------

   Total shareholders' equity                    47,868       27,670
                                              ---------    ---------

   Total liabilities and shareholders'
    equity                                    $ 330,732    $ 299,346
                                              =========    =========

                                     Earnings Summary
                                      (In Thousands)

                          Three Months Ended       Six Months Ended
                        ---------------------   ---------------------
                         June 30,    June 30,    June 30,    June 30,
                           2007        2007        2006        2006
                        ---------   ---------   ---------   ---------
                       (Unaudited) (Unaudited) (Unaudited) (Unaudited)
 Statement of Income
  Data:

 Net interest income    $   2,635   $   2,692   $   5,399   $   5,494
 Provision for loan
  losses                      260         111         331         222
 Noninterest income           313         334         607         656
 Noninterest expense        2,002       1,725       3,982       3,458
 Provision for income
  taxes                       286         507         701       1,037
                        ---------   ---------   ---------   ---------
 Net income             $     400   $     683   $     992   $   1,433
                        =========   =========   =========   =========

 Selected per Share Data:

 Basic earnings per
  share                 $    0.08   $    0.20   $    0.21   $    0.43
 Diluted earnings per
  share                 $    0.08   $    0.20   $    0.20   $    0.42
 Book value per share
  (b)                   $    9.88   $    8.23   $    9.88   $    8.23

 Selected Ratios:

 Return on average
  assets (a)                 0.49%       0.94%       0.62%       0.96%
 Return on average
  equity (a)                 3.32%       9.93%       4.15%      10.50%
 Return on average
  tangible equity (a)        3.63%      11.67%       4.54%      12.35%
 Efficiency ratio           67.91%      57.01%      66.30%      56.23%
 Net interest margin (a)     3.43%       3.94%       3.59%       3.92%
 Dividend payout ratio     109.25%      44.22%      87.90%      42.22%
 Average equity to average
  assets                    14.75%       9.48%      14.93%       9.14%
 Nonperforming loans to
  total loans (b)            0.13%       0.38%       0.13%       0.38%
 Nonperforming assets to
  total assets (b)           0.38%       0.32%       0.38%       0.32%
 Allowance for loan losses
  to total loans (b)         1.19%       1.48%       1.19%       1.48%
 Allowance for loan losses
  to nonperforming
  loans (b)                931.09%     386.64%     931.09%     386.64%

 (a) Annualized
 (b) As of period end


            

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