SANTA ROSA, Calif., July 28, 2008 (PRIME NEWSWIRE) -- Summit State Bank (Nasdaq:SSBI) today reported a 46% increase in net income for the second quarter ended June 30, 2008 over the same quarter in 2007. Net income was $584,000, or $0.12 per diluted share for the quarter and $814,000, or $0.17 per diluted share for the six months ended June 30, 2008. A dividend of $0.09 per share on the Company's common stock was declared.
Dividend
On July 28, 2008, the Board of Directors declared a quarterly cash dividend of $0.09 per share on the Company's common Stock. The dividend is payable August 21, 2008 to shareholders of record as of the close of business on August 12, 2008.
Net Income and Results of Operation
The Bank had net income of $584,000, or $0.12 per diluted share for the quarter ended June 30, 2008. This is a 46% increase as compared to net income of $400,000, or $0.08 per diluted share for the second quarter of 2007. Net income for the six months ended June 30, 2008 was $814,000, or $0.17 per diluted share compared to $992,000, or $0.20 per diluted share for the same period in 2007. Net income for the second quarter of 2008 benefited from a higher net interest margin.
"Our higher earnings were the result of improved net interest margin as we continue to focus on productivity to improve our efficiency ratio reflecting favorably on the bank's ability to manage effectively in this present weakened economy," said President and CEO Thomas Duryea.
Total shareholders' equity was $47,277,000 at June 30, 2008 and book value per share was $9.96.
The Bank's regulatory capital remains well above the required capital ratios with a Tier 1 capital leverage ratio of 12.9%, a Tier 1 risk-based capital ratio of 15.2% and a Total risk-based capital ratio of 16.5% at June 30, 2008.
Annualized return on average assets and annualized return on average equity increased by 43% and 48%, respectively, to 0.70% and 4.92% for the three months ended June 30, 2008, as compared to 0.49% and 3.32% for the second quarter of 2007.
Net interest income increased $427,000, or 16%, to $3,062,000 during the second quarter of 2008 compared to $2,635,000 for the same quarter of 2007. The annualized net interest margin increased to 3.84% for the second quarter of 2008, compared to 3.43% for the second quarter of 2007. The net interest margin was positively impacted by the declines in the bank's funding costs which decreased more than the decline in interest income and the yield on average earning assets.
"We continue to focus on lowering our cost of funds, which is an ongoing top priority of the bank," said Dennis Kelley, Chief Financial Officer.
Average earning assets were $319,759,000 for the second quarter of 2008, as compared to $307,893,000 for the same quarter of 2007. The annualized yield on average earning assets was 6.72% and the annualized cost of average interest-bearing liabilities was 3.30% for the second quarter of 2008, as compared to the annualized yield on average earning assets of 7.30% and annualized cost of interest-bearing liabilities of 4.48% for the same quarter of 2007.
Non-interest income in the second quarter of 2008, reflects a $61,000 pretax impairment charge on an investment security that is collateralized by trust preferred issues of financial institutions. The adjusted book value after the charge of the security is $185,000.
For the second quarter of 2008, non-interest expense increased $110,000, or 5%, to $2,112,000, compared to the same quarter in 2007 primarily due to the opening of the Bank's fifth office on the third quarter of 2007. For the first six months of 2008, non-interest expense increased $520,000, or 13%, to $4,502,000, compared to the same period in 2007.
During the first six months of 2008, the Bank restructured various departments to address productivity resulting in the elimination of employee positions. Also, the Bank entered into a contract to convert its core data processing system to a new vendor. Excluding $267,000 of expenses associated with the employee position eliminations and $196,000 of expenses related to our core data processor change, total non-interest expense would have increased $57,000, or 1%, for the first six months of 2008 compared to the same period in 2007.
Total loans were $275,622,000 at June 30, 2008, an increase of $9,403,000, or 4%, compared to total loans of $266,219,000 at June 30, 2007.
Total deposits were $229,637,000 at June 30, 2008, a decrease of $15,633,000, or 6%, compared to $245,270,000 at June 30, 2007. The decline in total deposits was the result of management's decision to aggressively reduce the cost of its deposits. Alternative funding to replace the deposits was acquired from the Federal Home Loan Bank.
Total assets were $341,798,000 at June 30, 2008, an increase of $11,066,000, or 3%, compared to $330,732,000 at June 30, 2007.
Nonperforming assets at June 30, 2008 consisted of one loan on nonaccrual status with a balance of $267,000 secured by a single family residence.
"We remain focused on loan quality. Loan growth will continue to be dictated by prudent underwriting practices implemented by our experienced staff that have resulted in continued minimal nonaccruals; charge-offs; and past due loans," said Duryea.
The provision for loan losses was $180,000 for the second quarter ended June 30, 2008 as compared to $260,000 for the second quarter of 2007. The Bank had $143,000 in loan charge-offs during the second quarter of 2008. At June 30, 2008, the allowance for loan losses was $3,813,000 and represented a ratio to gross loans of 1.38% and to nonperforming loans of 1,428%. These ratios compare to 1.19% and 931% at June 30, 2007.
The Bank's lending focus has been on commercial lending, commercial real estate and construction lending. Residential home mortgage lending has been minimal over the past several years and the Bank has not made loans that would be classified as subprime mortgage loans.
About Summit State Bank
Summit State Bank has total assets of $342 million and total equity of $47 million at June 30, 2008. The Bank provides diverse financial products and services which are marketed throughout Sonoma County, California and surrounding areas, 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. This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, and competition within the business areas in which the Bank will be conducting its operations, including the real estate market in California and other factors beyond the Bank's control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. You should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.
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,
2008 2007 2008 2007
-------- -------- -------- --------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income:
Interest and fees
on loans $ 4,643 $ 4,986 $ 9,384 $ 9,948
Interest on
Federal funds
sold -- 2 69 2
Interest on
investment
securities and
deposits in
banks 658 589 1,257 1,132
Dividends on
FHLB stock 35 30 68 58
-------- -------- -------- --------
Total interest
income 5,336 5,607 10,778 11,140
-------- -------- -------- --------
Interest expense:
Deposits 1,723 2,426 4,015 4,771
Securities sold
under repurchase
agreements -- 1 -- 2
FHLB advances 551 545 1,054 968
-------- -------- -------- --------
Total interest
expense 2,274 2,972 5,069 5,741
-------- -------- -------- --------
Net interest
income before
provision for
loan losses 3,062 2,635 5,709 5,399
Provision for
loan losses 180 260 335 331
-------- -------- -------- --------
Net interest
income after
provision for
loan losses 2,882 2,375 5,374 5,068
-------- -------- -------- --------
Non-interest income:
Service charges 101 95 214 181
Office leases 150 166 309 332
Gains on sales
of loans -- 27 -- 41
Loan servicing,
net 19 19 34 29
Other income (49) 6 (46) 24
-------- -------- -------- --------
Total non-
interest income 221 313 511 607
-------- -------- -------- --------
Non-interest
expense:
Salaries and
employee benefits 1,039 957 2,332 1,956
Occupancy and
equipment 425 390 842 757
Other expenses 648 655 1,328 1,269
-------- -------- -------- --------
Total non-
interest
expense 2,112 2,002 4,502 3,982
-------- -------- -------- --------
Income before
provision
for income
taxes 991 686 1,383 1,693
Provision for
Income taxes 407 286 569 701
-------- -------- -------- --------
Net income $ 584 $ 400 $ 814 $ 992
======== ======== ======== ========
Basic earnings
per share $ 0.12 $ 0.08 $ 0.17 $ 0.21
Diluted earnings
per share $ 0.12 $ 0.08 $ 0.17 $ 0.20
Basic weighted
average shares
of common stock
outstanding 4,745 4,845 4,745 4,837
Diluted weighted
average shares
of common stock
outstanding 4,745 4,857 4,745 4,849
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, June 30,
2008 2007
--------- ---------
(Unaudited)(Unaudited)
ASSETS
Cash and due from banks $ 4,781 $ 5,932
Federal funds sold -- 690
--------- ---------
Total cash and cash equivalents 4,781 6,622
Time deposits in banks -- 160
Available-for-sale investment securities -
amortized cost of $46,080 at June 30, 2008
and $35,317 at June 30, 2007 45,412 34,502
Held-to-maturity investment securities -
market value of $4,820 at June 30, 2007 -- 5,000
Loans, less allowance for loan losses of
$3,813 at June 30, 2008 and $3,175 at June
30 ,2007 271,809 263,044
Bank premises and equipment, net 8,112 8,482
Investment in Federal Home Loan Bank stock,
at cost 3,098 3,305
Goodwill 4,119 4,119
Accrued interest receivable and other assets 4,467 5,498
--------- ---------
Total assets $ 341,798 $ 330,732
========= =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - non interest-bearing $ 11,966 $ 11,701
Demand - interest-bearing 12,294 11,724
Savings 10,795 12,296
Money market 22,304 37,624
Time deposits, $100 thousand and over 98,824 85,396
Other time deposits 73,454 86,529
--------- ---------
Total deposits 229,637 245,270
Securities sold under repurchase agreements -- 101
Federal Home Loan Bank (FHLB) advances 64,045 36,620
Accrued interest payable and other
liabilities 839 873
--------- ---------
Total liabilities 294,521 282,864
--------- ---------
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 4,745 at June 30, 2008 and
4,845 at June 30, 2007 36,244 36,956
Retained earnings 11,415 11,376
Accumulated other comprehensive income
(loss), net of taxes (382) (464)
--------- ---------
Total shareholders' equity 47,277 47,868
--------- ---------
Total liabilities and shareholders' equity $ 341,798 $ 330,732
========= =========
Earnings Summary
(In Thousands)
Three Months Ended Six Months Ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statement of Income
Data:
Net interest income $ 3,062 $ 2,635 $ 5,709 $ 5,399
Provision for loan
losses 180 260 335 331
Non-interest income 221 313 511 607
Non-interest expense 2,112 2,002 4,502 3,982
Provision for Income
taxes 407 286 569 701
-------- -------- -------- --------
Net income $ 584 $ 400 $ 814 $ 992
======== ======== ======== ========
Selected per Share
Data:
Basic earnings per
share $ 0.12 $ 0.08 $ 0.17 $ 0.21
Diluted earnings per
share $ 0.12 $ 0.08 $ 0.17 $ 0.20
Book value per
share (2) $ 9.96 $ 9.88 $ 9.96 $ 9.88
Selected Ratios:
Return on average
assets (1) 0.70% 0.49% 0.49% 0.62%
Return on average
equity (1) 4.92% 3.32% 3.43% 4.15%
Return on average
tangible equity (1) 5.39% 3.63% 3.75% 4.54%
Efficiency ratio 64.33% 67.91% 72.38% 66.30%
Net interest margin
(1) 3.84% 3.43% 3.58% 3.59%
Dividend payout ratio 73.12% 109.25% 104.91% 87.90%
Average equity to
average assets 14.17% 14.75% 14.15% 14.93%
Nonperforming loans
to total loans (2) 0.10% 0.13% 0.10% 0.13%
Nonperforming assets
to total assets (2) 0.08% 0.38% 0.08% 0.38%
Allowance for loan
losses to total
loans (2) 1.38% 1.19% 1.38% 1.19%
Allowance for loan
losses to
nonperforming
(2) 1428.09% 931.09% 1428.09% 931.09%
(1) Annualized
(2) As of period end