Summit State Bank Reports 73 Percent Increase in Fourth Quarter Results and Declaration of Dividend


SANTA ROSA, Calif., Jan. 26, 2009 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq:SSBI) today reported strong, continuing improvements in the bank's net income representing a 73% increase over the same quarter of 2007. "We continue to benefit from measured asset growth with smart community lending, improved net interest margins, greater efficiencies in operations, and excellent asset quality," said President & CEO, Thomas Duryea.

Dividend

On January 26, 2009, the Board of Directors declared a quarterly cash dividend of $0.09 per share on the Company's common Stock. The dividend is payable February 23, 2009 to shareholders of record as of the close of business on February 12, 2009. The Board of Directors also declared a $66,111 quarterly dividend payable on February 15, 2009, on the Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A, which was issued to the U.S. Department of the Treasury on December 19, 2008.

Net Income and Results of Operation

Net operating income was $764,000 or $0.16 per diluted share for the fourth quarter of 2008, reflecting an improved net interest margin, continuing strength in asset quality, and focus on operating efficiencies. This represented a $323,000 or 73% increase to net income of $441,000 or $0.09 per diluted share for the fourth quarter of 2007.

Before other than temporary impairment charges on investment securities (OTTI), net income was $842,000 in the fourth quarter 2008 representing a $401,000 or 91% increase over fourth quarter 2007.

The fourth quarter benefited from loan growth and further improvement in cost of funding, which increased net interest income to $3,343,000, a 23% increase over the fourth quarter of 2007. The net interest margin increased to 3.95% for the fourth quarter of 2008 compared to 3.36% for the fourth quarter of 2007.

"Loan growth of 12% from December 31, 2007 to December 31, 2008 added to interest earning assets. Moreover, the Bank benefited from continuing aggressive funds management that has reduced our funding costs to 2.71% in the fourth quarter of 2008 from 4.38.% for the same quarter in 2007," said Dennis Kelley, Chief Financial Officer.

The bank's efficiency ratio, excluding OTTI charges, improved to 54% at the fourth quarter of 2008 from 67% at the fourth quarter 2007.

For the year ended December 31, 2008, net income was $1,009,000 or $0.21 per diluted share, a 48% decline from the 2007 annual net income of $1,942,000 or $0.40 per diluted share due largely to other than temporary impairment charges (OTTI) primarily recorded in the third quarter due to the valuations of Fannie Mae and Freddie Mac preferred stocks and other corporate bond investments.

Before charges, including OTTI, employee severance and IT system conversion costs, net income was $2,770,000 in 2008 or 43 % higher than in 2007.

Total shareholders' equity was $55,561,000 at December 31, 2008, which includes the $8,500,000 in preferred stock and common stock warrants issued to the U.S. Department of the Treasury under the governments Capital Purchase Program (CPP). Book value per common share was $9.92 at December 31, 2008. The Bank's regulatory capital remains well above the required capital ratios with a Tier 1 capital leverage ratio of 14.8%; a Tier 1 risk-based capital ratio of 17.4%; and a Total risk-based capital ratio of 18.6% ranking in the top tier of local and national banks.

Nonperforming loans at December 31, 2008 were $1,046,000, of which $461,000 is guaranteed by the Small Business Administration and all are secured by real estate at conforming advances. The nonperforming assets to total assets ratio was 0.29% at December 31, 2008 and 0.23% after SBA guaranty. The bank's performing loan portfolio ranks favorably compared to peer banks. The Bank had one investment bond with a book value of $17,000 that had payments deferred.

The Bank had 0% of its loans past due 30 to 89 days for the sixth quarter out of the past seven, including all of 2008.

The bank had no REO (foreclosed properties) during 2008.

The provision for loan losses was $220,000 for the fourth quarter ended December 31, 2008 as compared to $259,000 in the fourth quarter of 2007 and $685,000 for the full year 2008 compared to $749,000 in 2007. The Bank had $142,000 in loan charge-offs and $57,000 in loan recoveries during the fourth quarter of 2008. At December 31, 2008, the allowance for loan losses was $4,016,000 and represented a ratio to gross loans of 1.32% and to nonperforming loans of 384%. These ratios compare to 1.34% and 779% at December 31, 2007.

Average earning assets were $336,161,000 for the fourth quarter of 2008, as compared to $321,172,000 for the same quarter of 2007. The annualized yield on average earning assets was 6.30% and the annualized cost of average interest-bearing liabilities was 2.71% for the fourth quarter of 2008, as compared to the annualized yield on average earning assets of 7.16% and annualized cost of interest-bearing liabilities of 4.38% for the same quarter of 2007. Total loans increased $15,365,000 during the fourth quarter of 2008, representing an annualized growth rate of 21% from the third quarter of 2008.

For the fourth quarter of 2008, non-interest expense decreased $44,000 or 2% to $1,972,000, compared to the same quarter in 2007. Non-interest expense increased to $8,639,000 for the year ended December 31, 2008 compared to $7,993,000, with the increase primarily attributable to the costs associated with conversion to a new data processor, employee severance expenses; and full year costs of a branch opened in July 2007.

The Bank recorded a non cash OTTI charge on Investments in the fourth quarter of $134,000 and for the year $2,457,000. The OTTI charge in the fourth quarter was the further write down of government agency preferred stocks and one trust preferred pooled security. The remaining recorded book value of these securities at December 31, 2008 was $46,000. In the third quarter the Bank recorded an OTTI charge on a GMAC bond with a par value of $500,000 and current book value of $263,000. The market value of the GMAC bond recovered to $375,000 at December 31, 2008.

Total assets were $364,333,000 at December 31, 2008, an increase of $24,140,000, or 7%, compared to $340,193,000 at December 31, 2007.

"We are pleased with the results of the fourth quarter and our operating earnings growth in 2008. We remain committed to driving stronger results in 2009 and beyond. We are on an upward trend in operating results and are entering 2009 with a net interest margin of 4%. The excellent asset quality ratios at year end are testament to our prudent underwriting standards employed by our strong, experienced credit team. With our strong capital position, we look forward to continuing to serve the banking needs of our community, so essential in these times," said Thomas Duryea, President & CEO.

About Summit State Bank

Summit State Bank has total assets of $364 million and total equity of $56 million at December 31, 2008. Headquartered in Sonoma County, the Bank provides diverse financial products and services throughout Sonoma, Napa, San Francisco, and Marin Counties. Summit State Bank stock is traded on the Nasdaq Global Market under the symbol SSBI. Further information can be found at www.summitstatebank.com.

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      Twelve Months
                                         Ended             Ended
                                   ----------------  ----------------
                                   Dec. 31, Dec. 31, Dec. 31, Dec. 31,
                                     2008     2007     2008     2007
                                   -------  -------  -------  -------
                                 (Unaudited)       (Unaudited)

 Interest income:
   Interest and fees on loans      $ 4,726  $ 5,166  $18,848  $20,327
   Interest on Federal funds
    sold                                --        3       69        6
   Interest on investment
    securities and deposits
    in banks                           602      581    2,523    2,293
   Dividends on FHLB stock               7       43      114      129
                                   ----------------  -------  -------

     Total interest income           5,335    5,793   21,554   22,755
                                   -------  -------  -------  -------

 Interest expense:
   Deposits                          1,663    2,485    7,332    9,869
   Securities sold under
    repurchase agreements               --       --       --        2
   FHLB advances                       329      587    1,879    2,033
                                   -------  -------  -------  -------

     Total interest expense          1,992    3,072    9,211   11,904
                                   -------  -------  -------  -------

     Net interest income
      before provision for
       loan losses                   3,343    2,721   12,343   10,851

 Provision for loan losses             220      259      685      749
                                   -------  -------  -------  -------

     Net interest income
      after provision for
      loan losses                    3,123    2,462   11,658   10,102
                                   -------  -------  -------  -------

 Non-interest income:
   Service charges                      94       96      404      352
   Office leases                       181      183      669      699
   Gains on sales of loans              --       --       --       41
   Securities Impairment              (134)      --   (2,457)      --
   Loan servicing, net                   2       15       46       65
   Other income                         13        5       35       39
                                   -------  -------  -------  -------

     Total non-interest income         156      299   (1,303)   1,196
                                   -------  -------  -------  -------

 Non-interest expense:
   Salaries and employee
    benefits                           946    1,061    4,343    3,974
   Occupancy and equipment             443      436    1,735    1,624
   Other expenses                      583      519    2,561    2,395
                                   -------  -------  -------  -------

     Total non-interest
      expense                        1,972    2,016    8,639    7,993
                                   -------  -------  -------  -------

     Income before provision
       for income taxes              1,307      745    1,716    3,305

 Provision for Income taxes            543      304      707    1,363
                                   -------  -------  -------  -------

     Net income                    $   764  $   441  $ 1,009  $ 1,942
                                   =======  =======  =======  =======

   Less: Accretion of
    perferred stock discount            (4)      --       (4)      --
                                   -------  -------  -------  -------

     Net Income available for
      common stock                 $   760  $   441  $ 1,005  $ 1,942
                                   =======  =======  =======  =======


 Basic earnings per share          $  0.16  $  0.09  $  0.21  $  0.40
 Diluted earnings per share        $  0.16  $  0.09  $  0.21  $  0.40

 Basic weighted average
  shares of common stock
  outstanding                        4,745    4,805    4,745    4,831
 Diluted weighted average
  shares of common stock
  outstanding                        4,745    4,808    4,745    4,834



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

                                                   Dec. 31,  Dec. 31,
                                                     2008      2007
                                                   --------  --------
                                                 (Unaudited)

         ASSETS

 Cash and due from banks                           $  3,650  $  5,695
 Federal funds sold                                      --     7,110
                                                   --------  --------
     Total cash and cash equivalents                  3,650    12,805

 Time deposits in banks                                  --        80
 Available-for-sale investment
  securities - amortized cost of
  $41,089 in 2008 and $35,404 in 2007                41,183    35,426
 Held-to-maturity investment
  securities - market value of
  $5,000 in 2007                                         --     5,000
 Loans, less allowance for loan losses
  of $4,016 in 2008 and $3,621 in 2007              299,645   267,067
 Bank premises and equipment, net                     7,816     8,463
 Investment in Federal Home Loan Bank
  stock, at cost                                      2,695     2,850
 Goodwill                                             4,119     4,119
 Accrued interest receivable and other
  assets                                              5,225     4,383
                                                   --------  --------

     Total assets                                  $364,333  $340,193
                                                   ========  ========

     LIABILITIES AND
   SHAREHOLDERS' EQUITY

 Deposits:
   Demand - non interest-bearing                   $ 10,773  $ 10,297
   Demand - interest-bearing                         13,597    12,421
   Savings                                           10,068    12,460
   Money market                                      26,123    29,858
   Time deposits, $100,000 and over                  84,751   103,995
   Other time deposits                              107,451    79,988
                                                   --------  --------
     Total deposits                                 252,763   249,019

 Federal Home Loan Bank (FHLB) advances              55,173    42,600
 Accrued interest payable and other
  liabilities                                           836       859
                                                   --------  --------
     Total liabilities                              308,772   292,478
                                                   --------  --------

 Shareholders' equity
   Preferred stock (net); 20,000 shares
    authorized; 8,500 issued at
    December 31, 2008                                 7,882        --
   Common stock, no par value; shares
    authorized - 30,000; shares isssued
    and outstanding - 4,745 at December
    31, 2008 and 2007                                36,251    36,244
   Common stock warrants                                622        --
   Retained earnings                                 10,752    11,455
   Accumulated other comprehensive income
    (loss), net of taxes                                 54        16
                                                   --------  --------

     Total shareholders' equity                      55,561    47,715
                                                   --------  --------
     Total liabilities and shareholders'
      equity                                       $364,333  $340,193
                                                   ========  ========



               (In Thousands Except Per share Data)


                             Three Months Ended   Twelve Months Ended
                             ------------------    ------------------
                             Dec. 31,   Dec. 31,   Dec. 31,   Dec. 31,
                               2008       2007       2008       2007
                             -------    -------    -------    -------
                           (Unaudited)(Unaudited)(Unaudited)(Unaudited)
 Statement of Income
  Data:
 Net interest income         $ 3,343    $ 2,721    $12,343    $10,851
 Provision for loan
  losses                         220        259        685        749
 Total non-interest
  income                         156        299     (1,303)     1,196
 Total non-interest
  expense                      1,972      2,016      8,639      7,993
 Provision for Income
  taxes                          543        304        707      1,363
                             -------    -------    -------    -------
 Net income                  $   764    $   441    $ 1,009    $ 1,942
                             =======    =======    =======    =======

 Selected per Share Data:
 Earnings per share -
  basic                      $  0.16    $  0.09    $  0.21    $  0.40
 Earnings per share -
  diluted                    $  0.16    $  0.09    $  0.21    $  0.40
 Book value per share (2)    $ 10.05    $ 10.06    $ 10.05    $ 10.06

 Nonperforming assets:
 Loans on non-accrual or
  past due more than 90
  days                       $ 1,046    $   465    $ 1,046    $   465
 Other nonperforming
  assets                     $    17    $    --    $    17    $    --

 Selected Ratios:
 Return on average
  assets (1)                    0.86%      0.52%      0.29%      0.59%
 Return on average
  equity (1)                    6.36%      3.61%      2.12%      4.03%
 Return on average
   tangible equity (1)          6.96%      3.94%      2.32%      4.40%
 Net interest margin (1)        3.95%      3.36%      3.78%      3.49%
 Dividend payout ratio         56.18%     98.64%     56.18%     89.75%
 Average equity to
  average assets               13.55%     14.28%     13.88%     14.64%
 Leveraged capital ratio       14.76%     12.48%     14.76%     12.98%
 Efficiency ratio (3)          54.28%     66.75%     64.01%     66.35%
 Nonperforming loans to
  total loans (2)               0.34%      0.17%      0.34%      0.17%
 Nonperforming assets to
  total assets (2)              0.29%      0.14%      0.29%      0.14%
 Allowance for loan losses
  to total loans (2)            1.32%      1.34%      1.32%      1.34%
 Allowance for loan losses
  to nonperforming loans (2)     384%       779%       384%       779%

 (1) Annualized.
 (2) As of period end

 (3) Efficiency ratio is noninterest
 expenses divided by net interest
 income and noninterest income,
 excluding other than temporary
 impairment charges.


            

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