Summit State Bank Reports 50% Increase in Quarterly Profitability and Declaration of Dividend


SANTA ROSA, Calif., Oct. 23, 2018 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended September 30, 2018 of $1,505,000 and diluted earnings per share of $0.25.  A quarterly dividend of $0.12 per share was declared for common shareholders.

Dividend

The Board of Directors declared a $0.12 per share quarterly dividend on October 22, 2018 to be paid on November 27, 2018 to shareholders of record on November 20, 2018.

Net Income and Results of Operations

For the quarter ended September 30, 2018, Summit State Bank (“Bank”) had net income of $1,505,000 and diluted earnings per share of $0.25 compared to $1,001,000 in net income and $0.17 diluted earnings per share for the same quarter in 2017. This represented a 50% increase in net income between the periods.

Net income for the first nine months of 2018 was $4,706,000 compared to $2,813,000 for the same period in 2017, a 67% increase. Diluted earnings per share for the respective nine-month periods were $0.78 and $0.46.

“Our increase in core operating income continues to be driven by incremental higher net interest income related to higher average loan balances and an increase in loans as a percentage of total assets,” said Jim Brush, President and CEO.

Net income for the quarter and nine months ended September 30, 2018 benefited from a tax credit of $104,000 resulting from a cost segregation study performed on the Bank’s head office building.

Net loans increased 22% or $86 million between September 30, 2018 and 2017. The net interest margin increased from 3.39% for the third quarter of 2017 to 3.80% for the third quarter of 2018. The resulting increase in the net interest income was $960,000 or 21% between the quarters and $2,575,000 or 19% between the nine-month periods.

The additional loans and overall asset growth were funded by increasing the Bank’s local deposits by 30% or $105 million and a reduction in the investment portfolio of $29 million between September 30, 2017 and 2018. Additionally, institutional funding was reduced by $45 million with reductions in institutional deposits and FHLB borrowings.

Annualized return on average assets for the third quarter of 2018 was 1.02% and annualized return on average equity was 9.9%. The Bank’s efficiency ratio was 65.3% and the net interest margin was 3.80% during the third quarter of 2018. The third quarter of 2017 had an annualized return on average assets of 0.73%, annualized return on average equity of 6.6%, efficiency ratio of 66.3% and net interest margin of 3.39%.

There was a $645,000, or 20%, increase in operating expenses between the third quarter of 2018 as compared to the third quarter of 2017. The increased expenses were primarily due to the increase in employees and related compensation and benefits expense related to management’s strategy of positioning the Bank for loan growth.

“We are approaching a structure where we have improved efficiencies and processes so that our non-interest costs should increase more slowly than increases in net interest income from loan and core deposit production,” said Jim Brush, President and CEO.

Total assets at September 30, 2018 were $595 million compared to $539 million at September 30, 2017.

Nonperforming assets were $2,170,000 or 0.36% of total assets at September 30, 2018 compared to $3,142,000 or 0.58% at September 30, 2017. The nonperforming assets at September 30, 2018, consist of six loans which are predominantly secured by real property. The Bank recorded net recoveries of previously charged off loans of $226,000 and had provision expense of $380,000 for the nine months ended September 30, 2018. The allowance for loan losses to loans was 1.20% at September 30, 2018 and was 1.22% at September 30, 2017.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $595 million and total equity of $60 million at September 30, 2018. Headquartered in Sonoma County, the Bank specializes in providing exceptional customer service and customized financial solutions to aid in the success of local small businesses and nonprofits throughout Sonoma County. 

Summit State Bank is committed to embracing the diverse backgrounds, cultures and talents of its employees to create high performance and support the evolving needs of its customers and community it serves. At the center of diversity is inclusion, collaboration, and a shared vision for delivering superior service and results for shareholders. Presently, 83% of management are women and minorities with 40% represented on the Executive Management Team. Through the engagement of its team, Summit State Bank has received many esteemed awards including: Best Business Bank, Corporate Philanthropy Award and Best Places to Work in the North Bay.  Summit State Bank’s 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 earnings per share data)
            
            
      Three Months Ended   Nine Months Ended 
     September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
     (Unaudited) (Unaudited) (Unaudited) (Unaudited)
            
Interest income:       
 Interest and fees on loans$  5,854 $  4,275 $  16,563 $  12,230
 Interest on deposits with banks   59    43    185    112
 Interest on federal funds sold   -    5    14    11
 Interest on investment securities   584    809    1,800    2,470
 Dividends on FHLB stock   54    54    161    177
   Total interest income   6,551    5,186    18,723    15,000
Interest expense:       
 Deposits    931    473    2,458    1,088
 Federal Home Loan Bank advances   108    161    200    422
   Total interest expense   1,039    634    2,658    1,510
   Net interest income before provision for loan losses   5,512    4,552    16,065    13,490
Provision for loan losses    80    170    380    170
   Net interest income after provision for loan losses   5,432    4,382    15,685    13,320
Non-interest income:       
 Service charges on deposit accounts   182    187    569    529
 Rental income   148    145    444    429
 Net gain on loan sales   95    -    542    -
 Net securities gain   2    44    18    57
 Other income    26    16    185    21
   Total non-interest income   453    392    1,758    1,036
Non-interest expense:       
 Salaries and employee benefits    2,360    1,777    6,524    5,225
 Occupancy and equipment    360    375    1,131    1,133
 Other expenses    1,173    1,096    3,336    3,389
   Total non-interest expense   3,893    3,248    10,991    9,747
   Income before provision for income taxes   1,992    1,526    6,452    4,609
Provision for income taxes    487    525    1,746    1,796
   Net income$  1,505 $  1,001 $  4,706 $  2,813
            
Basic earnings per common share$  0.25 $  0.17 $  0.78 $  0.47
Diluted earnings per common share$  0.25 $  0.17 $  0.78 $  0.46
            
Basic weighted average shares of common stock outstanding 6,066  6,036  6,064  6,028
Diluted weighted average shares of common stock outstanding 6,074  6,058  6,071  6,057

 

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
          
          
     September 30, 2018 December 31, 2017 September 30, 2017
     (Unaudited)  (1)  (Unaudited)
          
ASSETS     
          
Cash and due from banks$  20,924  $  68,814  $  20,388
Federal funds sold   -     2,000     2,000
   Total cash and cash equivalents    20,924     70,814     22,388
          
Investment securities:     
 Held-to-maturity, at amortized cost   7,990     7,984     7,982
 Available-for-sale (at fair value; amortized cost of $70,805,
    $79,617 and $96,128)
          
      67,372     78,770     96,248
   Total investment securities    75,362     86,754     104,230
          
Loans, less allowance for loan losses of $5,842, $5,236 and $4,879   481,419     437,594     395,640
Bank premises and equipment, net    5,316     5,279     5,330
Investment in Federal Home Loan Bank stock, at cost   3,085     3,085     3,085
Goodwill     4,119     4,119     4,119
Other Real Estate Owned   -     -     -
Accrued interest receivable and other assets    5,018     3,219     4,201
          
   Total assets $  595,243  $  610,864  $  538,993
          
LIABILITIES AND     
SHAREHOLDERS' EQUITY     
          
Deposits:       
 Demand - non interest-bearing$  145,712  $  190,861  $  128,863
 Demand - interest-bearing   63,435     65,742     58,463
 Savings   28,282     30,102     27,470
 Money market   101,383     79,564     57,493
 Time deposits that meet or exceed the FDIC insurance limit   80,852     68,927     65,192
 Other time deposits   84,388     98,317     104,795
   Total deposits    504,052     533,513     442,276
          
Federal Home Loan Bank advances   28,500     15,000     34,100
Accrued interest payable and other liabilities   2,192     2,674     2,133
          
   Total liabilities    534,744     551,187     478,509
          
Shareholders' equity      
 Preferred stock, no par value; 20,000,000 shares authorized;     
  no shares issued and outstanding   -     -     -
 Common stock, no par value; shares authorized - 30,000,000 shares; issued     
  and outstanding 6,066,475, 6,041,475 and 6,041,475   36,967     36,847     36,847
 Retained earnings   25,949     23,427     23,568
 Accumulated other comprehensive gain (loss)   (2,417)    (597)    69
          
   Total shareholders' equity    60,499     59,677     60,484
          
   Total liabilities and shareholders' equity $  595,243  $  610,864  $  538,993
          
(1) Information derived from audited financial statements.     

 

Financial Summary
(In thousands except per share data)
         
  At or for the At or for the
   Three Months Ended   Nine Months Ended 
  September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statement of Income Data:        
Net interest income $  5,512  $  4,552  $  16,065  $  13,490 
Provision for loan losses     80     170     380     170 
Non-interest income    453     392     1,758     1,036 
Non-interest expense    3,893     3,248     10,991     9,747 
Provision for income taxes     487     525     1,746     1,796 
Net income $  1,505  $  1,001  $  4,706  $  2,813 
         
Selected per Common Share Data:        
Basic earnings per common share $  0.25  $  0.17  $  0.78  $  0.47 
Diluted earnings per common share $  0.25  $  0.17  $  0.78  $  0.46 
Dividend per share $  0.12  $  0.12  $  0.36  $  0.34 
Book value per common share (2) $  9.97  $  10.01  $  9.97  $  10.01 
         
Selected Balance Sheet Data:         
Assets $  595,243  $  538,993  $  595,243  $  538,993 
Loans, net    481,419     395,640     481,419     395,640 
Deposits    504,052     442,276     504,052     442,276 
Average assets    587,062     544,378     581,960     528,542 
Average earning assets    575,954     532,841     570,747     517,282 
Average shareholders' equity    60,593     60,583     60,076     59,828 
Nonperforming loans    2,170     3,142     2,170     3,142 
Total nonperforming assets    2,170     3,142     2,170     3,142 
Troubled debt restructures (accruing)    1,749     3,168     1,749     3,168 
         
Selected Ratios:        
Return on average assets (1)  1.02%  0.73%  1.08%  0.71%
Return on average common shareholders' equity (1)  9.85%  6.56%  10.47%  6.29%
Efficiency ratio (3)  65.29%  66.29%  61.73%  67.36%
Net interest margin (1)  3.80%  3.39%  3.76%  3.49%
Common equity tier 1 capital ratio  10.9%  12.7%  10.9%  12.7%
Tier 1 capital ratio  10.9%  12.7%  10.9%  12.7%
Total capital ratio  12.0%  13.8%  12.0%  13.8%
Tier 1 leverage ratio  10.1%  10.4%  10.1%  10.4%
Common dividend payout ratio (4)  48.37%  72.43%  46.41%  72.02%
Average shareholders' equity to average assets  10.32%  11.13%  10.32%  11.32%
Nonperforming loans to total loans  0.45%  0.78%  0.45%  0.78%
Nonperforming assets to total assets  0.36%  0.58%  0.36%  0.58%
Allowance for loan losses to total loans  1.20%  1.22%  1.20%  1.22%
Allowance for loan losses to nonperforming loans  269.26%  155.26%  269.26%  155.26%
     
(1) Annualized.        
(2) Total shareholders' equity divided by total common shares outstanding.    
(3) Non-interest expenses to net interest and non-interest income, net of securities gains.    
(4) Common dividends divided by net income available for common shareholders.    


Contact: James E. Brush, President and CEO, Summit State Bank (707) 568-4920