Summit State Bank Reports First Quarter Earnings and Declaration of Dividend


SANTA ROSA, Calif., April 30, 2007 (PRIME NEWSWIRE) -- Summit State Bank (Nasdaq:SSBI) today reported net income of $592,000 or $0.12 per diluted share for the quarter ended March 31, 2007, compared to net income of $750,000 or $0.22 per diluted share for the first quarter of 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

Today the Board of Directors has declared a quarterly cash dividend of nine cents per share on the Company's common Stock. The dividend is payable May 21, 2007 to shareholders of record as of May 10, 2007.

Net Income

The Bank had net income of $592,000 or $0.12 per diluted share for the quarter ended March 31, 2007. This compares to net income of $750,000 or $0.22 per diluted share for the first quarter of 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 first quarter ending March 31, 2007 over the first quarter in 2006 by 43%. The diluted earnings per share decline in the first quarter of 2007 of $0.10 per share as compared to the prior year period was comprised of a decline of $0.05 per share attributable to the decline in net income and $0.05 per share decline attributable to the increase in weighted average shares outstanding.

Total shareholder equity was $48,240,000 at March 31, 2007 compared to $27,433,000 at March 31, 2006. At March 31, 2007 there were 4,844,720 common shares outstanding with a per share book value of $9.96 compared to 3,361,430 shares outstanding at March 31, 2006 with a per share book value of $8.16.

Annualized return on average assets was 0.76% for the three months ended March 31, 2007, as compared to 0.98% for the same period one year ago. Annualized return on average equity was 4.99% for the three months ended March 31, 2007, as compared to 11.09% for the same period one year ago. Annualized return on average tangible equity was 5.46% for the three months ended March 31, 2007, as compared to 13.05% for the same period one year ago.

The Bank experienced a decline in net income during the first quarter of 2007 when compared to the first quarter of 2006 due to increased operating expenses, lower non-interest income and relatively unchanged net interest income.

Net Interest Income

Net interest income declined $38,000 or 1% to $2,764,000 during the first quarter of 2007 compared to $2,802,000 for the same quarter of 2006. The net interest margin declined to 3.75% for the three months ended March 31, 2007, compared to 3.89% for the three months ended March 31, 2006. The net interest margin continues to be impacted as rates on deposits continue to reprice while the change in yields on earning assets have slowed as the Federal Reserve stopped increasing short-term rates.

Average earning assets were $298,851,000 for the first quarter of 2007, as compared to $292,080,000 for the first quarter of 2006. The yield on earning assets was 7.51% and the cost of interest-bearing liabilities was 4.39% for the first quarter of 2007, as compared to the yield on earning assets of 6.76% and cost of interest-bearing liabilities of 3.11% for the first quarter of 2006.

Non-interest Income

For the first quarter 2007, total non-interest income was $294,000, as compared to $322,000 for the first quarter of 2006. The decline was due to the lower number of Section 1031 Real Estate Exchanges handled by the bank, lower loan servicing income and a lower amount of miscellaneous other income.

Management continues to concentrate on building service charge income by focusing marketing efforts on increasing the number of consumer and business checking accounts and related services. Management plans to launch remote deposit capture services for businesses in the second quarter of 2007.

Non-interest Expense

For the first quarter 2007, non-interest expense increased $247,000 or 14% to $1,980,000, compared to the same quarter in 2006. Salaries and employee benefit expense increased $122,000 or 14% to $999,000. The increase in expense relates to additional staffing added during 2006 and first quarter of 2007 to support the planned growth in deposits and assets. Occupancy and equipment expenses increased $45,000 or 14% and other operating expenses increased $80,000 or 15% for the first quarter of 2007 as compared to the first quarter of 2006. Part of the increase in expenses is attributable to space leased and personnel hired in the first quarter of 2007 for the new regional office in Petaluma, which is scheduled to open in the second quarter of 2007.

Loan and Deposit Activity

Total loans as of March 31, 2007 were $260,078,000, an increase of $17,936,000 or 7%, compared to total loans of $242,142,000 at March 31, 2006.

Total deposits were $238,451,000 at March 31, 2007, compared to $238,148,000 at March 31, 2006. Deposits at March 31, 2006 included a large $22 million tax deferred exchange transaction deposit, which as expected, was withdrawn after the first quarter of 2006.

Total assets were $323,341,000 at March 31, 2007, an increase of $36,620,000 or 13%, compared to $286,721,000 at March 31, 2006 and an increase of $10,391,000 or 3% compared to $312,950,000 at December 31, 2006.

Nonperforming Assets

Loans on nonaccrual were $2,110,000 or 0.8% of gross loans at March 31, 2007. This is a decline to the nonaccrual loan total at December 31, 2006 which was $2,383,000. The nonaccrual amount consisted of three loans. The Small Business Administration (SBA) guarantees back $323,000 of the nonaccrual loan balances. One real estate secured loan on nonaccrual status, with a book balance of $1,380,000, after a partial write-down, was transferred to other real estate owned subsequent to March 31, 2007.

The provision for loan losses was $71,000 for the first quarter ended March 31, 2007 as compared to $111,000 in the first quarter of 2006. The Bank charged-off $250,000 in loans to the allowance for loan losses in the first quarter of 2007. At March 31, 2007, the allowance for loan losses to gross loans was 1.37% and the allowance for loan losses to nonaccrual loans was 169%.

About Summit State Bank

Summit State Bank has total assets of $323 million and total equity of $48 million at March 31, 2007. It provides diverse financial products and services which are marketed through Sonoma County, California with offices located in Santa Rosa, Rohnert Park 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 
 For the Three Months Ended March 31, 2007 and March 31, 2006

         (In thousands except for earnings per share data)

                                                 Three Months Ended
                                               ----------------------
                                                March 31,   March 31,
                                                  2007        2006
                                               ----------  ----------
                                               (Unaudited) (Unaudited)

 Interest income:
  Interest and fees on loans                   $    4,962  $    4,271
  Interest on Federal funds sold                        0         240
  Interest on investment securities and
   deposits in banks                                  543         340
  Dividends on FHLB stock                              28          21
                                               ----------  ----------

    Total interest income                           5,533       4,872
                                               ----------  ----------

 Interest expense:
  Deposits                                          2,345       1,866
  Securities sold under repurchase agreements           1          97
  FHLB Advances                                       423         107
                                               ----------  ----------

    Total interest expense                          2,769       2,070
                                               ----------  ----------

    Net interest income before provision for
     loan losses                                    2,764       2,802

 Provision for loan losses                             71         111
                                               ----------  ----------

    Net interest income after provision for 
     loan losses                                    2,693       2,691
                                               ----------  ----------

 Non-interest income:
  Service charges                                      85          84
  Office leases                                       166         151
  Gains on sales of loans                              14          17
  Real estate exchange fees                             5          16
  Loan servicing, net                                  10          17
  Other income                                         14          37
                                               ----------  ----------

    Total non-interest income                         294         322
                                               ----------  ----------

 Non-interest expense:
  Salaries and employee benefits                      999         877
  Occupancy and equipment                             367         322
  Other expenses                                      614         534
                                               ----------  ----------

    Total non-interest expense                      1,980       1,733
                                               ----------  ----------

    Income before provision for income taxes        1,007       1,280

 Provision for Income taxes                           415         530
                                               ----------  ----------

    Net income                                 $      592  $      750
                                               ==========  ==========

 Basic earnings per share                      $     0.12  $     0.22
                                               ==========  ==========

 Diluted earnings per share                    $     0.12  $     0.22
                                               ==========  ==========

 Basic weighted average shares of common
  stock outstanding                             4,828,053   3,361,430
                                               ==========  ==========

 Diluted weighted average shares of common
  stock outstanding                             4,841,696   3,377,930
                                               ==========  ==========

               SUMMIT STATE BANK AND SUBSIDIARY 
                 CONSOLIDATED BALANCE SHEETS  
                        (In thousands)   
                                              
                                     March 31, December 31, March 31,
                                       2007       2006        2006
                                     --------   --------    --------
                                    (Unaudited)            (Unaudited)
                                                
                ASSETS

 Cash and due from banks             $  4,697  $ 10,606     $  3,313
 Federal funds sold                     2,200        --          800
                                     --------  --------     --------
   Total cash and cash equivalents      6,897    10,606        4,113



 Time deposits in banks                   160       457        1,047
 Available-for-sale investment
  securities - amortized cost of
  $36,092 at March 31, 2007 and
  $26,104 and $20,009 at December
  31, and March 31, 2006               35,876    25,829       19,447
 Held-to-maturity investment
  securities - market value of
  $4,886 at March 31, 2007 and
  $4,868 and $4,803 at December 31,
  and March 31, 2006                    5,000     5,000        5,000
 Loans, less allowance for loan
  losses of $3,557 at March 31, 2007
  and $3,736 and $3,643 at December
  31, and March 31, 2006              256,521   252,860      238,499
 Bank premises and equipment, net       8,228     8,175        8,506
 Investment in Federal Home Loan
  Bank stock, at cost                   2,181     1,699        2,273
 Goodwill                               4,119     4,119        4,119
 Accrued interest receivable and
  other assets                          4,359     4,205        3,717
                                     --------  --------     --------

   Total assets                      $323,341  $312,950     $286,721
                                     ========  ========     ========

           LIABILITIES AND 
        SHAREHOLDERS' EQUITY

 Deposits:
  Demand - non interest-bearing      $ 12,632  $ 11,188     $ 10,230
  Demand - interest-bearing            13,271    12,623       14,542
  Savings                              14,659    19,331       45,088
  Money market                         56,129    47,335       52,236
  Time deposits, $100,000 and over     88,526    80,160       60,096
  Other Time deposits                  53,234    62,337       55,956
                                     --------  --------     --------
    Total deposits                    238,451   232,974      238,148


 Securities sold under repurchase
  agreements                              125       257          597
 Federal Home Loan Bank (FHLB)
  advances                             35,975    31,460       20,200
 Accrued interest payable and other
  liabilities                             550       447          343
                                     --------  --------     --------

    Total liabilities                 275,101   265,138      259,288
                                     --------  --------     --------

 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 March 31, 2007 and
   4,795 and 3,361 outstanding at
   December 31, and March 31, 2006     36,956    36,698       17,395

  Retained earnings                    11,413    11,256       10,362

  Accumulated other comprehensive
   loss, net of taxes                    (129)     (142)        (324)
                                     --------  --------     --------


    Total shareholders' equity         48,240    47,812       27,433
                                     --------  --------     --------

    Total liabilities and 
     shareholders' equity            $323,341  $312,950     $286,721
                                     ========  ========     ========


                          Earnings Summary
                           (In Thousands)
                                                                                     
                                              Three Months Ended
                                            ----------------------
                                            March 31,    March 31, 
                                              2007         2006
                                            ---------    ---------
                                           (Unaudited)  (Unaudited)

 Statement of Income Data:

 Net interest income                        $   2,764    $   2,802
 Provision for loan losses                         71          111
 Noninterest income                               294          322
 Noninterest expense                            1,980        1,733
 Provision for income taxes                       415          530
                                            ---------    ---------
 Net income                                 $     592    $     750
                                            =========    =========

 Selected per Share Data:

 Basic earnings per share                   $    0.12    $    0.22
 Diluted earnings per share                 $    0.12    $    0.22
 Book value per share                       $    9.96    $    8.16

 Selected Ratios: (1)

 Return on average assets                        0.76%        0.98%
 Return on average equity                        4.99%       11.09%
 Return on average tangible equity               5.46%       13.05%
 Efficiency ratio                               64.75%       55.47%
 Net interest margin                             3.75%        3.89%
 Dividend payout ratio                          73.65%       40.33%
 Average equity to average assets               15.13%        8.83%
 Nonperforming loans to total loans              0.81%        0.14%
 Allowance for loan losses to total loans        1.37%        1.50%

 (1) All ratios in the table are annualized with the exception of 
     efficiency ratio, dividend payout ratio, and average equity to 
     average assets.


            

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