Summit State Bank Reports 36% Increase in Net Income for Third Quarter 2019 and Declaration of Dividend

Santa Rosa, California, UNITED STATES


SANTA ROSA, Calif., Oct. 22, 2019 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended September 30, 2019, of $2,045,000 and diluted earnings per share of $0.34.  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 21, 2019 to be paid on November 22, 2019 to shareholders of record on November 15, 2019.

Net Income and Results of Operations

For the quarter ended September 30, 2019, Summit State Bank (“Bank”) had net income of $2,045,000 and diluted earnings per share of $0.34 compared to net income of $1,505,000 and diluted earnings per share of $0.25 for the same quarter in 2018. Net income increased $540,000 or 36% the third quarter of 2019 compared to the third quarter of 2018.

A significant portion of the increase in net income is related to non-interest income. In the third quarter of 2019 non-interest income was $1,001,000 compared to $453,000 in the third quarter of 2018. The primary difference between 2019 and 2018 was the Bank sold more SBA loans in third quarter of 2019 generating $639,000 in gain on sale compared $95,000 in gain on sale in the third quarter of 2018.  

“Although we are selling some loans, we continue to grow assets at a targeted pace while generating income in line with our 2019 target,” said Jim Brush, President and CEO. “The Bank has a good mix of income generators and cost controls to build a strong future for success.”

Net interest income increased to $5,773,000 in the third quarter of 2019 compared to $5,512,000 in the third quarter of 2018. This was an increase of $261,000 or 5% from the prior year.

Net loans, deposits and total assets also increased when comparing the third quarter of 2019 to third quarter of 2018. Loans increased 15% to $554,122,000 at September 30, 2019 compared to $481,419,000 at September 30, 2018, deposits increased 20% to $605,130,000 at September 30, 2019 compared to $504,052,000 at September 30, 2018, and total assets increased 14% to $680,840,000 at September 30, 2019 compared to $595,243,000 at September 30, 2018.

“Each quarter we are experiencing consistent growth in our loan portfolio. This recent quarter we have increased loans outstanding by 15% compared to the same quarter one year ago,” said Brush. “We have spent the past several years investing in our staff and because of this we are growing our assets in line with our long-term strategy. We are deliberately growing our Bank at a controlled pace and this is adding to the Bank’s long-term sustainability for financial success.”

“We feel that our headwinds have recently turned into tailwinds and look forward to strong income growth,” said Brush.

For the third quarter 2019, the annualized net interest margin was 3.60%, annualized return on average assets was 1.24% and annualized return on average equity was 12.32%. The third quarter of 2018 generated an annualized net interest margin of 3.80%, annualized return on average assets of 1.02% and annualized return on average equity of 9.85%.

“The Bank is liability sensitive which provides a great opportunity to capitalize on the recent decrease in deposit rates,” said Brush. “We are reducing our cost of funds and positioning the Bank to maintain its net interest margin compared to a year ago.  We are pleased with our increased non-interest income while beginning to hold our non-interest costs.”

There was a $205,000, or 5%, decrease in operating expenses between the third quarter of 2019, as compared to the third quarter of 2018. The declining trend is due to the stabilization of expenses in major areas of cost including salary, benefits and other operational expenses.

Nonperforming assets were $592,000, or 0.09%, of total assets at September 30, 2019 compared to $2,170,000, or 0.36%, at September 30, 2018. The nonperforming assets at September 30, 2019, consist of loans which are predominantly secured by real property. The Bank had a loan loss provision expense of $210,000 in the third quarter of 2019. The allowance for loan losses to loans was 1.17% at September 30, 2019 compared to 1.20% at September 30, 2018.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $681 million and total equity of $67 million at September 30, 2019. 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, 80% of management are women and minorities with 60% 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, 2019 September 30, 2018 September 30, 2019 September 30, 2018 
     (Unaudited) (Unaudited) (Unaudited) (Unaudited) 
             
Interest income:        
Interest and fees on loans$7,031 $5,854 $20,113  $16,563 
Interest on deposits with banks 72  59  205   185 
Interest on federal funds sold -  -  -   14 
Interest on investment securities 459  584  1,525   1,800 
Dividends on FHLB stock 57  54  165   161 
 Total interest income 7,619  6,551  22,008   18,723 
Interest expense:        
Deposits 1,727  931  4,779   2,458 
Federal Home Loan Bank advances 119  108  410   200 
 Total interest expense 1,846  1,039  5,189   2,658 
 Net interest income before provision for loan losses 5,773  5,512  16,819   16,065 
Provision for loan losses 210  80  490   380 
 Net interest income after provision for loan losses 5,563  5,432  16,329   15,685 
Non-interest income:        
Service charges on deposit accounts 226  182  635   569 
Rental income 86  148  258   444 
Net gain on loan sales 639  95  805   542 
Net securities gain (loss) -  2  (6)  18 
Other income 50  26  142   185 
 Total non-interest income 1,001  453  1,834   1,758 
Non-interest expense:        
Salaries and employee benefits 2,274  2,360  7,234   6,524 
Occupancy and equipment 429  360  1,286   1,131 
Other expenses 985  1,173  3,375   3,336 
 Total non-interest expense 3,688  3,893  11,895   10,991 
 Income before provision for income taxes 2,876  1,992  6,268   6,452 
Provision for income taxes 831  487  1,626   1,746 
 Net income$2,045 $1,505 $4,642  $4,706 
             
Basic earnings per common share$0.34 $0.25 $0.77  $0.78 
Diluted earnings per common share$0.34 $0.25 $0.76  $0.78 
             
Basic weighted average shares of common stock outstanding 6,069  6,066  6,067   6,064 
Diluted weighted average shares of common stock outstanding  6,074  6,074  6,072   6,071 
             



SUMMIT STATE BANK AND SUBSIDIARY 
CONSOLIDATED BALANCE SHEETS 
(In thousands except share data) 
          
          
    September 30, 2019 December 31, 2018 September 30, 2018 
    (Unaudited)  (1) (Unaudited) 
          
ASSETS      
          
Cash and due from banks$36,979 $21,693  $20,924  
   Total cash and cash equivalents 36,979  21,693   20,924  
          
Investment securities:      
 Held-to-maturity, at amortized cost 7,996  7,991   7,990  
 Available-for-sale (at fair value; amortized cost of $57,631,      
  $72,716 and $70,805) 58,657  70,174   67,372  
   Total investment securities 66,653  78,165   75,362  
          
Loans, less allowance for loan losses of $6,550, $6,029 and $5,842 554,122  504,549   481,419  
Bank premises and equipment, net (2) 6,338  5,803   5,316  
Investment in Federal Home Loan Bank stock, at cost 3,342  3,085   3,085  
Goodwill  4,119  4,119   4,119  
Accrued interest receivable and other assets (2) 9,287  4,690   5,018  
          
   Total assets$680,840 $622,104  $595,243  
          
LIABILITIES AND      
SHAREHOLDERS' EQUITY      
          
Deposits:       
 Demand - non interest-bearing$135,065 $120,011  $145,712  
 Demand - interest-bearing 63,333  65,652   63,435  
 Savings 26,500  25,817   28,282  
 Money market 129,343  104,060   101,383  
 Time deposits that meet or exceed the FDIC insurance limit 81,388  83,071   80,852  
 Other time deposits 169,501  102,578   84,388  
   Total deposits 605,130  501,189   504,052  
          
Federal Home Loan Bank advances -  56,800   28,500  
Junior subordinated debt 5,858  -   -  
Accrued interest payable and other liabilities (2) 3,348  2,595   2,192  
          
   Total liabilities 614,336  560,584   534,744  
          
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 6,069,600, 6,066,475 and 6,066,475 36,981  36,967   36,967  
 Retained earnings 28,800  26,342   25,949  
 Accumulated other comprehensive income (loss), net 723  (1,789)  (2,417) 
          
   Total shareholders' equity 66,504  61,520   60,499  
          
   Total liabilities and shareholders' equity$680,840 $622,104  $595,243  
          
(1) Information derived from audited financial statements.      
(2) ASU No. 2016-02 (Topic 842) was adopted January 1, 2019 using the modified retrospective approach at the beginning of the adoption period. This standard increases the transparency by recognizing the right-to-use lease asset for the lease term. As of September 30, 2019, the right-of-use asset was recorded for $1,056,000 and a lease liability was recorded for $1,068,000. 
          



Financial Summary
(Dollars in thousands except per share data)
         
  At or for the At or for the
  Three Months Ended Nine Months Ended
  September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statement of Income Data:        
Net interest income $5,773  $5,512  $16,819  $16,065 
Provision for loan losses  210   80   490   380 
Non-interest income  1,001   453   1,834   1,758 
Non-interest expense  3,688   3,893   11,895   10,991 
Provision for income taxes  831   487   1,626   1,746 
Net income $2,045  $1,505  $4,642  $4,706 
         
Selected per Common Share Data:        
Basic earnings per common share $0.34  $0.25  $0.77  $0.78 
Diluted earnings per common share $0.34  $0.25  $0.76  $0.78 
Dividend per share $0.12  $0.12  $0.36  $0.36 
Book value per common share (2) $10.96  $9.97  $10.96  $9.97 
         
Selected Balance Sheet Data:         
Assets $680,840  $595,243  $680,840  $595,243 
Loans, net  554,122   481,419   554,122   481,419 
Deposits  605,130   504,052   605,130   504,052 
Average assets  652,043   587,062   634,375   581,960 
Average earning assets  635,579   575,954   618,081   570,747 
Average shareholders' equity  65,859   60,593   64,047   60,076 
Nonperforming loans  592   2,170   592   2,170 
Total nonperforming assets  592   2,170   592   2,170 
Troubled debt restructures (accruing)  2,429   1,749   2,429   1,749 
         
Selected Ratios:        
Return on average assets (1)  1.24%  1.02%  0.98%  1.08%
Return on average common shareholders' equity (1)  12.32%  9.85%  9.69%  10.47%
Efficiency ratio (3)  54.44%  65.29%  63.75%  61.73%
Net interest margin (1)  3.60%  3.80%  3.64%  3.76%
Common equity tier 1 capital ratio  10.3%  10.9%  10.3%  10.9%
Tier 1 capital ratio  10.3%  10.9%  10.3%  10.9%
Total capital ratio  12.5%  12.0%  12.5%  12.0%
Tier 1 leverage ratio  9.0%  10.1%  9.0%  10.1%
Common dividend payout ratio (4)  35.60%  48.37%  47.07%  46.41%
Average shareholders' equity to average assets  10.10%  10.32%  10.10%  10.32%
Nonperforming loans to total loans  0.11%  0.45%  0.11%  0.45%
Nonperforming assets to total assets  0.09%  0.36%  0.09%  0.36%
Allowance for loan losses to total loans  1.17%  1.20%  1.17%  1.20%
Allowance for loan losses to nonperforming loans  1105.95%  269.26%  1105.95%  269.26%
     
(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 and losses.    
(4) Common dividends divided by net income available for common shareholders.    

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