SANTA ROSA, Calif., July 27, 2021 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq: SSBI) today reported record net income for the quarter ended June 30, 2021 of $3,898,000 and diluted earnings per share of $0.64. This compares to net income of $2,218,000 and diluted earnings per share of $0.37 for the quarter ended June 30, 2020. Additionally, 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 July 26, 2021 to be paid on August 20, 2021 to shareholders of record on August 13, 2021.
Net Income and Results of Operations
Net income increased $1,680,000 or 76% the second quarter of 2021 compared to second quarter of 2020. Net interest income increased to $8,976,000 in the second quarter of 2021 compared to $7,174,000 in the second quarter of 2020.
“The Bank continues to experience strong core earnings growth in the first half of 2021,” noted Brian Reed, President and CEO. “The full opening of local businesses in June was a welcomed change. Although the future impacts to the economy is unknown and many economic indicators provide a mixed review on the speed of the recovery, we are pleased to see many businesses beginning to feel the positive impact of this transition.”
The net interest margin for the second quarter of 2021 was 4.13%, annualized return on average assets was 1.76% and annualized return on average equity was 20.18%. The second quarter of 2020 had a net interest margin was 3.71%, annualized return on average assets was 1.12% and annualized return on average equity was 12.71%. The Bank is experiencing growth in its margin due to a reduction in cost of funds; this reduction was caused by repricing high cost maturing deposits and an increase in low-cost, non-maturing deposit volume.
Interest income increased to $10,082,000 in the second quarter of 2021 compared to $8,816,000 in the second quarter of 2020, this was an increase of 14%. The increase in interest income is primarily attributable to $1,201,000 from increases in loan balances and $87,000 from increases in income, net of fees, due to the Paycheck Protection Program (“PPP”) loans. The fees collected from all SBA PPP loans are amortized over the life of the loan and upon forgiveness the remaining fee income, net of cost, is taken into interest income. In the second quarter of 2021, the Bank recorded $468,000 in PPP fees net of costs; the Bank has $1,094,000 in remaining PPP fees net of costs left to amortize.
“The Bank funded $134,000,000 of PPP loans for both Round 1 and Round 2 to over 860 loans averaging about $156,000 per loan,” said Reed. “We are pleased to have the opportunity to provide our customers and communities with these loans. We are now focused on actively working with our customers to request forgiveness from the SBA for both rounds of PPP loans. Currently the Bank has approximately $13,000,000 in SBA Round 1 loans and $35,000,000 in SBA Round 2 loans remaining to be forgiven.”
Loans increased 8% to $765,461,000 at June 30, 2021 compared to $709,689,000 at June 30, 2020. Excluding PPP loans, loans increased 17% to $717,295,000 at June 30, 2021 compared to $614,155,000 at June 30, 2020. Total deposits increased 8% to $763,953,000 at June 30, 2021 compared to $709,473,000 at June 30, 2020.
Non-interest income increased in the second quarter of 2021 to $1,597,000 compared to $693,000 in the second quarter of 2020. The Bank recognized $1,160,000 in gains on sales of SBA guaranteed loan balances in the second quarter of 2021 compared to $320,000 in gains on sales of SBA guaranteed loans balances in the second quarter of 2020.
Operating expenses increased $821,000 or 19% in the second quarter of 2021 to $5,037,000 compared to $4,216,000 in the second quarter of 2020. The increase in expenses is primarily due to deferred loan costs for PPP loans boarded Q2 2020 totaling approximately $590,000; these costs are amortized over two-years and all remaining balances are expensed when a PPP loan is paid in full, or the forgiveness payment is received by the SBA. Other factors causing the increase in expense is a $113,000 increase in commissions directly related to the Bank’s loan portfolio growth and a $70,000 increase in salary expenses net of deferred loan costs. The Bank is achieving economies of scale as it grows, resulting in an efficiency ratio improvement which went from 53.59% for the second quarter of 2020 to 47.86% for the second quarter of 2021.
Nonperforming assets were $464,000 or 0.05% of total assets at June 30, 2021 compared to $407,000 or 0.05% on June 30, 2020. The nonperforming assets on June 30, 2021 consist of 2 loans that are secured by real property and another loan that has a guarantee.
The Bank had no provision expense in the second quarter of 2021. The allowance for credit losses to total loans including SBA-guaranteed PPP loans was 1.50% on June 30, 2021 and 1.11% on June 30, 2020. Excluding $48,166,000 of PPP loan balances, the non-GAAP financial measurement ratio of allowance for credit losses increases to 1.60% and 1.28% on June 30, 2021 and 2020, respectively.
As of June 30, 2021, 5 loans totaling $3,169,000 or 0.4% of the loan portfolio excluding PPP loans were in principal and interest deferral. The loan to value ranges from 11% to 68%, and 93% of the deferred loans are real estate secured.
Reed further explains “we are fortunate to maintain improved financial performance on our core operations during an unforgettable global crisis. With the recent change to fully opening businesses Sonoma County, we continue to support our customers as they transition into the post-pandemic recovery process.”
About Summit State Bank
Summit State Bank, a local community bank, has total assets of $902 million and total equity of $79 million at June 30, 2021. 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, 66% 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 | |||||||||||||||
| STATEMENTS OF INCOME | |||||||||||||||
| (In thousands except earnings per share data) | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
| Interest income: | |||||||||||||||
| Interest and fees on loans | $ | 9,618 | $ | 8,329 | $ | 19,591 | $ | 16,148 | |||||||
| Interest on deposits with banks | 7 | 7 | 15 | 51 | |||||||||||
| Interest on investment securities | 396 | 393 | 779 | 762 | |||||||||||
| Dividends on FHLB stock | 61 | 87 | 104 | 146 | |||||||||||
| Total interest income | 10,082 | 8,816 | 20,489 | 17,107 | |||||||||||
| Interest expense: | |||||||||||||||
| Deposits | 818 | 1,343 | 1,751 | 2,788 | |||||||||||
| Federal Home Loan Bank advances | 194 | 205 | 387 | 433 | |||||||||||
| Junior Subordinated Debt | 94 | 94 | 187 | 188 | |||||||||||
| Total interest expense | 1,106 | 1,642 | 2,325 | 3,409 | |||||||||||
| Net interest income before provision for credit losses | 8,976 | 7,174 | 18,164 | 13,698 | |||||||||||
| Allowance for credit losses (1) | - | 500 | 335 | 1,100 | |||||||||||
| Net interest income after provision for credit losses | 8,976 | 6,674 | 17,828 | 12,598 | |||||||||||
| Non-interest income: | |||||||||||||||
| Service charges on deposit accounts | 208 | 178 | 411 | 393 | |||||||||||
| Rental income | 88 | 88 | 175 | 175 | |||||||||||
| Net gain on loan sales | 1,160 | 320 | 1,509 | 1,017 | |||||||||||
| Net securities gain | 49 | - | 56 | 871 | |||||||||||
| Other income | 92 | 107 | 142 | 167 | |||||||||||
| Total non-interest income | 1,598 | 693 | 2,293 | 2,623 | |||||||||||
| Non-interest expense: | |||||||||||||||
| Salaries and employee benefits | 3,153 | 2,431 | 6,170 | 5,154 | |||||||||||
| Occupancy and equipment | 418 | 424 | 832 | 807 | |||||||||||
| Other expenses | 1,466 | 1,361 | 2,874 | 2,676 | |||||||||||
| Total non-interest expense | 5,037 | 4,216 | 9,877 | 8,637 | |||||||||||
| Income before provision for income taxes | 5,536 | 3,151 | 10,244 | 6,584 | |||||||||||
| Provision for income taxes | 1,638 | 933 | 3,031 | 1,950 | |||||||||||
| Net income | $ | 3,899 | $ | 2,218 | $ | 7,214 | $ | 4,634 | |||||||
| Basic earnings per common share | $ | 0.64 | $ | 0.37 | $ | 1.19 | $ | 0.76 | |||||||
| Diluted earnings per common share | $ | 0.64 | $ | 0.37 | $ | 1.19 | $ | 0.76 | |||||||
| Basic weighted average shares of common stock outstanding | 6,070 | 6,070 | 6,070 | 6,070 | |||||||||||
| Diluted weighted average shares of common stock outstanding | 6,075 | 6,074 | 6,072 | 6,072 | |||||||||||
| (1) Allowance in 2021 reported with current expected credit loss ("CECL") method, all prior period allowance is reported in accordance with previous GAAP incurred loss method. | |||||||||||||||
| SUMMIT STATE BANK | |||||||||||
| BALANCE SHEETS | |||||||||||
| (In thousands except share data) | |||||||||||
| June 30, 2021 | December 31, 2020 | June 30, 2020 | |||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
| ASSETS | |||||||||||
| Cash and due from banks | $ | 56,143 | $ | 30,826 | $ | 67,954 | |||||
| Total cash and cash equivalents | 56,143 | 30,826 | 67,954 | ||||||||
| Investment securities: | |||||||||||
| Available-for-sale (at fair value; amortized cost of $66,666, | |||||||||||
| $66,335 and $58,807) | 67,096 | 67,952 | 60,472 | ||||||||
| Total investment securities | 67,096 | 67,952 | 60,472 | ||||||||
| Loans, less allowance for credit losses of $11,482, $8,882 and $7,881 (1) | 753,979 | 745,939 | 701,808 | ||||||||
| Bank premises and equipment, net | 5,841 | 5,994 | 6,191 | ||||||||
| Investment in Federal Home Loan Bank stock, at cost | 4,320 | 3,429 | 3,429 | ||||||||
| Goodwill | 4,119 | 4,119 | 4,119 | ||||||||
| Accrued interest receivable and other assets | 10,145 | 7,595 | 6,686 | ||||||||
| Total assets | $ | 901,643 | $ | 865,854 | $ | 850,659 | |||||
| LIABILITIES AND | |||||||||||
| SHAREHOLDERS' EQUITY | |||||||||||
| Deposits: | |||||||||||
| Demand - non interest-bearing | $ | 232,206 | $ | 199,097 | $ | 202,012 | |||||
| Demand - interest-bearing | 120,664 | 88,684 | 79,570 | ||||||||
| Savings | 50,380 | 42,120 | 36,887 | ||||||||
| Money market | 162,157 | 167,113 | 136,754 | ||||||||
| Time deposits that meet or exceed the FDIC insurance limit | 32,535 | 35,765 | 44,092 | ||||||||
| Other time deposits | 166,011 | 193,516 | 210,158 | ||||||||
| Total deposits | 763,953 | 726,295 | 709,473 | ||||||||
| Federal Home Loan Bank advances | 48,500 | 53,500 | 58,500 | ||||||||
| Junior subordinated debt | 5,884 | 5,876 | 5,869 | ||||||||
| Accrued interest payable and other liabilities | 4,329 | 4,554 | 5,581 | ||||||||
| Total liabilities | 822,666 | 790,225 | 779,423 | ||||||||
| 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, 6,069,600 and 6,069,600 | 36,981 | 36,981 | 36,981 | ||||||||
| Retained earnings | 41,693 | 37,510 | 33,083 | ||||||||
| Accumulated other comprehensive income, net | 303 | 1,138 | 1,172 | ||||||||
| Total shareholders' equity | 78,977 | 75,629 | 71,236 | ||||||||
| Total liabilities and shareholders' equity | $ | 901,643 | $ | 865,854 | $ | 850,659 | |||||
| (1) Allowance in 2021 reported with current expected credit loss ("CECL") method, all prior period allowance is reported in accordance with previous GAAP incurred loss method. | |||||||||||
| Financial Summary | ||||||||||||||||
| (Dollars in thousands except per share data) | ||||||||||||||||
| As of and for the | As of and for the | |||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Statement of Income Data: | ||||||||||||||||
| Net interest income | $ | 8,976 | $ | 7,174 | $ | 18,164 | $ | 13,698 | ||||||||
| Provision for credit losses (5) | - | 500 | 335 | 1,100 | ||||||||||||
| Non-interest income | 1,598 | 693 | 2,293 | 2,623 | ||||||||||||
| Non-interest expense | 5,037 | 4,216 | 9,877 | 8,637 | ||||||||||||
| Provision for income taxes | 1,638 | 933 | 3,031 | 1,950 | ||||||||||||
| Net income | $ | 3,899 | $ | 2,218 | $ | 7,214 | $ | 4,634 | ||||||||
| Selected per Common Share Data: | ||||||||||||||||
| Basic earnings per common share | $ | 0.64 | $ | 0.37 | $ | 1.19 | $ | 0.76 | ||||||||
| Diluted earnings per common share | $ | 0.64 | $ | 0.37 | $ | 1.19 | $ | 0.76 | ||||||||
| Dividend per share | $ | 0.12 | $ | 0.12 | $ | 0.24 | $ | 0.24 | ||||||||
| Book value per common share (1) | $ | 13.01 | $ | 11.74 | $ | 13.01 | $ | 11.74 | ||||||||
| Selected Balance Sheet Data: | ||||||||||||||||
| Assets | $ | 901,643 | $ | 850,659 | $ | 901,643 | $ | 850,659 | ||||||||
| Loans, net (5) | 753,979 | 701,808 | 753,979 | 701,808 | ||||||||||||
| Deposits | 763,953 | 709,473 | 763,953 | 709,473 | ||||||||||||
| Average assets | 888,439 | 794,442 | 880,752 | 741,642 | ||||||||||||
| Average earning assets | 872,483 | 775,852 | 864,616 | 724,791 | ||||||||||||
| Average shareholders' equity | 77,477 | 69,969 | 76,520 | 69,269 | ||||||||||||
| Nonperforming loans | 464 | 407 | 464 | 407 | ||||||||||||
| Total nonperforming assets | 464 | 407 | 464 | 407 | ||||||||||||
| Troubled debt restructures (accruing) | 2,160 | 2,214 | 2,160 | 2,214 | ||||||||||||
| Selected Ratios: | ||||||||||||||||
| Return on average assets (2) | 1.76 | % | 1.12 | % | 1.65 | % | 1.25 | % | ||||||||
| Return on average common shareholders' equity (2) | 20.18 | % | 12.71 | % | 19.01 | % | 13.42 | % | ||||||||
| Efficiency ratio (3) | 47.87 | % | 53.59 | % | 48.41 | % | 55.90 | % | ||||||||
| Net interest margin (2) | 4.13 | % | 3.71 | % | 4.24 | % | 3.81 | % | ||||||||
| Common equity tier 1 capital ratio | 10.03 | % | 10.40 | % | 10.03 | % | 10.40 | % | ||||||||
| Tier 1 capital ratio | 10.03 | % | 10.40 | % | 10.03 | % | 10.40 | % | ||||||||
| Total capital ratio | 12.04 | % | 12.60 | % | 12.04 | % | 12.60 | % | ||||||||
| Tier 1 leverage ratio | 8.29 | % | 8.20 | % | 8.29 | % | 8.20 | % | ||||||||
| Common dividend payout ratio (4) | 18.68 | % | 32.82 | % | 20.19 | % | 31.44 | % | ||||||||
| Average shareholders' equity to average assets | 8.72 | % | 8.81 | % | 8.69 | % | 9.34 | % | ||||||||
| Nonperforming loans to total loans | 0.06 | % | 0.06 | % | 0.06 | % | 0.06 | % | ||||||||
| Nonperforming assets to total assets | 0.05 | % | 0.05 | % | 0.05 | % | 0.05 | % | ||||||||
| Allowance for credit losses to total loans (5) | 1.50 | % | 1.11 | % | 1.50 | % | 1.11 | % | ||||||||
| Allowance for credit losses to total loans excluding PPP (5)* | 1.60 | % | 1.28 | % | 1.60 | % | 1.28 | % | ||||||||
| Allowance for credit losses to nonperforming loans (5) | 2476.35 | % | 1938.33 | % | 2476.35 | % | 1938.33 | % | ||||||||
| (1) Total shareholders' equity divided by total common shares outstanding. | ||||||||||||||||
| (2) Annualized. | ||||||||||||||||
| (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. | ||||||||||||||||
| (5) Allowance in 2021 reported with current expected credit loss ("CECL") method, all prior period allowance is reported in accordance with previous GAAP incurred loss method. | ||||||||||||||||
| *Non-GAAP Financial Measures: | ||||||||||||||||
| This news release contains a non-GAAP (Generally Accepted Accounting Principles) financial measure in addition to results presented in accordance with GAAP for the allowance for credit losses to total loans excluding PPP loans. The Bank has presented this non-GAAP financial measure in the earnings release because it believes that it provides useful information to assess the Bank’s allowance for credit loss reserves. This non-GAAP financial measure has inherent limitations, is not required to be uniformly applied, and is not audited. Further, this non-GAAP financial measure should not be considered in isolation or as a substitute for the allowance for credit losses to total loans determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other financial institutions. Reconciliation of the GAAP and non-GAAP financial measurement is presented below. | ||||||||||||||||
| June 30, 2021 | March 31, 2021 | December 30, 2020 | September 30, 2020 | June 30, 2020 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||
| Allowance for Credit Losses (ACL) on loans to Loans receivable, excluding SBA PPP loans | ||||||||||||||||||||||
| Allowance for credit losses on loans (1) | $ | (11,482 | ) | $ | (11,476 | ) | $ | (8,882 | ) | $ | (8,393 | ) | $ | (7,881 | ) | |||||||
| Loans receivable (GAAP) | $ | 765,461 | $ | 761,416 | $ | 754,820 | $ | 735,252 | $ | 709,689 | ||||||||||||
| Excluding SBA PPP loans | 48,166 | 66,313 | 69,583 | 96,710 | 95,534 | |||||||||||||||||
| Loans receivable, excluding SBA PPP (non-GAAP) | $ | 717,296 | $ | 695,103 | $ | 685,237 | $ | 638,542 | $ | 614,155 | ||||||||||||
| ACL on loans to Loans receivable (GAAP) | 1.50 | % | 1.51 | % | 1.18 | % | 1.14 | % | 1.11 | % | ||||||||||||
| ACL on loans to Loans receivable, excluding SBA PPP loans (non-GAAP) | 1.60 | % | 1.65 | % | 1.30 | % | 1.31 | % | 1.28 | % | ||||||||||||
| (1) Allowance in 2021 reported with current expected credit loss ("CECL") method, all prior period allowance is reported in accordance with previous GAAP incurred loss method. | ||||||||||||||||||||||