Market Overview

Summit State Bank Reports Over 100% Increase in Profitability and Declaration of Dividend

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SANTA ROSA, Calif., Oct. 29, 2012 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended September 30, 2012 of $977,000, a 139% increase over the quarter ended September 30, 2011. The regular quarterly dividend of $0.09 per share was declared for common shareholders.

Dividend

The Board of Directors today declared a $0.09 quarterly common stock dividend to be paid on November 23 to shareholders of record on November 15.

Net Income and Results of Operations

The Bank had net income of $977,000 and net income available for common stockholders of $883,000, or $0.19 per diluted share, for the quarter ended September 30, 2012 compared to net income of $409,000 and net income available for common stockholders of $207,000, or $0.04 per diluted share, for the quarter ended September 30, 2011. For the nine months ended September 30, 2012 and 2011, net income available for common stockholders was $1,986,000 and $1,198,000 and diluted earnings per share was $0.42 and $0.25.

"Our profitability growth is largely a result of our ongoing success in driving a greater number of full banking relationships into Summit through the focus and hard work of our top quality team. The continuing growth in core deposits is providing us the proper funding for increasing loans into Sonoma County as part of our $50,000,000 Small Business Lending program to benefit our community," said Thomas Duryea, President and CEO.

Net interest income increased to $3,989,000 for the third quarter of 2012 compared to $3,873,000 for the same quarter in 2011. Net interest income declined $128,000 between the nine month periods. The increase in the net interest income for the quarter was primarily due to a 7.2% increase in average earning assets which offset a decline in the net interest margin to 3.96% compared to 4.11% for the third quarter of 2011. The net interest margin decline was the result of investments purchased to replace called investments, with lower replacement yields and loans originated or renewed at lower yields.

Non-interest income for the third quarter of 2012 was $1,737,000. This included income recorded from a property defect settlement in the amount of $1,363,000. Non-interest income was $374,000 in the third quarter of 2012 compared to $278,000 in the third quarter 2011, net of security gains and the non-recurring building settlement monies. The increase in net non-interest income was from rental income on foreclosed commercial property of $117,000.

"The net interest margin continues to be a challenge for all banks in this present low rate environment. Its impact has been partially offset by the continuing increase in lower cost core deposits, asset growth, non-interest income, and flat operating expenses," said Dennis Kelley, Chief Financial Officer.

Core deposits, defined as demand, money market and savings, increased 26% between September 30, 2012 and 2011, with non-interest bearing demand deposits increasing 53%. Core Deposits represent 48% of total deposits compared to 39% at September 30, 2011.

"We have continued to reduce the Bank's funding costs by actively opening new relationship deposit accounts which have a lower cost than time deposits to enhance our community banking franchise value and long term sustainability to serve our community," stated Thomas Duryea.

The Bank's efficiency ratio, which expresses operating costs as a percentage of revenues, excluding securities' gains and the impact of the building settlement described above, was 55% for the third quarter of 2012 compared to 61% for the same quarter in 2011. For the nine months ended September 30, 2012 and 2011, the efficiency ratio was 58% and 60%, respectively. Operating expense between the quarters remained relatively stable at $2,564,000 at September 30, 2012 compared to $2,528,000 at September 30, 2011 and therefore the decline in the efficiency ratio was driven by increased revenues.

Total Assets increased 11% to $429,722,000 at September 30, 2012 compared to $387,625,000 at December 31, 2011. Net loans increased 5% to $283,318,000 at September 30, 2012 compared to $269,963,000 at December 31, 2011.

Nonperforming assets declined to 3.0% at September 30, 2012 compared to 4.2% at June 30, 2012. Nonperforming assets at September 30, 2012 consisted of $8,210,000 of loans on non-accrual and $4,845,000 of foreclosed real estate. This compares favorably to nonperforming assets of $12,009,000 in loans on non-accrual and $5,101,000 in foreclosed real estate at June 30, 2012.

"Our non-performing loans as a percentage of total loans decreased from 4.32% at June 30, 2012 to 2.83% at September 30, 2012 as we were able to make noticeable progress in problem loan resolutions in the third quarter through the hard work of our credit team. We remain committed to continuing improvement, which should further strengthen the bank's performance," said, Bill Fogarty, Chief Credit Officer

The provision for loan losses was $1,500,000 for third quarter of 2012 and $3,360,000 for the nine month period compared to $1,600,000 and $3,000,000 for the same periods in 2011. The provision in the third quarter of 2012 enabled bank to resolve a number of former problem credits which partially contributed to net charge-offs for the quarter of $1,888,000. The allowance for loan losses to total loans represented 2.23% and 2.53% at September 30, 2012 and 2011.

The Bank's regulatory capital remains well above the required capital ratios with a Tier 1 capital leverage ratio of 14%, a Tier 1 risk-based capital ratio of 17% and a Total risk-based capital ratio of 18% at September 30, 2012.

About Summit State Bank

Summit State Bank has total assets of $430 million and total equity of $62 million at September 30, 2012. Headquartered in Sonoma County, the Bank provides diverse financial products and services throughout Sonoma, Napa, San Francisco, and Marin Counties. Summit State Bank is a Top Performing Bank, earning the highest Findley Reports designation of all Sonoma County-based banks. Summit State Bank received the 2012 Community Bank Award from the American Bankers Association. In addition, Summit has been recognized with the Gold Medal award for Best Business Bank from the Northbay Biz Magazine and as one of the North Bay's Best Places to Work by the North Bay Business Journal. 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 BALANCE SHEETS
(In thousands except share and per share data)
       
  September 30, December 31, September 30,
  2012 2011 2011
  (Unaudited) (Unaudited) (Unaudited)
       
ASSETS      
       
Cash and due from banks  $ 21,916  $ 8,290  $ 19,169
Federal funds sold  --  --  --
Total cash and cash equivalents  21,916  8,290  19,169
       
Time deposits with banks  2,977  --  --
Available-for-sale investment securities - amortized cost of $98,403 in 2012 and $87,001 in 2011  100,750  88,660  79,914
Loans, less allowance for loan losses of $6,454 in 2012 and $5,411 in 2011  283,318  269,963  271,687
Bank premises and equipment, net   5,325  6,731  6,883
Investment in Federal Home Loan Bank stock, at cost  2,265  2,190  2,296
Goodwill  4,119  4,119  4,119
Other Real Estate Owned  4,845  1,074  4,319
Accrued interest receivable and other assets   4,207  6,598  6,695
       
Total assets  $ 429,722  $ 387,625  $ 395,082
       
LIABILITIES AND      
SHAREHOLDERS' EQUITY      
       
Deposits:      
Demand - non interest-bearing  $ 51,840  $ 31,022  $ 33,712
Demand - interest-bearing  26,808  25,743  26,861
Savings  21,800  20,201  22,678
Money market  59,693  47,455  43,616
Time deposits, $100 thousand and over  124,300  140,680  143,357
Other time deposits  47,981  46,957  54,319
Total deposits  332,422  312,058  324,543
       
Federal Home Loan Bank (FHLB) advances  34,000  13,750  7,000
Accrued interest payable and other liabilities  1,151  808  2,189
       
Total liabilities  367,573  326,616  333,732
       
Shareholders' equity       
Preferred stock, no par value; 20,000,000 shares authorized; shares issued and outstanding - 13,750 series B in 2012 and 2011; per share redemption of $1,000 for total liquidation preference of $13,750  13,666  13,666  13,666
Common stock, no par value; shares authorized - 30,000,000 shares; issued and outstanding 4,744,720 at September 30, 2012 and December 31, 2011  36,387  36,352  36,341
Common stock warrant  --  --  --
Retained earnings  10,735  10,030  10,077
Accumulated other comprehensive income, net of taxes   1,361  961  1,266
       
Total shareholders' equity  62,149  61,009  61,350
       
Total liabilities and shareholders' equity  $ 429,722  $ 387,625  $ 395,082
 
 
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except for earnings per share data)
         
  Three Months Ended Nine Months Ended
  September 30,
2012
September 30,
2011
September 30,
2012
September 30,
2011
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Interest income:        
Interest and fees on loans  $ 3,718  $ 3,915  $ 11,190  $ 12,546
Interest on Federal funds sold  --  --  --  5
Interest on investment securities and deposits in banks  725  710  2,410  1,826
Dividends on FHLB stock  3  1  8  5
         
Total interest income  4,446  4,626  13,608  14,382
         
Interest expense:        
Deposits   441  669  1,450  1,995
FHLB advances  16  84  155  256
         
Total interest expense  457  753  1,605  2,251
         
Net interest income before provision for loan losses  3,989  3,873  12,003  12,131
         
Provision for loan losses   1,500  1,600  3,360  3,000
         
Net interest income after provision for loan losses  2,489  2,273  8,643  9,131
         
Non-interest income:        
         
Service charges on deposit accounts  137  140  390  388
Office leases   122  116  376  395
Net securities gains  1  655  750  655
Loan servicing, net  6  6  23  20
Other income   1,471  16  1,680  18
         
Total non-interest income  1,737  933  3,219  1,476
         
Non-interest expense:        
Salaries and employee benefits   1,342  1,217  3,975  3,847
Occupancy and equipment   351  374  1,088  1,214
Other expenses   871  937  2,675  2,697
         
Total non-interest expense  2,564  2,528  7,738  7,758
         
Income before provision for income taxes  1,662  678  4,124  2,849
         
Provision for income taxes   685  269  1,700  1,173
         
Net income  $ 977  $ 409  $ 2,424  $ 1,676
         
Less: preferred dividends 94  202 438  478
         
Net income available for common stockholders  $ 883  $ 207  $ 1,986  $ 1,198
         
Basic earnings per common share  $ 0.19  $ 0.04  $ 0.42  $ 0.25
Diluted earnings per common share  $ 0.19  $ 0.04  $ 0.42  $ 0.25
         
Basic weighted average shares of common stock outstanding 4,745 4,745 4,745 4,745
Diluted weighted average shares of common stock outstanding 4,746 4,745 4,746 4,745
 
 
Earnings Summary
(In Thousands)
         
         
  Three Months Ended Nine Months Ended
  September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statement of Income Data:        
Net interest income  $ 3,989  $ 3,873  $ 12,003  $ 12,131
Provision for loan losses   1,500  1,600  3,360  3,000
Non-interest income  1,737  933  3,219  1,476
Non-interest expense  2,564  2,528  7,738  7,758
Provision for income taxes   685  269  1,700  1,173
Net income  $ 977  $ 409  $ 2,424  $ 1,676
Less: preferred dividends  94  202  438  478
Net income available for common stockholders  $ 883  $ 207  $ 1,986  $ 1,198
         
Selected per Common Share Data:        
Basic earnings per common share  $ 0.19  $ 0.04  $ 0.42  $ 0.25
Diluted earnings per common share  $ 0.19  $ 0.04  $ 0.42  $ 0.25
Dividend per share  $ 0.09  $ 0.09  $ 0.27  $ 0.27
Book value per common share (2)(3)  $ 10.22  $ 10.05  $ 10.22  $ 10.05
         
Selected Balance Sheet Data:         
Assets  $ 429,722  $ 395,082  $ 429,722  $ 395,082
Loans, net  283,318  271,687  283,318  271,687
Deposits  332,422  324,543  332,422  324,543
Average assets  415,966  387,308  403,041  372,623
Average earning assets  400,834  373,872  386,638  358,809
Average shareholders' equity  61,879  59,863  61,463  57,109
Average common shareholders' equity  48,213  47,831  47,797  47,247
Nonperforming loans  8,210  9,639  8,210  9,639
Total nonperforming assets  13,055  13,958  13,055  13,958
         
Selected Ratios:        
Return on average assets (1) 0.93% 0.42% 0.80% 0.60%
Return on average common equity (1) 7.29% 1.72% 5.55% 3.39%
Efficiency ratio (4) 55.30% 60.90% 57.87% 59.90%
Net interest margin (1) 3.96% 4.11% 4.15% 4.52%
Tier 1 leverage capital ratio 13.8% 14.6% 13.8% 14.6%
Tier 1 risk-based capital ratio 17.0% 18.5% 17.0% 18.5%
Total risk-based capital ratio 18.2% 19.7% 18.2% 19.7%
Common dividend payout ratio (5) 48.36% 206.3% 64.50% 71.29%
Average equity to average assets 14.88% 15.46% 15.25% 15.33%
Nonperforming loans to total loans (2) 2.83% 3.46% 2.83% 3.46%
Nonperforming assets to total assets (2) 3.04% 3.53% 3.04% 3.53%
Allowance for loan losses to total loans (2) 2.23% 2.53% 2.23% 2.53%
Allowance for loan losses to nonperforming loans (2) 78.62% 73.18% 78.62% 73.18%
 
(1) Annualized
(2) As of period end
(3) Total shareholders' equity, less preferred stock, divided by total common shares outstanding
(4) Excludes securities gains and in 2012, the building settlement
(5) Common dividends divided by net income available for common stockholders
CONTACT: Thomas Duryea, President and CEO Summit State Bank (707) 568-4920
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