Market Overview

Summit State Bank Reports 36% Increase in Profitability and Declaration of Dividend

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SANTA ROSA, Calif., July 28, 2015 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended June 30, 2015 of $1,746,000, a 36% increase over the quarter ended June 30, 2014. A quarterly dividend of $0.12 per share was declared for common shareholders.

Dividend

The Board of Directors declared a $0.12 quarterly dividend to be paid on August 25, 2015 to common shareholders of record on August 17, 2015.

Net Income and Results of Operations

The Bank had net income of $1,746,000 and net income available for common stockholders of $1,712,000, or $0.35 per diluted common share, for the quarter ended June 30, 2015 compared to net income of $1,281,000 and net income available for common stockholders of $1,247,000, or $0.26 per diluted common share, for the quarter ended June 30, 2014. For the six months ended June 30, 2015 and 2014, net income available for common stockholders and diluted earnings per common share were $3,399,000 or $0.70 and $2,422,000 or $0.50.

Net income for the second quarter periods benefited from the reversal of the allowance for loan losses of $800,000 in 2015 and $400,000 in 2014. Without these benefits pre-tax operating income increased 22% between the quarters. Additionally, the six month periods benefitted from gain on sale of foreclosed properties of $1,125,000 and $73,000 during the first quarter periods. Without the allowance for loan loss reversals and gain on foreclosed properties, the six month periods pre-tax operating income increased 5.6%.

"Our earnings continue to be driven by our community banking team's strong efforts in attracting like-minded quality local small businesses, their owners, individuals, and non-profits to our Summit Way brand of community banking as loan activity has picked up nicely in the first half of 2015," said Tom Duryea, President and CEO.

Return on average assets for the quarter and first six months of 2015 were 1.47% and 1.49% compared to 1.12% and 1.10% for the same periods in 2014. Return on average common equity for the six months ended June 30, 2015 was 12.5% compared to 9.8% in the first six months of 2014. Excluding the impact of the $800,000 reversal of the allowance for loan losses in the second quarter of 2015, the return on average assets would have been 1.07% in the second quarter of 2015.

The net interest margin was stable at 3.73% in the second quarter of 2015 compared to 3.76% in the second quarter of 2014. The six month periods had a decline to 3.74% in 2015 compared to 3.84% in 2014. Net interest income increased 4.8% between the two second quarters and increased 1% between the six month periods. Total loans increased 8.2% at June 30, 2015 compared to March 31, 2015 and increased 13% from December 31, 2014.

"We have been experiencing a strong increase in local commercial loan activity driven by our community banking team's growing reputation for delivering top customer service to our ever increasing portfolio of quality business relationships that continue to strengthen our local Sonoma County community," said Brandy Seppi, Senior Vice President and Chief Credit Officer.

Non-interest operating expenses declined between the second quarter comparisons and the six month comparisons. The declines in operating expenses were largely loan related and only partially offset with an increase in occupancy expense.

The efficiency ratio for the second quarters of 2015 and 2014 were 54.5% and 61.0%. For the six month periods the ratios were 51.3% and 58.7% in 2015 compared to 2014.

Total assets increased 6% to $492,283,000 at June 30, 2015 compared to $463,470,000 at June 30, 2014, primarily driven by loan growth.

Deposit totals remained the same, but the mix of deposit types continued to improve with a 12% increase in demand, savings and money market deposits between June 30, 2015 and 2014 with demand deposits representing 66% of this growth. Demand, savings and money market deposits now constitute 62% of total deposits at June 30, 2015 compared to 55% at June 30, 2014.

Nonperforming assets declined to $1,440,000 for June 30, 2015 compared to $8,529,000 for June 30, 2014. This represents a decline in the ratio of nonperforming assets to total assets to 0.29% compared to 1.84%. The Bank reversed $800,000 of the allowance for loan losses in the second quarter of 2015 as there is continued improvement in nonperforming assets. The coverage of allowance for loan losses to gross loans was 1.39% at June 30, 2015 compared to 1.69% at June 30, 2014.

Summit State Bank continues to concentrate on its location in the heart of Sonoma Wine Country, which has provided a diverse economic base for its banking activities. Our strategic plan has focused on supporting the net interest margin by lowering the Bank's cost of funds by increasing the funding by core or transactional deposit accounts. The increased earning asset base has offset the decline in net interest margin that is being experienced in the industry. Continued focus on controlling expenses has resulted in period over period favorable comparisons and is aided with the ability to offer bank customers functional mobile and internet banking access.

"Summit has been able to efficiently manage costs while increasing our assets despite the competition in the banking community and the challenges of an improving local economy. We continue to attract commercial customer relationships based on our responsive and relationship focused Summit Way service culture," said Linda Bertauche, Senior Vice President, Chief Operating Officer.

About Summit State Bank

Summit State Bank has total assets of $492 million and total equity of $69 million at June 30, 2015. Headquartered in Sonoma County, the Bank specializes in providing exceptional services and solutions to aid in the success of local businesses and nonprofits throughout Sonoma, Napa, San Francisco, and Marin Counties. Summit State Bank was again named to the Top 75 Corporate Philanthropists list by the San Francisco Business Times and received the Top Corporate Philanthropy Award by North Bay Business Journal. Summit has also been consistently recognized as a high performing bank by Findley Reports, received the 2013 Rising Star Award from the California Independent Bankers, the 2012 Community Bank Award from the American Bankers Association for its nonprofit work, and has been recognized 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 STATEMENTS OF INCOME
(In thousands except earnings per share data)
 
  Three Months Ended Six Months Ended
  June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Interest income:        
Interest and fees on loans  $ 3,474  $ 3,454  $ 6,848  $ 7,002
Interest on federal funds sold  1  1  $ 1  1
Interest on investment securities and deposits in banks  944  914  1,901  1,851
Dividends on FHLB stock  151  43  199  87
Total interest income  4,570  4,412  8,949  8,941
Interest expense:        
Deposits   174  218  353  440
FHLB advances  45  44  89  81
Total interest expense  219  262  442  521
Net interest income before provision for loan losses  4,351  4,150  8,507  8,420
Provision for loan losses   (800)  (400)  (800)  (400)
Net interest income after provision for loan losses  5,151  4,550  9,307  8,820
Non-interest income:        
Service charges on deposit accounts  181  152  337  286
Rental income  133  130  266  262
Net securities gain  52  13  52  13
Net gain on other real estate owned  --  --  1,125  73
Loan servicing, net  2  3  4  7
Other income   (8)  95  118  214
Total non-interest income  360  393  1,902  855
Non-interest expense:        
Salaries and employee benefits   1,304  1,372  2,717  2,740
Occupancy and equipment   341  321  650  613
Other expenses   896  1,072  1,942  2,085
Total non-interest expense  2,541  2,765  5,309  5,438
Income before provision for income taxes  2,970  2,178  5,900  4,237
Provision for income taxes   1,224  897  2,432  1,746
Net income  $ 1,746  $ 1,281  $ 3,468  $ 2,491
Less: preferred dividends 34  34 69  69
Net income available for common stockholders  $ 1,712  $ 1,247  $ 3,399  $ 2,422
         
Basic earnings per common share  $ 0.36  $ 0.26  $ 0.71  $ 0.51
Diluted earnings per common share  $ 0.35  $ 0.26  $ 0.70  $ 0.50
         
Basic weighted average shares of common stock outstanding 4,783 4,778 4,782 4,778
Diluted weighted average shares of common stock outstanding 4,839 4,824 4,838 4,822
 
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
 
  June 30, 2015 December 31, 2014 June 30, 2014
  (Unaudited)   (Unaudited)
       
ASSETS      
       
Cash and due from banks  $ 21,341  $ 21,313  $ 18,225
Federal funds sold  2,000  2,000  1,893
Total cash and cash equivalents  23,341  23,313  20,118
       
Time deposits with banks  744  1,240  1,240
       
Investment securities:      
Held-to-maturity, at amortized cost  5,986  9,977  15,558
Available-for-sale (at fair market value; amortized cost of $127,492, $123,503 and $116,082)  127,631  124,723  116,094
Total investment securities  133,617  134,700  131,652
       
Loans, less allowance for loan losses of $4,477, $5,143 and $4,966  317,387  279,798  288,857
Bank premises and equipment, net   5,667  5,803  5,877
Investment in Federal Home Loan Bank stock, at cost  2,701  2,701  2,701
Goodwill  4,119  4,119  4,119
Other Real Estate Owned  --  4,051  4,051
Accrued interest receivable and other assets   4,707  3,950  4,855
       
Total assets  $ 492,283  $ 459,675  $ 463,470
       
LIABILITIES AND      
SHAREHOLDERS' EQUITY      
       
Deposits:      
Demand - non interest-bearing  $ 85,929  $ 73,707  $ 70,609
Demand - interest-bearing  47,608  55,377  47,272
Savings  27,385  25,587  25,232
Money market  61,924  58,819  56,103
Time deposits that meet or exceed the FDIC insurance limit  53,628  53,563  54,131
Other time deposits  82,931  88,206  105,923
Total deposits  359,405  355,259  359,270
       
Federal Home Loan Bank (FHLB) advances  61,700  35,000  38,200
Accrued interest payable and other liabilities  1,929  1,836  1,009
       
Total liabilities  423,034  392,095  398,479
       
Shareholders' equity       
Preferred stock, no par value; 20,000,000 shares authorized; shares issued and outstanding - 13,750 Series B in 2015 and 2014; 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 4,783,170, 4,778,370 and 4,778,370  36,691  36,646  36,631
Retained earnings  18,812  16,560  14,687
Accumulated other comprehensive income (loss)  80  708  7
       
Total shareholders' equity  69,249  67,580  64,991
       
Total liabilities and shareholders' equity  $ 492,283  $ 459,675  $ 463,470
 
Financial Summary
(In Thousands)
 
  Three Months Ended Six Months Ended
  June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statement of Income Data:        
Net interest income  $ 4,351  $ 4,150  $ 8,507  $ 8,420
Provision for loan losses   (800)  (400)  (800)  (400)
Non-interest income  360  393  1,902  855
Non-interest expense  2,541  2,765  5,309  5,438
Provision for income taxes   1,224  897  2,432  1,746
Net income  $ 1,746  $ 1,281  $ 3,468  $ 2,491
Less: preferred dividends  34  34  69  69
Net income available for common stockholders  $ 1,712  $ 1,247  $ 3,399  $ 2,422
         
Selected per Common Share Data:        
Basic earnings per common share  $ 0.36  $ 0.26  $ 0.71  $ 0.51
Diluted earnings per common share  $ 0.35  $ 0.26  $ 0.70  $ 0.50
Dividend per share  $ 0.12  $ 0.11  $ 0.24  $ 0.22
Book value per common share (2)(3)  $ 11.62  $ 10.74  $ 11.62  $ 10.74
         
Selected Balance Sheet Data:         
Assets  $ 492,283  $ 463,470  $ 492,283  $ 463,470
Loans, net  317,387  288,857  317,387  288,857
Deposits  359,405  359,270  359,405  359,270
Average assets  477,990  457,740  470,772  457,684
Average earning assets  468,025  443,282  459,056  442,481
Average shareholders' equity  69,574  64,245  68,737  63,467
Average common shareholders' equity  55,908  50,579  55,071  49,801
Nonperforming loans  1,440  4,478  1,440  4,478
Other real estate owned  --   4,051  --   4,051
Total nonperforming assets  1,440  8,529  1,440  8,529
Troubled debt restructures (accruing)  3,638  4,099  3,638  4,099
         
Selected Ratios:        
Return on average assets (1) 1.47% 1.12% 1.49% 1.10%
Return on average common equity (1) 12.28% 9.89% 12.45% 9.81%
Efficiency ratio (4) 54.54% 61.04% 51.26% 58.71%
Net interest margin (1) 3.73% 3.76% 3.74% 3.84%
Common equity tier 1 capital ratio 13.9%  --  13.9%  -- 
Tier 1 capital ratio 17.6% 17.4% 17.6% 13.4%
Total capital ratio 18.8% 18.7% 18.8% 17.4%
Tier 1 leverage ratio 13.7% 13.4% 13.7% 18.7%
Common dividend payout ratio (5) 33.53% 42.18% 33.77% 43.39%
Average equity to average assets 14.56% 14.04% 14.60% 13.87%
Nonperforming loans to total loans (2) 0.45% 1.52% 0.45% 1.52%
Nonperforming assets to total assets (2) 0.29% 1.84% 0.29% 1.84%
Allowance for loan losses to total loans (2) 1.39% 1.69% 1.39% 1.69%
Allowance for loan losses to nonperforming loans (2) 310.82% 110.90% 310.82% 110.90%
         
(1) Annualized
(2) As of period end
(3) Total shareholders' equity, less preferred stock, divided by total common shares outstanding
(4) Non-interest expenses to net interest and non-interest income, net of securities gains.
(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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