Summit State Bank Reports Net Income for 2017 and Declaration of Dividend

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SANTA ROSA, Calif., Jan. 23, 2018 (GLOBE NEWSWIRE) -- Summit State Bank SSBI today reported net income for the year ended December 31, 2017 of $3,292,000 and diluted earnings per share of $0.54.  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 to be paid on February 23, 2018 to shareholders of record on February 16, 2018.

Net Income and Results of Operations

"In late 2016, Summit State Bank embarked on a strategy to increase our asset growth rate, adding to our quality staff to help execute our business plan to increase loan volume and earnings performance," said Jim Brush, President and CEO. "As a result, we experienced positive results with increased loan and deposit volumes in 2017. However, there is a lag between the increase in new loans and realization of the earnings impact, as a result of various costs to implement our plan." The following are some of the key accomplishments in 2017:

  • Loan totals increased 23.2% for 2017.
     
  • Deposit totals increased 38.8% for 2017.
     
  • Additional lending staff were hired to focus on SBA guaranteed lending and resulted in $351,000 in gains on sale of loans.

Net income was $3,292,000 and $0.54 diluted earnings per share for the year ended December 31, 2017, compared to net income of $4,967,000 and $0.82 diluted earnings per share for the year ended December 31, 2016.

For the quarter ended December 31, 2017, Summit State Bank had net income of $478,000 and diluted earnings per share of $0.08 compared to $1,188,000 of net income and $0.20 diluted earnings per share, for the same period in 2016.

The enactment of the Tax Cuts and Jobs Act on December 22, 2017 resulted in a write-down of the net deferred tax asset against 2017 earnings of $292,000. Our Board of Directors recognized the contribution of Summit's employees and desired to share the future positive impact of the new tax law. As a result, each non-executive officer employee was awarded a special bonus, which totaled $144,000 and was expensed in 2017.

The Bank experienced a 10.6% increase in gross loans during the fourth quarter and a 23.2% increase for 2017. As a result, the Bank recorded a provision for loan loss of $350,000 for the fourth quarter and $520,000 for the year. This compares to no provision for loan loss recorded in either period in 2016.

Due to the liability sensitive nature of the Bank's balance sheet, the interest rate increases brought on by the Federal Reserve during 2017 proved challenging as net interest income declined by $101,000 during 2017 compared to 2016. The increase in loans outstanding were primarily recorded in the second half of the year and therefore did not fully offset the impact of the rising rates on the Bank's interest-bearing liabilities. However, the increased loans in the second half of the year had positive results in the fourth quarter as interest income increased 14.9% to $5,712,000 and net interest income increased 8.8% to $5,080,000 compared to $4,972,000 and $4,670,000 for the fourth quarter of 2016.

"The Bank should experience the positive impacts on earnings in 2018 from the increased loans generated in 2017 by having a full year of interest income related to the increase," said Jim Brush. "We also believe increases in our payroll and other cost will become more measured as we accommodate future growth."

"Loan production is working on a healthy pipeline of potential new loans, both conventional commercial real estate and government guaranteed. This should be a key contributor to 2018 loan growth and income," said Brandy Seppi, Chief Lending Officer and EVP.

Return on average assets was 0.62% for 2017, compared to 0.97% for 2016 and return on average common equity was 5.49% for 2017 compared to 8.37% for 2016.

Total assets were $610,864,000 at December 31, 2017 compared to $513,704,000 at December 31, 2016. Total assets were higher at December 31, 2017 with the receipt of a large deposit of approximately $55 million, which was partially withdrawn from the Bank after year end.

"We continue to focus on quality balance sheet growth to target long-term increases in shareholder value.  The ratio of loans to assets has increased during 2017 and loan quality remains stable," said Jim Brush. "Core deposits have also increased to fund loans and maintain stability in a rising rate environment.  The balance sheet is liability sensitive and our earnings will be challenged by increased cost of funds in the coming year."

About Summit State Bank

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Summit State Bank, a local community bank, has total assets of $611 million and total equity of $60 million at December 31, 2017. 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, 70% of management are women and minorities with 40% 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 Year Ended 
 December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 
 (Unaudited) (2) (Unaudited) (2) 
         
Interest income:        
Interest and fees on loans$  4,947 $  4,058  $  17,176 $  16,549  
Interest on deposits with banks   50    22     162    82  
Interest on federal funds sold   5    2     17    7  
Interest on investment securities   656    715     3,126    2,912  
Dividends on FHLB stock   54    175     232    357  
Total interest income   5,712    4,972     20,713    19,907  
Interest expense:        
Deposits    552    201     1,639    855  
Federal Home Loan Bank advances   80    101     502    379  
Total interest expense   632    302     2,141    1,234  
Net interest income before provision for loan losses   5,080    4,670     18,572    18,673  
Provision for loan losses    350    -     520    -  
Net interest income after provision for loan losses   4,730    4,670     18,052    18,673  
Non-interest income:        
Service charges on deposit accounts   166    184     695    748  
Rental income   144    141     574    559  
Net gain on loan sales   351    -     351    -  
Net securities gain   14    23     72    692  
Net gain on other real estate owned   -    -     -    -  
Other income    3    7     23    22  
Total non-interest income   678    355     1,715    2,021  
Non-interest expense:        
Salaries and employee benefits    2,564    1,597     7,788    6,562  
Occupancy and equipment    370    332     1,503    1,229  
Other expenses    1,162    1,075     4,554    4,454  
Total non-interest expense   4,096    3,004     13,845    12,245  
Income before provision for income taxes   1,312    2,021     5,922    8,449  
Provision for income taxes    834    833     2,630    3,482  
Net income$  478 $  1,188  $  3,292 $  4,967  
         
Basic earnings per common share (1)$  0.08 $  0.20  $  0.55 $  0.83  
Diluted earnings per common share (1)$  0.08 $  0.20  $  0.54 $  0.82  
         
Basic weighted average shares of common stock outstanding (1) 6,041  6,019   6,031  6,005  
Diluted weighted average shares of common stock outstanding (1) 6,064  6,050   6,059  6,036  
         
(1) Adjusted for stock split issued on March 14, 2017.        
(2) Information derived from audited financial statements.        
         


  
SUMMIT STATE BANK AND SUBSIDIARY 
CONSOLIDATED BALANCE SHEETS 
(In thousands except share data) 
     
 December 31, December 31, 
  2017 2016 
 (Unaudited)  (1) 
     
ASSETS    
     
Cash and due from banks$  68,814 $  24,231  
Federal funds sold   2,000    2,000  
Total cash and cash equivalents   70,814    26,231  
     
Time deposits with banks   -    248  
     
Investment securities:    
Held-to-maturity, at amortized cost   7,984    7,976  
Available-for-sale (at fair value; amortized cost of $79,617 in 2017 and $109,297 in 2016)   78,770    107,771  
Total investment securities   86,754    115,747  
     
Loans, less allowance for loan losses of $5,236 in 2017 and $4,765 in 2016   437,594    354,638  
Bank premises and equipment, net    5,279    5,413  
Investment in Federal Home Loan Bank stock, at cost   3,085    3,085  
Goodwill   4,119    4,119  
Other Real Estate Owned   -    -  
Accrued interest receivable and other assets    3,219    4,223  
     
Total assets$  610,864 $  513,704  
     
LIABILITIES AND    
SHAREHOLDERS' EQUITY    
     
Deposits:    
Demand - non interest-bearing$  190,861 $  112,540  
Demand - interest-bearing   65,742    62,006  
Savings   30,102    26,584  
Money market   79,564    53,866  
Time deposits that meet or exceed the FDIC insurance limit   68,927    52,594  
Other time deposits   98,317    76,661  
Total deposits   533,513    384,251  
     
Federal Home Loan Bank advances   15,000    68,900  
Accrued interest payable and other liabilities   2,674    1,931  
     
Total liabilities   551,187    455,082  
     
Total shareholders' equity   59,677    58,622  
     
Total liabilities and shareholders' equity$  610,864 $  513,704  
     
(1) Information derived from audited financial statements.    
     


  
Financial Summary 
(In Thousands except per share data) 
  
  
 At or for the
Three Months Ended
 At or for the
Year Ended
 
 December 31, 2017 December 31, 2016 December 31, 2017 December 31, 2016 
 (Unaudited) (Unaudited) (Unaudited) (Unaudited) 
Statement of Income Data:        
Net interest income$  5,080  $  4,670  $  18,572  $  18,673  
Provision for loan losses    350     -     520     -  
Non-interest income   678     355     1,715     2,021  
Non-interest expense   4,096     3,004     13,845     12,245  
Provision for income taxes    834     833     2,630     3,482  
Net income$  478  $  1,188  $  3,292  $  4,967  
         
Selected per Common Share Data:        
Basic earnings per common share (1)$  0.08  $  0.20  $  0.55  $  0.83  
Diluted earnings per common share (1)$  0.08  $  0.20  $  0.54  $  0.82  
Dividend per share (1)$  0.12  $  0.10  $  0.46  $  0.38  
Book value per common share (1)(3)$  9.88  $  9.74  $  9.88  $  9.74  
         
Selected Balance Sheet Data:         
Assets$  610,864  $  513,704  $  610,864  $  513,704  
Loans, net   437,594     354,638     437,594     354,638  
Deposits   533,513     384,251     533,513     384,251  
Average assets   552,312     504,146     534,534     510,829  
Average earning assets   541,852     494,972     523,475     502,381  
Average common shareholders' equity   60,456     60,011     59,987     59,326  
Nonperforming loans   2,730     3,351     2,730     3,351  
Other real estate owned   -      -      -      -   
Total nonperforming assets   2,730     3,351     2,730     3,351  
Troubled debt restructures (accruing)   1,630     3,348     1,630     3,348  
         
Selected Ratios:        
Return on average assets (2) 0.34%  0.93%  0.62%  0.97% 
Return on average common shareholders' equity (2) 3.14%  7.85%  5.49%  8.37% 
Efficiency ratio (4) 75.75%  60.06%  69.45%  61.22% 
Net interest margin (2) 3.72%  3.74%  3.55%  3.72% 
Common equity tier 1 capital ratio 11.6%  13.5%  11.6%  13.5% 
Tier 1 capital ratio 11.6%  13.5%  11.6%  13.5% 
Total capital ratio 12.7%  14.7%  12.7%  14.7% 
Tier 1 leverage ratio 10.2%  11.1%  10.2%  11.1% 
Common dividend payout ratio (5) 151.67%  48.65%  83.57%  46.43% 
Average common shareholders' equity to average assets 10.95%  11.90%  11.22%  11.61% 
Nonperforming loans to total loans 0.62%  0.93%  0.62%  0.93% 
Nonperforming assets to total assets 0.45%  0.65%  0.45%  0.65% 
Allowance for loan losses to total loans 1.18%  1.33%  1.18%  1.33% 
Allowance for loan losses to nonperforming loans 191.79%  142.23%  191.79%  142.23% 
         
(1) Adjusted for stock split issued on March 14, 2017. 
(2) Annualized. 
(3) Total shareholders' equity 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 shareholders. 
  

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

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