Market Overview

Summit State Bank Reports 8% Increase in Profitability and Declaration of Dividend

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SANTA ROSA, Calif., Oct. 22, 2015 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended September 30, 2015 of $1,280,000, an 8% increase over the quarter ended September 30, 2014. 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 November 25, 2015 to shareholders of record on November 17, 2015.

Net Income and Results of Operations

The Bank had net income of $1,280,000 and net income available for common stockholders of $1,257,000, or $0.26 per diluted share, for the third quarter ended
September 30, 2015, compared to net income of $1,183,000 and net income available for common stockholders of $1,149,000, or $0.24 per diluted share, for the quarter ended September 30, 2014.

Net income available for common stockholders and diluted earnings per common share for the nine months ended September 30, 2015 and 2014 were $4,654,000 or $0.96 and $3,572,000 or $0.74. The nine month periods benefitted from gains on sales of foreclosed properties of $1,125,000 in 2015 and $73,000 in 2014 during the first quarters ended March 31. Additionally, in the second quarters ended June 30, there were reversals from the allowance for loan loss of $800,000 in 2015 and $400,000 in 2014. Excluding these items, pretax net income for the nine months ended September 30, 2015 increased 6.4% from September 30, 2014.

Return on average assets for the quarter and first nine months of 2015 were 1.03% and 1.32% compared to 1.01% and 1.07% for the same periods in 2014.

Return on average common equity for the quarter and nine months ended September 30, 2015 was 8.8% and 11.2% compared to 8.8% and 9.5% for the same periods in 2014.

"The Bank continues to record strong operating performance as a result of our strong community banking team's ability to attract and expand full banking relationships by providing the best customer service experience and customized financial solutions through The Summit Way brand of community banking," said Thomas Duryea, President and CEO.

Total assets were $505,564,000 at September 30, 2015 compared to $463,376,000 at September 30, 2014, representing an annual increase of 9.1%.

The increase in assets was predominantly from a 15% increase in loans.

"We are pleased with exceeding the $500 million asset mark at the end of the third quarter with a strong loan pipeline as a result of our team's deep connections in our local Sonoma County community," said Brandy Seppi, Chief Credit Officer and Executive Vice President.

The asset growth was funded primarily by a $25,322,000 or 12% increase in demand, savings and money market deposits between the quarter ended September 30, 2015 compared to quarter ended September 30, 2014. Demand deposits currently represent 36% of total deposits.

"We have achieved strong loan growth and are concentrating on continuing to increase our funding of loans through core deposit relationships which drive franchise and shareholder value, and provide the proper foundation to continue to support our community's small businesses and nonprofits in the future," said Linda Bertauche, Chief Operating Officer and Executive Vice President"

Nonperforming assets declined to $1,395,000 from $7,385,000 at September 30, 2015 compared to September 30, 2014. This represents a decline in the ratio of nonperforming assets to total assets to 0.28% compared to 1.59%.

The coverage of allowance for loan losses to gross loans was 1.39% at September 30, 2015 compared to 1.71% at September 30, 2014, as a result of the reversal of $1,800,000 in the allowance for loss provisions between the dates and the 15% increase in loan volumes.

Net interest income increased 4% and 2% for the 2015 three and nine month periods as loan volumes increased 15% between September 30, 2015 and 2014. The net interest margin was 3.69% compared to 3.81% between the third quarters of 2015 and 2014 and the nine month periods of 3.72% compared to 3.83% in 2014.

Non-interest operating expenses declined in the third quarter of 2015 compared to the same quarter of 2014 by 5% primarily attributable to lower loan collection expenses.

The efficiency ratios for the third quarters of 2015 and 2014 were 56.1% and 59.4%. For the nine month periods the ratios were 52.8% and 58.9% in 2015 compared to 2014.

Summit State Bank retired all the preferred stock issued by the Small Business Lending Fund in the amount of $13,750,000 in the third quarter ended September 30, 2015. Regulatory capital ratios continue to be in excess of the well capitalized ratios as defined by the FDIC.

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. Strategic plans have focused on supporting the net interest margin by lowering the Bank's cost of funds through increased funding of core or relationship-based deposit accounts. The net interest income generated by the increased earning asset base has offset the decline in net interest margin that is being experienced in the industry. Continued focus on gaining greater operating efficiencies has resulted in period over period favorable financial comparisons and is aided by the ability to offer Bank customers industry leading mobile and internet banking access.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $506 million and total equity of $57 million at September 30, 2015. 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, Napa, San Francisco, and Marin Counties.

Summit State Bank's workforce resembles the diverse community it serves. Presently, 80% of management are women and minorities with 50% represented on the Executive Management Team. Through the inclusion and engagement of its workforce, Summit State Bank has earned many prestigious awards including: Top 75 Corporate Philanthropists in the Bay Area by the San Francisco Business Times; Super Performing Bank by Findley Reports; Best Places to Work by the North Bay Business Journal; and Best Company to do Business with in Sonoma County by the Northbay Biz magazine.

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, 2015 September 30, 2014 September 30, 2015 September 30, 2014
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Interest income:        
Interest and fees on loans  $ 3,766  $ 3,612  $ 10,615  $ 10,614
Interest on federal funds sold  1  1  2  2
Interest on investment securities and deposits in banks  917  926  2,816  2,778
Dividends on FHLB stock  67  49  267  135
Total interest income  4,751  4,588  13,700  13,529
Interest expense:        
Deposits  192  215  545  655
FHLB advances  50  43  139  124
Total interest expense  242  258  684  779
Net interest income before provision for loan losses  4,509  4,330  13,016  12,750
Provision for loan losses  --  --  (800)  (400)
Net interest income after provision for loan losses  4,509  4,330  13,816  13,150
Non-interest income:        
Service charges on deposit accounts  188  159  525  445
Rental income  133  130  399  392
Net securities gain  55  60  108  73
Net gain on other real estate owned  --  --  1,125  73
Loan servicing, net  2  3  6  9
Other income  1  188  119  403
Total non-interest income  379  540  2,282  1,395
Non-interest expense:        
Salaries and employee benefits  1,499  1,412  4,217  4,152
Occupancy and equipment  327  383  976  996
Other expenses  886  1,060  2,831  3,144
Total non-interest expense  2,712  2,855  8,024  8,292
Income before provision for income taxes  2,176  2,015  8,074  6,253
Provision for income taxes  896  832  3,328  2,578
Net income  $ 1,280  $ 1,183  $ 4,746  $ 3,675
Less: preferred dividends 23  34 92  103
Net income available for common stockholders  $ 1,257  $ 1,149  $ 4,654  $ 3,572
         
Basic earnings per common share  $ 0.26  $ 0.24  $ 0.97  $ 0.75
Diluted earnings per common share  $ 0.26  $ 0.24  $ 0.96  $ 0.74
         
Basic weighted average shares of common stock outstanding 4,783 4,778 4,783 4,778
Diluted weighted average shares of common stock outstanding 4,838 4,834 4,838 4,827
 
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
       
       
  September 30, 2015 December 31, 2014 September 30, 2014
  (Unaudited)   (Unaudited)
       
ASSETS      
       
Cash and due from banks  $ 24,286  $ 21,313  $ 20,004
Federal funds sold  2,000  2,000  1,900
Total cash and cash equivalents  26,286  23,313  21,904
       
Time deposits with banks  744  1,240  1,240
       
Investment securities:      
Held-to-maturity, at amortized cost  5,987  9,977  13,951
Available-for-sale (at fair value; amortized cost of $124,161, $123,503 and $118,969)  125,681  124,723  119,208
Total investment securities  131,668  134,700  133,159
       
Loans, less allowance for loan losses of $4,664, $5,143 and $4,973  330,325  279,798  285,809
Bank premises and equipment, net  5,591  5,803  5,880
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  4,130  3,950  4,513
       
Total assets  $ 505,564  $ 459,675  $ 463,376
       
LIABILITIES AND      
SHAREHOLDERS' EQUITY      
       
Deposits:      
Demand - non interest-bearing  $ 93,988  $ 73,707  $ 73,224
Demand - interest-bearing  46,966  55,377  51,562
Savings  28,217  25,587  25,313
Money market  65,127  58,819  58,877
Time deposits that meet or exceed the FDIC insurance limit  53,988  53,563  53,768
Other time deposits  105,320  88,206  102,152
Total deposits  393,606  355,259  364,896
       
Federal Home Loan Bank (FHLB) advances  52,000  35,000  31,000
Accrued interest payable and other liabilities  2,969  1,836  1,724
       
Total liabilities  448,575  392,095  397,620
       
Shareholders' equity      
Preferred stock, no par value; 20,000,000 shares authorized; Series B shares issued and outstanding - 0 in 2015 and 13,750 in 2014; per share redemption of $1,000 for total liquidation preference of $13,750  --  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  36,698  36,646  36,640
Retained earnings  19,410  16,560  15,311
Accumulated other comprehensive income  881  708  139
       
Total shareholders' equity  56,989  67,580  65,756
       
Total liabilities and shareholders' equity  $ 505,564  $ 459,675  $ 463,376
 
Financial Summary
(In thousands except per share data)
         
         
  Three Months Ended Nine Months Ended
  September 30, 2015 September 30, 2014 September 30, 2015 September 30, 2014
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statement of Income Data:        
Net interest income  $ 4,509  $ 4,330  $ 13,016  $ 12,750
Provision for loan losses  --  --  (800)  (400)
Non-interest income  379  540  2,282  1,395
Non-interest expense  2,712  2,855  8,024  8,292
Provision for income taxes  896  832  3,328  2,578
Net income  $ 1,280  $ 1,183  $ 4,746  $ 3,675
Less: preferred dividends  23  34  92  103
Net income available for common stockholders  $ 1,257  $ 1,149  $ 4,654  $ 3,572
         
Selected per Common Share Data:        
Basic earnings per common share  $ 0.26  $ 0.24  $ 0.97  $ 0.75
Diluted earnings per common share  $ 0.26  $ 0.24  $ 0.96  $ 0.74
Dividend per share  $ 0.12  $ 0.11  $ 0.36  $ 0.33
Book value per common share (2)(3)  $ 11.91  $ 10.90  $ 11.91  $ 10.90
         
Selected Balance Sheet Data:        
Assets  $ 505,564  $ 463,376  $ 505,564  $ 463,376
Loans, net  330,325  285,809  330,325  285,809
Deposits  393,606  364,896  393,606  364,896
Average assets  494,934  466,107  478,915  460,523
Average earning assets  484,515  451,062  467,636  445,373
Average shareholders' equity  65,559  65,711  67,666  64,223
Average common shareholders' equity  56,498  52,044  55,552  50,557
Nonperforming loans  1,395  3,334  1,395  3,334
Other real estate owned  --   4,051  --   4,051
Total nonperforming assets  1,395  7,385  1,395  7,385
Troubled debt restructures (accruing)  3,585  4,960  3,585  4,960
         
Selected Ratios:        
Return on average assets (1) 1.03% 1.01% 1.32% 1.07%
Return on average common equity (1) 8.83% 8.76% 11.20% 9.45%
Efficiency ratio (4) 56.11% 59.36% 52.82% 58.93%
Net interest margin (1) 3.69% 3.81% 3.72% 3.83%
Common equity tier 1 capital ratio (5) 13.7%  --  13.7%  -- 
Tier 1 capital ratio 13.7% 13.3% 13.7% 13.3%
Total capital ratio 14.9% 17.7% 14.9% 17.7%
Tier 1 leverage ratio 10.6% 19.0% 10.6% 19.0%
Common dividend payout ratio (6) 45.51% 45.78% 36.96% 44.15%
Average equity to average assets 13.25% 14.10% 14.13% 13.95%
Nonperforming loans to total loans (2) 0.42% 1.15% 0.42% 1.15%
Nonperforming assets to total assets (2) 0.28% 1.59% 0.28% 1.59%
Allowance for loan losses to total loans (2) 1.39% 1.71% 1.39% 1.71%
Allowance for loan losses to nonperforming loans (2) 334.20% 149.17% 334.20% 149.17%
 
(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 equity tier 1 capital ratio requirement was effective January 1, 2015.
(6) 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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