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Summit State Bank Reports 57% Increase in Profitability for Second Quarter 2018

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SANTA ROSA, Calif., July 23, 2018 (GLOBE NEWSWIRE) -- Summit State Bank (NASDAQ:SSBI) today reported net income for the quarter ended June 30, 2018 of $1,461,000 and diluted earnings per share of $0.24.

Net Income and Results of Operations

For the quarter ended June 30, 2018, Summit State Bank ("Bank") had net income of $1,461,000 and diluted earnings per share of $0.24 compared to $930,000 in net income and $0.15 diluted earnings per share for the same quarter in 2017. This represented an increase of 57% in net income between the periods.

Net income for the six months ended June 30, 2018 increased 77% compared to the same period in 2017, with net income of $3,201,000 or diluted earnings per share of $0.53 in 2018 compared to $1,812,000 or diluted earnings per share of $0.30 in 2017. 

"We continue to see good increases in core earnings driven by growth in loans and core deposits. Our market in Sonoma County is strong, including the rebuilding effort caused by last October's fire disaster. The Bank's capital has been leveraged to provide better performance in return on equity.  We believe we are in a good position to serve our local customers with superior service and products," said Jim Brush, President and CEO.

Revenues, defined as net interest income and non-interest income, for the second quarter of 2018 increased 20% over same quarter of 2017 while operating expenses increased 10% between the two quarters. This resulted in an operating efficiency ratio of 61.6%.

The increase in revenues was a result of an improved net interest margin which was 3.69% for second quarter of 2018 compared to 3.48% during the same quarter in 2017. Additionally, non-interest income increased from gains on sales of SBA guaranteed loans of $155,000 during the second quarter of 2018 compared to no loan sales gains in the same quarter of 2017.

Net loans increased 27% or $98 million and total assets increased 9% or $48 million between June 30, 2018 and 2017. Total deposits increased 27% or $109 million between June 30, 2018 and 2017, with $90 million of the increase in demand, savings and money market deposits.

Annualized return on average assets for the second quarter of 2018 was 1.01% and annualized return on average equity was 9.79%. The annualized return on average assets for the six months ended June 30, 2018 was 1.11% and annualized return on average equity was 10.79%. The second quarter of 2017 had an annualized return on average assets of 0.71% and annualized return on average equity of 6.23%. The first six months of 2017 had an annualized return on average assets of 0.70% and annualized return on average equity of 6.15%.

"We continue to execute on our strategy and are focusing on our net interest margin during this period of rising interest rates," said Dennis Kelley, Chief Financial Officer.

Nonperforming assets were $2,606,000 or 0.44% of total assets at June 30, 2018 compared to $2,616,000 or 0.49% at June 30, 2017. The nonperforming assets at June 30, 2018, consist of nine loans which are predominantly secured by real property. The Bank had provision expense of $150,000 in the second quarter of 2018 and $300,000 for the six month period. The allowance for loan losses to loans was 1.23% at June 30, 2018 and was 1.27% at June 30, 2017.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $586 million and total equity of $60 million at June 30, 2018. 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, 79% 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.

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

 

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except earnings per share data)
                       
                       
          Three Months Ended   Six Months Ended
          June 30, 2018   June 30, 2017   June 30, 2018   June 30, 2017
          (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
                       
Interest income:              
  Interest and fees on loans $   5,399   $   4,014   $   10,709   $   7,954
  Interest on deposits with banks     58       42       126       69
  Interest on federal funds sold     8       4       14       7
  Interest on investment securities     601       868       1,215       1,660
  Dividends on FHLB stock     53       53       108       124
      Total interest income     6,119       4,981       12,172       9,814
Interest expense:              
  Deposits      818       358       1,526       614
  Federal Home Loan Bank advances     61       136       92       262
      Total interest expense     879       494       1,618       876
      Net interest income before provision for loan losses     5,240       4,487       10,554       8,938
Provision for loan losses      150       -       300       -
      Net interest income after provision for loan losses     5,090       4,487       10,254       8,938
Non-interest income:              
  Service charges on deposit accounts     194       172       387       342
  Rental income     149       141       296       285
  Net gain on loan sales     155       -       447       -
  Net securities gain     9       -       16       13
  Other income      35       2       158       5
      Total non-interest income     542       315       1,304       645
Non-interest expense:              
  Salaries and employee benefits      2,098       1,707       4,164       3,448
  Occupancy and equipment      381       402       771       758
  Other expenses      1,078       1,111       2,163       2,294
      Total non-interest expense     3,557       3,220       7,098       6,500
      Income before provision for income taxes     2,075       1,582       4,460       3,083
Provision for income taxes      614       652       1,259       1,271
      Net income $   1,461   $   930   $   3,201   $   1,812
                       
Basic earnings per common share $   0.24   $   0.15   $   0.53   $   0.30
Diluted earnings per common share $   0.24   $   0.15   $   0.53   $   0.30
                       
Basic weighted average shares of common stock outstanding   6,066     6,027     6,063     6,024
Diluted weighted average shares of common stock outstanding   6,074     6,059     6,070     6,056

 

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
                 
                 
        June 30, 2018   December 31, 2017   June 30, 2017
        (Unaudited)     (1)     (Unaudited)
                 
ASSETS          
                 
Cash and due from banks $   23,660     $   68,814     $   20,175
Federal funds sold     -         2,000         1,720
      Total cash and cash equivalents     23,660         70,814         21,895
                 
Investment securities:          
  Held-to-maturity, at amortized cost     7,988         7,984         7,980
  Available-for-sale (at fair value; amortized cost of $75,676,          
    $79,617 and $124,149)     72,921         78,770         124,774
      Total investment securities     80,909         86,754         132,754
                 
Loans, less allowance for loan losses of $5,775, $5,236 and $4,702     463,856         437,594         366,259
Bank premises and equipment, net      5,151         5,279         5,411
Investment in Federal Home Loan Bank stock, at cost     3,085         3,085         3,085
Goodwill       4,119         4,119         4,119
Other Real Estate Owned     -         -         -
Accrued interest receivable and other assets      5,170         3,219         3,959
                 
      Total assets $   585,950     $   610,864     $   537,482
                 
LIABILITIES AND          
SHAREHOLDERS' EQUITY          
                 
Deposits:            
  Demand - non interest-bearing $   143,926     $   190,861     $   110,509
  Demand - interest-bearing     71,476         65,742         62,539
  Savings     27,298         30,102         26,848
  Money market     101,106         79,564         53,829
  Time deposits that meet or exceed the FDIC insurance limit     75,888         68,927         59,008
  Other time deposits     97,624         98,317         95,298
      Total deposits     517,318         533,513         408,031
                 
Federal Home Loan Bank advances     6,800         15,000         67,000
Accrued interest payable and other liabilities     1,633         2,674         2,012
                 
      Total liabilities     525,751         551,187         477,043
                 
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 6,066,475, 6,041,475 and 6,027,100     36,967         36,847         36,785
  Retained earnings     25,171         23,427         23,292
  Accumulated other comprehensive gain(loss)     (1,939 )       (597 )       362
                 
      Total shareholders' equity     60,199         59,677         60,439
                 
      Total liabilities and shareholders' equity $   585,950     $   610,864     $   537,482
                 
(1) Information derived from audited financial statements.          

 

Financial Summary
(In thousands except per share data)
                 
    At or for the   At or for the
    Three Months Ended   Six Months Ended
    June 30, 2018   June 30, 2017   June 30, 2018   June 30, 2017
    (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
Statement of Income Data:                
Net interest income   $   5,240     $   4,487     $   10,554     $   8,938  
Provision for loan losses        150         -         300         -  
Non-interest income       542         315         1,304         645  
Non-interest expense       3,557         3,220         7,098         6,500  
Provision for income taxes        614         652         1,259         1,271  
Net income   $   1,461     $   930     $   3,201     $   1,812  
                 
Selected per Common Share Data:                
Basic earnings per common share   $   0.24     $   0.15     $   0.53     $   0.30  
Diluted earnings per common share   $   0.24     $   0.15     $   0.53     $   0.30  
Dividend per share   $   0.12     $   0.12     $   0.24     $   0.22  
Book value per common share (2)   $   9.92     $   10.03     $   9.92     $   10.03  
                 
Selected Balance Sheet Data:                 
Assets   $   585,950     $   537,482     $   585,950     $   537,482  
Loans, net       463,856         366,259         463,856         366,259  
Deposits       517,318         408,031         517,318         408,031  
Average assets       580,611         528,009         579,366         520,493  
Average earning assets       568,851         516,746         568,100         509,374  
Average shareholders' equity       59,866         59,877         59,814         59,445  
Average common shareholders' equity       59,866         59,877         59,814         59,445  
Nonperforming loans       2,606         2,616         2,606         2,616  
Total nonperforming assets       2,606         2,616         2,606         2,616  
Troubled debt restructures (accruing)       1,591         3,216         1,591         3,216  
                 
Selected Ratios:                
Return on average assets (1)     1.01 %     0.71 %     1.11 %     0.70 %
Return on average common shareholders' equity (1)     9.79 %     6.23 %     10.79 %     6.15 %
Efficiency ratio (3)     61.61 %     67.06 %     59.94 %     67.92 %
Net interest margin (1)     3.69 %     3.48 %     3.75 %     3.54 %
Common equity tier 1 capital ratio     11.3 %     13.2 %     11.3 %     13.2 %
Tier 1 capital ratio     11.3 %     13.2 %     11.3 %     13.2 %
Total capital ratio     12.5 %     14.3 %     12.5 %     14.3 %
Tier 1 leverage ratio     10.0 %     10.7 %     10.0 %     10.7 %
Common dividend payout ratio (4)     49.83 %     77.74 %     45.49 %     71.80 %
Average shareholders' equity to average assets     10.31 %     11.34 %     10.32 %     11.42 %
Nonperforming loans to total loans     0.55 %     0.71 %     0.55 %     0.71 %
Nonperforming assets to total assets     0.44 %     0.49 %     0.44 %     0.49 %
Allowance for loan losses to total loans     1.23 %     1.27 %     1.23 %     1.27 %
Allowance for loan losses to nonperforming loans     221.60 %     179.73 %     221.60 %     179.73 %
         
(1) Annualized.                
(2) Total shareholders' equity divided by total common shares outstanding.        
(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.        

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