SSBI Summit State Bank

Summit State Bank (Nasdaq:SSBI) today reported net income for the quarter ended September 30, 2016 of $1,198,000 and diluted earnings per share of $0.25. 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 23, 2016 to shareholders of record on November 16, 2016.

Net Income and Results of Operations

The Bank had net income of $1,198,000 or $0.25 per diluted share, for the third quarter ended September 30, 2016, compared to net income of $1,280,000 or $0.26 per diluted share, for the quarter ended September 30, 2015.

Net income and diluted earnings per common share for the nine months ended September 30, 2016 and 2015 were $3,779,000 or $0.78 and $4,746,000 or $0.96.  The nine-month period in 2015 benefited from gains on sales of foreclosed properties of $1,125,000 and reversal from the allowance for loan loss of $800,000. There were net gains on investment securities of $669,000 and $108,000 for the nine months ended September 30, 2016 and 2015.

Return on average assets for the quarter and nine months ended September 30, 2016 were 0.95% and 0.98% compared to 1.03% and 1.32% for the same periods in 2016.

Return on average common equity for the quarter and nine months ended September 30, 2016 was 7.9% and 8.5% compared to 8.8% and 11.2% for the same periods in 2015.

“We are focused on the long-term success of our Bank employees, customers and community.  This strategy will continue to drive improved core operating performance and shareholder value,” said Jim Brush, President and CEO.

Total assets were $513,666,000 at September 30, 2016 compared to $505,564,000 at September 30, 2015, representing an annual increase of 1.6%.  

The increase in assets was predominantly from a 10% increase in loans while investment securities declined 15%. This shift in assets from investments to loans has enabled the net interest margin to stay relatively stable at 3.70% for the nine months ended September 30, 2016 compared to 3.72% for the same period in 2015.

The asset growth was funded primarily by a $31 million or 22% increase in demand deposits between September 30, 2016 and 2015. Demand deposits currently represent 45% of total deposits at September 30, 2016 compared to 36% at September 30, 2015.

Nonperforming assets increased to $3,430,000 from $1,395,000 at September 30, 2016 compared to September 30, 2015. This represents a ratio of nonperforming assets to total assets of 0.67% compared to 0.28%. The increase in nonperforming assets was from increased nonaccrual loans which are secured by real estate.

The coverage of allowance for loan losses to gross loans was 1.29% at September 30, 2016 compared to 1.39% at September 30, 2015.  The decline was primarily from 10% loan growth between the dates.

Net interest income increased 0.8% and 7.6% for the three and nine month periods ended September 30, 2016, as loan volumes increased.

Non-interest operating expenses increased in the third quarter of 2016 compared to the same quarter of 2015 by 4.6% or $124,000, attributable to various other operating expenses, partially offset by a decline in salaries and employee benefits and occupancy expenses.

The efficiency ratios for the third quarters of 2016 and 2015 were 58% and 56%. For the nine month periods, the ratios were 62% in 2016 compared to 53% in 2015.

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 with loans as a greater percentage, has offset the decline in net interest margin that is being experienced in the industry.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $514 million and total equity of $60 million at September 30, 2016. 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’s workforce resembles the diverse community it serves.  Presently, 60% 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: Best Company to do Business with in Sonoma County; Best Places to Work in the North Bay; Super Performing Bank; and Top 75 Corporate Philanthropists in the San Francisco 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								Nine Months Ended
					September 30, 2016				September 30, 2015				September 30, 2016				September 30, 2015
					(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Interest income:
	Interest and fees on loans				$	4,146			$	3,766			$	12,491			$	10,615
	Interest on federal funds sold					2				1				5				2
	Interest on investment securities and deposits in banks					628				917				2,257				2,816
	Dividends on FHLB stock					68				67				182				267
			Total interest income			4,844				4,751				14,935				13,700
Interest expense:
	Deposits					209				192				654				545
	FHLB advances					90				50				278				139
			Total interest expense			299				242				932				684
			Net interest income before provision for loan losses			4,545				4,509				14,003				13,016
Provision for loan losses						-				-				-				(800	)
			Net interest income after provision for loan losses			4,545				4,509				14,003				13,816
Non-interest income:
	Service charges on deposit accounts					193				188				564				525
	Rental income					142				133				418				399
	Net securities gain (loss)					(20	)			55				669				108
	Net gain on other real estate owned					-				-				-				1,125
	Loan servicing, net					2				2				6				6
	Other income					9				1				8				119
			Total non-interest income			326				379				1,665				2,282
Non-interest expense:
	Salaries and employee benefits					1,399				1,499				4,965				4,217
	Occupancy and equipment					309				327				896				976
	Other expenses					1,128				886				3,379				2,831
			Total non-interest expense			2,836				2,712				9,240				8,024
			Income before provision for income taxes			2,035				2,176				6,428				8,074
Provision for income taxes						837				896				2,649				3,328
			Net income		$	1,198			$	1,280			$	3,779			$	4,746
Less:  preferred dividends						-				23				-				92
			Net income available for common shareholders		$	1,198			$	1,257			$	3,779			$	4,654
Basic earnings per common share					$	0.25			$	0.26			$	0.79			$	0.97
Diluted earnings per common share					$	0.25			$	0.26			$	0.78			$	0.96
Basic weighted average shares of common stock outstanding						4,814				4,783				4,801				4,783
Diluted weighted average shares of common stock outstanding						4,840				4,838				4,827				4,838

 

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
				September 30, 2016				December 31, 2015				September 30, 2015
				(Unaudited)								(Unaudited)
ASSETS
Cash and due from banks				$	20,090			$	15,583			$	24,286
Federal funds sold					1,580				2,000				2,000
			Total cash and cash equivalents		21,670				17,583				26,286
Time deposits with banks					248				744				744
Investment securities:
	Held-to-maturity, at amortized cost				7,974				5,988				5,987
	Available-for-sale (at fair value; amortized cost of $102,180,
		$127,735 and $124,161)			104,564				128,599				125,681
			Total investment securities		112,538				134,587				131,668
Loans, less allowance for loan losses of $4,758, $4,731 and 4,664					363,336				343,217				330,325
Bank premises and equipment, net					5,487				5,498				5,591
Investment in Federal Home Loan Bank stock, at cost					3,085				2,701				2,701
Goodwill					4,119				4,119				4,119
Other Real Estate Owned					-				-				-
Accrued interest receivable and other assets					3,183				4,916				4,130
			Total assets	$	513,666			$	513,365			$	505,564
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
	Demand - non interest-bearing			$	114,077			$	98,062			$	93,988
	Demand - interest-bearing				58,325				56,281				46,966
	Savings				27,130				27,644				28,217
	Money market				52,906				59,445				65,127
	Time deposits that meet or exceed the FDIC insurance limit				52,140				53,953				53,988
	Other time deposits				78,132				101,861				105,320
			Total deposits		382,710				397,246				393,606
Federal Home Loan Bank advances					67,500				55,800				52,000
Accrued interest payable and other liabilities					3,177				2,994				2,969
			Total liabilities		453,387				456,040				448,575
Shareholders' equity
	Preferred stock, no par value; 20,000,000 shares authorized;
		Series B shares issued and outstanding - 0 in 2016 and 2015;
		per share redemption of $1,000 for total liquidation preference of $13,750			-				-				-
	Common stock, no par value; shares authorized - 30,000,000 shares; issued
		and outstanding 4,814,380 in 2016 and 4,783,170 in 2015 periods			36,725				36,704				36,698
	Retained earnings				22,171				20,120				19,410
	Accumulated other comprehensive income				1,383				501				881
			Total shareholders' equity		60,279				57,325				56,989
			Total liabilities and shareholders' equity	$	513,666			$	513,365			$	505,564

 

Financial Summary
(In thousands except per share data)
		At or for the								At or for the
		Three Months Ended								Nine Months Ended
		September 30, 2016				September 30, 2015				September 30, 2016				September 30, 2015
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Statement of Income Data:
Net interest income		$	4,545			$	4,509			$	14,003			$	13,016
Provision for loan losses			-				-				-				(800	)
Non-interest income			326				379				1,665				2,282
Non-interest expense			2,836				2,712				9,240				8,024
Provision for income taxes			837				896				2,649				3,328
Net income		$	1,198			$	1,280			$	3,779			$	4,746
Less: preferred dividends			-				23				-				92
Net income available for common shareholders		$	1,198			$	1,257			$	3,779			$	4,654
Selected per Common Share Data:
Basic earnings per common share		$	0.25			$	0.26			$	0.79			$	0.97
Diluted earnings per common share		$	0.25			$	0.26			$	0.78			$	0.96
Dividend per share		$	0.12			$	0.12			$	0.36			$	0.36
Book value per common share (2)(3)		$	12.52			$	11.91			$	12.52			$	11.91
Selected Balance Sheet Data:
Assets		$	513,666			$	505,564			$	513,666			$	505,564
Loans, net			363,336				330,325				363,336				330,325
Deposits			382,710				393,606				382,710				393,606
Average assets			502,807				494,934				513,073				478,915
Average earning assets			494,849				484,515				504,869				467,636
Average shareholders' equity			60,087				65,559				59,096				67,666
Average common shareholders' equity			60,087				56,498				59,097				55,552
Nonperforming loans			3,430				1,395				3,430				1,395
Other real estate owned			-				-				-				-
Total nonperforming assets			3,430				1,395				3,430				1,395
Troubled debt restructures (accruing)			3,395				3,585				3,395				3,585
Selected Ratios:
Return on average assets (1)			0.95	%			1.03	%			0.98	%			1.32	%
Return on average common equity (1)			7.91	%			8.83	%			8.54	%			11.20	%
Efficiency ratio (4)			57.98	%			56.11	%			61.60	%			52.82	%
Net interest margin (1)			3.64	%			3.69	%			3.70	%			3.72	%
Common equity tier 1 capital ratio			13.2	%			13.7	%			13.2	%			13.7	%
Tier 1 capital ratio			13.2	%			13.7	%			13.2	%			13.7	%
Total capital ratio			14.4	%			14.9	%			14.4	%			14.9	%
Tier 1 leverage ratio			11.0	%			10.6	%			11.0	%			10.6	%
Common dividend payout ratio (5)			48.25	%			45.51	%			45.73	%			36.96	%
Average equity to average assets			11.95	%			13.25	%			11.52	%			14.13	%
Nonperforming loans to total loans (2)			0.93	%			0.42	%			0.93	%			0.42	%
Nonperforming assets to total assets (2)			0.67	%			0.28	%			0.67	%			0.28	%
Allowance for loan losses to total loans (2)			1.29	%			1.39	%			1.29	%			1.39	%
Allowance for loan losses to nonperforming loans (2)			138.72	%			334.20	%			138.72	%			334.20	%
(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 shareholders

Contact: Dennis Kelley, CFO, Summit State Bank (707) 568-6000