SSBI Summit State Bank

Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended September 30, 2018 of $1,505,000 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 on October 22, 2018 to be paid on November 27, 2018 to shareholders of record on November 20, 2018.

Net Income and Results of Operations

For the quarter ended September 30, 2018, Summit State Bank (“Bank”) had net income of $1,505,000 and diluted earnings per share of $0.25 compared to $1,001,000 in net income and $0.17 diluted earnings per share for the same quarter in 2017. This represented a 50% increase in net income between the periods.

Net income for the first nine months of 2018 was $4,706,000 compared to $2,813,000 for the same period in 2017, a 67% increase. Diluted earnings per share for the respective nine-month periods were $0.78 and $0.46.

“Our increase in core operating income continues to be driven by incremental higher net interest income related to higher average loan balances and an increase in loans as a percentage of total assets,” said Jim Brush, President and CEO.

Net income for the quarter and nine months ended September 30, 2018 benefited from a tax credit of $104,000 resulting from a cost segregation study performed on the Bank’s head office building.

Net loans increased 22% or $86 million between September 30, 2018 and 2017. The net interest margin increased from 3.39% for the third quarter of 2017 to 3.80% for the third quarter of 2018. The resulting increase in the net interest income was $960,000 or 21% between the quarters and $2,575,000 or 19% between the nine-month periods.

The additional loans and overall asset growth were funded by increasing the Bank’s local deposits by 30% or $105 million and a reduction in the investment portfolio of $29 million between September 30, 2017 and 2018. Additionally, institutional funding was reduced by $45 million with reductions in institutional deposits and FHLB borrowings.

Annualized return on average assets for the third quarter of 2018 was 1.02% and annualized return on average equity was 9.9%. The Bank’s efficiency ratio was 65.3% and the net interest margin was 3.80% during the third quarter of 2018. The third quarter of 2017 had an annualized return on average assets of 0.73%, annualized return on average equity of 6.6%, efficiency ratio of 66.3% and net interest margin of 3.39%.

There was a $645,000, or 20%, increase in operating expenses between the third quarter of 2018 as compared to the third quarter of 2017. The increased expenses were primarily due to the increase in employees and related compensation and benefits expense related to management’s strategy of positioning the Bank for loan growth.

“We are approaching a structure where we have improved efficiencies and processes so that our non-interest costs should increase more slowly than increases in net interest income from loan and core deposit production,” said Jim Brush, President and CEO.

Total assets at September 30, 2018 were $595 million compared to $539 million at September 30, 2017.

Nonperforming assets were $2,170,000 or 0.36% of total assets at September 30, 2018 compared to $3,142,000 or 0.58% at September 30, 2017. The nonperforming assets at September 30, 2018, consist of six loans which are predominantly secured by real property. The Bank recorded net recoveries of previously charged off loans of $226,000 and had provision expense of $380,000 for the nine months ended September 30, 2018. The allowance for loan losses to loans was 1.20% at September 30, 2018 and was 1.22% at September 30, 2017.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $595 million and total equity of $60 million at September 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, 83% 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						Nine Months Ended
					September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
					(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Interest income:
	Interest and fees on loans				$	5,854		$	4,275		$	16,563		$	12,230
	Interest on deposits with banks					59			43			185			112
	Interest on federal funds sold					-			5			14			11
	Interest on investment securities					584			809			1,800			2,470
	Dividends on FHLB stock					54			54			161			177
			Total interest income			6,551			5,186			18,723			15,000
Interest expense:
	Deposits					931			473			2,458			1,088
	Federal Home Loan Bank advances					108			161			200			422
			Total interest expense			1,039			634			2,658			1,510
			Net interest income before provision for loan losses			5,512			4,552			16,065			13,490
Provision for loan losses						80			170			380			170
			Net interest income after provision for loan losses			5,432			4,382			15,685			13,320
Non-interest income:
	Service charges on deposit accounts					182			187			569			529
	Rental income					148			145			444			429
	Net gain on loan sales					95			-			542			-
	Net securities gain					2			44			18			57
	Other income					26			16			185			21
			Total non-interest income			453			392			1,758			1,036
Non-interest expense:
	Salaries and employee benefits					2,360			1,777			6,524			5,225
	Occupancy and equipment					360			375			1,131			1,133
	Other expenses					1,173			1,096			3,336			3,389
			Total non-interest expense			3,893			3,248			10,991			9,747
			Income before provision for income taxes			1,992			1,526			6,452			4,609
Provision for income taxes						487			525			1,746			1,796
			Net income		$	1,505		$	1,001		$	4,706		$	2,813
Basic earnings per common share					$	0.25		$	0.17		$	0.78		$	0.47
Diluted earnings per common share					$	0.25		$	0.17		$	0.78		$	0.46
Basic weighted average shares of common stock outstanding						6,066			6,036			6,064			6,028
Diluted weighted average shares of common stock outstanding						6,074			6,058			6,071			6,057

 

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
					September 30, 2018				December 31, 2017				September 30, 2017
					(Unaudited)					(1)			(Unaudited)
ASSETS
Cash and due from banks					$	20,924			$	68,814			$	20,388
Federal funds sold						-				2,000				2,000
			Total cash and cash equivalents			20,924				70,814				22,388
Investment securities:
	Held-to-maturity, at amortized cost					7,990				7,984				7,982
	Available-for-sale (at fair value; amortized cost of $70,805,     $79,617 and $96,128)
						67,372				78,770				96,248
			Total investment securities			75,362				86,754				104,230
Loans, less allowance for loan losses of $5,842, $5,236 and $4,879						481,419				437,594				395,640
Bank premises and equipment, net						5,316				5,279				5,330
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						5,018				3,219				4,201
			Total assets		$	595,243			$	610,864			$	538,993
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
	Demand - non interest-bearing				$	145,712			$	190,861			$	128,863
	Demand - interest-bearing					63,435				65,742				58,463
	Savings					28,282				30,102				27,470
	Money market					101,383				79,564				57,493
	Time deposits that meet or exceed the FDIC insurance limit					80,852				68,927				65,192
	Other time deposits					84,388				98,317				104,795
			Total deposits			504,052				533,513				442,276
Federal Home Loan Bank advances						28,500				15,000				34,100
Accrued interest payable and other liabilities						2,192				2,674				2,133
			Total liabilities			534,744				551,187				478,509
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 6,041,475				36,967				36,847				36,847
	Retained earnings					25,949				23,427				23,568
	Accumulated other comprehensive gain (loss)					(2,417	)			(597	)			69
			Total shareholders' equity			60,499				59,677				60,484
			Total liabilities and shareholders' equity		$	595,243			$	610,864			$	538,993
(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								Nine Months Ended
		September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Statement of Income Data:
Net interest income		$	5,512			$	4,552			$	16,065			$	13,490
Provision for loan losses			80				170				380				170
Non-interest income			453				392				1,758				1,036
Non-interest expense			3,893				3,248				10,991				9,747
Provision for income taxes			487				525				1,746				1,796
Net income		$	1,505			$	1,001			$	4,706			$	2,813
Selected per Common Share Data:
Basic earnings per common share		$	0.25			$	0.17			$	0.78			$	0.47
Diluted earnings per common share		$	0.25			$	0.17			$	0.78			$	0.46
Dividend per share		$	0.12			$	0.12			$	0.36			$	0.34
Book value per common share (2)		$	9.97			$	10.01			$	9.97			$	10.01
Selected Balance Sheet Data:
Assets		$	595,243			$	538,993			$	595,243			$	538,993
Loans, net			481,419				395,640				481,419				395,640
Deposits			504,052				442,276				504,052				442,276
Average assets			587,062				544,378				581,960				528,542
Average earning assets			575,954				532,841				570,747				517,282
Average shareholders' equity			60,593				60,583				60,076				59,828
Nonperforming loans			2,170				3,142				2,170				3,142
Total nonperforming assets			2,170				3,142				2,170				3,142
Troubled debt restructures (accruing)			1,749				3,168				1,749				3,168
Selected Ratios:
Return on average assets (1)			1.02	%			0.73	%			1.08	%			0.71	%
Return on average common shareholders' equity (1)			9.85	%			6.56	%			10.47	%			6.29	%
Efficiency ratio (3)			65.29	%			66.29	%			61.73	%			67.36	%
Net interest margin (1)			3.80	%			3.39	%			3.76	%			3.49	%
Common equity tier 1 capital ratio			10.9	%			12.7	%			10.9	%			12.7	%
Tier 1 capital ratio			10.9	%			12.7	%			10.9	%			12.7	%
Total capital ratio			12.0	%			13.8	%			12.0	%			13.8	%
Tier 1 leverage ratio			10.1	%			10.4	%			10.1	%			10.4	%
Common dividend payout ratio (4)			48.37	%			72.43	%			46.41	%			72.02	%
Average shareholders' equity to average assets			10.32	%			11.13	%			10.32	%			11.32	%
Nonperforming loans to total loans			0.45	%			0.78	%			0.45	%			0.78	%
Nonperforming assets to total assets			0.36	%			0.58	%			0.36	%			0.58	%
Allowance for loan losses to total loans			1.20	%			1.22	%			1.20	%			1.22	%
Allowance for loan losses to nonperforming loans			269.26	%			155.26	%			269.26	%			155.26	%
(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.

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