SSBI Summit State Bank

Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended March 31, 2019 of $1,425,000 and diluted earnings per share of $0.23.  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 April 29, 2019 to be paid on May 24, 2019 to shareholders of record on May 17, 2019.

Net Income and Results of Operations

For the quarter ended March 31, 2019, Summit State Bank (“Bank”) had net income of $1,425,000 and diluted earnings per share of $0.23 compared to $1,740,000 in net income and $0.29 diluted earnings per share for the same quarter in 2018.

Net income decreased $315,000 or 18% the first quarter of 2019 compared to first quarter of 2018. Net interest income increased to $5,547,000 in the first quarter of 2019 compared to $5,314,000 in the first quarter of 2018.

“When comparing our net income to first quarter 2018, the difference is a result of the Bank implementing its strategy to increase loans and total assets,” said Jim Brush, President and CEO. “We expanded our team of experienced staff which increased our salary-related expenses. We are also retaining more SBA loans instead of selling them given the decreasing premiums in the secondary market.”

Net loans and deposits also increased when comparing the first quarter of 2019 to first quarter of 2018; loans were $509,989,000 in 2019 compared to $457,256,000 in 2018 and deposits were $555,255,000 in 2019 compared to $503,858,000 in 2018. The net interest margin decreased from 3.80% for the first quarter of 2018 to 3.65% for the first quarter of 2019.

Annualized return on average assets for the first quarter of 2019 was 0.92% and annualized return on average equity was 9.3%. The Bank’s efficiency ratio was 69.7% and the net interest margin was 3.65% during the first quarter of 2019. The first quarter of 2018 had an annualized return on average assets of 1.22%, annualized return on average equity of 11.8%, efficiency ratio of 58.4% and net interest margin of 3.80%.

Non-interest income decreased in the first quarter of 2019 to $493,000 compared to $763,000 in the first quarter of 2018. The Bank recognized $167,000 in gains on sales of SBA guaranteed loan balances in 2019 and $292,000 in the first quarter of 2018. Rental income also decreased in the first quarter of 2019 to $90,000 compared to $147,000 in the first quarter of 2018; this decrease was due to less office space available to rent out caused by the increase number of staff personnel occupying the space.

There was a $670,000 or 19% increase in operating expenses between the first quarter of 2019 as compared to the first quarter of 2018. The increased expenses are primarily due to the increase in employees and related personnel and occupancy costs.

Total assets at March 31, 2019 were $626,290,000 compared to $576,983,000 at March 31, 2018. Total assets increased 9% or $49,307,000 between March 31, 2019 and 2018. Net loans increased 12% or $52,733,000 and total deposits increased 10% or $51,397,000 between March 31, 2019 and 2018.

“Our increasing balance sheet is a testament to our strategic plan becoming a reality,” according to Brush. “I am pleased to report net income ended the quarter within 1% of the plan and the balance sheet continues increasing in alignment with our strategic plan.”

“When we developed our 2019 plan, we anticipated continued pressure on our net interest margin. As we continue to manage our balance sheet growth, we are focused on making business decisions that shift assets from lower yielding investment securities to higher yielding loans while also managing deposit costs,” said Mr. Brush.

Nonperforming assets were $736,000 or 0.12% of total assets at March 31, 2019 compared to $2,679,000 or 0.46% at March 31, 2018. The nonperforming assets at March 31, 2019, consist of five loans which are predominantly secured by real property. The Bank had provision expense of $100,000 in the first quarter of 2019. The allowance for loan losses to loans was 1.19% at March 31, 2019 and was 1.21% at March 31, 2018.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $626 million and total equity of $63 million at March 31, 2019. 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, 82% of management are women and minorities with 60% 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
					March 31, 2019			March 31, 2018
					(Unaudited)			(Unaudited)
Interest income:
	Interest and fees on loans				$	6,452		$	5,310
	Interest on deposits with banks					101			69
	Interest on federal funds sold					-			7
	Interest on investment securities					590			614
	Dividends on FHLB stock					54			54
			Total interest income			7,197			6,054
Interest expense:
	Deposits					1,471			709
	Federal Home Loan Bank advances					179			31
			Total interest expense			1,650			740
			Net interest income before provision for loan losses			5,547			5,314
Provision for loan losses						100			150
			Net interest income after provision for loan losses			5,447			5,164
Non-interest income:
	Service charges on deposit accounts					190			194
	Rental income					90			147
	Net gain on loan sales					167			292
	Net securities gain					-			7
	Other income					46			123
			Total non-interest income			493			763
Non-interest expense:
	Salaries and employee benefits					2,657			2,027
	Occupancy and equipment					423			397
	Other expenses					1,132			1,118
			Total non-interest expense			4,212			3,542
			Income before provision for income taxes			1,728			2,385
Provision for income taxes						303			645
			Net income		$	1,425		$	1,740
Basic earnings per common share					$	0.23		$	0.29
Diluted earnings per common share					$	0.23		$	0.29
Basic weighted average shares of common stock outstanding						6,067			6,059
Diluted weighted average shares of common stock outstanding						6,073			6,066

 

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
				March 31, 2019				December 31, 2018				March 31, 2018
				(Unaudited)				(1)				(Unaudited)
ASSETS
Cash and due from banks				$	18,628			$	21,693			$	18,901
Federal funds sold					-				-				2,000
			Total cash and cash equivalents		18,628				21,693				20,901
Investment securities:
	Held-to-maturity, at amortized cost				7,993				7,991				7,986
	Available-for-sale (at fair value; amortized cost of $71,610,
		$72,716 and $76,892)			70,690				70,174				74,502
			Total investment securities		78,683				78,165				82,488
Loans, less allowance for loan losses of $6,139, $6,029 and $5,590					509,989				504,549				457,256
Bank premises and equipment, net (2)					6,364				5,803				5,208
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 (2)					5,422				4,690				3,926
			Total assets	$	626,290			$	622,104			$	576,983
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
	Demand - non interest-bearing			$	117,870			$	120,011			$	131,243
	Demand - interest-bearing				62,140				65,652				73,605
	Savings				26,503				25,817				29,905
	Money market				112,553				104,060				109,226
	Time deposits that meet or exceed the FDIC insurance limit				86,073				83,071				72,343
	Other time deposits				150,116				102,578				87,536
			Total deposits		555,255				501,189				503,858
Federal Home Loan Bank advances					4,700				56,800				11,200
Accrued interest payable and other liabilities (2)					2,970				2,595				2,202
			Total liabilities		562,925				560,584				517,260
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 6,067,975, 6,066,475 and 6,066,475			36,974				36,967				36,967
	Retained earnings				27,039				26,342				24,438
	Accumulated other comprehensive loss, net				(648	)			(1,789	)			(1,682	)
			Total shareholders' equity		63,365				61,520				59,723
			Total liabilities and shareholders' equity	$	626,290			$	622,104			$	576,983
(1) Information derived from audited financial statements.
(2) ASU No. 2016-02 (Topic 842) was adopted January 1, 2019 using the modified retrospective approach at the beginning of the adoption period. This standard increases the transparency by recognizing the right-to-use lease asset for the lease term. As of March 31, 2019, the right-of-use asset was recorded for $1,209,000 and a lease liability was recorded for $1,212,000.

 

Financial Summary
(In Thousands except per share data)
		At or for the
		Three Months Ended
		March 31, 2019				March 31, 2018
		(Unaudited)				(Unaudited)
Statement of Income Data:
Net interest income		$	5,547			$	5,314
Provision for loan losses			100				150
Non-interest income			493				763
Non-interest expense			4,212				3,542
Provision for income taxes			303				645
Net income		$	1,425			$	1,740
Selected per Common Share Data:
Basic earnings per common share		$	0.23			$	0.29
Diluted earnings per common share		$	0.23			$	0.29
Dividend per share		$	0.12			$	0.12
Book value per common share (2)		$	10.44			$	9.85
Selected Balance Sheet Data:
Assets		$	626,290			$	576,983
Loans, net			509,989				457,256
Deposits			555,255				503,858
Average assets			627,931				578,109
Average earning assets			616,014				567,341
Average shareholders' equity			62,388				59,761
Nonperforming loans			736				2,679
Total nonperforming assets			736				2,679
Troubled debt restructures (accruing)			2,472				1,610
Selected Ratios:
Return on average assets (1)			0.92	%			1.22	%
Return on average common shareholders' equity (1)			9.26	%			11.81	%
Efficiency ratio (3)			69.74	%			58.35	%
Net interest margin (1)			3.65	%			3.80	%
Common equity tier 1 capital ratio			10.2	%			11.3	%
Tier 1 capital ratio			10.2	%			11.3	%
Total capital ratio			11.3	%			12.5	%
Tier 1 leverage ratio			9.6	%			10.0	%
Common dividend payout ratio (4)			51.09	%			41.84	%
Average shareholders' equity to average assets			9.94	%			10.34	%
Nonperforming loans to total loans			0.14	%			0.58	%
Nonperforming assets to total assets			0.12	%			0.46	%
Allowance for loan losses to total loans			1.19	%			1.21	%
Allowance for loan losses to nonperforming loans			834.24	%			208.65	%
(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: Jim Brush, President and CEO, Summit State Bank (707) 568-4920