SSBI Summit State Bank

Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended September 30, 2019, of $2,045,000 and diluted earnings per share of $0.34.  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 21, 2019 to be paid on November 22, 2019 to shareholders of record on November 15, 2019.

Net Income and Results of Operations

For the quarter ended September 30, 2019, Summit State Bank (“Bank”) had net income of $2,045,000 and diluted earnings per share of $0.34 compared to net income of $1,505,000 and diluted earnings per share of $0.25 for the same quarter in 2018. Net income increased $540,000 or 36% the third quarter of 2019 compared to the third quarter of 2018.

A significant portion of the increase in net income is related to non-interest income. In the third quarter of 2019 non-interest income was $1,001,000 compared to $453,000 in the third quarter of 2018. The primary difference between 2019 and 2018 was the Bank sold more SBA loans in third quarter of 2019 generating $639,000 in gain on sale compared $95,000 in gain on sale in the third quarter of 2018.  

“Although we are selling some loans, we continue to grow assets at a targeted pace while generating income in line with our 2019 target,” said Jim Brush, President and CEO. “The Bank has a good mix of income generators and cost controls to build a strong future for success.”

Net interest income increased to $5,773,000 in the third quarter of 2019 compared to $5,512,000 in the third quarter of 2018. This was an increase of $261,000 or 5% from the prior year.

Net loans, deposits and total assets also increased when comparing the third quarter of 2019 to third quarter of 2018. Loans increased 15% to $554,122,000 at September 30, 2019 compared to $481,419,000 at September 30, 2018, deposits increased 20% to $605,130,000 at September 30, 2019 compared to $504,052,000 at September 30, 2018, and total assets increased 14% to $680,840,000 at September 30, 2019 compared to $595,243,000 at September 30, 2018.

“Each quarter we are experiencing consistent growth in our loan portfolio. This recent quarter we have increased loans outstanding by 15% compared to the same quarter one year ago,” said Brush. “We have spent the past several years investing in our staff and because of this we are growing our assets in line with our long-term strategy. We are deliberately growing our Bank at a controlled pace and this is adding to the Bank’s long-term sustainability for financial success.”

“We feel that our headwinds have recently turned into tailwinds and look forward to strong income growth,” said Brush.

For the third quarter 2019, the annualized net interest margin was 3.60%, annualized return on average assets was 1.24% and annualized return on average equity was 12.32%. The third quarter of 2018 generated an annualized net interest margin of 3.80%, annualized return on average assets of 1.02% and annualized return on average equity of 9.85%.

“The Bank is liability sensitive which provides a great opportunity to capitalize on the recent decrease in deposit rates,” said Brush. “We are reducing our cost of funds and positioning the Bank to maintain its net interest margin compared to a year ago.  We are pleased with our increased non-interest income while beginning to hold our non-interest costs.”

There was a $205,000, or 5%, decrease in operating expenses between the third quarter of 2019, as compared to the third quarter of 2018. The declining trend is due to the stabilization of expenses in major areas of cost including salary, benefits and other operational expenses.

Nonperforming assets were $592,000, or 0.09%, of total assets at September 30, 2019 compared to $2,170,000, or 0.36%, at September 30, 2018. The nonperforming assets at September 30, 2019, consist of loans which are predominantly secured by real property. The Bank had a loan loss provision expense of $210,000 in the third quarter of 2019. The allowance for loan losses to loans was 1.17% at September 30, 2019 compared to 1.20% at September 30, 2018.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $681 million and total equity of $67 million at September 30, 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, 80% 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						Nine Months Ended
					September 30, 2019			September 30, 2018			September 30, 2019				September 30, 2018
					(Unaudited)			(Unaudited)			(Unaudited)				(Unaudited)
Interest income:
Interest and fees on loans					$	7,031		$	5,854		$	20,113			$	16,563
Interest on deposits with banks						72			59			205				185
Interest on federal funds sold						-			-			-				14
Interest on investment securities						459			584			1,525				1,800
Dividends on FHLB stock						57			54			165				161
	Total interest income					7,619			6,551			22,008				18,723
Interest expense:
Deposits						1,727			931			4,779				2,458
Federal Home Loan Bank advances						119			108			410				200
	Total interest expense					1,846			1,039			5,189				2,658
	Net interest income before provision for loan losses					5,773			5,512			16,819				16,065
Provision for loan losses						210			80			490				380
	Net interest income after provision for loan losses					5,563			5,432			16,329				15,685
Non-interest income:
Service charges on deposit accounts						226			182			635				569
Rental income						86			148			258				444
Net gain on loan sales						639			95			805				542
Net securities gain (loss)						-			2			(6	)			18
Other income						50			26			142				185
	Total non-interest income					1,001			453			1,834				1,758
Non-interest expense:
Salaries and employee benefits						2,274			2,360			7,234				6,524
Occupancy and equipment						429			360			1,286				1,131
Other expenses						985			1,173			3,375				3,336
	Total non-interest expense					3,688			3,893			11,895				10,991
	Income before provision for income taxes					2,876			1,992			6,268				6,452
Provision for income taxes						831			487			1,626				1,746
	Net income				$	2,045		$	1,505		$	4,642			$	4,706
Basic earnings per common share					$	0.34		$	0.25		$	0.77			$	0.78
Diluted earnings per common share					$	0.34		$	0.25		$	0.76			$	0.78
Basic weighted average shares of common stock outstanding						6,069			6,066			6,067				6,064
Diluted weighted average shares of common stock outstanding						6,074			6,074			6,072				6,071

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
				September 30, 2019			December 31, 2018				September 30, 2018
				(Unaudited)			(1)				(Unaudited)
ASSETS
Cash and due from banks				$	36,979		$	21,693			$	20,924
			Total cash and cash equivalents		36,979			21,693				20,924
Investment securities:
	Held-to-maturity, at amortized cost				7,996			7,991				7,990
	Available-for-sale (at fair value; amortized cost of $57,631,
		$72,716 and $70,805)			58,657			70,174				67,372
			Total investment securities		66,653			78,165				75,362
Loans, less allowance for loan losses of $6,550, $6,029 and $5,842					554,122			504,549				481,419
Bank premises and equipment, net (2)					6,338			5,803				5,316
Investment in Federal Home Loan Bank stock, at cost					3,342			3,085				3,085
Goodwill					4,119			4,119				4,119
Accrued interest receivable and other assets (2)					9,287			4,690				5,018
			Total assets	$	680,840		$	622,104			$	595,243
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
	Demand - non interest-bearing			$	135,065		$	120,011			$	145,712
	Demand - interest-bearing				63,333			65,652				63,435
	Savings				26,500			25,817				28,282
	Money market				129,343			104,060				101,383
	Time deposits that meet or exceed the FDIC insurance limit				81,388			83,071				80,852
	Other time deposits				169,501			102,578				84,388
			Total deposits		605,130			501,189				504,052
Federal Home Loan Bank advances					-			56,800				28,500
Junior subordinated debt					5,858			-				-
Accrued interest payable and other liabilities (2)					3,348			2,595				2,192
			Total liabilities		614,336			560,584				534,744
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 6,069,600, 6,066,475 and 6,066,475			36,981			36,967				36,967
	Retained earnings				28,800			26,342				25,949
	Accumulated other comprehensive income (loss), net				723			(1,789	)			(2,417	)
			Total shareholders' equity		66,504			61,520				60,499
			Total liabilities and shareholders' equity	$	680,840		$	622,104			$	595,243
(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 September 30, 2019, the right-of-use asset was recorded for $1,056,000 and a lease liability was recorded for $1,068,000.

Financial Summary
(Dollars in thousands except per share data)
		At or for the								At or for the
		Three Months Ended								Nine Months Ended
		September 30, 2019				September 30, 2018				September 30, 2019				September 30, 2018
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Statement of Income Data:
Net interest income		$	5,773			$	5,512			$	16,819			$	16,065
Provision for loan losses			210				80				490				380
Non-interest income			1,001				453				1,834				1,758
Non-interest expense			3,688				3,893				11,895				10,991
Provision for income taxes			831				487				1,626				1,746
Net income		$	2,045			$	1,505			$	4,642			$	4,706
Selected per Common Share Data:
Basic earnings per common share		$	0.34			$	0.25			$	0.77			$	0.78
Diluted earnings per common share		$	0.34			$	0.25			$	0.76			$	0.78
Dividend per share		$	0.12			$	0.12			$	0.36			$	0.36
Book value per common share (2)		$	10.96			$	9.97			$	10.96			$	9.97
Selected Balance Sheet Data:
Assets		$	680,840			$	595,243			$	680,840			$	595,243
Loans, net			554,122				481,419				554,122				481,419
Deposits			605,130				504,052				605,130				504,052
Average assets			652,043				587,062				634,375				581,960
Average earning assets			635,579				575,954				618,081				570,747
Average shareholders' equity			65,859				60,593				64,047				60,076
Nonperforming loans			592				2,170				592				2,170
Total nonperforming assets			592				2,170				592				2,170
Troubled debt restructures (accruing)			2,429				1,749				2,429				1,749
Selected Ratios:
Return on average assets (1)			1.24	%			1.02	%			0.98	%			1.08	%
Return on average common shareholders' equity (1)			12.32	%			9.85	%			9.69	%			10.47	%
Efficiency ratio (3)			54.44	%			65.29	%			63.75	%			61.73	%
Net interest margin (1)			3.60	%			3.80	%			3.64	%			3.76	%
Common equity tier 1 capital ratio			10.3	%			10.9	%			10.3	%			10.9	%
Tier 1 capital ratio			10.3	%			10.9	%			10.3	%			10.9	%
Total capital ratio			12.5	%			12.0	%			12.5	%			12.0	%
Tier 1 leverage ratio			9.0	%			10.1	%			9.0	%			10.1	%
Common dividend payout ratio (4)			35.60	%			48.37	%			47.07	%			46.41	%
Average shareholders' equity to average assets			10.10	%			10.32	%			10.10	%			10.32	%
Nonperforming loans to total loans			0.11	%			0.45	%			0.11	%			0.45	%
Nonperforming assets to total assets			0.09	%			0.36	%			0.09	%			0.36	%
Allowance for loan losses to total loans			1.17	%			1.20	%			1.17	%			1.20	%
Allowance for loan losses to nonperforming loans			1105.95	%			269.26	%			1105.95	%			269.26	%
(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 and losses.
(4) Common dividends divided by net income available for common shareholders.

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