SSBI Summit State Bank

Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended March 31, 2020 of $2,415,000 and diluted earnings per share of $0.40.  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 27, 2020 to be paid on May 22, 2020 to shareholders of record on May 15, 2020.

Net Income and Results of Operations

For the quarter ended March 31, 2020, Summit State Bank (“Bank”) had net income of $2,415,000 and diluted earnings per share of $0.40 compared to $1,425,000 in net income and $0.23 diluted earnings per share for the same quarter in 2019.

Net income increased $990,000 or 69% the first quarter of 2020 compared to first quarter of 2019. Net interest income increased to $6,525,000 in the first quarter of 2020 compared to $5,547,000 in the first quarter of 2019.

“Summit spent the past three years implementing a strategic plan to restructure and grow the Bank’s balance sheet and earnings,” said Brian Reed, President and CEO. “We saw the Bank’s performance successfully shift in this direction in the second half of 2019 and continue growing into the first quarter of 2020.”

“With the recent impact to the economy caused by the COVID-19 pandemic, the Bank is aware that making changes to our operations and how we support our customers is imperative,” said Reed. “We are headed into a new era and although we do not know how the market will react in the medium to longer term, the Bank is planning for change. We will remain flexible and support our customers as we respond to these changing economic conditions.”                

Non-interest income increased in the first quarter of 2020 to $1,929,000 compared to $493,000 in the first quarter of 2019. The Bank recognized $871,000 in gain from called securities and $697,000 in gains on sales of SBA guaranteed loan balances in the first quarter of 2020 compared to $167,000 in gains on sales of SBA guaranteed loans balances in the first quarter of 2019.

Reed notes that “due to the decreasing rate environment, several investment bonds originally purchased at a discount were called in the first quarter of 2020.”

Total loans and deposits also increased when comparing the first quarter of 2020 to first quarter of 2019; loans were $601,400,000 in 2020 compared to $509,989,000 in 2019 and deposits were $574,006,000 in 2020 compared to $555,255,000 in 2019. The net interest margin increased to 3.88% for the first quarter of 2020 compared to 3.65% for the first quarter of 2019.

Annualized return on average assets for the first quarter of 2020 was 1.41%, annualized return on average equity was 14.13% and the efficiency ratio was 58.31% during the first quarter of 2020. The first quarter of 2019 had an annualized return on average assets of 0.92%, annualized return on average equity of 9.26% and efficiency ratio of 69.74%.

There was a $210,000 or 5% increase in operating expenses in the first quarter of 2020 compared to the first quarter of 2019. The increase in expenses is primarily due to an increase in employee expenses and occupancy costs.

Nonperforming assets were $472,000 or 0.07% of total assets at March 31, 2020 compared to $736,000 or 0.12% at March 31, 2019. The nonperforming assets at March 31, 2020, consist of loans which are predominantly secured by real property. The Bank had provision expense of $600,000 in the first quarter of 2020. The allowance for loan losses to loans was 1.21% at March 31, 2020 and was 1.19% at March 31, 2019.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $722 million and total equity of $68 million at March 31, 2020. 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, 75% 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.

Contact: Brian Reed, President and CEO, Summit State Bank (707) 568-4908

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except earnings per share data)
				Three Months Ended
				March 31, 2020			March 31, 2019
				(Unaudited)			(Unaudited)
Interest income:
	Interest and fees on loans			$	7,820		$	6,452
	Interest on deposits with banks				44			101
	Interest on investment securities				369			590
	Dividends on FHLB stock				59			54
		Total interest income			8,292			7,197
Interest expense:
	Deposits				1,445			1,471
	Federal Home Loan Bank advances				322			179
		Total interest expense			1,767			1,650
		Net interest income before provision for loan losses			6,525			5,547
Provision for loan losses					600			100
		Net interest income after provision for loan losses			5,925			5,447
Non-interest income:
	Service charges on deposit accounts				214			190
	Rental income				87			90
	Net gain on loan sales				697			167
	Net securities gain				871			-
	Other income				60			46
		Total non-interest income			1,929			493
Non-interest expense:
	Salaries and employee benefits				2,723			2,657
	Occupancy and equipment				383			423
	Other expenses				1,316			1,132
		Total non-interest expense			4,422			4,212
		Income before provision for income taxes			3,432			1,728
Provision for income taxes					1,017			303
		Net income		$	2,415		$	1,425
Basic earnings per common share				$	0.40		$	0.23
Diluted earnings per common share				$	0.40		$	0.23
Basic weighted average shares of common stock outstanding					6,070			6,067
Diluted weighted average shares of common stock outstanding					6,074			6,073

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
			March 31, 2020				December 31, 2019			March 31, 2019
			(Unaudited)				(Unaudited)			(Unaudited)
ASSETS
Cash and due from banks			$	36,493			$	38,299		$	18,628
	Total cash and cash equivalents			36,493				38,299			18,628
Investment securities:
	Held-to-maturity, at amortized cost			-				7,998			7,993
	Available-for-sale (at fair value; amortized cost of $58,690,
	$53,591 and $71,610)			58,160				54,241			70,690
	Total investment securities			58,160				62,239			78,683
Loans, less allowance for loan losses of $7,375, $6,769 and $6,139				601,400				576,548			509,989
Bank premises and equipment, net				6,270				6,301			6,364
Investment in Federal Home Loan Bank stock, at cost				3,342				3,342			3,085
Goodwill				4,119				4,119			4,119
Accrued interest receivable and other assets				11,861				5,130			5,422
	Total assets		$	721,645			$	695,978		$	626,290
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
	Demand - non interest-bearing		$	136,875			$	129,084		$	117,870
	Demand - interest-bearing			66,412				69,383			62,140
	Savings			27,459				28,359			26,503
	Money market			123,341				128,377			112,553
	Time deposits that meet or exceed the FDIC insurance limit			47,682				76,564			86,073
	Other time deposits			172,237				142,070			150,116
	Total deposits			574,006				573,837			555,255
Federal Home Loan Bank advances				69,300				45,600			4,700
Junior subordinated debt				5,865				5,862			-
Accrued interest payable and other liabilities				4,273				3,335			2,970
	Total liabilities			653,444				628,634			562,925
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, 6,069,600 and 6,067,975			36,981				36,981			36,974
	Retained earnings			31,593				29,906			27,039
	Accumulated other comprehensive income (loss), net			(373	)			457			(648	)
	Total shareholders' equity			68,201				67,344			63,365
	Total liabilities and shareholders' equity		$	721,645			$	695,978		$	626,290

Financial Summary
(Dollars in thousands except per share data)
		As of and for the
		Three Months Ended
		March 31, 2020				March 31, 2019
		(Unaudited)				(Unaudited)
Statement of Income Data:
Net interest income		$	6,525			$	5,547
Provision for loan losses			600				100
Non-interest income			1,929				493
Non-interest expense			4,422				4,212
Provision for income taxes			1,017				303
Net income		$	2,415			$	1,425
Selected per Common Share Data:
Basic earnings per common share		$	0.40			$	0.23
Diluted earnings per common share		$	0.40			$	0.23
Dividend per share		$	0.12			$	0.12
Book value per common share (2)		$	11.24			$	10.44
Selected Balance Sheet Data:
Assets		$	721,645			$	626,290
Loans, net			601,400				509,989
Deposits			574,006				555,255
Average assets			688,842				627,931
Average earning assets			673,731				616,014
Average shareholders' equity			68,569				62,388
Nonperforming loans			472				736
Total nonperforming assets			472				736
Troubled debt restructures (accruing)			2,061				2,472
Selected Ratios:
Return on average assets (1)			1.41	%			0.92	%
Return on average common shareholders' equity (1)			14.13	%			9.26	%
Efficiency ratio (3)			58.31	%			69.74	%
Net interest margin (1)			3.88	%			3.65	%
Common equity tier 1 capital ratio			10.30	%			10.70	%
Tier 1 capital ratio			10.30	%			10.70	%
Total capital ratio			12.50	%			11.80	%
Tier 1 leverage ratio			9.30	%			9.60	%
Common dividend payout ratio (4)			30.14	%			51.09	%
Average shareholders' equity to average assets			9.95	%			9.94	%
Nonperforming loans to total loans			0.08	%			0.14	%
Nonperforming assets to total assets			0.07	%			0.12	%
Allowance for loan losses to total loans			1.21	%			1.19	%
Allowance for loan losses to nonperforming loans			1562.90	%			834.24	%
(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.