SSBI Summit State Bank

Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended June 30, 2022 of $4,501,000 and diluted earnings per share of $0.67. This compares to net income of $3,898,000 and diluted earnings per share of $0.58 for the quarter ended June 30, 2021. Additionally, 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 July 25, 2022 to be paid on August 18, 2022 to shareholders of record on August 11, 2022.

Net Income and Results of Operations

Net income increased $603,000 or 15% the second quarter of 2022 compared to second quarter of 2021. Net interest income increased to $10,302,000 in the second quarter of 2022 compared to $8,976,000 in the second quarter of 2021.

“Our continued increase in net income can be attributed to the Bank’s ongoing focus to grow core operations,” noted Brian Reed, President and CEO. “Throughout the pandemic and heading into a new economic environment, the Bank focuses on helping our customers through hardships while also growing core operations. We are pleased the Bank is benefitting from investing time and resources to make our business stronger and more financially sustainable.”

The net interest margin for the second quarter of 2022 was 4.36%, annualized return on average assets was 1.85% and annualized return on average equity was 21.26%. The second quarter of 2021 had a net interest margin of 4.13%, annualized return on average assets of 1.76% and annualized return on average equity of 20.18%.

Interest income increased to $11,346,000 in the second quarter of 2022 compared to $10,082,000 in the second quarter of 2021, this was an increase of 13%. The increase in interest income is attributable to a $1,156,000 increase in core loan interest yield primarily driven by increased volume, $54,000 increase in interest on deposits with banks and $46,000 increase in investment interest.

Net loans and deposits increased when comparing the second quarter of 2022 to 2021. Net loans increased 11% to $838,265,000 at June 30, 2022 compared to $753,979,000 at June 30, 2021. Total deposits increased 7% to $819,932,000 at June 30, 2022 compared to $763,953,000 at June 30, 2021. Most of the deposit increase is due to the Bank’s ongoing focus to organically grow local deposits.

Non-interest income increased in the second quarter of 2022 to $2,354,000 compared to $1,597,000 in the second quarter of 2021. The Bank recognized $1,953,000 in gains on sales of SBA guaranteed loan balances in the second quarter of 2022 compared to $1,160,000 in gains on sales of SBA guaranteed loans balances in the second quarter of 2021.

Operating expenses increased 5% in the second quarter of 2022 to $5,298,000 compared to $5,037,000 in the second quarter of 2021. The increase in expenses is primarily due to a $158,000 increase in salaries and benefits net of deferred fees and costs, $52,000 for annual equity grants, and $127,000 increase in marketing and donations.

There was one nonperforming asset for $570,000 or 0.06% of total assets at June 30, 2022 compared to $464,000 or 0.05% of total assets on June 30, 2021.

The Bank had a provision for credit loss expense of $998,000 in the second quarter of 2022. The allowance for credit losses to total loans was 1.58% on June 30, 2022 and 1.50% on June 30, 2021. Most of the increase in the allowance for credit loss was due adjusting the Bank’s qualitative factors in response to recent economic changes.

“We are focused on managing challenges that lie ahead with the local and global economy,” states Reed. “We remain focused on serving our local community. We are a reliable resource for our customers while continuing to be focused on the longer-term growth of our Bank.”

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $980 million and total equity of $85 million at June 30, 2022. 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 to customers and results for shareholders. Presently, 65% 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, Best Places to Work in the North Bay, Top Community Bank Loan Producer, Raymond James Bankers Cup, and Super Premier Performing Bank. 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

The financial results in this release are preliminary. Final financial results and other disclosures will be reported in Summit State Bank’s quarterly report on Form 10-Q for the period ended June 30, 2022 and may differ materially from the results and disclosures in this release due to, among other things, the completion of final review procedures, the occurrence of subsequent events or the discovery of additional information.

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
STATEMENTS OF INCOME
(In thousands except earnings per share data)
	Three Months Ended						Six Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022				June 30, 2021
	(Unaudited)			(Unaudited)			(Unaudited)				(Unaudited)
Interest income:
Interest and fees on loans	$	10,774		$	9,618		$	21,193			$	19,591
Interest on deposits with banks		61			7			73				15
Interest on investment securities		442			396			826				779
Dividends on FHLB stock		69			61			134				104
Total interest income		11,346			10,082			22,226				20,489
Interest expense:
Deposits		750			818			1,460				1,751
Federal Home Loan Bank advances		200			194			393				387
Junior Subordinated Debt		94			94			187				187
Total interest expense		1,044			1,106			2,040				2,325
Net interest income before provision for credit losses		10,302			8,976			20,186				18,164
Provision for credit losses on loans		988			-			1,123				335
Provision for (reversal of) credit losses on unfunded loan commitments		10			-			(14	)			-
Net interest income after provision for (reversal of) credit
losses and unfunded loan commitments		9,304			8,976			19,077				17,829
Non-interest income:
Service charges on deposit accounts		213			208			422				411
Rental income		45			88			123				175
Net gain on loan sales		1,953			1,160			3,499				1,509
Net securities gain		-			49			6				56
Other income		143			92			258				142
Total non-interest income		2,354			1,597			4,308				2,293
Non-interest expense:
Salaries and employee benefits		3,311			3,153			7,275				6,170
Occupancy and equipment		416			418			826				832
Other expenses		1,571			1,466			3,484				2,874
Total non-interest expense		5,298			5,037			11,585				9,876
Income before provision for income taxes		6,360			5,536			11,800				10,246
Provision for income taxes		1,859			1,638			3,364				3,031
Net income	$	4,501		$	3,898		$	8,436			$	7,215
Basic earnings per common share (1)	$	0.67		$	0.58		$	1.26			$	1.08
Diluted earnings per common share (1)	$	0.67		$	0.58		$	1.26			$	1.08
Basic weighted average shares of common stock outstanding (1)		6,687			6,677			6,686				6,677
Diluted weighted average shares of common stock outstanding (1)		6,687			6,682			6,686				6,679
(1) Adjusted for 10% stock dividend declared; effective October 29, 2021

SUMMIT STATE BANK
BALANCE SHEETS
(In thousands except share data)
	June 30, 2022				December 31, 2021				June 30, 2021
	(Unaudited)				(Unaudited)				(Unaudited)
ASSETS
Cash and due from banks	$	36,616			$	40,699			$	56,143
Total cash and cash equivalents		36,616				40,699				56,143
Investment securities:
Available-for-sale (at fair value; amortized cost of $79,613,
$69,902 and $66,666)		69,926				69,367				67,096
Total investment securities		69,926				69,367				67,096
Loans, less allowance for credit losses of $13,452, $12,329 and $11,482		838,265				820,987				753,979
Bank premises and equipment, net		5,540				5,677				5,841
Investment in Federal Home Loan Bank stock, at cost		4,737				4,320				4,320
		4,119				4,119				4,119
Affordable housing tax credit investment		9,050				3,500				-
Accrued interest receivable and other assets		12,532				9,411				10,145
Total assets	$	980,785			$	958,080			$	901,643
LIABILITIES AND
SHAREHOLDERS' EQUITY
Demand - non interest-bearing	$	239,813			$	234,824			$	232,206
Demand - interest-bearing		139,765				147,289				120,664
Savings		66,938				69,982				50,380
Money market		167,761				168,637				162,157
Time deposits that meet or exceed the FDIC insurance limit		31,062				29,255				32,535
Other time deposits		174,593				161,613				166,011
Total deposits		819,932				811,600				763,953
Federal Home Loan Bank advances		58,600				48,500				48,500
Junior subordinated debt		5,898				5,891				5,884
Affordable housing commitment		5,998				2,483				-
Accrued interest payable and other liabilities		5,693				5,324				4,329
Total liabilities		896,121				873,798				822,666
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 6,687,959, 6,684,759 and 6,676,509 (1)		37,014				37,014				36,981
Retained earnings		54,470				47,644				41,693
Accumulated other comprehensive loss, net		(6,820	)			(376	)			303
Total shareholders' equity		84,664				84,282				78,977
Total liabilities and shareholders' equity	$	980,785			$	958,080			$	901,643
(1) Adjusted for 10% stock dividend declared; effective October 29, 2021

Financial Summary
(Dollars in thousands except per share data)
	As of and for the								As of and for the
	Three Months Ended								Six Months Ended
	June 30, 2022				June 30, 2021				June 30, 2022				June 30, 2021
	(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Statement of Income Data:
Net interest income	$	10,302			$	8,976			$	20,186			$	18,164
Provision for credit losses on loans		988				-				1,123				335
Provision for (Reversal of) credit losses on unfunded loan commitments		10				-				(14	)			-
Non-interest income		2,354				1,597				4,308				2,293
Non-interest expense		5,298				5,037				11,585				9,876
Provision for income taxes		1,859				1,638				3,364				3,031
Net income	$	4,501			$	3,898			$	8,436			$	7,215
Selected per Common Share Data:
Basic earnings per common share (5)	$	0.67			$	0.58			$	1.26			$	1.08
Diluted earnings per common share (5)	$	0.67			$	0.58			$	1.26			$	1.08
Dividend per share (5)	$	0.12			$	0.12			$	0.24			$	0.24
Book value per common share (1)(5)	$	12.66			$	13.01			$	12.66			$	13.01
Selected Balance Sheet Data:
Assets	$	980,785			$	901,643			$	980,785			$	901,643
Loans, net		838,265				753,979				838,265				753,979
Deposits		819,932				763,953				819,932				763,953
Average assets		975,422				888,439				967,308				880,752
Average earning assets		948,762				872,483				942,286				864,616
Average shareholders' equity		84,906				77,477				85,154				76,520
Nonperforming loans		570				464				570				464
Total nonperforming assets		570				464				570				464
Troubled debt restructurings (accruing)		1,027				2,160				1,027				2,160
Selected Ratios:
Return on average assets (2)		1.85	%			1.76	%			1.76	%			1.65	%
Return on average common shareholders' equity (2)		21.26	%			20.18	%			19.98	%			19.01	%
Efficiency ratio (3)		41.86	%			47.86	%			47.31	%			48.41	%
Net interest margin (2)		4.36	%			4.13	%			4.32	%			4.24	%
Common equity tier 1 capital ratio		10.00	%			10.25	%			10.00	%			10.25	%
Tier 1 capital ratio		10.00	%			10.25	%			10.00	%			10.25	%
Total capital ratio		11.94	%			12.33	%			11.94	%			12.33	%
Tier 1 leverage ratio		8.74	%			8.29	%			8.74	%			8.29	%
Common dividend payout ratio (4)		17.95	%			18.68	%			19.08	%			20.19	%
Average shareholders' equity to average assets		8.70	%			8.72	%			8.80	%			8.69	%
Nonperforming loans to total loans		0.07	%			0.06	%			0.07	%			0.06	%
Nonperforming assets to total assets		0.06	%			0.05	%			0.06	%			0.05	%
Allowance for credit losses to total loans		1.58	%			1.50	%			1.58	%			1.50	%
Allowance for credit losses to nonperforming loans		2360.36	%			2476.35	%			2360.36	%			2476.35	%
(1) Total shareholders' equity divided by total common shares outstanding.
(2) Annualized.
(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.
(5) Adjusted for 10% stock dividend declared; effective October 29, 2021

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