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

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