SSBI Summit State Bank

Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended June 30, 2019 of $1,172,000 and diluted earnings per share of $0.19.  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 22, 2019 to be paid on August 23, 2019 to shareholders of record on August 16, 2019.

Net Income and Results of Operations

For the quarter ended June 30, 2019, Summit State Bank (“Bank”) had net income of $1,172,000 and diluted earnings per share of $0.19 compared to net income of $1,461,000 and diluted earnings per share of $0.24 for the same quarter in 2018. Net income decreased $289,000 or 20% the second quarter of 2019 compared to the second quarter of 2018.

Net interest income increased to $5,499,000 in the second quarter of 2019 compared to $5,240,000 in the second quarter of 2018. This was an increase of $259,000 or 5% from the prior year.

Net loans, deposits and total assets also increased when comparing the second quarter of 2019 to second quarter of 2018. Loans increased 16% to $536,674,000 at June 30, 2019 compared to $463,856,000 at June 30, 2018, deposits increased 3% to $532,257,000 at June 30, 2019 compared to $517,318,000 at June 30, 2018, and total assets increased 8% to $635,622,000 at June 30, 2019 compared to $585,950,000 at June 30, 2018.

“In the past year, the Bank has seen significant growth in its loan portfolio, 16% for the current quarter compared to a year ago,” said Jim Brush, President and CEO. “It is rewarding to see our staff invest so much effort into making our strategy a reality, they are the heart of our operations and the key to our long-term success.”

For the second quarter 2019, the net interest margin was 3.64%, annualized return on average assets was 0.75% and annualized return on average equity was 7.36%. The second quarter of 2018 generated an annualized net interest margin of 3.69%, annualized return on average assets of 1.01% and annualized return on average equity of 9.79%.

Non-interest income decreased in the second quarter of 2019 to $340,000 compared to $542,000 in the second quarter of 2018. The Bank did not sell any loans in the second quarter of 2019 but recognized $155,000 in gains on sales of SBA guaranteed loan balances in 2018. Rental income also decreased in the second quarter of 2019 to $81,000 compared to $149,000 in the second quarter of 2018.

There was a $438,000 or 12% increase in operating expenses between the second quarter of 2019 as compared to the second quarter of 2018. The increase in expenses are primarily due to the increase in employees, benefits and occupancy costs.

“As expected, this type of growth comes with its own set of challenges like maintaining net interest margin,” said Brush. “We continue to make a deliberate focus to invest our money in local markets and this is having a positive impact on our loan and asset growth.”

“In the shorter term, we will continue managing the cost of deposits. In recent weeks we have seen several shifts in the deposit market that will improve margins and net income in the second half of this year,” Brush said. “We are disappointed the net profit was not higher this quarter but believe our earnings will rebound and end near target for 2019.”

Nonperforming assets were $715,000 or 0.11% of total assets at June 30, 2019 compared to $2,606,000 or 0.44% at June 30, 2018. The nonperforming assets at June 30, 2019, consist of five loans which are predominantly secured by real property. The Bank had provision expense of $180,000 in the second quarter of 2019. The allowance for loan losses to loans was 1.17% at June 30, 2019 compared to 1.23% at June 30, 2018. In June 2019, the Bank also completed the private placement of $6,000,000 in subordinated notes. These notes qualify as Tier 2 capital for regulatory purposes.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $636 million and total equity of $65 million at June 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, 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							Six Months Ended
					June 30, 2019				June 30, 2018			June 30, 2019				June 30, 2018
					(Unaudited)				(Unaudited)			(Unaudited)				(Unaudited)
Interest income:
	Interest and fees on loans				$	6,630			$	5,399		$	13,081			$	10,709
	Interest on deposits with banks					32				58			133				126
	Interest on federal funds sold					-				8			-				14
	Interest on investment securities					476				601			1,066				1,215
	Dividends on FHLB stock					53				53			108				108
			Total interest income			7,191				6,119			14,388				12,172
Interest expense:
	Deposits					1,581				818			3,052				1,526
	Federal Home Loan Bank advances					111				61			290				92
			Total interest expense			1,692				879			3,342				1,618
			Net interest income before provision for loan losses			5,499				5,240			11,046				10,554
Provision for loan losses						180				150			280				300
			Net interest income after provision for loan losses			5,319				5,090			10,766				10,254
Non-interest income:
	Service charges on deposit accounts					219				194			409				387
	Rental income					81				149			172				296
	Net gain on loan sales					-				155			167				447
	Net securities (loss) gain					(7	)			9			(7	)			16
	Other income					47				35			92				158
			Total non-interest income			340				542			833				1,304
Non-interest expense:
	Salaries and employee benefits					2,303				2,078			4,960				4,105
	Occupancy and equipment					434				387			857				784
	Other expenses					1,258				1,092			2,390				2,209
			Total non-interest expense			3,995				3,557			8,207				7,098
			Income before provision for income taxes			1,664				2,075			3,392				4,460
Provision for income taxes						492				614			795				1,259
			Net income		$	1,172			$	1,461		$	2,597			$	3,201
Basic earnings per common share					$	0.19			$	0.24		$	0.43			$	0.53
Diluted earnings per common share					$	0.19			$	0.24		$	0.43			$	0.53
Basic weighted average shares of common stock outstanding						6,069				6,066			6,068				6,063
Diluted weighted average shares of common stock outstanding						6,075				6,074			6,071				6,070

 

SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
				June 30, 2019			December 31, 2018				June 30, 2018
				(Unaudited)			(1)				(Unaudited)
ASSETS
Cash and due from banks				$	12,104		$	21,693			$	23,660
Federal funds sold					-			-				-
			Total cash and cash equivalents		12,104			21,693				23,660
Investment securities:
	Held-to-maturity, at amortized cost				7,995			7,991				7,988
	Available-for-sale (at fair value; amortized cost of $59,450,
		$72,716 and $75,676)			59,853			70,174				72,921
			Total investment securities		67,848			78,165				80,909
Loans, less allowance for loan losses of $6,328, $6,029 and $5,775					536,674			504,549				463,856
Bank premises and equipment, net (2)					6,324			5,803				5,151
Investment in Federal Home Loan Bank stock, at cost					3,341			3,085				3,085
Goodwill					4,119			4,119				4,119
Accrued interest receivable and other assets (2)					5,212			4,690				5,170
			Total assets	$	635,622		$	622,104			$	585,950
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
	Demand - non interest-bearing			$	119,535		$	120,011			$	143,926
	Demand - interest-bearing				65,227			65,652				71,476
	Savings				25,419			25,817				27,298
	Money market				99,585			104,060				101,106
	Time deposits that meet or exceed the FDIC insurance limit				85,315			83,071				75,888
	Other time deposits				137,176			102,578				97,624
			Total deposits		532,257			501,189				517,318
Federal Home Loan Bank advances					29,300			56,800				6,800
Junior subordinated debt					5,862			-				-
Accrued interest payable and other liabilities (2)					3,462			2,595				1,633
			Total liabilities		570,881			560,584				525,751
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 6,070,062, 6,066,475 and 6,066,475			36,974			36,967				36,967
	Retained earnings				27,483			26,342				25,171
	Accumulated other comprehensive income (loss), net				284			(1,789	)			(1,939	)
			Total shareholders' equity		64,741			61,520				60,199
			Total liabilities and shareholders' equity	$	635,622		$	622,104			$	585,950
(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 June 30, 2019, the right-of-use asset was recorded for $1,179,000 and a lease liability was recorded for $1,187,000.

 

Financial Summary
(Dollars in thousands except per share data)
		At or for the								At or for the
		Three Months Ended								Six Months Ended
		June 30, 2019				June 30, 2018				June 30, 2019				June 30, 2018
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Statement of Income Data:
Net interest income		$	5,499			$	5,240			$	11,046			$	10,554
Provision for loan losses			180				150				280				300
Non-interest income			340				542				833				1,304
Non-interest expense			3,995				3,557				8,207				7,098
Provision for income taxes			492				614				795				1,259
Net income		$	1,172			$	1,461			$	2,597			$	3,201
Selected per Common Share Data:
Basic earnings per common share		$	0.19			$	0.24			$	0.43			$	0.53
Diluted earnings per common share		$	0.19			$	0.24			$	0.43			$	0.53
Dividend per share		$	0.12			$	0.12			$	0.24			$	0.24
Book value per common share (2)		$	10.67			$	9.92			$	10.67			$	9.92
Selected Balance Sheet Data:
Assets		$	635,622			$	585,950			$	635,622			$	585,950
Loans, net			536,674				463,856				536,674				463,856
Deposits			532,257				517,318				532,257				517,318
Average assets			622,883				580,611				625,393				579,366
Average earning assets			606,280				568,851				609,179				568,100
Average shareholders' equity			63,855				59,866				63,126				59,814
Nonperforming loans			715				2,606				715				2,606
Total nonperforming assets			715				2,606				715				2,606
Troubled debt restructures (accruing)			2,449				1,591				2,449				1,591
Selected Ratios:
Return on average assets (1)			0.75	%			1.01	%			0.84	%			1.11	%
Return on average common shareholders' equity (1)			7.36	%			9.79	%			8.30	%			10.79	%
Efficiency ratio (3)			68.34	%			61.61	%			69.05	%			59.94	%
Net interest margin (1)			3.64	%			3.69	%			3.66	%			3.75	%
Common equity tier 1 capital ratio			10.7	%			11.3	%			10.7	%			11.3	%
Tier 1 capital ratio			10.7	%			11.3	%			10.7	%			11.3	%
Total capital ratio			13.0	%			12.5	%			13.0	%			12.5	%
Tier 1 leverage ratio			9.5	%			10.0	%			9.5	%			10.0	%
Common dividend payout ratio (4)			62.12	%			49.83	%			56.06	%			45.49	%
Average shareholders' equity to average assets			10.25	%			10.31	%			10.09	%			10.32	%
Nonperforming loans to total loans			0.13	%			0.55	%			0.13	%			0.55	%
Nonperforming assets to total assets			0.11	%			0.44	%			0.11	%			0.44	%
Allowance for loan losses to total loans			1.17	%			1.23	%			1.17	%			1.23	%
Allowance for loan losses to nonperforming loans			885.39	%			221.60	%			885.39	%			221.60	%
(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