Summit State Bank Reports Continued Profitability, Strong Core Deposit Growth And Declaration Of Dividend

SANTA ROSA, Calif., July 29, 2010 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq:SSBI) today reported net income for the Quarter ended June 30, 2010 of $506,000. The Board of Directors declared a cash dividend of $.09 per common share payable August 23, 2010 to shareholders of record on August 11, 2010.

Net Income and Results of Operations

The Bank had net income of $506,000 and net income available for common stockholders, which deducts the preferred dividends, of $368,000, or $0.08 per diluted share, for the quarter ended June 30, 2010 compared to net income of $713,000 and net income available for common stockholders of $575,000, or $0.12 per diluted share, for the quarter ended June 30, 2009. Net income available for common and diluted earnings per share for the six months ended June 30, 2010 were $770,000 or $0.16 compared to $1,325,000 or $0.28 for the same period in 2009.

"Continuing strong operating results driven by our disciplined asset and liability side initiatives were tempered by the increase in the allowance for loan losses and credit expenses related to former transaction credit focus and present economic conditions," stated Thomas Duryea, President and CEO.

The Bank's net interest margin was 4.56% for the three months ended June 30, 2010 compared to 4.53% for the three months ended June 30, 2009. Net interest income was stable at $3,795,000 during the second quarter of 2010 compared to $3,872,000 for the same quarter of 2009.

The Bank's regulatory capital remains well above the required capital ratios with a Tier 1 capital leverage ratio of 14.7%, a Tier 1 risk-based capital ratio of 18.1% and a Total risk-based capital ratio of 19.4% at June 30, 2010.

"Continued strong core operations and strong capital ratios have allowed continued dividends to our shareholders," said Dennis Kelley, Chief Financial Officer.

The provisions for loan losses increased with a provision of $700,000 for the second quarter of 2010 compared to $550,000 for the same quarter in 2009. The provision was $1,710,000 compared to $1,000,000 for the six months ended June 30, 2010 and 2009. These provisions increased the allowance for loan losses to 1.98% of total loans at June 30, 2010 from 1.62% at December 31, 2009.

Nonperforming loans at June 30, 2010 were $10,683,000 compared to $11,653,000 at December 31, 2009. Nonperforming loans to gross loans were 3.68% at June 30, 2010 compared to 3.98% at December 31, 2009. "Nonperforming loans consist of eight borrowers and are primarily secured by real estate. Problem loans have been leveling, but we remain ever cautious during these economic times," said Guy Dana, Chief Credit Officer.

Total assets increased to $360,974,000 at June 30, 2010 compared to $340,400,000 at December 31, 2009, as the Bank increased its liquidity position.

Core deposits, defined as demand, savings and money market deposits, increased 43% to $98,691,000 at June 30, 2010 from $69,064,000 at June 30, 2009, which reflects the Bank's relationship focus.

"Continuing to be recognized as Sonoma County's Top Rated Bank by Bauer Financial has enabled us to attract new full banking relationships in our local communities. We continue to replace transaction based loans with loans that involve banking relationships, growing our core deposits accordingly, which will strengthen the Bank's future earnings stream."

About Summit State Bank

Summit State Bank has total assets of $361 million and total equity of $56 million at June 30, 2010. Headquartered in Sonoma County, the Bank provides diverse financial products and services throughout Sonoma, Napa, San Francisco, and Marin Counties. 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 for earnings per share data)
         
  Three Months Ended Six Months Ended
  June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Interest income:        
Interest and fees on loans  $ 4,371  $ 4,845  $ 8,844  $ 9,589
Interest on Federal funds sold  6  --  8  --
Interest on investment securities and deposits in banks  339  446  698  1,044
Dividends on FHLB stock  2  --  4  --
         
Total interest income  4,718  5,291  9,554  10,633
         
Interest expense:        
Deposits   787  1,149  1,607  2,501
FHLB advances  136  270  272  558
         
Total interest expense  923  1,419  1,879  3,059
         
Net interest income before provision for loan losses  3,795  3,872  7,675  7,574
         
Provision for loan losses   700  550  1,710  1,000
         
Net interest income after provision for loan losses  3,095  3,322  5,965  6,574
         
Non-interest income:        
         
Service charges on deposit accounts  96  98  189  199
Office leases   134  114  260  339
Net securities gains  --  --  150  28
Loan servicing, net  10  11  22  38
Other income   11  2  57  27
         
Total non-interest income  251  225  678  631
         
Non-interest expense:        
Salaries and employee benefits   1,177  1,049  2,419  2,173
Occupancy and equipment   402  407  791  849
Other expenses   853  859  1,601  1,528
         
Total non-interest expense  2,432  2,315  4,811  4,550
         
Income before provision for income taxes  914  1,232  1,832  2,655
         
Provision for income taxes   408  519  786  1,095
         
Net income  $ 506  $ 713  $ 1,046  $ 1,560
         
Less: preferred dividends 138  138 276  235
         
Net income available for common stockholders  $ 368  $ 575  $ 770  $ 1,325
         
Basic earnings per common share  $ 0.08  $ 0.12  $ 0.16  $ 0.28
Diluted earnings per common share  $ 0.08  $ 0.12  $ 0.16  $ 0.28
         
Basic weighted average shares of common stock outstanding 4,745 4,745 4,745 4,745
Diluted weighted average shares of common stock outstanding 4,795 4,764 4,781 4,749
 
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
       
  June 30, 2010 December 31, 2009 June 30, 2009
  (Unaudited)   (Unaudited)
       
ASSETS      
       
Cash and due from banks  $ 4,610  $ 2,933  $ 2,364
Federal funds sold  13,200  --  --
Total cash and cash equivalents  17,810  2,933  2,364
       
Available-for-sale investment securities - amortized cost of $35,132 at June 30, 2010 and $27,393 and $32,699 at December 31, and June 30, 2009  36,177  27,400  32,050
Loans, less allowance for loan losses of $5,741 at June 30, 2010 and $4,737 and $4,415 at December 31, and June 30, 2009  284,711  288,277  300,070
Bank premises and equipment, net   7,493  7,721  7,697
Investment in Federal Home Loan Bank stock, at cost  2,832  2,942  2,941
Goodwill  4,119  4,119  4,119
Accrued interest receivable and other assets   7,832  7,008  6,678
       
Total assets  $ 360,974  $ 340,400  $ 355,919
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
       
Deposits:      
Demand - non interest-bearing  $ 22,928  $ 15,706  $ 12,722
Demand - interest-bearing  24,588  22,206  17,905
Savings  11,743  12,783  11,479
Money market  39,432  43,489  26,958
Time deposits, $100 thousand and over  95,860  97,855  89,460
Other time deposits  90,525  72,214  97,831
Total deposits  285,076  264,253  256,355
       
Federal Home Loan Bank (FHLB) advances  19,000  20,120  42,950
Accrued interest payable and other liabilities  797  522  959
       
Total liabilities  304,873  284,895  300,264
       
Shareholders' equity       
Preferred stock, no par value; 20,000,000 shares authorized; shares issued and outstanding - 8,500 in 2009 and 2008; per share redemption of  $1,000 for total liquidation preference of $8,500  8,053  7,989  7,927
Common stock, no par value; shares authorized - 30,000,000 shares; issued and outstanding 4,744,720 at June 30, 2010, December 31, 2009  and June 30, 2009  36,289  36,275  36,262
Common stock warrants  622  622  622
Retained earnings  10,531  10,615  11,223
Accumulated other comprehensive income (loss), net of taxes   606  4  (379)
       
Total shareholders' equity  56,101  55,505  55,655
       
Total liabilities and shareholders' equity  $ 360,974  $ 340,400  $ 355,919
         
Earnings Summary
(In Thousands)
         
  Three Months Ended Six Months Ended
  June 30, 2010 June 30, 2009 June 30, 2010 June 30, 2009
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statement of Income Data:        
Net interest income  $ 3,795  $ 3,872  $ 7,675  $ 7,574
Provision for loan losses   700  550  1,710  1,000
Non-interest income  251  225  678  631
Non-interest expense  2,432  2,315  4,811  4,550
Provision for income taxes   408  519  786  1,095
Net income  $ 506  $ 713  $ 1,046  $ 1,560
Less: preferred dividends  138  138  276  235
Net income available for common stockholders  $ 368  $ 575  $ 770  $ 1,325
         
Selected per Common Share Data:        
Basic earnings per common share  $ 0.08  $ 0.12  $ 0.16  $ 0.28
Diluted earnings per common share  $ 0.08  $ 0.12  $ 0.16  $ 0.28
Book value per common share (2)(3)  $ 10.13  $ 10.06  $ 10.13  $ 10.06
         
Selected Balance Sheet Data:         
Assets  $ 360,974  $ 355,919  $ 360,974  $ 355,919
Loans, net  284,711  300,070  284,711  300,070
Deposits  285,076  256,355  285,076  256,355
Average assets  352,380  357,568  348,591  360,192
Average earnings assets  334,098  343,185  330,949  349,291
Average shareholders equity  55,989  56,085  55,927  56,368
Average common shareholders equity  48,290  47,916  47,298  47,846
Nonperforming loans  10,683  3,886  10,683  3,886
Total nonperforming assets  10,683  3,927  10,683  3,927
         
Selected Ratios:        
Return on average assets (1) 0.58% 0.80% 0.61% 0.87%
Return on average common equity (1) 4.20% 5.10% 4.46% 5.58%
Return on average common tangible equity (1) 4.59% 5.50% 4.89% 6.02%
Efficiency ratio 60.11% 56.50% 57.60% 55.45%
Net interest margin (1) 4.56% 4.53% 4.68% 4.37%
Tier 1 leverage capital ratio 14.7% 14.7% 14.7% 14.7%
Tier 1 risk-based capital ratio 18.1% 17.7% 18.1% 17.7%
Total risk-based capital ratio 19.4% 18.9% 19.4% 18.9%
Common dividend payout ratio (4) 116.03% 74.26% 110.91% 64.45%
Average equity to average assets 15.89% 15.69% 16.04% 15.65%
Nonperforming loans to total loans (2) 3.68% 1.28% 3.68% 1.28%
Nonperforming assets to total assets (2) 2.96% 1.10% 2.96% 1.10%
Allowance for loan losses to total loans (2) 1.98% 1.45% 1.98% 1.45%
Allowance for loan losses to nonperforming loans (2) 53.74% 113.61% 53.74% 113.61%
 
(1) Annualized.
(2) As of period end
(3) Total shareholders' equity less, preferred stock, divided by total common shares outstanding
(4) common dividends divided by net income available for common stockholders
CONTACT:  Summit State Bank          Thomas Duryea, President and CEO          (707) 568-4920

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