Summit State Bank Reports 15% Increase In Profitability And Declaration Of Dividend

SANTA ROSA, Calif., Oct. 31, 2013 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq:SSBI) today reported net income for the quarter ended September 30, 2013 of $1,121,000 and earnings per share of $0.23, an increase of 15% in net income and 21% in earnings per share over the quarter ended September 30, 2012. The regular quarterly dividend of $0.11 per share was declared for common shareholders.

Dividend

The Board of Directors today declared an $0.11 quarterly common stock dividend to be paid on November 25 to shareholders of record on November 15.

Net Income and Results of Operations

The Bank had net income of $1,121,000 and net income available for common stockholders of $1,087,000, or $0.23 per diluted share, for the quarter ended September 30, 2013 compared to net income of $977,000 and net income available for common stockholders of $883,000, or $0.19 per diluted share, for the quarter ended September 30, 2012.

For the nine months ended September 30, 2013, net income available for common stockholders was $2,934,000 and diluted earnings per share was $0.61 compared to $1,986,000 and diluted earnings per share of $0.42, for the nine months ended September 30, 2012.

"We experienced a nice uptick in loan and core deposit growth in the third quarter resulting from the addition of a number of high quality new banking relationships through the hard work and focus of our community banking team. Establishing and building customer relationships that include loans and core deposits as part of our Summit Way focus remains our top goal, which will continue to drive our long term success and further increase franchise value," said Tom Duryea, President & CEO.

Net interest income increased 2% to $4,078,000 in the third quarter and $12,263,000 for the nine months ended September 30, 2013 compared to prior year periods as more earning assets offset the declines experienced in the net interest margin. Average earning assets increased 5.7% between the quarters and 9.4% for the nine month periods while the net interest margin declined to 3.82% for the third quarter and 3.87% for the first nine months of 2013 compared to 3.96% and 4.15% in the 2012 periods.

Noninterest income was $450,000 in the third quarter of 2013 compared to $1,737,000 in the third quarter of 2012. The third quarter of 2012 included income recorded from a property defect settlement in the amount of $1,363,000.

As credit quality has improved, loan loss allocation requirements have significantly declined positively impacting our net income. There was no provision for loan losses for the third quarter and $50,000 for the first nine months of 2013 compared to $1,500,000 and $3,360,000 for the same periods in 2012.

Total assets increased 7% to $459,272,000 at September 30, 2013 compared to $429,722,000 at September 30, 2012. The third quarter had strong loan growth of 7% in total loans to $290,589,000 at September 30, 2013 compared to $271,796,000 at June 30, 2013.

"We brought on board some significant new relationships in the third quarter through our $50,000,000 Small Business Lending Program in a very competitive loan environment. Problem loans continue to moderate and are below year ago levels and up slightly from previous quarter," said Bill Fogarty, Chief Credit Officer.

Demand deposits increased 40% to $110,006,000 at September 30, 2013 compared to September 30, 2012, now representing over 30% of total deposits. Core Deposits, defined as demand, savings and money market, as a percentage of total deposits grew to 55% at September 30, 2013 compared to 48% at September 30, 2012.

The Bank's efficiency ratio, which expresses operating costs as a percentage of operating revenues, was 58% for the third quarter of 2013 compared to 62% for the same quarter in 2012. For the nine months ended September 30, 2013 and 2012, efficiency ratio was 60%. Operating expenses increased between the quarters by 2.3% and increased 4% for nine month periods.

The allowance for loan losses to total loans represented 2.06% and 2.23% at September 30, 2013 and 2012. Nonperforming assets at September 30, 2013 included $6,556,000 in loans on non-accrual and $5,564,000 in foreclosed real estate of which $4,771,000 is in two properties that receive rental income. This compares to $4,214,000 in non-accrual loans and $5,654,000 in foreclosed real estate at June 30, 2013 and $8,210,000 in loans on non-accrual and $4,845,000 in foreclosed real estate at September 30, 2012. The increase in non-accrual loans from the second quarter of 2013 was four loans which are collateralized by real estate.

The Bank's regulatory capital remains well above the required capital ratios.

About Summit State Bank

Summit State Bank has total assets of $459 million and total equity of $61 million at September 30, 2013. Headquartered in Sonoma County, the Bank provides diverse financial products and services throughout Sonoma, Napa, San Francisco, and Marin Counties. Summit has been recognized as one of the Top 75 Corporate Philanthropists in the Bay Area by the San Francisco Business Times. In addition, Summit State Bank received the 2013 Rising Star Award from the California Independent Bankers, the 2012 Community Bank Award from the American Bankers Association for its nonprofit work, and has been recognized as one of the North Bay's Best Places to Work by the North Bay Business Journal. Summit has also been consistently recognized as a high performing bank by Findley Reports. 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 Nine Months Ended
  September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
         
Interest income:        
Interest and fees on loans  $ 3,476  $ 3,718  $ 10,597  $ 11,190
Interest on investment securities and deposits in banks  870  725  2,612  2,410
Dividends on FHLB stock  32  3  64  8
Total interest income  4,378  4,446  13,273  13,608
Interest expense:        
Deposits  270  441  933  1,450
FHLB advances  30  16  77  155
Total interest expense  300  457  1,010  1,605
Net interest income before provision for loan losses  4,078  3,989  12,263  12,003
Provision for loan losses  --  1,500  50  3,360
Net interest income after provision for loan losses  4,078  2,489  12,213  8,643
Non-interest income:        
Service charges on deposit accounts  149  137  426  390
Office leases  130  122  386  376
Net securities gains (losses)  (7)  1  74  750
Net gain (loss) on other real estate owned  17  --  (31)  --
Loan servicing, net  3  6  10  23
Building legal settlement  --  1,363  --  1,363
Other income  158  108  340  317
Total non-interest income  450  1,737  1,205  3,219
Non-interest expense:        
Salaries and employee benefits  1,248  1,342  3,939  3,975
Occupancy and equipment  371  351  1,127  1,088
Other expenses  1,003  871  2,987  2,675
Total non-interest expense  2,622  2,564  8,053  7,738
Income before provision for income taxes  1,906  1,662  5,365  4,124
Provision for income taxes  785  685  2,212  1,700
Net income  $ 1,121  $ 977  $ 3,153  $ 2,424
Less: preferred dividends 34  94 219  438
Net income available for common stockholders  $ 1,087  $ 883  $ 2,934  $ 1,986
         
Basic earnings per common share  $ 0.23  $ 0.19  $ 0.62  $ 0.42
Diluted earnings per common share  $ 0.23  $ 0.19  $ 0.61  $ 0.42
         
Basic weighted average shares of common stock outstanding 4,754 4,745 4,751 4,745
Diluted weighted average shares of common stock outstanding 4,791 4,746 4,781 4,746
       
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
       
       
  September 30, 2013 December 31, 2012 September 30, 2012
  (Unaudited)   (Unaudited)
       
ASSETS      
       
Cash and due from banks  $ 20,429  $ 19,979  $ 21,916
Total cash and cash equivalents  20,429  19,979  21,916
       
Time deposits with banks  1,985  2,977  2,977
       
Investment securities:      
Held-to-maturity, at amortized cost  15,558  --  --
Available-for-sale (at fair market value; amortized cost of $114,844, $123,026 and $98,403)  111,958  125,714  100,750
Total investment securities  127,516  125,714  100,750
       
Loans, less allowance for loan losses of $5,991, $5,749 and $6,454  284,598  275,877  283,318
Bank premises and equipment, net   5,209  5,160  5,325
Investment in Federal Home Loan Bank stock, at cost  2,578  2,265  2,265
Goodwill  4,119  4,119  4,119
Other Real Estate Owned  5,564  4,845  4,845
Accrued interest receivable and other assets   7,274  3,960  4,207
       
Total assets  $ 459,272  $ 444,896  $ 429,722
       
LIABILITIES AND      
SHAREHOLDERS' EQUITY      
       
Deposits:      
Demand - non interest-bearing  $ 66,937  $ 58,548  $ 51,840
Demand - interest-bearing  43,069  29,059  26,808
Savings  26,760  23,257  21,800
Money market  55,675  56,669  59,693
Time deposits, $100 thousand and over  120,625  128,785  124,300
Other time deposits  38,978  44,686  47,981
Total deposits  352,044  341,004  332,422
       
Federal Home Loan Bank (FHLB) advances  43,200  40,000  34,000
Accrued interest payable and other liabilities  2,756  1,022  1,151
       
Total liabilities  398,000  382,026  367,573
       
Shareholders' equity       
Preferred stock, no par value; 20,000,000 shares authorized; shares issued and outstanding - 13,750 Series B; per share redemption of $1,000 for total liquidation preference of $13,750  13,666  13,666  13,666
Common stock, no par value; shares authorized - 30,000,000 shares; issued and outstanding 4,775,270 in 2013 and 4,744,720 in 2012  36,571  36,396  36,387
Retained earnings  12,710  11,250  10,735
Accumulated other comprehensive income (loss), net of taxes   (1,675)  1,558  1,361
       
Total shareholders' equity  61,272  62,870  62,149
       
Total liabilities and shareholders' equity  $ 459,272  $ 444,896  $ 429,722
         
Earnings Summary
(In Thousands)
         
         
  Three Months Ended Nine Months Ended
  September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
  (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Statement of Income Data:        
Net interest income  $ 4,078  $ 3,989  $ 12,263  $ 12,003
Provision for loan losses   --  1,500  50  3,360
Non-interest income  450  1,737  1,205  3,219
Non-interest expense  2,622  2,564  8,053  7,738
Provision for income taxes   785  685  2,212  1,700
Net income  $ 1,121  $ 977  $ 3,153  $ 2,424
Less: preferred dividends  34  94  219  438
Net income available for common stockholders  $ 1,087  $ 883  $ 2,934  $ 1,986
         
Selected per Common Share Data:        
Basic earnings per common share  $ 0.23  $ 0.19  $ 0.62  $ 0.42
Diluted earnings per common share  $ 0.23  $ 0.19  $ 0.61  $ 0.42
Dividend per share  $ 0.11  $ 0.09  $ 0.31  $ 0.27
Book value per common share (2)(3)  $ 10.01  $ 10.22  $ 10.01  $ 10.22
         
Selected Balance Sheet Data:         
Assets  $ 459,272  $ 429,722  $ 459,272  $ 429,722
Loans, net  284,598  283,318  284,598  283,318
Deposits  352,044  332,422  352,044  332,422
Average assets  439,417  415,966  437,466  403,041
Average earning assets  423,564  400,834  423,123  386,638
Average shareholders' equity  61,160  61,879  62,662  61,463
Average common shareholders' equity  47,494  48,213  48,996  47,797
Nonperforming loans  6,556  8,210  6,556  8,210
Other real estate owned  5,564  4,845  5,564  4,845
Total nonperforming assets  12,120  13,055  12,120  13,055
Troubled debt restructures (accruing)  4,742  7,144  4,742  7,144
         
Selected Ratios:        
Return on average assets (1) 1.01% 0.93% 0.96% 0.80%
Return on average common equity (1) 9.08% 7.29% 8.01% 5.55%
Efficiency ratio (4)(5)(7) 58.03% 62.27% 59.99% 60.19%
Net interest margin (1) 3.82% 3.96% 3.87% 4.15%
Tier 1 leverage capital ratio 13.5% 13.8% 13.5% 13.8%
Tier 1 risk-based capital ratio 17.1% 17.0% 17.1% 17.0%
Total risk-based capital ratio 18.3% 18.2% 18.3% 18.2%
Common dividend payout ratio (6) 48.30% 48.36% 50.27% 64.50%
Average equity to average assets 13.92% 14.88% 14.32% 15.25%
Nonperforming loans to total loans (2) 2.26% 2.83% 2.26% 2.83%
Nonperforming assets to total assets (2) 2.64% 3.04% 2.64% 3.04%
Allowance for loan losses to total loans (2) 2.06% 2.23% 2.06% 2.23%
Allowance for loan losses to nonperforming loans (2) 91.38% 78.62% 91.38% 78.62%
         
(1) Annualized
(2) As of period end
(3) Total shareholders' equity, less preferred stock, divided by total common shares outstanding
(4) Noninterest expenses to net interest and noninterest income
(5) Excludes net gains (losses) on securities and other real estate owned
(6) Common dividends divided by net income available for common stockholders
(7) Excludes building legal settlement in 2012
CONTACT: Thomas Duryea, President and CEO,         Summit State Bank (707) 568-4920

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