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Summit State Bank Reports 98% Increase in Profitability and Declaration of Dividend

SANTA ROSA, Calif., April 24, 2018 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq:SSBI) today reported net income for the quarter ended March 31, 2018 of $1,740,000 and diluted earnings per share of $0.29.  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 April 23, 2018 to be paid on May 24, 2018 to shareholders of record on May 18, 2018.

Net Income and Results of Operations

For the quarter ended March 31, 2018, Summit State Bank (“Bank”) had net income of $1,740,000 and diluted earnings per share of $0.29 compared to $881,000 in net income and $0.15 diluted earnings per share for the same quarter in 2017. This represented a 98% increase in net income between the periods.

“Beginning in the second quarter of 2016 and continuing to the present, we shifted our strategic focus to increasing our loans and total assets. To accomplish this, we built the needed infrastructure by hiring additional experienced personnel. While 2017 earnings suffered during this period of staff increases and a declining net interest margin, we are now seeing the rewards of the implementation of this strategy,” said Jim Brush, President and CEO.

Net income increased 98% for the first quarter of 2018 compared to first quarter of 2017. Net loans increased 30% or $104 million and total assets increased 10% or $52 million between March 31, 2018 and 2017. The net interest margin increased from 3.60% for the first quarter of 2017 to 3.80% for the first quarter of 2018.

The additional loans and assets were funded by increasing the Bank’s local deposits by 40% or $124 million and a reduction in the investment portfolio of $49 million between March 31, 2017 and 2018. Additionally, institutional funding was reduced by $72 million with reductions in institutional deposits and FHLB borrowings.

The net interest margin declined during 2017 as general interest rates increased and the Bank’s cost of funding rose faster than its yields on earning assets. The Bank experienced a reversal in this trend in the first quarter of 2018, as yields on earning assets increased more than the funding costs.  This was partly because of the additional loans at incrementally higher interest rates and the shift from lower yielding investment securities into higher yielding loans.

Annualized return on average assets for the first quarter of 2018 was 1.22% and annualized return on average equity was 11.8%. The Bank’s efficiency ratio was 58.4% and the net interest margin was 3.80% during the first quarter of 2018. The first quarter of 2017 had an annualized return on average assets of 0.70%, annualized return on average equity of 6.1%, efficiency ratio of 68.8% and net interest margin of 3.60%.

Non-interest income increased in the first quarter of 2018 to $763,000 compared to $330,000 in the first quarter of 2017. The Bank recognized $292,000 in gains on sales of SBA guaranteed loan balances in 2018, while there were no gains on sales of loans in the first quarter of 2017. An experienced government guaranteed loan team of individuals joined the Bank in the second half of 2017 and first quarter of 2018. The new loan prospects for this group are strong and appears to continue through 2018. Additionally, the Bank recognized a recovery on a loss from the sale of a foreclosed property from 2011 through a guarantee payment from the SBA in an amount of $108,000 during the first quarter of 2018.

There was a $262,000 or 8% increase in operating expenses between the first quarter of 2018 as compared to the first quarter of 2017. The increased expenses were due to the increase in employees and related occupancy costs for them as discussed above.

The lower corporate tax rates that were in effect during the first quarter of 2018 reduced tax expense by $277,000 compared to what the expense would have been under the corporate tax rates in effect in 2017. Net income before taxes had a 59% increase in first quarter of 2018 compared to same quarter of 2017.

“We are well positioned to compete in our Sonoma County market with experienced individuals throughout the Bank. The increases in both new loans and deposits is a testament to their abilities,” said Jim Brush, President and CEO.

Total assets at March 31, 2018 were $577 million compared to $525 million at March 31, 2017.

Nonperforming assets were $2,679,000 or 0.46% of total assets at March 31, 2018 compared to $3,240,000 or 0.62% at March 31, 2017. The nonperforming assets at March 31, 2018, consist of nine loans which are predominantly secured by real property. The Bank recorded recoveries of previously charged off loans of $203,000 and had provision expense of $150,000 in the first quarter of 2018. The allowance for loan losses to loans was 1.21% at March 31, 2018 and was 1.33% at March 31, 2017.

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $577 million and total equity of $60 million at March 31, 2018. 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, 75% of management are women and minorities with 40% 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
         
March 31, 2018
  March 31, 2017
          (Unaudited)   (Unaudited)
               
Interest income:      
  Interest and fees on loans $   5,310   $   3,940
  Interest on deposits with banks     69       27
  Interest on federal funds sold     7       3
  Interest on investment securities     614       792
  Dividends on FHLB stock     54       70
      Total interest income     6,054       4,832
Interest expense:      
  Deposits      709       256
  Federal Home Loan Bank advances     31       126
      Total interest expense     740       382
      Net interest income before provision for loan losses     5,314       4,450
Provision for loan losses      150       -
      Net interest income after provision for loan losses     5,164       4,450
Non-interest income:      
  Service charges on deposit accounts     194       170
  Rental income     147       144
  Net gain on loan sales     292       -
  Net securities gain     7       13
  Other income      123       3
      Total non-interest income     763       330
Non-interest expense:      
  Salaries and employee benefits      2,066       1,741
  Occupancy and equipment      390       356
  Other expenses      1,086       1,183
      Total non-interest expense     3,542       3,280
      Income before provision for income taxes     2,385       1,500
Provision for income taxes      645       619
      Net income $   1,740   $   881
               
Basic earnings per common share $   0.29   $   0.15
Diluted earnings per common share $   0.29   $   0.15
               
Basic weighted average shares of common stock outstanding   6,059     6,022
Diluted weighted average shares of common stock outstanding   6,066     6,055
               

 

 
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
                 
                 
        March 31, 2018   December 31, 2017   March 31, 2017
        (Unaudited)   (1)   (Unaudited)
                 
ASSETS          
                 
Cash and due from banks $   18,901     $   68,814     $   20,824  
Federal funds sold     2,000         2,000         1,827  
      Total cash and cash equivalents     20,901         70,814         22,651  
                 
Time deposits with banks     -         -         248  
                 
Investment securities:          
  Held-to-maturity, at amortized cost     7,986         7,984         7,978  
  Available-for-sale (at fair value; amortized cost of $76,892,          
    $79,617 and $124,539)     74,502         78,770         123,598  
      Total investment securities     82,488         86,754         131,576  
                 
Loans, less allowance for loan losses of $5,590, $5,236 and $4,774     457,256         437,594         353,045  
Bank premises and equipment, net      5,208         5,279         5,489  
Investment in Federal Home Loan Bank stock, at cost     3,085         3,085         3,085  
Goodwill       4,119         4,119         4,119  
Other Real Estate Owned     -         -         -  
Accrued interest receivable and other assets      3,926         3,219         4,324  
                 
      Total assets $   576,983     $   610,864     $   524,537  
                 
LIABILITIES AND          
SHAREHOLDERS' EQUITY          
                 
Deposits:            
  Demand - non interest-bearing $   131,243     $   190,861     $   111,731  
  Demand - interest-bearing     73,605         65,742         61,514  
  Savings     29,905         30,102         27,452  
  Money market     109,226         79,564         51,276  
  Time deposits that meet or exceed the FDIC insurance limit     72,343         68,927         55,577  
  Other time deposits     87,536         98,317         92,596  
      Total deposits     503,858         533,513         400,146  
                 
Federal Home Loan Bank advances     11,200         15,000         62,800  
Accrued interest payable and other liabilities     2,202         2,674         2,286  
                 
      Total liabilities     517,260         551,187         465,232  
                 
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 6,066,475, 6,041,475 and 6,025,015     36,967         36,847         36,766  
  Retained earnings     24,438         23,427         23,085  
  Accumulated other comprehensive loss     (1,682 )       (597 )       (546 )
                 
      Total shareholders' equity     59,723         59,677         59,305  
                 
      Total liabilities and shareholders' equity $   576,983     $   610,864     $   524,537  
                 
(1) Information derived from audited financial statements.          

 

 
Financial Summary
(In thousands except per share data)
         
    At or for the
    Three Months Ended
    March 31, 2018   March 31, 2017
    (Unaudited)   (Unaudited)
Statement of Income Data:        
Net interest income   $   5,314     $   4,450  
Provision for loan losses        150         -  
Non-interest income       763         330  
Non-interest expense       3,542         3,280  
Provision for income taxes        645         619  
Net income   $   1,740     $   881  
         
Selected per Common Share Data:        
Basic earnings per common share   $   0.29     $   0.15  
Diluted earnings per common share   $   0.29     $   0.15  
Dividend per share   $   0.12     $   0.10  
Book value per common share (2)   $   9.85     $   9.84  
         
Selected Balance Sheet Data:         
Assets   $   576,983     $   524,537  
Loans, net       457,256         353,045  
Deposits       503,858         400,146  
Average assets       578,109         512,895  
Average earning assets       567,341         501,919  
Average shareholders' equity       59,761         59,008  
Average common shareholders' equity       59,761         59,008  
Nonperforming loans       2,679         3,240  
Other real estate owned       -          -   
Total nonperforming assets       2,679         3,240  
Troubled debt restructures (accruing)       1,611         3,263  
         
Selected Ratios:        
Return on average assets (1)     1.22 %     0.70 %
Return on average common shareholders' equity (1)     11.81 %     6.06 %
Efficiency ratio (3)     58.35 %     68.81 %
Net interest margin (1)     3.80 %     3.60 %
Common equity tier 1 capital ratio     11.3 %     13.6 %
Tier 1 capital ratio     11.3 %     13.6 %
Total capital ratio     12.5 %     14.8 %
Tier 1 leverage ratio     10.0 %     11.0 %
Common dividend payout ratio (4)     41.84 %     65.61 %
Average shareholders' equity to average assets     10.34 %     11.50 %
Nonperforming loans to total loans     0.58 %     0.91 %
Nonperforming assets to total assets     0.46 %     0.62 %
Allowance for loan losses to total loans     1.21 %     1.33 %
Allowance for loan losses to nonperforming loans     208.65 %     147.35 %
 
(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.
(4) Common dividends divided by net income available for common shareholders.
 

 

Contact: James E. Brush, President and CEO, Summit State Bank (707) 568-4920

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