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Summit State Bank Reports Third Quarter Results and Declaration of Dividend SANTA ROSA, Calif., Oct. 27, 2008 (GLOBE NEWSWIRE) -- Summit
State Bank (NasdaqGM:SSBI - News) today reported strong, continuing
improvements in the bank's core net operating income representing
a 45% increase over the same quarter of 2007. ``We are experiencing
strong core earnings growth due to our ongoing strategy
of prudently placing higher quality, higher yielding loans
on our balance sheet while driving core deposit growth to
drive lower cost of funding and generating greater efficiencies
in our overhead structure,'' said President & CEO, Thomas
Duryea. Company recorded a onetime, noncash charge related to the previously announced other than temporary impairment charges (OTTI) on investment securities resulting in a net loss of $0.12 per diluted share for the third quarter ended September 30, 2008. Company's ever important capital position remains ranked #1 of all established Sonoma based banks well above the level required by the FDIC to be considered a ``well capitalized'' bank. A dividend of $0.09 per share on the Company's common stock was declared. Dividend On October 27, 2008, the Board of Directors declared a quarterly cash dividend of $0.09 per share on the Company's common Stock. The dividend is payable November 21, 2008 to shareholders of record as of the close of business on November 12, 2008. Net Income (Loss) and Results of Operation Net operating income was $740,000 or $0.16 per diluted share for the third quarter of 2008, reflecting an improved net interest margin, continuing strength in asset quality and focus on operating expenses before the securities' impairment charge. Net interest income increased $560,000, or 21% to $3,291,000 during the third quarter of 2008 compared to $2,731,000 for the same quarter of 2007. The annualized net interest margin increased to 4.06% for the third quarter of 2008 contrary to industry trends, compared to 3.45% for the third quarter of 2007. The net interest margin was positively impacted by the declines in the bank's funding costs. The bank launched an advertising campaign with the caption ``safe, sound and smart'' to focus the community on Summit's strong capital ratios and asset quality comparing favorably to peers. This campaign has successfully attracted deposits & loans from customers seeking a strong, stable institution with which to conduct their banking business. The Bank had a net loss of $569,000, or $0.12 per diluted share for the quarter ended September 30, 2008 due to the OTTI compared to net income of $509,000, or $0.10 per diluted share for the third quarter of 2007. Net income for the nine months ended September 30, 2008 was $245,000, or $0.05 per diluted share compared to $1,501,000 or $0.31 per diluted share for the same period in 2007. The third quarter was impacted by an OTTI charge of $2,262,000 for investments in Fannie Mae and Freddie Mac preferred stocks and securities of Lehman Brothers Holdings and other corporations. ``These are extraordinary times,'' stated Mr. Duryea, ``that are impacting the whole banking industry regardless of whether or not you were involved directly with originating subprime loans, which we were not.'' ``The one time securities impairment charge,'' stated Mr. Dennis Kelley, Senior Vice President & CFO, ``does not impact the bank's steady, improving core operating trends that should portend well for the bank going forward.'' Net operating income was $740,000 or $0.16 per diluted share for the third quarter of 2008, reflecting in improved net interest margin, continuing strength in asset quality and focus on operating expenses. Total shareholders' equity was $46,353,000 at September 30, 2008 and book value per share was $9.77. The Bank's regulatory capital remains well above the required capital ratios with a Tier 1 capital leverage ratio of 12.5%, a Tier 1 risk-based capital ratio of 15.5% and a Total risk-based capital ratio of 16.8% ranking in the top tier of local and national banks. Moreover, the companies performing loan portfolio ranks favorably to all peer banks. Average earning assets were $321,275,000 for the third quarter of 2008, as compared to $314,341,000 for the same quarter of 2007. The annualized yield on average earning assets was 6.72% and the annualized cost of average interest-bearing liabilities was 2.98% for the third quarter of 2008, as compared to the annualized yield on average earning assets of 7.35% and annualized cost of interest-bearing liabilities of 4.51% for the same quarter of 2007. For the third quarter of 2008, non-interest expense increased $170,000 or 9% to $2,165,000, compared to the same quarter in 2007 due primarily to a onetime, non-recurring expense. During the third quarter, the Bank completed the conversion to a new vendor for its core data processing. Expenses incurred during the quarter related to the conversion were $108,000. Total loans were $288,296,000 at September 30, 2008, an increase of $10,157,000, or 4%, compared to total loans of $278,139,000 at September 30, 2007. Total deposits were $257,914,000 at September 30, 2008, an increase of $11,228,000, or 5%, compared to $246,686,000 at September 30, 2007. Total assets were $349,786,000 at September 30, 2008, an increase of $11,769,000, or 3%, compared to $338,017,000 at September 30, 2007. Nonperforming assets at September 30, 2008 was $883,000, of which the majority is partially guaranteed by the Small Business Administration and all are secured by real estate at conforming advances. After adjustment for SBA guaranty, app. 0.20% of total loans was nonperforming; which is app. 10 times better than industry average. The Bank has had no REO (foreclosed) properties in 2008. The provision for loan losses was $130,000 for the third quarter ended September 30, 2008 as compared to $159,000 in the third quarter of 2007. The Bank had $183,000 in loan charge-offs and $111,000 in loan recoveries during the third quarter of 2008. At September 30, 2008, the allowance for loan losses was $3,817,000 and represented a ratio to gross loans of 1.34% and to nonperforming loans of 432%. These ratios compare to 1.21% and 1010% at September 30, 2007. The Bank's lending focus has been on commercial lending & commercial real estate. Construction & Residential home mortgage lending have been minimal over the past several years and the Bank has not made loans that would be classified as subprime mortgage loans. About Summit State Bank Summit State Bank has total assets of $350 million and total equity of $46 million at September 30, 2008. Headquartered in Sonoma County, the Bank provides diverse financial products and services throughout Sonoma, Napa, San Francisco, and Marin Counties. Summit State Bank stock is traded on the Nasdaq Global Market under the symbol SSBI. 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
------------------ ------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2008 2007 2008 2007
-------- -------- -------- --------
(Un- (Un- (Un- (Un-
audited) audited) audited) audited)
Interest income:
Interest and fees on loans $ 4,738 $ 5,213 $ 14,122 $ 15,161
Interest on Federal funds
sold -- 1 69 3
Interest on investment
securities and deposits in
banks 664 580 1,921 1,712
Dividends on FHLB stock 39 28 107 86
-------- -------- -------- --------
Total interest income 5,441 5,822 16,219 16,962
-------- -------- -------- --------
Interest expense:
Deposits 1,654 2,613 5,669 7,384
Securities sold under
repurchase agreements -- -- -- 2
FHLB advances 496 478 1,550 1,446
-------- -------- -------- --------
Total interest expense 2,150 3,091 7,219 8,832
-------- -------- -------- --------
Net interest income before
provision for loan losses 3,291 2,731 9,000 8,130
Provision for loan losses 130 159 465 490
-------- -------- -------- --------
Net interest income after
provision for loan losses 3,161 2,572 8,535 7,640
-------- -------- -------- --------
Non-interest income:
Service charges 96 76 310 256
Office leases 179 184 488 516
Gains on sales of loans -- -- -- 41
Securities impairment (2,262) -- (2,323) --
Loan servicing, net 10 22 44 58
Other income 7 8 22 26
-------- -------- -------- --------
Total non-interest income (1,970) 290 (1,459) 897
-------- -------- -------- --------
Non-interest expense:
Salaries and employee benefits 1,066 957 3,397 2,913
Occupancy and equipment 450 431 1,292 1,187
Other expenses 649 607 1,978 1,877
-------- -------- -------- --------
Total non-interest expense 2,165 1,995 6,667 5,977
-------- -------- -------- --------
Income (loss) before
provision for income taxes (974) 867 409 2,560
Provision for Income taxes (405) 358 164 1,059
-------- -------- -------- --------
Net income (loss) $ (569) $ 509 $ 245 $ 1,501
======== ======== ======== ========
Basic earnings per share $ (0.12) $ 0.11 $ 0.05 $ 0.31
Diluted earnings per share $ (0.12) $ 0.10 $ 0.05 $ 0.31
Basic weighted average shares
of common stock outstanding 4,745 4,845 4,745 4,840
Diluted weighted average shares
of common stock outstanding 4,745 4,853 4,745 4,848
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept. 30, Sept. 30,
2008 2007
---------- ----------
(Unaudited) (Unaudited)
ASSETS
Cash and due from banks $ 3,783 $ 4,224
Federal funds sold -- --
---------- ----------
Total cash and cash equivalents 3,783 4,224
Time deposits in banks -- 160
Available-for-sale investment securities - at
market value $41,744 at September 30, 2008
and $35,209 at September 30, 2007 41,157 34,910
Held-to-maturity investment securities - at
cost $4,930 at September 30, 2007 -- 5,000
Loans, less allowance for loan losses of $3,871
at September 30, 2008 and $3,362 at
September 30,2007 284,425 274,777
Bank premises and equipment, net 7,899 8,577
Investment in Federal Home Loan Bank stock, at
cost 3,383 2,203
Goodwill 4,119 4,119
Accrued interest receivable and other assets 5,020 4,047
---------- ----------
Total assets $ 349,786 $ 338,017
========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Demand - non interest-bearing $ 11,659 $ 11,015
Demand - interest-bearing 12,785 12,299
Savings 10,126 11,484
Money market 34,830 33,670
Time deposits, $100 thousand and over 84,761 91,922
Other time deposits 103,753 86,296
---------- ----------
Total deposits 257,914 246,686
Securities sold under repurchase agreements -- 4
Federal Home Loan Bank (FHLB) advances 44,740 42,370
Accrued interest payable and other liabilities 779 725
---------- ----------
Total liabilities 303,433 289,785
---------- ----------
Shareholders' equity
Preferred stock, no par value; 20,000 shares
authorized; none issued --
Common stock, no par value; shares authorized
- 30,000; shares issued and outstanding
4,745 at September 30, 2008 and 4,845 at
September 30, 2007 36,238 36,957
Retained earnings 10,419 11,449
Accumulated other comprehensive income (loss),
net of taxes (304) (174)
---------- ----------
Total shareholders' equity 46,353 48,232
---------- ----------
Total liabilities and shareholders' equity $ 349,786 $ 338,017
========== ==========
Earnings Summary
(In Thousands)
Three Months Ended Nine Months Ended
------------------ ------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2008 2007 2008 2007
-------- -------- -------- --------
(Un- (Un- (Un- (Un-
audited) audited) audited) audited)
Statement of Income Data:
Net interest income $ 3,291 $ 2,731 $ 9,000 $ 8,130
Provision for loan losses 130 159 465 490
Non-interest income (1,970) 290 (1,459) 897
Non-interest expense 2,165 1,995 6,667 5,977
Provision for Income taxes (405) 358 164 1,059
-------- -------- -------- --------
Net income (loss) $ (569) $ 509 $ 245 $ 1,501
======== ======== ======== ========
Selected per Share Data:
Basic earnings per share $ (0.12) $ 0.11 $ 0.05 $ 0.31
Diluted earnings per share $ (0.12) $ 0.10 $ 0.05 $ 0.31
Book value per share(2) $ 9.77 $ 9.96 $ 9.77 $ 9.96
Selected Ratios:
Return on average assets(1) -0.65% 0.61% 0.10% 0.62%
Return on average equity(1) -4.79% 4.20% 0.69% 4.17%
Return on average tangible
equity(1) -5.25% 4.60% 0.75% 4.56%
Efficiency ratio -- 66.04% 88.41% 66.21%
Net interest margin(1) 4.06% 3.45% 3.79% 3.54%
Dividend payout ratio -- 85.66% 522.86% 87.14%
Average equity to average
assets 13.65% 14.43% 14.07% 14.76%
Nonperforming loans to total
loans(2) 0.31% 0.12% 0.31% 0.12%
Nonperforming assets to total
assets(2) 0.25% 0.10% 0.25% 0.10%
Allowance for loan losses to
total loans(2) 1.34% 1.21% 1.34% 1.21%
Allowance for loan losses to
nonperforming loans(2) 438.39% 1009.61% 438.39% 1009.61%
(1) Annualized.
(2) As of period end
Contact: Summit State Bank
Dennis E. Kelley, Senior VP and CFO
(707)568-4910
Source: Summit State Bank
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