SSBI - Summit State Bank Earnings Increase 5% to $4.0 Million for Third Quarter 2022; Quarterly Average Assets Surpass $1.0 Billion; Declares Quarterly Cash Dividend of $0.12 Per Common Share
SANTA ROSA, Calif., Oct. 26, 2022 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq: SSBI) today reported net income for the third quarter ended September 30, 2022 increased $183,000, or 5%, to $3,979,000, or $0.59 per diluted share, compared to net income of $3,796,000, or $0.57 per diluted share for the third quarter ended September 30, 2021. Strong loan and deposit growth and net interest margin expansion contributed to profitability for the quarter. In the first nine months of 2022, net income increased 10% to $12.4 million, or $1.86 per diluted share, compared to $11.0 million, or $1.65 per diluted share, in the first nine months of 2021. Additionally, a quarterly dividend of $0.12 per share was declared for common shareholders.
Dividend:
The Board of Directors declared a quarterly cash dividend of $0.12 per share on October 25, 2022. The quarterly dividend will be paid on November 17, 2022 to shareholders of record on November 10, 2022.
Results of Operations:
“The highlights of the third quarter included substantial growth in the loan portfolio, increases to our core deposit base, and expansion of our net interest margin,” noted Brian Reed, President and CEO. “Loan production was stronger than anticipated during the third quarter, and noninterest bearing deposit balances continued to increase, despite deposit pricing pressures. We also surpassed the $1 billion asset milestone, which is a testament to our growth plan. As we head into a new economic environment, we continue to look for new strategies to help our customers while also growing our operations. We are located in some of the most vibrant Northern California markets with a diverse and strong economy. Together, with our strong core operations and ample capital base, we have the resources in place to make our business stronger and more financially sustainable.”
The net interest margin for the third quarter of 2022 was 4.42%, annualized return on average assets was 1.56% and annualized return on average equity was 18.12%. This compared to a net interest margin of 4.31%, annualized return on average assets of 1.68% and annualized return on average equity of 18.54%, respectively, for the third quarter of 2021. These results were above the average 3.42% net interest margin, 1.05% return on average assets and 11.52% return on average equity posted by the 154 bank index peers that make up the Dow Jones U.S. MicroCap Bank index as of June 30, 2022.*
Interest income increased 18% to $12,541,000 in the third quarter of 2022 compared to $10,601,000 in the third quarter of 2021. The increase in interest income is attributable to a $1,674,000 increase in loan interest yield primarily driven by increased loan volume and secondarily by increased rates, $143,000 increase in interest on deposits with banks and $125,000 increase in investment interest.
Net loans and deposits increased when comparing the third quarter of 2022 to 2021. Net loans increased 13% to $893,580,000 at September 30, 2022 compared to $792,504,000 at September 30, 2021. Total deposits increased 16% to $868,912,000 at September 30, 2022 compared to $749,007,000 at September 30, 2021. Most of the deposit increase year-over-year is due to the Bank’s ongoing focus on growing local deposits organically.
Non-interest income decreased in the third quarter of 2022 to $1,055,000 compared to $1,359,000 in the third quarter of 2021. The Bank recognized $578,000 in gains on sales of SBA guaranteed loan balances in the third quarter of 2022 compared to $951,000 in gains on sales of SBA guaranteed loans balances in the third quarter of 2021.
Operating expenses decreased slightly in the third quarter of 2022 to $5,533,000 compared to $5,550,000 in the third quarter of 2021. The decrease is primarily due to a $463,000 reduction in stock appreciation rights expense and is offset by a $310,000 increase in salaries and benefits net of deferred fees and costs and a $140,000 increase in IT expenses.
Nonperforming assets were $3,947,000, or 0.38% of total assets, at September 30, 2022, and consisted of three loans; one loan for $3,200,000 is a real estate secured commercial loan that is in process of liquidation and the other two loans for $759,000 are commercial and agriculture secured loans. Nonperforming assets totaled $416,000, or 0.05% of total assets, at September 30, 2021.
Due to strong loan production and increases in expected losses, the Bank recorded a $770,000 provision for credit loss expense in the third quarter of 2022. This compared to no provision for credit loss expense in the third quarter of 2021. The allowance for credit losses to total loans was 1.57% on September 30, 2022 and 1.42% on September 30, 2021.
“We remain focused on being a reliable resource for our customers and communities through all economic cycles,” said Reed. “While there will be challenges in the local and global economy in the near term, we have the right team in place, together with the strength of our local markets, to lead the momentum to grow during the remainder of the year and into 2023.”
About Summit State Bank
Summit State Bank, a local community bank, has total assets of $1,044 million and total equity of $84 million at September 30, 2022. 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 to customers and results for shareholders. Presently, 63% 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, Best Places to Work in the North Bay, Top Community Bank Loan Producer, Raymond James Bankers Cup, and Super Premier Performing Bank. 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 .
*As of June 30, 2022, the Dow Jones U.S. MicroCap Bank Index tracked 154 banks with total common market capitalization under $250 million for the following ratios: NIM of 3.42%, return on average assets (ROAA) 1.05%, and return on average equity (ROAE) 11.52%.
Forward-looking Statements
The financial results in this release are preliminary. Final financial results and other disclosures will be reported in Summit State Bank’s quarterly report on Form 10-Q for the period ended September 30, 2022 and may differ materially from the results and disclosures in this release due to, among other things, the completion of final review procedures, the occurrence of subsequent events or the discovery of additional information.
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 |
| STATEMENTS OF INCOME |
| (In thousands except earnings per share data) |
| Three Months Ended |
| Nine Months Ended |
| September 30, 2022 |
| September 30, 2021 |
| September 30, 2022 |
| September 30, 2021 |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| Interest income: |
| Interest and fees on loans |
| $ |
| 11,833 |
| $ |
| 10,159 |
| $ |
| 33,025 |
| $ |
| 29,752 |
| Interest on deposits with banks |
| 154 |
| 11 |
| 227 |
| 25 |
| Interest on investment securities |
| 485 |
| 360 |
| 1,312 |
| 1,139 |
| Dividends on FHLB stock |
| 69 |
| 71 |
| 203 |
| 176 |
| Total interest income |
| 12,541 |
| 10,601 |
| 34,767 |
| 31,092 |
| Interest expense: |
| Deposits |
| 1,100 |
| 720 |
| 2,560 |
| 2,471 |
| Federal Home Loan Bank advances |
| 355 |
| 202 |
| 749 |
| 589 |
| Junior Subordinated Debt |
| 94 |
| 94 |
| 281 |
| 281 |
| Total interest expense |
| 1,549 |
| 1,016 |
| 3,590 |
| 3,341 |
| Net interest income before provision for credit losses |
| 10,992 |
| 9,585 |
| 31,177 |
| 27,751 |
| Provision for credit losses on loans |
| 753 |
| - |
| 1,876 |
| 335 |
| Provision for (reversal of) credit losses on unfunded loan commitments |
| 17 |
| - |
| 3 |
| - |
| Net interest income after provision for (reversal of) credit |
| losses and unfunded loan commitments |
| 10,222 |
| 9,585 |
| 29,298 |
| 27,416 |
| Non-interest income: |
| Service charges on deposit accounts |
| 219 |
| 227 |
| 640 |
| 638 |
| Rental income |
| 38 |
| 89 |
| 162 |
| 264 |
| Net gain on loan sales |
| 578 |
| 951 |
| 4,077 |
| 2,459 |
| Net securities gain |
| 1 |
| - |
| 7 |
| 56 |
| Other income |
| 219 |
| 92 |
| 477 |
| 234 |
| Total non-interest income |
| 1,055 |
| 1,359 |
| 5,363 |
| 3,651 |
| Non-interest expense: |
| Salaries and employee benefits |
| 3,449 |
| 3,326 |
| 10,724 |
| 9,496 |
| Occupancy and equipment |
| 405 |
| 394 |
| 1,230 |
| 1,227 |
| Other expenses |
| 1,679 |
| 1,830 |
| 5,163 |
| 4,704 |
| Total non-interest expense |
| 5,533 |
| 5,550 |
| 17,117 |
| 15,427 |
| Income before provision for income taxes |
| 5,744 |
| 5,394 |
| 17,544 |
| 15,640 |
| Provision for income taxes |
| 1,765 |
| 1,598 |
| 5,129 |
| 4,629 |
| Net income |
| $ |
| 3,979 |
| $ |
| 3,796 |
| $ |
| 12,415 |
| $ |
| 11,011 |
| Basic earnings per common share (1) |
| $ |
| 0.59 |
| $ |
| 0.57 |
| $ |
| 1.86 |
| $ |
| 1.65 |
| Diluted earnings per common share (1) |
| $ |
| 0.59 |
| $ |
| 0.57 |
| $ |
| 1.86 |
| $ |
| 1.65 |
| Basic weighted average shares of common stock outstanding (1) |
| 6,688 |
| 6,680 |
| 6,687 |
| 6,678 |
| Diluted weighted average shares of common stock outstanding (1) |
| 6,688 |
| 6,680 |
| 6,687 |
| 6,681 |
| (1) Adjusted for 10% stock dividend declared; effective October 29, 2021 |
| SUMMIT STATE BANK |
| BALANCE SHEETS |
| (In thousands except share data) |
| September 30, 2022 |
| December 31, 2021 |
| September 30, 2021 |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| ASSETS |
| Cash and due from banks |
| $ |
| 42,818 |
| $ |
| 40,699 |
| $ |
| 37,772 |
| Total cash and cash equivalents |
| 42,818 |
| 40,699 |
| 37,772 |
| Investment securities: |
| Available-for-sale (at fair value; amortized cost of $83,417, |
| $69,902 and $68,507) |
| 68,694 |
| 69,367 |
| 68,803 |
| Total investment securities |
| 68,694 |
| 69,367 |
| 68,803 |
| Loans, less allowance for credit losses of $14,209, $12,329 and $11,453 |
| 893,580 |
| 820,987 |
| 792,504 |
| Bank premises and equipment, net |
| 5,509 |
| 5,677 |
| 5,772 |
| Investment in Federal Home Loan Bank stock, at cost |
| 4,737 |
| 4,320 |
| 4,320 |
| Goodwill |
| 4,119 |
| 4,119 |
| 4,119 |
| Affordable housing tax credit investments |
| 8,964 |
| 3,500 |
| - |
| Accrued interest receivable and other assets |
| 15,391 |
| 9,411 |
| 9,302 |
| Total assets |
| $ |
| 1,043,812 |
| $ |
| 958,080 |
| $ |
| 922,592 |
| LIABILITIES AND |
| SHAREHOLDERS' EQUITY |
| Deposits: |
| Demand - non interest-bearing |
| $ |
| 254,135 |
| $ |
| 234,824 |
| $ |
| 229,557 |
| Demand - interest-bearing |
| 147,349 |
| 147,289 |
| 115,253 |
| Savings |
| 68,880 |
| 69,982 |
| 47,251 |
| Money market |
| 149,409 |
| 168,637 |
| 163,640 |
| Time deposits that meet or exceed the FDIC insurance limit |
| 102,660 |
| 29,255 |
| 31,279 |
| Other time deposits |
| 146,479 |
| 161,613 |
| 162,027 |
| Total deposits |
| 868,912 |
| 811,600 |
| 749,007 |
| Federal Home Loan Bank advances |
| 73,700 |
| 48,500 |
| 80,000 |
| Junior subordinated debt |
| 5,902 |
| 5,891 |
| 5,887 |
| Affordable housing commitment |
| 4,752 |
| 2,483 |
| - |
| Accrued interest payable and other liabilities |
| 6,125 |
| 5,324 |
| 5,715 |
| Total liabilities |
| 959,391 |
| 873,798 |
| 840,609 |
| 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 6,687,959, 6,684,759 and 6,684,759 (1) |
| 37,145 |
| 37,014 |
| 37,014 |
| Retained earnings |
| 57,641 |
| 47,644 |
| 44,761 |
| Accumulated other comprehensive (loss) income, net |
| (10,365 |
| ) |
| (376 |
| ) |
| 208 |
| Total shareholders' equity |
| 84,421 |
| 84,282 |
| 81,983 |
| Total liabilities and shareholders' equity |
| $ |
| 1,043,812 |
| $ |
| 958,080 |
| $ |
| 922,592 |
| (1) Adjusted for 10% stock dividend declared; effective October 29, 2021 |
| Financial Summary |
| (Dollars in thousands except per share data) |
| As of and for the |
| As of and for the |
| Three Months Ended |
| Nine Months Ended |
| September 30, 2022 |
| September 30, 2021 |
| September 30, 2022 |
| September 30, 2021 |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| Statement of Income Data: |
| Net interest income |
| $ |
| 10,992 |
| $ |
| 9,585 |
| $ |
| 31,177 |
| $ |
| 27,751 |
| Provision for credit losses on loans |
| 753 |
| - |
| 1,876 |
| 335 |
| Provision for (Reversal of) credit losses on unfunded loan commitments |
| 17 |
| - |
| 3 |
| - |
| Non-interest income |
| 1,055 |
| 1,359 |
| 5,363 |
| 3,651 |
| Non-interest expense |
| 5,533 |
| 5,550 |
| 17,117 |
| 15,427 |
| Provision for income taxes |
| 1,765 |
| 1,598 |
| 5,129 |
| 4,629 |
| Net income |
| $ |
| 3,979 |
| $ |
| 3,796 |
| $ |
| 12,415 |
| $ |
| 11,011 |
| Selected per Common Share Data: |
| Basic earnings per common share (5) |
| $ |
| 0.59 |
| $ |
| 0.57 |
| $ |
| 1.86 |
| $ |
| 1.65 |
| Diluted earnings per common share (5) |
| $ |
| 0.59 |
| $ |
| 0.57 |
| $ |
| 1.86 |
| $ |
| 1.65 |
| Dividend per share (5) |
| $ |
| 0.12 |
| $ |
| 0.12 |
| $ |
| 0.36 |
| $ |
| 0.36 |
| Book value per common share (1)(5) |
| $ |
| 12.62 |
| $ |
| 13.51 |
| $ |
| 12.62 |
| $ |
| 13.51 |
| Selected Balance Sheet Data: |
| Assets |
| $ |
| 1,043,812 |
| $ |
| 922,592 |
| $ |
| 1,043,812 |
| $ |
| 922,592 |
| Loans, net |
| 893,580 |
| 792,504 |
| 893,580 |
| 792,504 |
| Deposits |
| 868,912 |
| 749,007 |
| 868,912 |
| 749,007 |
| Average assets |
| 1,014,891 |
| 898,680 |
| 983,343 |
| 886,794 |
| Average earning assets |
| 986,780 |
| 881,444 |
| 957,280 |
| 870,288 |
| Average shareholders' equity |
| 87,142 |
| 81,234 |
| 85,824 |
| 78,109 |
| Nonperforming loans |
| 3,947 |
| 416 |
| 3,947 |
| 416 |
| Total nonperforming assets |
| 3,947 |
| 416 |
| 3,947 |
| 416 |
| Troubled debt restructurings (accruing) |
| 1,011 |
| 2,146 |
| 1,011 |
| 2,146 |
| Selected Ratios: |
| Return on average assets (2) |
| 1.56 |
| % |
| 1.68 |
| % |
| 1.69 |
| % |
| 1.66 |
| % |
| Return on average common shareholders' equity (2) |
| 18.12 |
| % |
| 18.54 |
| % |
| 19.34 |
| % |
| 18.85 |
| % |
| Efficiency ratio (3) |
| 45.93 |
| % |
| 50.71 |
| % |
| 46.85 |
| % |
| 49.22 |
| % |
| Net interest margin (2) |
| 4.42 |
| % |
| 4.31 |
| % |
| 4.35 |
| % |
| 4.26 |
| % |
| Common equity tier 1 capital ratio |
| 9.57 |
| % |
| 9.93 |
| % |
| 9.57 |
| % |
| 9.93 |
| % |
| Tier 1 capital ratio |
| 9.57 |
| % |
| 9.93 |
| % |
| 9.57 |
| % |
| 9.93 |
| % |
| Total capital ratio |
| 11.47 |
| % |
| 11.95 |
| % |
| 11.47 |
| % |
| 11.95 |
| % |
| Tier 1 leverage ratio |
| 8.71 |
| % |
| 8.54 |
| % |
| 8.71 |
| % |
| 8.54 |
| % |
| Common dividend payout ratio (4) |
| 20.31 |
| % |
| 19.20 |
| % |
| 19.48 |
| % |
| 19.84 |
| % |
| Average shareholders' equity to average assets |
| 8.59 |
| % |
| 9.04 |
| % |
| 8.73 |
| % |
| 8.81 |
| % |
| Nonperforming loans to total loans |
| 0.43 |
| % |
| 0.05 |
| % |
| 0.43 |
| % |
| 0.05 |
| % |
| Nonperforming assets to total assets |
| 0.38 |
| % |
| 0.05 |
| % |
| 0.38 |
| % |
| 0.05 |
| % |
| Allowance for credit losses to total loans |
| 1.57 |
| % |
| 1.42 |
| % |
| 1.57 |
| % |
| 1.42 |
| % |
| Allowance for credit losses to nonperforming loans |
| 359.97 |
| % |
| 2756.36 |
| % |
| 359.97 |
| % |
| 2756.36 |
| % |
| (1) Total shareholders' equity divided by total common shares outstanding. |
| (2) Annualized. |
| (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. |
| (5) Adjusted for 10% stock dividend declared; effective October 29, 2021 |
Contact: Brian Reed, President and CEO, Summit State Bank (707) 568-4908