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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) 568-4920Source:Summit State Bank