Summit State Bank (Nasdaq: SSBI) today reported record net income
for the quarter ended March 31, 2021 of $3,317,000 and diluted
earnings per share of $0.55. This compares to net income of
$2,415,000 and diluted earnings per share of $0.40 for the quarter
ended March 31, 2020. Additionally, 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 26, 2021 to be paid on May 21,
2021 to shareholders of record on May 14, 2021.
Net Income and Results of Operations
For the quarter ended March 31, 2021, Summit
State Bank (“Bank”) had net income of $3,317,000 and diluted
earnings per share of $0.55 compared to net income of $2,415,000
and $0.40 diluted earnings per share for the quarter ended March
31, 2020.
Net income increased $902,000 or 37% the first
quarter of 2021 compared to first quarter of 2020. Net interest
income increased to $9,190,000 in the first quarter of 2021
compared to $6,525,000 in the first quarter of 2020.
“The Bank recorded record earnings in 2020 and
we continue to experience record earnings into the first quarter of
2021,” noted Brian Reed, President and CEO. “In the past year we
have seen unprecedented events unfold across the globe. I am proud
of the support our staff has provided to our customers and our
local communities. Their diligence, long hours, and commitment to
doing their best every day has allowed our Bank to achieve strong
core financial performance.”
The net interest margin for the first quarter of
2021 was 4.35%, annualized return on average assets was 1.54% and
annualized return on average equity was 17.80%. The first quarter
of 2020 had a net interest margin was 3.88%, annualized return on
average assets was 1.41% and annualized return on average equity
was 14.13%. The Bank is experiencing growth in its margin due to a
reduction in cost of funds; this reduction was caused by repricing
high cost maturing deposits and an increase in low-cost,
non-maturing deposit volume.
“We updated our five-year strategic plan in 2020
and are performing as expected,” said Brian Reed, President and
CEO. “We remain on our path to grow core earnings by strategically
managing our balance sheet.”
Interest income increased to $10,409,000 in the
first quarter of 2021 compared to $8,292,000 in the first quarter
of 2020, this was an increase of 26%. The increase in interest
income is attributable to $1,099,000 from increases in loan
balances and $1,057,000 from increases in income net of fees due to
the Paycheck Protection Program (“PPP”) loans. The fees collected
from all SBA PPP loans are amortized over the life of the loan and
upon forgiveness the remaining fee income, net of cost, is taken
into interest income. In the first quarter of 2021, the Bank
recorded $906,000 in PPP fees net of costs; the Bank has $1,587,000
in remaining PPP fees net of costs left to amortize.
“Last year we funded $96,710,000 of PPP loans to
over 600 businesses and are pleased to offer a second draw of funds
to eligible customers through PPP Round 2,” said Reed. “To date the
Bank funded over $35,000,000 in PPP Round 2 loans. We continue to
actively work with our customers to request forgiveness from the
SBA for the PPP Round 1 loans. Currently the Bank has approximately
$28,000,000 remaining in SBA Round 1 loans to be forgiven.”
Net loans and deposits increased when comparing
the first quarter of 2021 to 2020. Net loans increased 25% to
$749,940,000 at March 31, 2021 compared to $601,400,000 at March
31, 2020. Excluding PPP loans, net loans increased 14% to
$683,627,000 at March 31, 2021 when compared to March 31, 2020.
Total deposits increased 30% to $747,350,000 at March 31, 2021
compared to $574,006,000 at March 31, 2020.
Non-interest income decreased in the first
quarter of 2021 to $694,000 compared to $1,929,000 in the first
quarter of 2020. The Bank recognized $348,000 in gains on sales of
SBA guaranteed loan balances in the first quarter of 2021 compared
to $697,000 in gains on sales of SBA guaranteed loans balances in
the first quarter of 2020. The Bank recognized $871,000 in one-time
investment security gains in the first quarter of 2020 caused by
investments being called because of the reduced interest rate
environment.
Operating expenses increased 9% in the first
quarter of 2021 to $4,839,000 compared to $4,442,000 in the first
quarter of 2020. The increase in expenses is primarily due to an
increase in employee salaries, employee expenses, third-party IT
services, and professional fees. The Bank is achieving economies of
scale as it grows resulting in an efficiency ratio improvement
which went from 58.31% for the first quarter of 2020 to 48.99% for
the first quarter of 2021.
Nonperforming assets were $467,000 or 0.05% of
total assets at March 31, 2021 compared to $416,000 or 0.06% on
March 31, 2020. The nonperforming assets on March 31, 2021 consist
of 2 loans that are secured by real property and another loan that
has a guarantee from the State of California.
The Financial Accounting Standards Board has
adopted a new accounting standard that must be implemented by
January 1, 2023. This standard, referred to as Current Expected
Credit Loss (“CECL”), requires financial institutions to determine
periodic estimates of lifetime expected credit losses on loans, and
recognize those losses as allowances for credit losses The Bank
early adopted CECL on January 1, 2021. At adoption, the Bank
recognized a one-time cumulative-effect adjustment on January 1,
2021 by recording a reduction in retained earnings of $1,575,000,
an increase in the Allowance for Credit Losses (“ACL”) of
$2,250,000, and an increase in the Deferred Tax Asset of $675,000.
The decrease in retained earnings at adoption reduced the Bank’s
common equity tier 1 capital for regulatory capital purposes.
In addition to the adjustment made to the ACL
due to the CECL adoption, the Bank had a provision expense of
$335,000 in the first quarter of 2021. The allowance for credit
losses to total loans including SBA-guaranteed PPP loans was 1.51%
on March 31, 2021 and 1.21% on March 31, 2020. Excluding
$66,313,000 of PPP loan balances, the non-GAAP financial
measurement ratio of allowance for credit losses increases to 1.65%
on March 31, 2021.
As of March 31, 2021, 9 loans totaling
$27,279,000 or 4% of the loan portfolio excluding PPP loans were in
principal and interest deferral. Of the loans in deferral, 7 of
those loans totaling $22,836,000 are extended deferments for a
total deferment period up to one year; none of the loans in
deferral qualify as a Troubled Debt Restructure. The deferral
portfolio has a loan to value ranging from 34% to 78%, and 99% of
the deferred loans are real estate secured.
Reed further explains, “We are fortunate to have
improved financial performance during an unforgettable global
crisis. With the recent change to the orange tier in Sonoma County,
we will support our customers as they begin the post-pandemic
recovery process. We will continue to monitor trends in the economy
and adjust credit loss reserves, as needed, to account for any
measured change in risk of loss.”
About Summit State Bank
Summit State Bank, a local community bank, has
total assets of $886 million and total equity of $76 million at
March 31, 2021. 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, 69% 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, 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.
Contact: Brian Reed, President and CEO, Summit State
Bank (707) 568-4908
SUMMIT STATE
BANK |
STATEMENTS
OF INCOME |
(In thousands except
earnings per share data) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, 2021 |
|
March 31, 2020 |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
Interest
income: |
|
|
|
Interest and fees on loans |
$ |
9,976 |
|
|
$ |
7,820 |
|
Interest on deposits with banks |
|
7 |
|
|
|
44 |
|
Interest on investment securities |
|
383 |
|
|
|
369 |
|
Dividends on FHLB stock |
|
43 |
|
|
|
59 |
|
Total interest income |
|
10,409 |
|
|
|
8,292 |
|
Interest
expense: |
|
|
|
Deposits |
|
933 |
|
|
|
1,445 |
|
Federal Home Loan Bank advances |
|
286 |
|
|
|
322 |
|
Total interest expense |
|
1,219 |
|
|
|
1,767 |
|
Net interest income before provision for credit losses |
|
9,190 |
|
|
|
6,525 |
|
Provision
for credit losses (1) |
|
335 |
|
|
|
600 |
|
Net interest income after provision for credit losses |
|
8,855 |
|
|
|
5,925 |
|
Non-interest
income: |
|
|
|
Service charges on deposit accounts |
|
203 |
|
|
|
214 |
|
Rental income |
|
86 |
|
|
|
87 |
|
Net gain on loan sales |
|
348 |
|
|
|
697 |
|
Net securities gain |
|
7 |
|
|
|
871 |
|
Other income |
|
50 |
|
|
|
60 |
|
Total non-interest income |
|
694 |
|
|
|
1,929 |
|
Non-interest
expense: |
|
|
|
Salaries and employee benefits |
|
3,018 |
|
|
|
2,723 |
|
Occupancy and equipment |
|
414 |
|
|
|
383 |
|
Other expenses |
|
1,407 |
|
|
|
1,316 |
|
Total non-interest expense |
|
4,839 |
|
|
|
4,422 |
|
Income before provision for income taxes |
|
4,710 |
|
|
|
3,432 |
|
Provision
for income taxes |
|
1,393 |
|
|
|
1,017 |
|
Net income |
$ |
3,317 |
|
|
$ |
2,415 |
|
|
|
|
|
Basic
earnings per common share |
$ |
0.55 |
|
|
$ |
0.40 |
|
Diluted
earnings per common share |
$ |
0.55 |
|
|
$ |
0.40 |
|
|
|
|
|
Basic
weighted average shares of common stock outstanding |
|
6,070 |
|
|
|
6,070 |
|
Diluted
weighted average shares of common stock outstanding |
|
6,075 |
|
|
|
6,074 |
|
|
|
|
|
(1) Allowance in 2021 reported with current expected credit loss
("CECL") method, all prior period allowance is reported in
accordance with previous GAAP incurred loss method. |
SUMMIT STATE
BANK |
BALANCE
SHEETS |
(In thousands except
share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021 |
|
December 31, 2020 |
March 31, 2020 |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
$ |
46,949 |
|
$ |
30,826 |
|
$ |
36,493 |
|
Total cash and cash equivalents |
|
46,949 |
|
|
30,826 |
|
|
36,493 |
|
|
|
|
|
|
|
Investment
securities: |
|
|
|
|
|
Available-for-sale (at fair value; amortized cost of $68,966, |
|
|
|
|
|
$66,335 and $58,690) |
|
68,973 |
|
|
67,952 |
|
|
58,160 |
|
Total investment securities |
|
68,973 |
|
|
67,952 |
|
|
58,160 |
|
|
|
|
|
|
|
Loans, less
allowance for credit losses of $11,476, $8,882 and $7,375 (1) |
|
749,940 |
|
|
745,939 |
|
|
601,400 |
|
Bank
premises and equipment, net |
|
5,943 |
|
|
5,994 |
|
|
6,270 |
|
Investment
in Federal Home Loan Bank stock, at cost |
|
3,429 |
|
|
3,429 |
|
|
3,342 |
|
|
|
4,119 |
|
|
4,119 |
|
|
4,119 |
|
Accrued
interest receivable and other assets |
|
6,790 |
|
|
7,595 |
|
|
11,861 |
|
|
|
|
|
|
|
Total
assets |
$ |
886,143 |
|
$ |
865,854 |
|
$ |
721,645 |
|
|
|
|
|
|
|
LIABILITIES AND |
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand - non interest-bearing |
$ |
220,197 |
|
$ |
199,097 |
|
$ |
136,875 |
|
Demand - interest-bearing |
|
111,646 |
|
|
88,684 |
|
|
66,412 |
|
Savings |
|
44,588 |
|
|
42,120 |
|
|
27,459 |
|
Money market |
|
164,621 |
|
|
167,113 |
|
|
123,341 |
|
Time deposits that meet or exceed the FDIC insurance limit |
|
37,147 |
|
|
35,765 |
|
|
47,682 |
|
Other time deposits |
|
169,151 |
|
|
193,516 |
|
|
172,237 |
|
Total deposits |
|
747,350 |
|
|
726,295 |
|
|
574,006 |
|
|
|
|
|
|
|
Federal Home
Loan Bank advances |
|
53,500 |
|
|
53,500 |
|
|
69,300 |
|
Junior
subordinated debt |
|
5,880 |
|
|
5,876 |
|
|
5,865 |
|
Accrued
interest payable and other liabilities |
|
3,904 |
|
|
4,554 |
|
|
4,273 |
|
|
|
|
|
|
|
Total
liabilities |
|
810,634 |
|
|
790,225 |
|
|
653,444 |
|
|
|
|
|
|
|
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 6,069,600, 6,069,600 and 6,069,600 |
|
36,981 |
|
|
36,981 |
|
|
36,981 |
|
|
|
38,524 |
|
|
37,510 |
|
|
31,593 |
|
Accumulated other comprehensive income (loss), net |
|
4 |
|
|
1,138 |
|
|
(373 |
) |
|
|
|
|
|
|
Total shareholders' equity |
|
75,509 |
|
|
75,629 |
|
|
68,201 |
|
|
|
|
|
|
|
Total liabilities and shareholders' equity |
$ |
886,143 |
|
$ |
865,854 |
|
$ |
721,645 |
|
|
|
|
|
|
|
(1) Allowance in 2021
reported with current expected credit loss ("CECL") method, all
prior period allowance is reported in accordance with previous GAAP
incurred loss method. |
Financial
Summary |
(Dollars in
thousands except per share data) |
|
|
|
|
|
As of and
for the |
|
Three Months Ended |
|
March 31, 2021 |
|
March 31, 2020 |
|
(Unaudited) |
|
(Unaudited) |
Statement of Income Data: |
|
|
|
Net interest income |
$ |
9,190 |
|
|
$ |
6,525 |
|
Provision
for credit losses (5) |
|
335 |
|
|
|
600 |
|
Non-interest
income |
|
694 |
|
|
|
1,929 |
|
Non-interest
expense |
|
4,839 |
|
|
|
4,422 |
|
Provision
for income taxes |
|
1,393 |
|
|
|
1,017 |
|
Net
income |
$ |
3,317 |
|
|
$ |
2,415 |
|
|
|
|
|
Selected per Common Share Data: |
|
|
|
Basic
earnings per common share |
$ |
0.55 |
|
|
$ |
0.40 |
|
Diluted
earnings per common share |
$ |
0.55 |
|
|
$ |
0.40 |
|
Dividend per
share |
$ |
0.12 |
|
|
$ |
0.12 |
|
Book value
per common share (1) |
$ |
12.44 |
|
|
$ |
11.24 |
|
|
|
|
|
Selected Balance Sheet Data: |
|
|
|
Assets |
$ |
886,143 |
|
|
$ |
721,645 |
|
Loans, net
(5) |
|
749,940 |
|
|
|
601,400 |
|
Deposits |
|
747,350 |
|
|
|
574,006 |
|
Average
assets |
|
884,238 |
|
|
|
688,842 |
|
Average
earning assets |
|
856,663 |
|
|
|
673,731 |
|
Average
shareholders' equity |
|
75,554 |
|
|
|
68,569 |
|
Nonperforming loans |
|
467 |
|
|
|
472 |
|
Total
nonperforming assets |
|
467 |
|
|
|
416 |
|
Troubled
debt restructures (accruing) |
|
2,176 |
|
|
|
2,061 |
|
|
|
|
|
Selected Ratios: |
|
|
|
Return on
average assets (2) |
|
1.52 |
% |
|
|
1.41 |
% |
Return on
average common shareholders' equity (2) |
|
17.80 |
% |
|
|
14.13 |
% |
Efficiency
ratio (3) |
|
48.99 |
% |
|
|
58.31 |
% |
Net interest
margin (2) |
|
4.35 |
% |
|
|
3.88 |
% |
Common
equity tier 1 capital ratio |
|
9.92 |
% |
|
|
10.30 |
% |
Tier 1
capital ratio |
|
9.92 |
% |
|
|
10.30 |
% |
Total
capital ratio |
|
12.32 |
% |
|
|
12.50 |
% |
Tier 1
leverage ratio |
|
8.10 |
% |
|
|
9.30 |
% |
Common
dividend payout ratio (4) |
|
21.95 |
% |
|
|
30.14 |
% |
Average
shareholders' equity to average assets |
|
8.54 |
% |
|
|
9.95 |
% |
Nonperforming loans to total loans |
|
0.06 |
% |
|
|
0.08 |
% |
Nonperforming assets to total assets |
|
0.05 |
% |
|
|
0.06 |
% |
Allowance
for credit losses to total loans (5) |
|
1.51 |
% |
|
|
1.21 |
% |
Allowance
for credit losses to total loans excluding PPP (5)* |
|
1.65 |
% |
|
|
1.21 |
% |
Allowance
for credit losses to nonperforming loans (5) |
|
2458.47 |
% |
|
|
1562.90 |
% |
|
(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) Allowance in 2021 reported with current expected credit loss
("CECL") method, all prior period allowance is reported in
accordance with previous GAAP incurred loss method. |
|
|
|
|
*Non-GAAP Financial Measures: |
|
|
|
This news release contains a non-GAAP (Generally Accepted
Accounting Principles) financial measure in addition to results
presented in accordance with GAAP for the allowance for credit
losses to total loans excluding PPP loans. The Bank has presented
this non-GAAP financial measure in the earnings release because it
believes that it provides useful information to assess the Bank’s
allowance for credit loss reserves. This non-GAAP financial measure
has inherent limitations, is not required to be uniformly applied,
and is not audited. Further, this non-GAAP financial measure should
not be considered in isolation or as a substitute for the allowance
for credit losses to total loans determined in accordance with GAAP
and may not be comparable to similarly titled measures reported by
other financial institutions. Reconciliation of the GAAP and
non-GAAP financial measurement is presented below. |
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021 |
|
December 31,
2020 |
|
September
30, 2020 |
|
June 30,
2020 |
|
March 31,
2020 |
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
Allowance for Credit Losses (ACL) on loans to Loans
receivable, excluding SBA PPP loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses on loans (1) |
$ |
(11,476 |
) |
|
$ |
(8,882 |
) |
|
$ |
(8,393 |
) |
|
$ |
(7,881 |
) |
|
$ |
(7,375 |
) |
|
|
|
|
|
|
|
|
|
|
Loans
receivable (GAAP) |
$ |
761,416 |
|
|
$ |
754,820 |
|
|
$ |
735,252 |
|
|
$ |
709,689 |
|
|
$ |
608,775 |
|
Excluding SBA PPP loans |
|
66,313 |
|
|
|
69,583 |
|
|
|
96,710 |
|
|
|
95,534 |
|
|
|
- |
|
Loans
receivable, excluding SBA PPP (non-GAAP) |
$ |
695,103 |
|
|
$ |
685,237 |
|
|
$ |
638,542 |
|
|
$ |
614,155 |
|
|
$ |
608,775 |
|
|
|
|
|
|
|
|
|
|
|
ACL on loans
to Loans receivable (GAAP) |
|
1.51 |
% |
|
|
1.18 |
% |
|
|
1.14 |
% |
|
|
1.11 |
% |
|
|
1.21 |
% |
ACL on loans
to Loans receivable, excluding SBA PPP loans (non-GAAP) |
|
1.65 |
% |
|
|
1.30 |
% |
|
|
1.31 |
% |
|
|
1.28 |
% |
|
|
1.21 |
% |
|
|
|
|
|
|
|
|
|
|
(1) Allowance in 2021
reported with current expected credit loss ("CECL") method, all
prior period allowance is reported in accordance with previous GAAP
incurred loss method. |
|
|
|
|
|
|
|
|
|
|
Summit State Bank (NASDAQ:SSBI)
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