SANTA ROSA, Calif., Aug. 16 /PRNewswire-FirstCall/ -- Summit State Bank today reported net income of $683,000 or $.20 per diluted share for the quarter ended June 30, 2006. This compares to net income of $770,000 or $.23 per diluted share for the second quarter of 2005. For the six months ended June 30, 2006, net income was $1,433,000 or $.42 per diluted share as compared to $1,388,000 or $.41 per diluted share one year ago. On May 22, 2006, the Board of Directors declared a 2-for-1 stock split of its outstanding shares of common stock. Earnings and dividends per share information for all periods presented give effect to the split.
Annualized return on average equity was 9.93% and 10.50% for the three and six months ended June 30, 2006, as compared to 11.93% and 10.88% for the same periods one year ago. Annualized return on average tangible equity was 11.67% and 12.35% for the three and six months ended June 30, 2006, as compared to 14.19% and 12.96% for the same periods one year ago. Annualized return on average assets was .94% and .96% for the three and six months ended June 30, 2006, as compared to 1.19% and 1.09% for the same periods one year ago.
The Bank experienced a decline in net income during the three months ended June 30, 2006 when compared to the same period in 2005, primarily due to a decline in noninterest income and increase in operating expenses, which was partially offset by an increase in net interest income. Noninterest income declined primarily due to reduced guaranteed loan sales, reduced service charge income and reduced real estate exchange fees Operating expenses increased due to increased staffing to support the growth of the Bank.
Net income increased for the six months ended June 30, 2006 when compared to the same period in 2005, as the increase in net interest income was sufficient to offset the decline in noninterest income and increase in operating expenses.
Net Interest Income
Net interest income increased $101,000 or 4% to $2,692,000 during the second quarter of 2006 compared to $2,591,000 for the same quarter of 2005. The net interest margin declined to 3.94% for the three months ended June 30, 2006, compared to 4.28% for the three months ended June 30, 2005. The decline in the Bank's net interest margin was due to the general rise in interest rates between the two periods which affects the yield on earning assets and the cost of funds by varying amounts. While the net interest margin declined, net interest income increased due to the increase in earning assets. Average interest earning assets increased 13% to $273,804,000 from $242,561,000 for the three months ended June 30, 2006 and 2005.
Net interest income increased $598,000 or 12% to $5,494,000 during the first six months of 2006 compared to $4,896,000 for the same period of 2005, resulting in a net interest margin of 3.92% for the six months ended June 30, 2006, a decrease from the net interest margin of 4.14% for the six months ended June 30, 2005. While the net interest margin declined, growth in the volume of earning assets and a modest change in the mix of earning assets was sufficient to overcome the declining margin, as average interest earning assets increased 19% to $282,862,000 from $238,249,000 for the six months ended June 30, 2006 and 2005.
Noninterest Income
For the second quarter 2006, non-interest income totaled $334,000, as compared to $469,000 for the second quarter of 2005. While lease income increased $19,000 to $167,000, in the quarter over quarter comparison, most of the change is related to service charges on deposit accounts, which decreased $148,000 to $78,000 as a result of the discontinuance of a deposit product line and the loss of a large national account.
Other non- interest income sources included Real Estate 1031 Exchange Fees, which decreased $28,000 to $7,000 in the comparison with second quarter 2005 and SBA Guaranteed Loan Sales, which decreased $23,000 to $5,000 during the same period. Rising short term interest rates have reduced the volume in both product lines.
Total non-interest income for the first six months of 2006 decreased $216,000 to $656,000 for the same reasons outlined above. Because the Headquarters Office was fully leased in 2006, Lease Income increased $75,000 to $318,000 in the comparison with the first six months of 2005. Most of the decrease is represented by the $206,000 decrease in service charges to $162,000, for 2006.
Noninterest Expenses
For the second quarter 2006, non-interest expenses increased $85,000 to $1,725,000, compared to the same period in 2005. While general operating expenses decreased $116,000 in the second quarter comparison with 2005, human resources expense increased $136,000 to $890,000 and premises and equipment related expenses increased $65,000 to $339,000. The increase in expense relates to additional staffing, training and positioning for growth in deposits and assets.
While total non-interest expenses increased $272,000 to $3,458,000, in comparison with the first six months of 2005, the 9% increase in expenses compares to a 17% increase in average assets for the period. The key components of change, in comparison with 2005, were the $59,000 decrease in general operating expenses, $221,000 increase in human resources related expenses, and the $110,000 increase in premises and equipment related expenses.
Loan and Deposit Activity
Total loans as of June 30, 2006 were $250,349,000, an increase of $29,682,000 or 13%, compared to total loans of $220,667,000 at June 30, 2005.
Total deposits were $236,395,000 at June 30, 2006, an increase of $23,235,000 or 11%, compared to $213,160,000 at June 30, 2005.
Total assets were $299,409,000 at June 30, 2006, an increase of $33,794,000 or 13%, compared to $265,615,000 at June 30, 2005. Total assets declined $46,443,000 compared to December 31, 2005 as a result of fluctuations in deposits from the Real Estate 1031 Exchange program.
Nonperforming Assets
Loans on nonaccrual were $958,000 or 0.4% of gross loans at June 30, 2006 and consisted of three loans. There were no loans past due 90 days and still accruing interest.
About Summit State Bank
Summit State Bank provides diverse financial products and services which are marketed through Sonoma County, California with offices located in Santa Rosa, Rohnert Park and Windsor. 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. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those set forth in or implied by forward-looking statements. These risks are described from time to time in Summit State Bank's filings with the Federal Deposit Insurance Corporation, including its Registration Statement on Form 10 and quarterly reports on Form 10-Q. Summit State Bank disclaims any intent or obligation to update these forward-looking statements.
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
For the Three Months Ended June 30, 2006 and 2005 and the Six Months Ended
June 30, 2006 and 2005
(Dollars in thousands except for earnings per share and share data)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
Interest income:
Interest and fees on loans $4,554 $3,510 $8,824 $6,642
Interest on Federal funds
sold 4 43 244 103
Interest on investment
securities and deposits
in banks 362 265 723 457
Total interest income 4,920 3,818 9,791 7,202
Interest expense:
Deposits 1,759 1,008 3,625 1,863
Short-term borrowings 323 111 419 228
Long-term debt 146 108 253 215
Total interest expense 2,228 1,227 4,297 2,306
Net interest income
before provision
for loan losses 2,692 2,591 5,495 4,896
Provision for loan losses 111 111 222 222
Net interest income
after provision for
loan losses 2,581 2,480 5,272 4,674
Non-interest income:
Service charges 78 226 162 368
Office leases 167 148 318 243
Gain on sale of loans 5 29 22 120
Real estate exchange fees 7 36 23 61
Loan servicing 13 18 31 34
Other income 64 12 100 46
Total non-interest
income 334 469 656 872
Other expenses:
Salaries and employee
benefits 890 754 1,767 1,546
Occupancy and equipment 339 274 661 551
Other expenses 496 612 1,030 1,089
Total other expenses 1,725 1,640 3,458 3,186
Income before provision
for income taxes 1,190 1,309 2,470 2,359
Provision for Income taxes 507 539 1,037 971
Net income $683 $770 $1,433 $1,388
Basic earnings per share $0.20 $0.23 $0.43 $0.41
Diluted earnings per share $0.20 $0.23 $0.42 $0.41
Basic weighted average shares
of common stock outstanding 3,361,579 3,361,430 3,361,505 3,361,430
Diluted weighted average
shares of common stock
outstanding 3,393,798 3,377,530 3,377,530 3,361,430
SUMMIT STATE BANK AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(In thousands)
June 30, December 31, June 30,
2006 2005 2005
(Unaudited) (Unaudited)
ASSETS
Cash and due from banks $5,950 $2,186 $7,018
Federal funds sold 63,370 3,200
Total cash and cash
equivalents 5,950 65,556 10,218
Time deposits in banks 652 1,635 3,025
Available-for-sale investment
securities - at fair value 21,671 19,547 12,692
Held-to-maturity investment
securities 5,000 5,000 5,000
Loans, net of unearned income 250,349 239,826 220,667
Allowance for Loan Losses (3,641) (3,354) (3,445)
Loans, net 246,708 236,272 217,272
Bank premises and equipment, net 8,406 8,652 8,996
Investment in Federal Home Loan Bank
stock, at cost 2,609 1,451 1,393
Goodwill 4,119 4,119 4,119
Accrued interest receivable and other
assets 4,294 3,620 2,950
Total assets $299,409 $345,852 $265,615
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Demand $10,490 $11,291 $12,014
NOW 13,168 14,247 13,761
Savings 42,666 112,399 34,832
Money market 37,855 53,867 59,831
Certificates of deposit, $100,000
and over 76,305 59,187 49,320
Other certificates of deposit 55,910 50,764 43,402
Total deposits 236,394 301,755 213,160
Short-term borrowings 14,466 5,175 15,804
Long-term debt 20,200 10,200 10,200
Accrued interest payable and other
liabilities 679 1,679 313
Total liabilities 271,739 318,809 239,477
Shareholders' equity
Common stock 17,402 17,395 17,395
Retained earnings 10,743 9,914 8,776
Accumulated other comprehensive
loss, net of taxes (475) (266) (33)
Total shareholders' equity 27,670 27,043 26,138
Total liabilities and
shareholders' equity $299,409 $345,852 $265,615
Selected Other Data and Ratios
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
(Ratios are annualized)
Return on average assets 0.94% 1.19% 0.96% 1.09%
Return on average equity 9.93% 11.93% 10.50% 10.88%
Return on average tangible equity 11.67% 14.19% 12.35% 12.96%
Efficiency ratio 57.01% 53.59% 56.23% 55.25%
Net interest margin 3.94% 4.28% 3.92% 4.14%