SSBI Summit State Bank

Summit State Bank (Nasdaq: SSBI) today reported record net income for the year ended December 31, 2021 of $14,698,000 and diluted earnings per share of $2.20. This compares to net income of $10,517,000 and diluted earnings per share of $1.57 for the year ended December 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 January 24, 2022 to be paid on February 17, 2022 to shareholders of record on February 10, 2022.

The Bank also issued a 10% stock dividend that was paid on November 4, 2021 to shareholders of record as of the close of business on October 29, 2021. The Bank issued 607,659 shares as a result of the stock dividend, increasing its total shares outstanding to 6,684,759. All prior period average share and earnings per share calculations disclosed in this press release have been retroactively adjusted to account for this stock split.

Net Income and Results of Operations

For the quarter ended December 31, 2021, the Bank had net income of $3,686,000 and diluted earnings per share of $0.55 compared to $2,929,000 of net income and $0.44 diluted earnings per share, for the same period in 2020, a 26% increase in net income and diluted earnings per share.

“The Bank has experienced consistent core earnings growth throughout 2021 and we are pleased to report another year with record earnings,” noted Brian Reed, President and CEO. “The impacts of the pandemic have presented many challenges to our local customers and businesses. Our community’s fortitude and determination has allowed our local economy to persevere through these unprecedented times. Although the future impact of the new COVID variant is unknown, we are pleased to see many businesses continue to stay open and evolve with these changing conditions.”

The 2021 net interest margin was 4.28%, return on average assets was 1.64% and return on average equity was 18.48%. In 2020 net interest margin was 3.91%, return on average assets was 1.33% and return on average equity was 14.68%. 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.

“In 2021 we continue to experience record earnings for the Bank,” said Brian Reed, President and CEO. “Five years ago we embarked on a growth strategy and have seen a consistent increase in earnings in the last four years. Our strategic plan is to remain on a path to grow core earnings for many years to come by strategically managing our balance sheet growth.”     

Interest income increased to $41,973,000 in 2021 compared to $36,425,000 in 2020, up 15% from 2020. The increase in interest income is attributable to $2,632,000 from increases in loan balances, $2,927,000 from increases in income net of fees due to the Paycheck Protection Program (“PPP”) loans, and ($11,000) from decreases in investment income and deposits with Banks due to lower interest rates.

“Since the onset of the pandemic, the Bank funded over 860 PPP loans totaling $134,000,000. We are actively working with our customers who received almost $117,000,000 in forgiveness from the SBA,” said Reed. “We continue to work with our customers to request forgiveness from the SBA for the remaining balance of PPP loans that are on our books. Currently the Bank has almost $17,000,000 in PPP loan balances with $326,000 in net deferred fees.”

Net loans and deposits increased when comparing 2021 to 2020. Net loans increased 10% to $820,987,000 at December 31, 2021 compared to $745,939,000 at December 31, 2020. Total deposits increased 12% to $811,600,000 at December 31, 2021 compared to $726,295,000 at December 31, 2020.

Non-interest income increased in 2021 to $4,901,000 compared to $4,448,000 in 2020. The Bank recognized $3,343,000 in gains on sales of SBA guaranteed loan balances in 2021 compared to $2,108,000 in gains on sales of SBA guaranteed loans balances in 2020; the gains primarily reflect the Bank’s continued growth in the SBA lending group. The Bank also recognized $65,000 in one-time investment security gains in 2021 compared to $874,000 in 2020; these gains were a result of investments being called because of the reduced interest rate environment.

Operating expenses increased 15% in 2021 to $20,333,000 compared to $17,671,000 in 2020. The increase in expenses is primarily due to a $975,000 increase in salaries net of deferred fees and costs, a $492,000 increase in commissions directly related to the Bank’s loan portfolio growth, a $397,000 increase in Stock Appreciation Rights benefits, a $195,000 increase in marketing and donations, and a $195,000 increase in reserve for undisbursed loans. The Bank’s efficiency ratio improved from 52.23% in 2020 to 47.91% in 2021.

Nonperforming assets were $487,000 or 0.05% of total assets on December 31, 2021 compared to $264,000 or 0.03% on December 31, 2020. Nonperforming assets on December 31, 2021 consist of one loan that is secured by real property, one PPP loan and another loan that has a guarantee from the State of California.

The Bank had a provision expense of $1,294,000 in 2021. The allowance for credit losses to total loans including SBA-guaranteed PPP loans was 1.48% on December 31, 2021 and 1.18% on December 31, 2020. Excluding $16,957,000 of PPP loans increases the ratio of allowance for credit losses to 1.51% on December 31, 2021 compared to 1.30% at December 31, 2020. Most of the increase in the allowance for credit loss was due to the early conversion of the Current Expected Credit Loss (“CECL”) on January 1, 2021.

Since the onset of the COVID pandemic, the Bank processed Credit Relief requests for 148 loans totaling $206,649,000. As of December 31, 2021, all deferred loans are now current, and customers are paying on those loans as agreed, in accordance with the original loan terms.

Reed further explains, “We are diligently working to ensure we maintain consistent financial growth in our core earnings. Our 2021 growth in the balance sheet and net income is a testament to our unwavering support of our customers, communities and employees.”

About Summit State Bank

Summit State Bank, a local community bank, has total assets of $958 million and total equity of $84 million at December 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 to customers and results for shareholders. Presently, 65% 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.

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
STATEMENTS OF INCOME
(In thousands except earnings per share data)
					Three Months Ended						Year Ended
					December 31, 2021			December 31, 2020			December 31, 2021			December 31, 2020
					(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Interest income:
	Interest and fees on loans				$	10,442		$	9,731		$	40,192		$	34,633
	Interest on deposits with banks					12			4			37			65
	Interest on investment securities					360			372			1,500			1,498
	Dividends on FHLB stock					68			40			244			229
			Total interest income			10,882			10,147			41,973			36,425
Interest expense:
	Deposits					734			1,030			3,205			4,956
	Federal Home Loan Bank advances					198			201			787			833
	Junior subordinated debt					94			94			375			375
			Total interest expense			1,026			1,325			4,366			6,164
			Net interest income before provision for credit losses			9,857			8,822			37,607			30,261
Provision for credit losses (1)						959			500			1,294			2,100
			Net interest income after provision for credit losses			8,898			8,322			36,312			28,161
Non-interest income:
	Service charges on deposit accounts					220			215			858			808
	Rental income					89			87			353			351
	Net gain on loan sales					884			305			3,343			2,108
	Net securities gain					9			-			65			874
	Other income					47			30			282			307
			Total non-interest income			1,249			637			4,901			4,448
Non-interest expense:
	Salaries and employee benefits					3,182			2,975			12,720			10,748
	Occupancy and equipment					429			383			1,637			1,605
	Other expenses					1,296			1,441			5,976			5,318
			Total non-interest expense			4,907			4,799			20,333			17,671
			Income before provision for income taxes			5,239			4,160			20,880			14,938
Provision for income taxes						1,553			1,231			6,182			4,421
			Net income		$	3,686		$	2,929		$	14,698		$	10,517
Basic earnings per common share (2)					$	0.55		$	0.44		$	2.20		$	1.58
Diluted earnings per common share (2)					$	0.55		$	0.44		$	2.20		$	1.57
Basic weighted average shares of common stock outstanding (2)						6,685			6,677			6,680			6,677
Diluted weighted average shares of common stock outstanding (2)						6,685			6,682			6,682			6,680
(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.
(2) Adjusted for 10% stock dividend rewarded on October 29, 2021

SUMMIT STATE BANK
BALANCE SHEETS
(In thousands except share data)
				December 31,			December 31,
					2021			2020
				(Unaudited)			(Unaudited)
ASSETS
Cash and due from banks				$	40,699		$	30,826
			Total cash and cash equivalents		40,699			30,826
Investment securities:
	Available-for-sale (at fair value; amortized cost of $69,902
		in 2021 and $66,335 in 2020)			69,367			67,952
			Total investment securities		69,367			67,952
Loans, less allowance for credit losses of $12,329
	in 2021 and $8,882 in 2020 (1)				820,987			745,939
Bank premises and equipment, net					5,677			5,994
Investment in Federal Home Loan Bank stock, at cost					4,320			3,429
Goodwill					4,119			4,119
Accrued interest receivable and other assets					12,911			7,595
			Total assets	$	958,080		$	865,854
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
	Demand - non interest-bearing			$	234,824		$	199,097
	Demand - interest-bearing				147,289			88,684
	Savings				69,982			42,120
	Money market				168,637			167,113
	Time deposits that meet or exceed the FDIC insurance limit				29,255			35,765
	Other time deposits				161,613			193,516
			Total deposits		811,600			726,295
Federal Home Loan Bank advances					48,500			53,500
Junior subordinated debt					5,891			5,876
Accrued interest payable and other liabilities					7,807			4,554
			Total liabilities		873,798			790,225
			Total shareholders' equity		84,282			75,629
			Total liabilities and shareholders' equity	$	958,080		$	865,854
(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
(In thousands except per share data)
		As of and for the								As of and for the
		Three Months Ended								Year Ended
		December 31, 2021				December 31, 2020				December 31, 2021				December 31, 2020
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Statement of Income Data:
Net interest income		$	9,856			$	8,822			$	37,606			$	30,261
Provision for credit losses (5)			959				500				1,294				2,100
Non-interest income			1,249				637				4,901				4,448
Non-interest expense			4,907				4,799				20,333				17,671
Provision for income taxes			1,553				1,231				6,182				4,421
Net income		$	3,686			$	2,929			$	14,698			$	10,517
Selected per Common Share Data:
Basic earnings per common share (6)		$	0.55			$	0.44			$	2.20			$	1.58
Diluted earnings per common share (6)		$	0.55			$	0.44			$	2.20			$	1.57
Dividend per share (6)		$	0.11			$	0.11			$	0.44			$	0.44
Book value per common share (1)(6)		$	12.61			$	11.33			$	12.61			$	11.33
Selected Balance Sheet Data:
Assets		$	958,080			$	865,854			$	958,080			$	865,854
Loans, net (5)			820,987				745,939				820,987				745,939
Deposits			811,600				726,295				811,600				726,295
Average assets			920,909				848,900				895,393				791,059
Average earning assets			901,914				831,481				878,258				774,037
Average shareholders' equity			83,780				74,941				79,538				71,637
Average common shareholders' equity			83,780				74,941				79,538				71,637
Nonperforming loans			487				264				487				264
Total nonperforming assets			487				264				487				264
Troubled debt restructures (accruing)			2,128				2,189				2,128				2,189
Selected Ratios:
Return on average assets (2)			1.59	%			1.37	%			1.64	%			1.33	%
Return on average common shareholders' equity (2)			17.46	%			15.55	%			18.48	%			14.68	%
Efficiency ratio (3)			44.22	%			50.73	%			47.91	%			52.23	%
Net interest margin (2)			4.34	%			4.22	%			4.28	%			3.91	%
Common equity tier 1 capital ratio			9.73	%			10.35	%			9.73	%			10.35	%
Tier 1 capital ratio			9.73	%			10.35	%			9.73	%			10.35	%
Total capital ratio			11.77	%			12.62	%			11.77	%			12.62	%
Tier 1 leverage ratio			8.65	%			8.15	%			8.65	%			8.15	%
Common dividend payout ratio (4)			21.79	%			24.85	%			20.33	%			27.70	%
Average common shareholders' equity to average assets			9.10	%			8.83	%			8.88	%			9.06	%
Nonperforming loans to total loans			0.06	%			0.03	%			0.06	%			0.03	%
Nonperforming assets to total assets			0.05	%			0.03	%			0.05	%			0.03	%
Allowance for credit losses to total loans (5)			1.48	%			1.18	%			1.48	%			1.18	%
Allowance for credit losses to total loans excluding PPP (5)*			1.51	%			1.30	%			1.51	%			1.30	%
Allowance for credit losses to nonperforming loans (5)			2532.64	%			3369.08	%			2532.64	%			3369.08	%
(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.
(6) Adjusted for 10% stock dividend rewarded on October 29, 2021
*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.

				December 31, 2021				September 30, 2021				June 30, 2021				March 31, 2021				December 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)				$	12,329			$	11,453			$	11,482			$	11,476			$	8,882
Loans receivable (GAAP)				$	833,316			$	803,957			$	765,461			$	761,416			$	754,820
Excluding SBA PPP loans					16,957				32,126				48,166				32,032				69,583
Loans receivable, excluding SBA PPP (non-GAAP)				$	816,360			$	771,831			$	717,296			$	729,384			$	685,237
ACL on loans to Loans receivable (GAAP)					1.48	%			1.42	%			1.50	%			1.51	%			1.18	%
ACL on loans to Loans receivable, excluding SBA PPP loans (non-GAAP)					1.51	%			1.48	%			1.60	%			1.57	%			1.30	%
(1) Allowance in 2021 reported using current expected credit loss ("CECL") method, all 2020 and prior periods' allowance are reported in accordance with previous GAAP using the incurred loss method.

Contact: Brian Reed, President and CEO, Summit State Bank (707) 568-4908