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Summit State Bank Reports Third Quarter Profit and Declaration of Dividend

(October 26, 2009)

SANTA ROSA, Calif., Oct. 26, 2009 (GLOBE NEWSWIRE) -- Summit State Bank (Nasdaq:SSBI) today reported net income for the third quarter was $166,000 and $1,726,000 for the nine months ended September 30, 2009. A dividend of $0.09 per share on the Company's common stock was declared.

Dividend

On October 26, 2009, the Board of Directors declared a quarterly cash dividend of $0.09 per share on the Company's common stock. The dividend is payable November 20, 2009 to shareholders of record as of the close of business on November 11, 2009. Additionally, a dividend on the preferred stock of $106,250 was declared payable on November 15, 2009.

Net Income and Results of Operations


The Bank had net income of $166,000 and net income available for common stockholders, which deducts the preferred dividends, of $28,000 or $0.01 per diluted share for the quarter ended September 30, 2009 compared to a net loss of $569,000, or $(0.12) per diluted share for the quarter ended September 30, 2008. Net income for the nine months ended September 30, 2009 was $1,726,000, and net income available for common stockholders was $1,353,000 or $0.28 per diluted share compared to $245,000 or $0.05 per diluted share for the same period in 2008.

The quarter ended September 30, 2009 was negatively impacted by a provision for loan losses of $1,450,000 which increased the allowance for loan losses to gross loans to 1.6% from 1.5% at June 30, 2009. Net loan charge-offs for the quarter was $1,107,000. "Weakness in the economy and the stress it is putting on our customers has resulted in a need to continue to increase our allowance for loan losses. We are fortunate to have the increased operating margins and efficiencies to fund these increased loan loss provisions," stated Thomas Duryea, President and CEO.

The Bank's regulatory capital remains well above the required capital ratios with a Tier 1 capital leverage ratio of 14.8%, a Tier 1 risk-based capital ratio of 18.2% and a Total risk-based capital ratio of 19.5% at September 30, 2009.

Net interest income increased $479,000, or 15%, to $3,770,000 during the third quarter of 2009 compared to $3,291,000 for the same quarter of 2008. The annualized net interest margin increased to 4.47% for the third quarter of 2009, compared to 4.06% for the third quarter of 2008.

Non-interest income was $221,000 for the third quarter of 2009. This compares to a negative $1,970,000 for the third quarter of 2008, which reflected a $2,262,000 impairment charge on investments in preferred stocks of Fannie Mae and Freddie Mac and a Shearson Lehman bond.

Non-interest expense increased $94,000 or 4% for the third quarter of 2009 over the third quarter of 2008. The increase is primarily attributable to increased FDIC insurance premiums and marketing expenses related to the relocation of two of our branches. The efficiency ratio for the third quarter of 2009 was 57%.

Total assets declined $17.5 million or 5% to $347,077,000 at September 30, 2009 compared to December 31, 2008, as the Bank's investment portfolio experienced calls on its long-term government agency securities and payments on loans. Gross loans declined $7.7 million or 3% to $295,969,000 at September 30, 2009 compared to December 31, 2008.

"We continue to take advantage of our strong capital position in attracting new deposit customers and increasing our core deposit base," said Mr. Duryea. Demand, savings and money market deposits increased $20 million or 33% at September 30, 2009 compared to December 31, 2008.

Nonperforming assets at September 30, 2009 were $9,293,000 compared to $3,927,000 at June 30, 2009. Nonperforming loans to gross loans was 3.14% at September 30, 2009 which compares favorably to the banking industry. The Bank has no foreclosed real estate owned. The increase in nonperforming loans was primarily attributable to multiple loans to one borrower with a majority secured by real property.

"We expect that nonperforming loans will continue to surface as the financial conditions of borrowers are further impacted by the current economy. I believe it is safe to assume that we will continue to build our allowance for loan losses through year end as conditions dictate," said Mr. Duryea.

The provision for loan losses was $1,450,000 for the third quarter ended September 30, 2009 as compared to $130,000 for the third quarter of 2008. The Bank had $1,112,000 in loan charge-offs and recoveries of $5,000 during the third quarter of 2009. At September 30, 2009, the allowance for loan losses was $4,758,000 and represented a ratio to gross loans of 1.61% and to nonperforming loans of 51%. These ratios compare to 1.45% and 114% at June 30, 2009.

The Bank's lending focus has remained on business lending and commercial real estate with reduced focus on construction lending. Residential home mortgage lending has been minimal over the past several years and the Bank has not made loans that would be classified as subprime mortgage loans.

"We continue to promote our customer service standards and gain new customer relationships. We utilize product pricing models that reward customers with deep relationships," said Mr. Duryea.

About Summit State Bank

Summit State Bank has total assets of $347 million and total equity of $56 million at September 30, 2009. Headquartered in Sonoma County, the Bank provides diverse financial products and services throughout Sonoma, Napa, San Francisco, and Marin Counties. 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 ------------------ ------------------ Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2009 2008 2009 2008 -------- -------- -------- -------- (Unaudited) Interest income: Interest and fees on loans $ 4,726 $ 4,738 $ 14,315 $ 14,122 Interest on Federal funds sold -- -- -- 69 Interest on investment securities and deposits in banks 403 664 1,447 1,921 Dividends on FHLB stock 6 39 6 107 -------- -------- -------- -------- Total interest income 5,135 5,441 15,768 16,219 -------- -------- -------- -------- Interest expense: Deposits 1,103 1,654 3,604 5,669 FHLB advances 262 496 820 1,550 -------- -------- -------- -------- Total interest expense 1,365 2,150 4,424 7,219 -------- -------- -------- -------- Net interest income before provision for loan losses 3,770 3,291 11,344 9,000 Provision for loan losses 1,450 130 2,450 465 -------- -------- -------- -------- Net interest income after provision for loan losses 2,320 3,161 8,894 8,535 -------- -------- -------- -------- Non-interest income: Service charges on deposit accounts 101 96 300 310 Office leases 124 179 462 488 Net securities gains -- -- 28 -- Loan servicing, net 10 10 48 44 Securities impairment (17) (2,262) (17) (2,323) Other income 3 7 30 22 -------- -------- -------- -------- Total non-interest income 221 (1,970) 851 (1,459) -------- -------- -------- -------- Non-interest expense: Salaries and employee benefits 1,079 1,066 3,252 3,397 Occupancy and equipment 423 450 1,272 1,292 Other expenses 757 649 2,284 1,978 -------- -------- -------- -------- Total non-interest expense 2,259 2,165 6,808 6,667 -------- -------- -------- -------- Income before provision for income taxes 282 (974) 2,937 409 Provision for Income taxes 116 (405) 1,211 164 -------- -------- -------- -------- Net income $ 166 $ (569) $ 1,726 $ 245 ======== ======== ======== ======== Less: preferred dividends 138 -- 373 -- -------- -------- -------- -------- Net income available for common stockholders $ 28 $ (569) $ 1,353 $ 245 ======== ======== ======== ======== Basic earnings per common share $ 0.01 $ (0.12) $ 0.29 $ 0.05 Diluted earnings per common share $ 0.01 $ (0.12) $ 0.28 $ 0.05 Basic weighted average shares of common stock outstanding 4,745 4,745 4,745 4,745 Diluted weighted average shares of common stock outstanding 4,794 4,745 4,768 4,745 SUMMIT STATE BANK AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (In thousands except share and per share data) Sept. 30, Sept. 30, 2009 2008 -------- -------- (Unaudited) ASSETS Cash and due from banks $ 3,096 $ 3,783 -------- -------- Total cash and cash equivalents 3,096 3,783 Available-for-sale investment securities - amortized cost of $31,460 at September 30, 2009 and $41,744 at September 30, 2008 31,844 41,157 Loans, less allowance for loan losses of $4,758 at September 30, 2009 and $3,871 at September 30,2008 291,211 284,425 Bank premises and equipment, net 7,796 7,899 Investment in Federal Home Loan Bank stock, at cost 2,942 3,383 Goodwill 4,119 4,119 Accrued interest receivable and other assets 6,069 5,020 -------- -------- Total assets $347,077 $349,786 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Demand - non interest-bearing $ 15,080 $ 11,659 Demand - interest-bearing 21,316 12,785 Savings 11,755 10,126 Money market 32,381 34,830 Time deposits, $100 thousand and over 93,692 84,761 Other time deposits 88,310 103,753 -------- -------- Total deposits 262,534 257,914 Federal Home Loan Bank (FHLB) advances 27,650 44,740 Accrued interest payable and other liabilities 999 779 -------- -------- Total liabilities 291,183 303,433 -------- -------- Shareholders' equity Preferred stock, no par value; 20,000,000 shares authorized; shares issued and outstanding 8,500 in 2009 and 0 in 2008; per share redemption of $1,000 for total liquidation preference of $8,500 7,958 -- Common stock, no par value; shares authorized - 30,000,000 shares; shares issued and outstanding 4,744,720 at September 30, 2009 and 4,744,720 September 30, 2008 36,267 36,238 Common stock warrants 622 -- Retained earnings 10,824 10,419 Accumulated other comprehensive income (loss), net of taxes 223 (304) -------- -------- Total shareholders' equity 55,894 46,353 -------- -------- Total liabilities and shareholders' equity $347,077 $349,786 ======== ======== Earnings Summary (In Thousands) Three Months Ended Nine Months Ended ------------------ ------------------ Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2009 2008 2009 2008 -------- -------- -------- -------- (Unaudited) Statement of Income Data: Net interest income $ 3,770 $ 3,291 $ 11,344 $ 9,000 Provision for loan losses 1,450 130 2,450 465 Non-interest income 221 (1,970) 851 (1,459) Non-interest expense 2,259 2,165 6,808 6,667 Provision for Income taxes 116 (405) 1,211 164 -------- -------- -------- -------- Net income $ 166 $ (569) $ 1,726 $ 245 ======== ======== ======== ======== Less: preferred dividends 138 -- 373 -- -------- -------- -------- -------- Net income available for common stockholders $ 28 $ (569) $ 1,353 $ 245 ======== ======== ======== ======== Selected per Share Data: Basic earnings per common share $ 0.01 $ (0.12) $ 0.29 $ 0.05 Diluted earnings per common share $ 0.01 $ (0.12) $ 0.28 $ 0.05 Book value per common share (2)(3) $ 10.10 $ 9.77 $ 10.10 $ 9.77 Selected Balance Sheet Data: Assets $347,077 $349,786 $347,077 $349,786 Loans,net 291,211 284,425 291,211 284,425 Deposits 262,534 257,914 262,534 257,914 Average assets 351,523 346,168 357,271 338,786 Average earnings assets 334,976 321,275 341,602 317,270 Average equity 56,021 47,257 56,251 47,657 Average common equity 47,461 47,257 47,716 47,657 Nonperforming loans 9,293 883 9,293 883 Total nonperforming assets 9,293 3,206 9,293 3,206 Selected Ratios: Return on average assets (1) 0.19% -0.65% 0.65% 0.10% Return on average common equity (1) 0.23% -4.79% 3.79% 0.69% Return on average common tangible equity (1) 0.26% -5.25% 4.15% 0.75% Efficiency ratio 56.60% NM 55.83% 88.41% Net interest margin (1) 4.47% 4.06% 4.44% 3.79% Tier 1 leverage captial ratio 14.8% 12.5% 14.8% 12.5% Tier 1 risk-based captial ratio 18.2% 15.5% 18.2% 15.5% Total risk-based captial ratio 19.5% 16.8% 19.5% 16.8% Common dividend payout ratio (4) 74.26% NM 63.12% 522.86% Average equity to average assets 15.94% 13.65% 15.74% 14.07% Nonperforming loans to total loans (2) 3.14% 0.31% 3.14% 0.31% Nonperforming assets to total assets (2) 2.68% 0.25% 2.68% 0.25% Allowance for loan losses to total loans (2) 1.61% 1.34% 1.61% 1.34% Allowance for loan losses to nonperforming loans (2) 51.20% 438.39% 51.20% 438.39% (1) Annualized. (2) As of period end (3) Total shareholders' equity less, preferred stock, divided by total common shares outstanding (4) common dividends divided by net income available for common stockholders
CONTACT: Summit State Bank Thomas Duryea, President and CEO (707) 568-4920

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