Summit State Bank Earns $2.4 Million, or $0.36 Per Diluted Share, in Second Quarter 2025

SANTA ROSA, Calif., July 29, 2025 (GLOBE NEWSWIRE) -- Summit State Bank (the “Bank”) (Nasdaq: SSBI) today reported net income of $2,417,000, or $0.36 per diluted share for the second quarter ended June 30, 2025, compared to net income of $928,000, or $0.14 per diluted share for the second quarter ended June 30, 2024.

“We delivered strong operating results in the second quarter of 2025 – our second consecutive quarter of solid earnings - driven by robust net interest income and meaningful margin expansion,” said Brian Reed, President and CEO. “With notable progress made in addressing problem loans that weighed on 2024 results, we are encouraged by the momentum in our earnings outlook. Despite ongoing market volatility in the broader financial sector, we remain disciplined in our balance sheet strategy and operational execution. As deposits and loans continue to reprice, we anticipate further upside to our net interest margin.”

“Maintaining a strong capital position remains a top priority as we navigate the current environment,” said Reed. “To support this objective, we are actively managing our balance sheet and have made the strategic decision to suspend cash dividends for the third quarter of 2025. This action allows us to further strengthen capital, enhance liquidity, and position the Bank to deliver long-term value to shareholders.”

“A key highlight in the second quarter was the notable reduction in non-performing assets, reflecting our proactive approach to resolving problem loans,” said Reed. “Non-performing assets declined by $8,122,000 quarter-over-quarter and by $27,232,000 year-over-year, demonstrating the effectiveness of our credit management strategies. Looking ahead, we expect continued improvement in credit quality as our portfolio remains well-positioned and asset resolution efforts progress.”

Second Quarter 2025 Financial Highlights (at or for the three months ended June 30, 2025)

• Net income was $2,417,000, or $0.36 per diluted share, compared to $928,000, or $0.14 per diluted share, in the second quarter of 2024 and $2,494,000, or $0.37 per diluted share for the first quarter ended March 31, 2025.
• Net interest margin was 3.66% in the second quarter of 2025 compared to 2.71% in the second quarter of 2024 and 3.19% in the first quarter of 2025.
• Non-performing assets decreased to $13,762,000 at June 30, 2025 compared to $40,994,000 in non-performing assets at June 30, 2024 and $21,884,000 at March 31, 2025.
• The Bank’s Tier 1 Leverage ratio increased to 9.84% at June 30, 2025 compared to 9.31% at June 30, 2024.
• Annualized return on average assets and annualized return on average equity for the second quarter of 2025 was 0.93% and 9.98%, respectively. This compared to annualized return on average assets and annualized return on average equity for the second quarter of 2024 of 0.35% and 3.82%, respectively.
• The allowance for credit losses to total loans held for investment was 1.52% at June 30, 2025 compared to 1.52% one year earlier and 1.53% in the preceding quarter.
• The Bank maintained strong total liquidity of $453,328,000, or 43.9% of total assets as of June 30, 2025. This includes on balance sheet liquidity (cash and equivalents and unpledged available-for-sale securities) of $133,788,000 or 13.0% of total assets, plus available borrowing capacity of $319,540,000 or 30.9% of total assets.
• The Bank has been strategically managing its loan and deposit portfolios to reduce risk in the balance sheet and improve capital ratios. The Bank has been successful in reducing the size of its balance sheet as noted below:
  • Net loans held for investment decreased 7% to $851,309,000 at June 30, 2025, compared to $913,514,000 one year earlier and decreased 3% compared to $877,354,000 in the first quarter of 2025.
  • Total deposits decreased 5% to $922,609,000 at June 30, 2025, compared to $966,587,000 at June 30, 2024, and decreased 4% when compared to the first quarter of 2025, at $957,065,000.
• Book value was $14.49 per share, compared to $14.44 per share a year ago and $14.07 in the first quarter of 2025.
  

Operating Results

For the second quarter of 2025, the annualized return on average assets was 0.93% and the annualized return on average equity was 9.98%. This compared to an annualized return on average assets of 0.35% and an annualized return on average equity of 3.82%, respectively, for the second quarter of 2024.

"In the second quarter of 2025, our net interest margin expanded by 47 basis points quarter-over-quarter, driven by a favorable shift in funding costs, continued repricing of our loan portfolio at higher yields and prepayment fees,” said Reed.

The Bank’s net interest margin was 3.66% in the second quarter of 2025 compared to 2.71% in the second quarter of 2024 and 3.19% in the first quarter of 2025.

Interest and dividend income increased 6.0% to $15,230,000 in the second quarter of 2025 compared to $14,371,000 in the second quarter of 2024. The increase in interest income is attributable to a $876,000 increase in interest and fees on loans from existing loans repricing to higher yields and one-time prepayment fees collected, an increase of $189,000 in interest on deposits with banks offset by a $206,000 decrease in interest on investment securities due to lower volume of investments held.

Interest expense decreased 18% to $6,001,000 in the second quarter of 2025 compared to $7,277,000 in the second quarter of 2024. The decrease in interest expense is primarily attributable to a $1,171,000 decrease in interest expense on deposits resulting from lower cost of funds and a $137,000 decrease in interest expense on Federal Home Loan Bank advances due to decreased borrowing volume.

Noninterest income decreased in the second quarter of 2025 to $263,000 compared to $801,000 in the second quarter of 2024. The decrease is primarily attributed to the Bank recognizing $29,000 in gains on sales of SBA guaranteed loan balances in the second quarter of 2025 compared to $270,000 in gains on sales of SBA guaranteed loan balances in the second quarter of 2024 and a $288,000 decrease in other income related to the accelerated amortization of originated servicing rights for the early payoff on sold SBA loans. .

“We remain committed to enhancing operational efficiency and driving cost savings across the Bank. Through targeted expense management initiatives and process improvements, we are reducing our cost structure while maintaining the quality of service our clients expect,” said Reed.

Operating expenses decreased in the second quarter of 2025 to $6,305,000 compared to $6,627,000 in the second quarter of 2024. The savings were primarily due to a decrease of $137,000 in salaries and employee benefits resulting from an 8% reduction in force due to a cost savings initiative in the fourth quarter of 2024 and $193,000 insurance claim reimbursement for branch losses recorded in 2024.

Balance Sheet Review

During the second quarter of 2025, the Bank strategically managed its loan and deposit portfolios to reduce balance sheet risk and improve liquidity and capital ratios. As a result, net loans held for investment decreased 7% to $851,309,000, and total deposits decreased 5% to $922,609,000 as of June 30, 2025 compared to June 30, 2024.

Net loans held for investment were $851,309,000 at June 30, 2025 compared to $913,514,000 at June 30, 2024, and decreased 3% compared to March 31, 2025. The Bank’s largest loan types are commercial real estate loans which make up 80% of the portfolio and loans secured by farmland totaling 7% of the portfolio. Of the commercial real estate total, approximately 32% or $218,209,000 is owner occupied, and the remaining 68% or $470,880,000 is non-owner occupied. The Bank’s entire loan portfolio is well diversified between industries and product type. The office space product type totals $153,034,000 or 18% of the total loan portfolio; of this total owner occupied is $59,346,000 or 39% and non-owner occupied is $93,688,000 or 61%.

Total deposits were $922,609,000 at June 30, 2025 compared to $966,587,000 at June 30, 2024, and decreased 4% compared to the prior quarter end. At June 30, 2025, noninterest bearing demand deposit accounts increased 6% compared to a year ago and represented 21% of total deposits; savings, NOW and money market accounts decreased 6% compared to a year ago and represented 48% of total deposits, and CDs decreased 9% compared to a year ago and comprised 31% of total deposits.

Shareholders’ equity was $98,108,000 at June 30, 2025, compared to $97,949,000 one year earlier and $95,341,000 three months earlier. The slight increase in shareholders’ equity compared to a year ago was due to a decrease in accumulated other comprehensive losses offset by an increase in retained earnings. The increase in shareholders’ equity compared to three months earlier was primarily due to an increase in retained. At June 30, 2025 book value was $14.49 per share, compared to $14.07 three months earlier, and $14.44 at June 30, 2024.

The Bank’s Tier 1 Leverage ratio continues to exceed the minimum of 5% necessary to be categorized as “well-capitalized” for regulatory capital purposes. The Tier-1 leverage ratio for the second quarter of 2025 was 9.84%, an increase compared to 9.31% for the second quarter of 2024.

Credit Quality

Non-performing assets were $13,762,000, or 1.33% of total assets, at June 30, 2025. This compared to $21,884,000 in non-performing assets at March 31, 2025, and $40,994,000 in non-performing assets at June 30, 2024. The decrease was related to the payoff of several non-accrual loans secured by one agriculture property, which was sold by the borrower during the quarter. Non-performing assets include $4,437,000 for one other real estate owned property at June 30, 2025 and March 31, 2025, compared to $5,130,000 for one other real estate owned property at June 30, 2024.

“We are pleased with the progress in credit quality and our main priority continues to be vigilant management of asset quality and risk reduction within the portfolio,” said Reed. “As of June 30, 2025, three loans to a single borrower, totaling $8,031,000 and representing 86% of our non-performing loans, are secured by farmland—a sector currently facing economic challenges. Beyond these exposures, the Bank’s total loan portfolio includes a modest $53,118,000, or 6%, in the farmland industry, which we closely monitor to ensure continued performance.”

There was $492,000 in net charge-offs during the three months ended June 30, 2025, compared to $509,000 in net recoveries during the three months ended March 31, 2025 and net charge-offs of $1,067,000 during the three months ended June 30, 2024.

For the second quarter of 2025, the Bank recorded no provision for credit loss on loans, a $55,000 reversal of credit losses for unfunded loan commitments and no provision for credit losses on investments. This compared to a $6,000 provision for credit loss expense on loans, a $26,000 reversal of credit losses on unfunded loan commitments and a $4,000 provision for credit losses on investments in the second quarter of 2024. The allowance for credit losses to total loans held for investment was 1.52% on June 30, 2025 and June 30, 2024.

About Summit State Bank

Founded in 1982 and headquartered in Sonoma County, Summit State Bank is an award-winning community bank serving the North Bay. The Bank serves small businesses, nonprofits and the community, with total assets of $1.0 billion and total equity of $98 million as of June 30, 2025. The Bank has built its reputation over the past 40 years by specializing in providing exceptional customer service and customized financial solutions to aid in the success of its customers.

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. Through the engagement of its team, Summit State Bank has received many esteemed awards including: Top Performing Community Bank by American Banker, Best Places to Work in the North Bay and Diversity in Business by North Bay Business Journal, Corporate Philanthropy Award by the San Francisco Business Times, and Hall of Fame by North Bay Biz Magazine. 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.

Cautionary Note Regarding Preliminary Financial Results and Forward-looking Statements

The financial results in this release are preliminary and unaudited. Final audited financial results and other disclosures will be reported in Summit State Bank’s annual report on Form 10-Q for the period ended June 30, 2025, and may differ materially from the results and disclosures in this release due to, among other things, the completion of final review procedures, the occurrence of subsequent events or the discovery of additional information.

Except for historical information, the statements contained in this 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. Forward-looking statements are non-historical statements regarding management’s expectations and beliefs about the Bank’s future financial performance and financial condition and trends in its business and markets. Words such as “expects,” “anticipates,” “believes,” “estimates” and similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could” are intended to identify such forward-looking statements. Examples of forward-looking statements include but are not limited to statements regarding future operating results, operating improvements, loans sales and resolutions, cost savings, insurance recoveries and dividends. The forward-looking statements in this release are based on current information and on assumptions about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond the Bank’s control. As a result of those risks and uncertainties, the Bank’s actual future results and outcomes could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this release. Those risks and uncertainties include, but are not limited to, the risk of incurring credit losses; the quality and quantity of deposits; the market for deposits, adverse developments in the financial services industry and any related impact on depositor behavior or investor sentiment; risks related to the sufficiency of the Bank’s liquidity; fluctuations in interest rates; governmental regulation and supervision; the risk that the Bank will not maintain growth at historic rates or at all; general economic conditions, either nationally or locally in the areas in which the Bank conducts its business; risks associated with changes in interest rates, which could adversely affect future operating results; the risk that customers or counterparties may not performance in accordance with the terms of credit documents or other agreements due a decline in credit worthiness, business conditions or other reasons;; adverse conditions in real estate markets; and the inherent uncertainty of expectations regarding litigation, insurance claims and the performance or resolution of loans. Additional information regarding these and other risks and uncertainties to which the Bank’s business and future financial performance are subject is contained in the Bank’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and other documents the Bank files with the FDIC from time to time. Readers should not place undue reliance on the forward-looking statements, which reflect management’s views only as of the date of this release. 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