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SANTA ROSA -- Summit State Bank (Nasdaq: SSBI) today reported net income for the quarter ended June 30 of $790,000, or 14 cents per common share.

The bank had net income of $790,000 and net income available for common stockholders, which deducts the preferred dividends, of $652,000, or 14 cents per diluted share, for the quarter ended June 30. This represented a 56 percent increase compared to net income of $506,000 and net income available for common stockholders of $368,000, or 08 cents per diluted share, for the quarter ended June 30, 2010.

Net income for firs six months was $1,267,000, net income available for common stockholders was $991,000, or 21 cents per diluted share, compared to net income of $1,046,000, net income available for common stockholders of $770,000 or 16 cents per diluted share for six months ending June 30, 2010.

The increase in net income between the quarters was driven by a 14 percent or $520,000 increase in net interest income. The increase in net interest income resulted from increased interest revenue from additional bond investments, resolution of a nonaccrual loan relationship and the continued decline in the bank's cost of funds. The net interest margin for the quarter ended June 30 was 4.82 percent compared to 4.56 percent for the quarter ended June 30, 2010.

Net interest income was $4,315,000 for the second quarter of 2011 compared to $3,795,000 for the same quarter in 2010. A 7.5 percent increase in average earning assets between the quarters was predominantly due to an increase in the investment portfolio.

"Our continuing success in attracting key full banking relationships, including core deposits, has allowed us to further improve the bank's cost of funds, which is the key to the bank's long term top line performance. In addition, starting in the first quarter of this year, we increased our investment portfolio to better utilize our excess liquidity, further strengthening performance," stated Thomas Duryea, President and CEO.

The provision for loan losses was $600,000 for the second quarter of 2011 compared to $700,000 in 2010. Allowance for loan losses increased to $7,319,000 at June 30 from $6,058,000 at December 31, 2010, increasing the coverage of allowance for loan losses to gross loans to 2.61 percent from 2.11 percent. Nonperforming assets at June 30 included $10,145,000 in loans on non-accrual and $1,317,000 in foreclosed real estate. This compares to nonperforming assets of $14,294,000 at March 31, 2010 and $13,472,000 at December 31, 2010. "Nonperforming loans are primarily secured by real estate. Credit Quality remains a key focus especially during this uneven economic recovery," said Guy Dana, Chief Credit Officer.

The bank's efficiency ratio, which expresses operating costs as a percentage of revenues, was 57 percent for the second quarter of 2011 compared to 60 percent for the same quarter in 2010. "In addition to revenue growth, we remain committed to gaining greater efficiencies in the bank's operating cost structure," stated Mr. Duryea.

Total assets increased to $383,524,000 at June 30, 2011, a 10.2 percent increase compared to $347,933,000 at December 31, 2010.

Total deposits increased 11.9 percent for the quarter over December 31, 2010 to $313,412,000, with demand, money market and savings deposits increasing 12.9 percent to $115,039,000.

The bank's regulatory capital remains well above the required capital ratios with a Tier 1 capital leverage ratio of 13.9 percent, a Tier 1 risk-based capital ratio of 17.5 percent and a Total risk-based capital ratio of 18.8 percent at June 30.

"The capital ratios were further enhanced after the quarter end as the bank exchanged its $8,500,000 in TARP preferred capital for $13,750,000 in preferred capital issued under the Small Business Lending Initiative," said Dennis Kelley, Chief Financial Officer.

Summit State Bank has total assets of $384 million and total equity of $56 million at June 30.

The share price of the bank's stock slipped 41 cents, or nearly 3 percent, by the end of trading Thursday to $6.41.