SANTA ROSA -- Summit State Bank (NASDAQ: SSBI) today reported net income increased 30 percent in the first three months of 2012 than during the same period in 2011, and the bank's board of directors approved a 9 cent dividend.

Those earnings -- of $613,000 -- were also 11 percent higher than in the three months ending Dec. 31. Net interest income grew 2 percent, to $4.02 million, versus the same period one year ago.

Net income available to common shareholders was $441,000, or 9 cents per diluted share. The dividend will be paid on May 23 to shareholders of record as of May 15.

The bank also earned $1 million in noninterest income in the first quarter, attributable to gains on securities of $702,000 and rental income on foreclosed real estate of $103,000.

Total assets at the Santa Rosa-based bank increased five percent from the end of 2011, to $406.8 million as of March 31. Gross loans were $274 million, a $1.3 million decrease from the prior quarter. The bank attributed that to the elimination of problem loans despite loan generation during the period.

The institution transferred $4 million to other real estate owned property during the first quarter, which the bank indicated is now producing rent income exceeding operating expense.

The provision for loan losses at the bank remained at $1.45 million for the first quarter. The bank said that level reflects continued work on problem loans, the strained commercial real estate market and regulatory requirements.

The allowance for loan losses increased to $6.84 million on March 31, up from $5.4 million at the end of 2011. Nonperforming assets at the end of the quarter totaled $14.25 million, down slightly from $14.3 million during the same period in 2011 and up from $13.37 million at the end of the prior quarter.

Summit State Bank President and Chief Executive Officer Tom Duryea said in a statement that the bank has increased its relationship-based core deposits by 300 percent from the same period last year, reaching $324.6 million at the end of the first quarter.

“This is further lowering our cost of funds and enabling us to get more loans into our community through our $50 million Small Business Lending Program,” he said.

The bank’s efficiency ratio, which compares operating costs to revenue, was 59 percent for the quarter. That was down from 62 percent for the same quarter in 2011, though operating costs were flat. The net interest margin was 4.34 at the end of the quarter, compared with 4.66 percent at the same time last year and unchanged from the end of 2011.

The tier 1 regulatory capital ratio for the bank was 14.5 percent for the quarter, with a 17.7 percent risk-based ratio and a total risk-based capital ratio of 19 percent.