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Santa Rosa-based Summit State Bank filed documents on Thursday, Feb. 9, for a 5-to-4 stock split, scheduled for Feb. 28.

“The directors are pleased to reward our shareholders with the declaration of the 5-for-4 stock split,” said Allan Hemphill, chairman of the Summit State Bank board of directors, in a press release that accompanied the filing with the U.S. Securities & Exchange Commission.

Such a stock split is much less common than a 2-1 split. A shareholder who owns $10,000 worth of Summit State Bank stock on Feb. 28 would have 588 shares if the price is then $17 a share. When the stock split occurs, that same shareholder will still own exactly $10,000 worth of Summit State Bank stock with 735 shares at the adjusted price of $13.60 a share.

Summit State Bank’s share price in November was about $13 a share. Along with most banks after the presidential election, Summit State’s share price has risen. The closing price Feb. 9 was $16.20, down 1.5 percent on the day.

A bank may use a 5-4 split to increase the yield per share. Because the stock price drops when the split occurs, the yield rises if the dividend stays the same.

“We felt for quite a while that we were a good dividend bank,” Hemphill said in an interview with North Bay Business Journal. “We wanted to do something to signal our confidence in where we’re going with the bank. We thought this would be a signal. But we didn’t want to overdo it in a way that would make the stock split too rich. With the dividend stream, it would kind of tie our hands if we ever had to dial it back. It was a balancing act. We think we hit the right balance.”

The bank will announce its next quarterly earnings and declare a dividend in April. Because the stock split creates more shares, if the bank keeps its dividend amount per share steady, it will pay shareholders a larger total amount out of earnings. “If you look at our past history, we have never reduced the dividend and we have carefully raised it on two occasions,” Hemphill said.

“I’m confident in where we’re going,” Hemphill said. “You would assume that if we continued on that path, there would be opportunities to raise the dividend, but I don’t want to predict that at this point.”

Summit State Bank’s quarterly dividend distribution per share stayed at 9 cents per share from August 2006 to February 2013. From May 2013 to November 2014 the dividend was 11 cents. From February 2015 to January 2017 the dividend was 12 cents a share.

Summit State Bank is not for sale, Hemphill said. “We have given signals to all the investment bankers that we are not in play,” he said. “Don’t come to us with some supposed deal, which they trot out quite frequently. We have had approaches by other institutions. We told them no, definitively no.”

“You can never say never. Everything is for sale at a certain price,” he said. “We’re not looking for it. We’d say no to most anything that might come. We have a fiduciary responsibility to look at anything that comes to us formally. There’s a lot of tire-kicking that goes on out there that’s less than formal. We’re not engaged with anybody currently in discussion, and we don’t intend to be.”

James Dunn covers technology, biotech, law, the food industry, and banking and finance. Reach him at james.dunn@busjrnl.com or 707-521-4257