Summit State Bank reports 89% jump in Q2 earnings
Summit State Bank (Nasdaq: SSBI) on Tuesday reported an 89% increase in second-quarter earnings, bucking economic misfortunes on its rebuilding path from early last year.
The second quarter ended June 30 with a reported $2.2 million in net income compared with $1.1 million in the same period last year. The promising jump coincides with last quarter’s rise in earnings to $2.42 million from $1.42 million in 2019.
The board of directors declared on Monday a 12 cent-per-share dividend to be paid on Aug. 21.
Despite facing a global pandemic that has wreaked havoc on the economy, Summit State Bank CEO and President Brian Reed was little surprised by the encouraging news. He expressed cautious optimism, going forward in an uncertain economic future.
Summit State Bank restructured three years ago, laying out a thorough, frugal strategic plan that would build on new growth, healthy reserves, precise staffing and financial solvency over the long haul.
The Santa Rosa-based bank has steadily shown increases in earnings since the middle of last year.
“Part of the good earnings now is because of growth and maintaining a net interest margin while our overhead has stayed steady,” Reed told the Business Journal.
Net interest income went up to $7.1 million in the second quarter in comparison to $5.4 million in 2019. This is attributable to a rise in loan balances under the Paycheck Protection Program. The bank processed low-interest loans valued at a collective of $95 million, which represented 13.5% of the quarterly portfolio. Net interest is the difference between revenue generated by interest-bearing assets and costs of servicing liabilities.
“The bank has deliberately built its balance sheet growth around strong-performing loans,” Reed said.
Even with the bank maintaining costs as it progresses, Reed is somewhat apprehensive about how much the pandemic will impact its clientele.
“The big question will be the credit quality of our customers,” he said.
Summit State Bank has developed math-intensive models using a lot of correlations and factors in hopes of averting economic stresses.
Reed remains guarded by what the future holds.
“We’re very cautious and know the COVID risk element. I would agree that we’re not seeing the worst of the impact yet. We’ve been propped up by the CARES Act,” he said of the stimulus plan enacted by the U.S. Congress.
