Summit State Bank reports significant net income increase

Summit State Bank reported on Tuesday that its net income increased 27 percent last year, attributing the good news to fewer problem loans and a spike in deposits.

The Santa Rosa-based bank, which concentrates mostly in commercial lending for nonprofits and small businesses, posted $5.5 million in net ?income for 2014, up from $4.3 million in 2013. Its earnings per share ?rose from 85 cents in 2013 to $1.12 last year.

Shareholders will receive a quarterly dividend of 12 cents per share payable on Feb. 24, which represents a 9 percent increase over the last dividend. The bank’s shares rose 5 percent Tuesday on the Nasdaq, closing at $13.57.

Summit State said it saw a significant improvement in loan quality, allowing it to release money previously allocated to its reserves for loan losses.

The bank had previously budgeted for potential loan losses during the recession, but was able to recover $1.1 million in earlier charge-offs and had a reduction in nonperforming loans, allowing it to lower its reserve requirements.

President and Chief Executive Officer Thomas Duryea applauded the bank’s work with its clients to help them repay poorly performing loans rather than just write them off. “We believe very much in not taking unnecessary charge-offs,” Duryea said.

Its nonperforming assets declined from $10.4 million at the end of 2013 to $5.9 million at the end of 2014. That includes $4 million in a foreclosed commercial property that is now producing income for the bank.

The bank also has improved its funding mix. Its core deposits - such as checking, savings and money market deposits - increased by 13 percent to $213 million. Its checking deposits now represent 36 percent of its overall deposits, a tremendous increase as it represented about 10 percent only seven years ago, Duryea said.

The growth is attributable to switching from its saving-and-loans roots to becoming more of full-fledged community bank, he said. Among its clients are Oliver’s Markets, Hotel Healdsburg and Petaluma Health Center.

“I’m in the relationship-building business,” Duryea said.

The bank also has developed a niche in serving local nonprofit industry, which has more than $1 billion in revenue. Summit serves more than 140 nonprofits.

Duryea said he believes that the nonprofit sector is a good indicator of the relative strength of the local economy, and he believes Sonoma County is on the uptick.

“When nonprofits are doing better, they are raising more money,” he said. “I think that’s a real good indicator that things are better.”

The bank’s total assets were at $460 million at the end of last year, an increase of $6 million from the end of 2013.

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.