SBGA Summit Bank

Summit Bank Corporation (NASDAQ: SBGA), parent company of The Summit National Bank, announces fourth quarter 2005 earnings of $1.87 million, or $0.33 diluted earnings per share, up 55.6% over the $1.20 million, or $0.22 diluted earnings per share, for the same period last year. For the year ended December 31, 2005, earnings were $6.11 million, or $1.07 diluted earnings per share, up 18.6% over the $5.15 million, or $0.91 diluted earnings per share, for the twelve months ended December 31, 2004. Record earnings were attained for both the quarter and the year to date largely due to increased net interest income and international fees and a decreased loan loss provision, partially offset by an increase in operating expenses. Total assets decreased to $526.3 million at December 31, 2005 from $547.7 million at December 31, 2004 due partially to the reduction of temporary investments resulting from the presence of $20 million of temporary deposits at the end of last year. The other factor has been the de-leveraging of the balance sheet in light of the flattening yield curve, resulting in a decrease in the investment portfolio by $26.7 million and a corresponding reduction in borrowed funds by $31.3 million. However, total loans grew 5.5% over the past twelve months from $339.2 million to $358.0 million at December 31, 2005. Non-performing assets have continued to decline over the past twelve months and totaled $1.2 million, or 0.33% of loans, at December 31, 2005 compared to $2.8 million, or 0.84% of loans at the end of last year. Approximately half of the non-performing assets at December 31, 2005 were guaranteed by the SBA. The allowance for loan losses totaled $4.6 million, or 1.27% of loans, at December 31, 2005 compared to $4.5 million, or 1.34% of loans, one year ago. Despite only a 1% increase in deposits from year-end 2004 to year-end 2005, average deposits increased from $396.4 million in 2004 to $429.6 million in 2005, an increase of 8.4%. In addition, non-interest bearing deposit balances remained strong increasing from 24.0% of total deposits last year to 24.8% of deposits at December 31, 2005. The rising interest rate environment and the increase in non-interest bearing deposits resulted in net interest income increasing from $4.88 million for the fourth quarter of 2004 to $5.52 million for the same period this year. Net interest margin improved to 4.55% for the fourth quarter of 2005 from 4.04% for the fourth quarter last year. For the year ended December 31, 2005, net interest income was $21.0 million, up from $18.6 million for the same period a year ago. The net interest margin for the twelve months ended December 31, 2005 was 4.31%, up from 3.97% for the same period last year. Total noninterest income was $789,000 for the fourth quarter 2005, down from $945,000 for the fourth quarter last year primarily due to losses on the Bank's low income housing tax credit investment and interest rate floor that were both initiated in 2005. For the year ended December 31, 2005, noninterest income has slightly declined from $3.79 million last year to $3.63 million this year. A 27.6% increase in international fee income this year was offset by a decline in deposit fees and the losses on the two new investments mentioned above.(a) Noninterest expenses decreased from $3.89 million in the fourth quarter 2004 to $3.62 million for the same period this year. The decrease was primarily due to the $350,000 customer check fraud expense recorded in the fourth quarter of last year and the ultimate $240,000 partial recovery on that loss in the fourth quarter of this year. For the year, noninterest expenses increased 13.4% to $15.58 million from $13.74 million for last year. The increase was due to personnel and operating costs of two new branches opened in the past year and a half, increased resources for risk management and regulatory compliance efforts, increased legal expenses and fraud expense for additional claims early in 2005 related to the customer check fraud previously mentioned. Summit announced in December the signing of a definitive agreement to purchase Concord Bank, N.A. in Houston, Texas. Concord has approximately $112 million in assets. That transaction is expected to close near the end of the first quarter of 2006. In addition, Summit opened a loan production office proximate to the growing Asian community in San Diego, California at the beginning of January, 2006. Chief Executive Officer, Pin Pin Chau, said, "Our strategy of managing our balance sheet to improve net interest margin, our focus on asset quality and underwriting prudence in the face of general relaxation of underwriting standards in the competitive environment, and our ability to increase international trade service income by increasing our import and export customer base, have all paid off for us in 2005. We feel good about Summit's core earnings as well as the opportunity to expand our foot print with the Concord Bank, N.A. acquisition. We are confident that given the fine management team at Concord and their excitement in joining hands with us to offer the dynamic Houston ethnic market expanded products and capabilities, Summit can look forward to another rewarding year in 2006." Summit Bank Corporation is the parent company of The Summit National Bank, a nationally chartered full-service community bank specializing in the small business and international trade finance markets. It currently operates six branches in the metropolitan Atlanta area and two in the South Bay area of San Francisco, California. This release contains forward-looking statements including statements relating to present or future trends or factors generally affecting the banking industry and specifically affecting Summit's operations, markets and products. Without limiting the foregoing, the words "believes," "anticipates," "intends," "expects," or similar expressions are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties. Actual results could differ materially from those projected for many reasons, including, without limitation, changing events and trends that have influenced Summit's assumptions, but that are beyond Summit's control. These trends and events include (i) changes in the interest rate environment which may reduce margins, (ii) not achieving expected growth, (iii) less favorable than anticipated changes in the international, national and local business environments and securities markets, (iv) adverse changes in the regulatory requirements affecting Summit, (v) greater competitive pressures among financial institutions in Summit's markets and (vi) greater loan losses than historic levels. Additional information and other factors that could affect future financial results are included in Summit's filings with the Securities and Exchange Commission. -0- *T Selected Financial Information December 31, 2005 (In thousands, except per share data) December 31, --------------------- % 2005 2004 Change ---------- --------- ------ Summary Balance Sheet: Cash and Short Term Investments $ 18,775 $ 37,059 -49.3% Investments 125,187 151,891 -17.6% Commercial Loans 300,609 282,149 6.5% SBA Loans 56,686 56,376 0.6% Other Loans 691 680 1.6% Total Loans 357,986 339,205 5.5% Allowance for Loan Loss (4,555) (4,549) 0.1% Net Loans 353,431 334,656 Other Assets 28,909 24,102 19.9% Total Assets $ 526,302 $ 547,708 -3.9% Demand Deposits - Noninterest-Bearing $ 108,601 $ 104,055 4.4% NOW & MMA 84,031 97,836 -14.1% Savings & CDs 245,600 232,562 5.6% Total Deposits 438,232 434,453 0.9% Borrowed Funds 41,097 72,394 -43.2% Other Liabilities 10,334 6,232 65.8% Stockholders Equity 36,639 34,629 5.8% Total Liabilities & Stockholders Equity $ 526,302 $ 547,708 -3.9% Three Months Ended December 31, % Summary Income Statement: 2005 2004 Change ---------- ---------- ------- Interest Income (a) $ 8,335 $ 7,105 17.3% Interest Expense 2,819 2,221 26.9% Net Interest Income (a) 5,516 4,884 12.9% Provision for Loan Losses 25 175 -85.7% Net Interest Income after Provision for Loan Loss 5,491 4,709 16.6% Service Charges on Deposits 330 376 -12.3% International Fee Income (a) 358 333 7.6% BOLI 118 112 5.2% Other noninterest income/(loss) (17) 124 -113.5% Total Noninterest Income 789 945 -16.5% Salaries & Benefits 2,092 1,921 8.9% Occupancy 366 293 25.0% Premises & Equipment 419 370 13.3% Other noninterest expense 747 1,307 -42.8% Total Noninterest Expense 3,624 3,891 -6.8% Income before Tax 2,656 1,763 50.7% Income Tax Expense 783 559 40.1% Net Income $ 1,873 $ 1,204 55.6% Average Balances: Average Assets $ 527,123 $ 518,585 1.6% Average Earning Assets 485,179 484,005 0.2% Average Total Loans 351,415 339,532 3.5% Average Deposits 436,283 411,117 6.1% Average Total Funds 480,227 480,949 -0.2% Average Shareholder Equity 35,843 34,810 3.0% Per Share Data: Basic Earnings per Share $ 0.33 $ 0.22 50.0% Diluted Earnings per Share $ 0.33 $ 0.22 50.0% Dividend Per Share $ 0.10 $ 0.10 0.0% Weighted - Average Shares Outstanding - Basic 5,694,604 5,690,104 Weighted - Average Shares Outstanding - Diluted 5,694,604 5,691,284 Common Shares Outstanding 5,694,604 5,690,104 Key Ratios: Return on Average Assets 1.42% 0.93% Return on Average Shareholder Equity 20.90% 13.84% Yield on Earning Assets (a) 6.90% 5.89% Cost of Funds (a) 2.35% 1.85% Net Interest Margin (a) 4.55% 4.04% Noninterest Income as % of Average Assets 0.60% 0.73% Noninterest Expense as % of Average Assets 2.75% 3.00% Efficiency Ratio 57.49% 66.76% ALLL as % of Total Loans 1.27% 1.34% Nonperforming Assets as % of Total Loans and ORE 0.33% 0.84% Net Chargeoffs(Recoveries) as % of Average Loans 0.09% 0.34% Twelve Months Ended December 31, % Summary Income Statement: 2005 2004 Change ---------- ---------- ------ Interest Income (a) $ 31,261 $ 26,828 16.5% Interest Expense 10,274 8,260 24.4% Net Interest Income (a) 20,987 18,568 13.0% Provision for Loan Losses 539 1,090 -50.6% Net Interest Income after Provision for Loan Loss 20,448 17,478 17.0% Service Charges on Deposits 1,361 1,560 -12.7% International Fee Income (a) 1,511 1,184 27.6% BOLI 461 437 5.6% Other noninterest income/(loss) 300 609 -50.7% Total Noninterest Income 3,633 3,790 -4.1% Salaries & Benefits 8,003 7,161 11.8% Occupancy 1,359 1,082 25.6% Premises & Equipment 1,698 1,375 23.5% Other noninterest expense 4,523 4,119 9.8% Total Noninterest Expense 15,583 13,737 13.4% Income before Tax 8,498 7,531 12.8% Income Tax Expense 2,386 2,378 0.3% Net Income $ 6,112 $ 5,153 18.6% Average Balances: Average Assets $ 528,222 $ 501,766 5.3% Average Earning Assets 487,455 468,269 4.1% Average Total Loans 341,961 330,531 3.5% Average Deposits 429,559 396,442 8.4% Average Total Funds 484,758 465,864 4.1% Average Shareholder Equity 35,201 33,705 4.4% Per Share Data: Basic Earnings per Share $ 1.07 $ 0.91 17.6% Diluted Earnings per Share $ 1.07 $ 0.91 17.6% Dividend Per Share $ 0.40 $ 0.40 0.0% Weighted - Average Shares Outstanding - Basic 5,694,222 5,686,563 Weighted - Average Shares Outstanding - Diluted 5,694,222 5,687,303 Common Shares Outstanding 5,694,604 5,690,104 Key Ratios: Return on Average Assets 1.16% 1.03% Return on Average Shareholder Equity 17.36% 15.29% Yield on Earning Assets (a) 6.43% 5.74% Cost of Funds (a) 2.12% 1.77% Net Interest Margin (a) 4.31% 3.97% Noninterest Income as % of Average Assets 0.69% 0.76% Noninterest Expense as % of Average Assets 2.95% 2.74% Efficiency Ratio 63.30% 61.84% ALLL as % of Total Loans 1.27% 1.34% Nonperforming Assets as % of Total Loans and ORE 0.33% 0.84% Net Chargeoffs(Recoveries) as % of Average Loans 0.16% 0.18% (a) Bankers Acceptances Discount Income has been reclassified from International Fee income to Interest Income effective this reporting period. The reclassified amounts totaled $82,000 and $57,000 for the fourth quarter of 2005 and 2004, respectively, and $431,000 and $139,000 for the years 2005 and 2004, respectively. *T