Summit State earnings turned to a net loss of $1.098 million in the third quarter of 2026, compared with a profit of $818,000 a year earlier, as the California bank recorded a $5.688 million provision for credit losses on loans.

Key Takeaways

  • The quarterly loss was $0.16 per diluted share, compared with earnings of $0.12 a year earlier.
  • The allowance for credit losses rose to 2.36% of loans held for investment at September 30, from 1.69% at June 30.
  • Net interest margin widened year over year but narrowed from the second quarter.

Summit State earnings reflect higher credit costs

The results, announced October 27, were preliminary and unaudited. Summit State Bank reported a smaller loss than the $1.307 million recorded in the second quarter of 2026.

The third-quarter provision for credit losses on loans rose from $2.709 million in the same quarter of 2025. The bank also recorded $507,000 in gross charge-offs after reviewing certain higher-risk credits and receiving new information about collateral values.

Nonperforming assets stood at $20.676 million at September 30, down slightly from $20.757 million at June 30. The bank said charge-offs on two relationships were partly offset by the addition of a $465,000 commercial relationship.

Margin improves from a year earlier

Net interest margin was 3.87%, compared with 3.51% in the third quarter of 2025 and 3.95% in the second quarter of 2026. CEO Brian Reed attributed the year-over-year improvement to lower funding costs, higher loan yields and a reduction in nonperforming loans, partly offset by lower average loan balances.

Pre-tax, pre-provision income was $4.031 million, compared with $4.008 million a year earlier. The bank said margin improvement and expense management offset declining asset balances. This non-GAAP measure excludes credit-loss provisions and income taxes and is not a substitute for reported net income.

Loans and deposits decline

Net loans held for investment fell 11% from a year earlier to $745.351 million at September 30, while deposits declined 7% to $826.610 million. The bank said it had been managing both portfolios to reduce balance-sheet risk and improve capital ratios.

The Tier 1 leverage ratio rose to 11.03% from 10.24% a year earlier. Total liquidity was $427.221 million, including $150.416 million in cash, equivalents and unpledged available-for-sale securities, and $276.805 million in available borrowing capacity.

Next milestone

The bank said final results and disclosures will be reported in its Form 10-Q for the period ended September 30, 2026.

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