Southern Michigan Bancorp, Inc. Announces Third Quarter 2013 Earnings

COLDWATER, Mich., Oct. 23, 2013 /PRNewswire/ -- Southern Michigan Bancorp, Inc. (OTCQB: SOMC) announced third quarter 2013 net income of $1,207,000, or $0.50 per share, compared to net income of $1,154,000, or $0.49 per share, for the third quarter of 2012.  Southern's net income for the nine month period ended September 30, 2013, was $3,341,000, or $1.40 per share, compared to net income of $3,183,000, or $1.34 per share, for the same nine month period a year ago.

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Total consolidated assets at September 30, 2013 were $535.5 million compared to $528.9 million at December 31, 2012. 

Southern provided $250,000 for loan losses during the third quarter of 2013 resulting in an allowance for loan losses of $5,397,000, or 1.46% of loans at September 30, 2013.  This compared to $350,000 of provision for loan losses expense for the third quarter of 2012.   Net charge-offs totaled $447,000 during the third quarter of 2013, compared to net charge-offs of $155,000 during the third quarter of 2012.  Specific reserves decreased $256,000 during the third quarter of 2013 reducing the amount of provision for loan losses.  For the nine month period ended September 30, 2013, net charge offs totaled $708,000, or annualized 0.26% of loans, compared to $1,101,000, or annualized 0.42% of loans, for the same nine month period of 2012. 

The annualized return on average assets for the nine month periods ended September 30, 2013 and 2012 was 0.84% and 0.82%, respectively.  The annualized return on average equity was 7.97% for the first nine months of 2013 compared to 7.94% for the same period of 2012.  The tax equivalent net interest margin for both nine month periods ended September 30, 2013 and 2012 was 3.81%.

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. stated, "We are pleased that earnings increased 5.0% compared to the same nine month period of 2012 in spite of $538,000 in non-reoccurring expense relating to the core processing system conversion. The new operating system went live in August and we are beginning to see benefits from it." 

Castle continued, "We are encouraged by renewed loan demand from creditworthy borrowers.  Based on the volume in our commercial loan pipeline, we expect to see loan growth during the fourth quarter of 2013 and continuing into the first quarter of 2014."

Southern Michigan Bancorp, Inc. is a bank holding company and the parent company of Southern Michigan Bank & Trust.  It operates 15 branches within Branch, Calhoun, Hillsdale and St. Joseph Counties, providing a broad range of consumer, business and wealth management services throughout the region. 

***

This press release contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and Southern Michigan Bancorp, Inc. Forward-looking statements are identifiable by words or phrases such as "expected", "begin" and other similar words or expressions.  All statements with reference to a future time period are forward-looking.  Management's determination of the provision and allowance for loan losses and other accounting estimates, such as the carrying value of goodwill, other real estate owned and mortgage servicing rights and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment), involves judgments that are inherently forward-looking.  There can be no assurance that future loan losses will be limited to the amounts estimated.  Our ability to sell other real estate owned at its carrying value or at all, successfully implement new programs and initiatives, increase efficiencies, maintain our current level of deposits and other sources of funding, respond to declines in collateral values and credit quality, and improve profitability is not entirely within our control and is not assured.  The future effect of changes in the financial and credit markets and the national and regional economy on the banking industry, generally, and Southern Michigan Bancorp, Inc., specifically, are also inherently uncertain.  These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extend, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed in or implied by such forward-looking statements. Southern Michigan Bancorp, Inc. does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

Risk factors include, but are not limited to, the risk factors described in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2012.  These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

 

Southern Michigan Bancorp, Inc.
Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share data)


September 30,
2013


December 31,
2012


ASSETS







     Cash and cash equivalents

$

46,227


$

50,334


     Federal funds sold


250



276


     Securities available for sale


74,756



64,525


     Loans held for sale


1,050



1,776


     Loans, net of allowance for loan losses of  $5,397 - 2013 ($5,455 – 2012)


365,297



364,150


     Premises and equipment, net


12,105



12,419


     Accrued interest receivable


2,666



2,059


     Net cash surrender value of life insurance


10,893



10,644


     Goodwill


13,422



13,422


     Other intangible assets, net


1,119



1,341


     Other assets


7,680



7,914


TOTAL ASSETS

$

535,465


$

528,860









LIABILITIES







     Deposits :







          Non-interest bearing

$

81,401


$

87,013


          Interest bearing


366,557



357,157


     Total deposits


447,958



444,170









     Securities sold under agreements to repurchase and overnight borrowings


18,532



16,134


     Accrued expenses and other liabilities


5,634



5,662


     Other borrowings


39



1,039


     Subordinated debentures


5,155



5,155


     Common stock subject to repurchase obligation in Employee







         Stock Ownership Plan, shares outstanding –126,425 in 2013







         (125,125 shares in 2012)


2,110



2,065


Total liabilities


479,428



474,225









SHAREHOLDERS' EQUITY







     Preferred stock, 100,000 shares authorized; none issued or outstanding


-



-


     Common stock, $2.50 par value:







         Authorized - 4,000,000 shares







         Issued – 2,393,087 shares in 2013 (2,375,975 shares in 2012)







          Outstanding (other than ESOP shares) – 2,266,662 shares in 2013
         (2,250,850 shares in 2012)


5,666



5,627


     Additional paid-in capital


17,638



17,700


     Retained earnings


33,499



31,046


     Accumulated other comprehensive income (loss), net


(766)



297


     Unearned Employee Stock Ownership Plan shares


-



(35)


     Total shareholders' equity


56,037



54,635


TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

535,465


$

528,860










 

Southern Michigan Bancorp, Inc.
Condensed Consolidated Statements Of Income (Unaudited)

(In thousands, except per share data)


Three Months Ended
September 30,


Nine Months Ended
September 30,



2013


2012


2013


2012


Interest income:













     Loans, including fees

$

4,647


$

4,679


$

13,682


$

13,819


     Federal funds sold and balances with banks


18



20



69



77


     Securities:













          Taxable


170



120



458



339


          Tax-exempt


215



238



662



726


Total interest income


5,050



5,057



14,871



14,961















Interest expense:













     Deposits


451



554



1,421



1,802


     Other


69



119



217



381


Total interest expense


520



673



1,638



2,183


Net interest income


4,530



4,384



13,233



12,778


Provision for loan losses


250



350



650



1,050


Net interest income after provision for loan losses


4,280



4,034



12,583



11,728















Non-interest income:













     Service charges on deposit accounts


594



449



1,469



1,256


     Trust fees


304



276



849



837


     Net gains on security calls and sales


12



-



12



3


     Net gains on loan sales


389



519



1,365



1,397


     Earnings on life insurance assets


79



82



249



250


     ATM and debit card fee income


311



289



903



853


     Other


201



190



553



574


Total non-interest income


1,890



1,805



5,400



5,170















Non-interest expense:













     Salaries and employee benefits


2,708



2,492



7,633



7,180


     Occupancy, net


222



237



789



797


     Equipment


105



197



540



606


     Printing, postage and supplies


133



104



366



348


     Telecommunication expenses


67



55



204



212


     Professional and outside services


292



309



971



845


     FDIC assessments


88



94



270



294


     Software maintenance


328



125



860



356


     Amortization of other intangibles


74



82



222



244


     Expenses relating to OREO property


40



74



52



276


     ATM expenses


126



108



342



318


     Other


328



440



1,175



1,265


Total non-interest expense


4,511



4,317



13,424



12,741


INCOME BEFORE INCOME TAXES


1,659



1,522



4,559



4,157


Federal income tax provision


452



368



1,218



974


NET INCOME

$

1,207


$

1,154


$

3,341


$

3,183















Basic Earnings Per Common Share

$

0.50


$

0.49


$

1.40


$

1.35


Diluted Earnings Per Common Share


0.50



0.49



1.40



1.34


Dividends Declared Per Common Share


0.13



0.09



0.37



0.25


 

SOURCE Southern Michigan Bancorp, Inc.



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