Southern Michigan Bancorp, Inc. Announces First Quarter 2014 Earnings

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Apr 21, 2014, 04:00 ET

COLDWATER, Mich., April 21, 2014 /PRNewswire/ -- Southern Michigan Bancorp, Inc. (OTCQB: SOMC) reported net income of $1,102,000, or $0.46 per share, for the quarter ended March 31, 2014. This compared to net income of $1,055,000, or $0.44 per share, for the first quarter of 2013.

Total consolidated assets at March 31, 2014 were $583.3 million compared to $539.5 million at December 31, 2013. The increase in assets is in part due to $31.3 million deposited at the end of the quarter resulting in a temporary increase in cash and non-interest bearing deposits. This deposit is short term in nature and the money is expected to move out of the bank within 60 days.

No provision for loan losses was required during the first quarter of 2014. The allowance for loan losses was $5,098,000, or 1.34% of loans at March 31, 2014. This compared to $225,000 of provision for loan losses expense for the first quarter of 2013. Net charge-offs decreased 68.8%, totaling $140,000 for the first quarter of 2013, compared to $448,000 during the first quarter of 2013. Total delinquent loans decreased to 1.00% as of March 31, 2014 from 1.74% as of March 31, 2013.

The annualized return on average assets for the three month period ended March 31, 2014 was 0.80% compared to 0.79% for the first quarter of 2013. The annualized return on average equity was 7.65% for the first quarter of 2014 compared to 7.62% for the first quarter of 2013. The tax equivalent net interest margin for the three month period ending March 31, 2014 was 3.78% compared to 3.67% for the same period of 2013.

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc., stated, "We are pleased with our first quarter results including a 4.5% increase in earnings as compared to the first quarter of 2013, and significant reductions in net charge-offs, loan delinquencies and non-performing loans which resulted in reduced credit costs and overall improvement to credit quality."

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 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.

SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)

		March 31, 2014		December 31, 2013
	ASSETS
	Cash and cash equivalents	$	66,178	$	32,366
	Federal funds sold		392		148
	Securities available for sale		93,222		76,005
	Loans held for sale		690		115
	Loans, net of allowance for loan losses of $5,098 - 2014 ($5,238 - 2013)		374,087		380,773
	Premises and equipment, net		12,257		12,366
	Accrued interest receivable		2,552		2,351
	Net cash surrender value of life insurance		11,061		10,979
	Goodwill		13,422		13,422
	Other intangible assets, net		974		1,045
	Other assets		8,495		9,889
	TOTAL ASSETS	$	583,330	$	539,459

	LIABILITIES
	Deposits:
	Non-interest bearing	$	121,734	$	85,670
	Interest bearing		377,658		364,730
	Total deposits		499,392		450,400

	Securities sold under agreements to repurchase and overnight borrowings		13,941		18,479
	Accrued expenses and other liabilities		5,116		6,351
	Subordinated debentures		5,155		5,155
	Common stock subject to repurchase obligation in Employee
	Stock Ownership Plan, shares outstanding – 123,564 in 2014
	(126,931 shares in 2013)		2,164		2,247
	Total liabilities		525,768		482,632

	SHAREHOLDERS' EQUITY
	Preferred stock, 100,000 shares authorized; none issued or outstanding		-		-
	Common stock, $2.50 par value:
	Authorized - 4,000,000 shares
	Issued –2,406,519 shares in 2014 (2,392,630 shares in 2013)
	Outstanding (other than ESOP shares) – 2,282,955 shares in 2014 (2,265,699 shares in 2013)		5,702		5,665
	Additional paid-in capital		17,519		17,533
	Retained earnings		35,133		34,346
	Accumulated other comprehensive income, net		(792)		(717)
	Total shareholders' equity		57,562		56,827
	TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	583,330	$	539,459

SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(In thousands, except per share data)

	Three Months Ended March 31,
	2014		2013

Interest income:
Loans, including fees	$	4,588	$	4,498
Securities:
Taxable		193		122
Tax-exempt		196		225
Other		20		25
Total interest income		4,997		4,870

Interest expense:
Deposits		389		505
Other		74		78
Total interest expense		463		583
Net interest income		4,534		4,287
Provision for loan losses		-		225
Net interest income after provision for loan losses		4,534		4,062

Non-interest income:
Service charges on deposit accounts		486		397
Trust fees		290		280
Net gains on security calls		33		-
Net gains on loan sales		196		523
Earnings on life insurance assets		82		84
ATM and debit card fee income		290		279
Other		201		1600
Total non-interest income		1,578		1,723
Non-interest expense:
Salaries and employee benefits		2,364		2,535
Occupancy, net		367		292
Equipment		173		208
Printing, postage and supplies		105		109
Telecommunication expenses		73		69
Professional and outside services		344		310
Software maintenance		198		272
FDIC assessments		88		88
Loan related expenses		341		59
Amortization of other intangibles		71		74
Other		477		387
Total non-interest expense		4,601		4,403
INCOME BEFORE INCOME TAXES		1,511		1,382
Federal income tax provision		409		327
NET INCOME	$	1,102	$	1,055
Basic Earnings Per Common Share	$	0.46	$	0.44
Diluted Earnings Per Common Share	$	0.46	$	0.44
Dividends Declared Per Common Share	$	0.13	$	0.12