Southern Michigan Bancorp, Inc. Announces Second Quarter 2013 Earnings

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Jul 24, 2013, 10:15 ET

COLDWATER, Mich., July 24, 2013 /PRNewswire/ -- Southern Michigan Bancorp, Inc. (OTCQB: SOMC) announced second quarter 2013 net income of $1,079,000, or $0.45 per share, compared to net income of $1,027,000, or $0.43 per share, for the second quarter of 2012. Southern's net income for the six month period ended June 30, 2013, was $2,134,000, or $0.89 per share, compared to net income of $2,029,000, or $0.86 per share, for the same six month period a year ago.

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Total consolidated assets at June 30, 2013 were $522.3 million compared to $528.9 million at December 31, 2012.

Southern provided $175,000 for loan losses during the second quarter of 2013 resulting in an allowance for loan losses of $5,594,000, or 1.52% of loans at June 30, 2013. This compared to $475,000 of provision for loan losses expense for the second quarter of 2012. Net recoveries totaled $187,000 during the second quarter of 2013, compared to net charge-offs of $833,000 during the second quarter of 2012. For the six month period ended June 30, 2013, net charge offs totaled $261,000, or annualized 0.14% of loans, compared to $946,000 for the same six month period of 2012.

The annualized return on average assets for the six month periods ended June 30, 2013 and 2012 was 0.80% and 0.78%, respectively. The annualized return on average equity was 7.65% for the first six months of 2013 compared to 7.66% for the same period of 2012. The tax equivalent net interest margin for the six month periods ending June 30, 2013 and 2012 was 3.76% and 3.74%, respectively.

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. stated, "We continue to be pleased with our financial performance. The 5.2% increase in year over year earnings is especially gratifying considering the core processing conversion costs of $462,000 incurred during the year. We look forward to the benefits our company and customers will see from the new system."

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.

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)

	June 30, 2013		December 31, 2012
ASSETS
Cash and cash equivalents	$	33,273	$	50,334
Federal funds sold		253		276
Securities available for sale		79,145		64,525
Loans held for sale		1,294		1,776
Loans, net of allowance for loan losses of $5,594 - 2013 ($5,455 – 2012)		361,228		364,150
Premises and equipment, net		12,484		12,419
Accrued interest receivable		1,882		2,059
Net cash surrender value of life insurance		10,814		10,644
Goodwill		13,422		13,422
Other intangible assets, net		1,193		1,341
Other assets		7,360		7,914
TOTAL ASSETS	$	522,348	$	528,860

LIABILITIES
Deposits :
Non-interest bearing	$	86,460	$	87,013
Interest bearing		353,946		357,157
Total deposits		440,406		444,170

Securities sold under agreements to repurchase and overnight borrowings		14,394		16,134
Accrued expenses and other liabilities		4,823		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 –123,652 in 2013
(125,125 shares in 2012)		2,171		2,065
Total liabilities		466,988		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 – 2,392,907 shares in 2013 (2,375,975 shares in 2012)
Outstanding (other than ESOP shares) – 2,269,255 shares in 2013 (2,250,850 shares in 2012)		5,674		5,627
Additional paid-in capital		17,528		17,700
Retained earnings		32,604		31,046
Accumulated other comprehensive income, net		(446)		297
Unearned Employee Stock Ownership Plan shares		-		(35)
Total shareholders' equity		55,360		54,635
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	522,348	$	528,860

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

(In thousands, except per share data)

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Interest income:
Loans, including fees	$	4,537	$	4,629	$	9,035	$	9,140
Federal funds sold and balances with banks		26		31		51		57
Securities:
Taxable		166		63		288		219
Tax-exempt		222		246		447		488
Total interest income		4,951		4,969		9,821		9,904

Interest expense:
Deposits		465		587		970		1,248
Other		70		129		148		262
Total interest expense		535		716		1,118		1,510
Net interest income		4,416		4,253		8,703		8,394
Provision for loan losses		175		475		400		700
Net interest income after provision for loan losses		4,241		3,778		8,303		7,694

Non-interest income:
Service charges on deposit accounts		478		413		875		807
Trust fees		265		263		545		561
Net gains on security calls and sales		-		-		-		3
Net gains on loan sales		453		476		976		878
Earnings on life insurance assets		86		80		170		168
ATM and debit card fee income		313		292		592		564
Other		192		176		352		384
Total non-interest income		1,787		1,700		3,510		3,365

Non-interest expense:
Salaries and employee benefits		2,390		2,267		4,925		4,688
Occupancy, net		275		277		567		560
Equipment		227		217		435		409
Printing, postage and supplies		124		105		233		244
Telecommunication expenses		68		61		137		157
Professional and outside services		369		280		679		536
FDIC assessments		94		100		182		200
Software maintenance		260		120		532		231
Amortization of other intangibles		74		81		148		162
Expenses relating to OREO property		72		74		12		202
ATM expenses		112		109		216		210
Other		445		451		847		825
Total non-interest expense		4,510		4,142		8,913		8,424
INCOME BEFORE INCOME TAXES		1,518		1,336		2,900		2,635
Federal income tax provision		439		309		766		606
NET INCOME	$	1,079	$	1,027	$	2,134	$	2,029

Basic Earnings Per Common Share	$	0.45	$	0.43	$	0.89	$	0.86
Diluted Earnings Per Common Share		0.45		0.43		0.89		0.86
Dividends Declared Per Common Share		0.12		0.09		0.24		0.16