Southern Michigan Bancorp, Inc. Announces Second Quarter 2014 Earnings

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Jul 22, 2014, 08:00 ET

COLDWATER, Mich., July 22, 2014 /PRNewswire/ -- Southern Michigan Bancorp, Inc. (OTCQB: SOMC) announced second quarter 2014 net income of $1,146,000, or $0.48 per share, compared to net income of $1,079,000, or $0.45 per share, for the second quarter of 2013. Southern's net income for the six month period ended June 30, 2014 increased 5.3% to $2,248,000, or $0.93 per share, compared to net income of $2,134,000, or $0.89 per share, for the same six month period a year ago.

Total consolidated assets at June 30, 2014 were $546.3 million compared to $539.5 million at December 31, 2013.

Southern provided $225,000 for loan losses during the six month period ended June 30, 2014 resulting in an allowance for loan losses of $5,236,000, or 1.36% of loans. This compared to $400,000 of provision for loan losses expense for the same six month period of 2013. Net charge offs totaled $227,000 or annualized 0.12% of loans for the six month period ending June 30, 2014, compared to $261,000 for the same six month period of 2013.

The annualized return on average assets for the six month periods ended June 30, 2014 and 2013 was 0.81% and 0.80%, respectively. The annualized return on average equity was 7.74% for the first six months of 2014 compared to 7.65% for the same period of 2013. The tax equivalent net interest margin for the six month periods ending June 30, 2014 and 2013 was 3.79% and 3.76%, respectively.

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. stated, "We continue to be pleased with the improvements being made in both profitability and credit quality. Shareholders are seeing these results positively impact their investment as Southern's stock price increased 7.3% or $1.29 per share during the twelve month period ending June 30, 2014. During the same twelve month period the shareholder's quarterly dividend increased 25.0% or $0.03 per share, rising from $0.12 per quarter to $0.15 per quarter."

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. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)

	June 30, 2014		December 31, 2013
ASSETS
Cash and cash equivalents	$	19,726	$	32,366
Federal funds sold		243		148
Securities available for sale		98,248		76,005
Loans held for sale		567		115
Loans, net of allowance for loan losses of $5,236 - 2014 ($5,238 – 2013)		379,276		380,773
Premises and equipment, net		11,937		12,366
Accrued interest receivable		2,280		2,351
Net cash surrender value of life insurance		11,138		10,979
Goodwill		13,422		13,422
Other intangible assets, net		903		1,045
Other assets		8,532		9,889
TOTAL ASSETS	$	546,272	$	539,459

LIABILITIES
Deposits :
Non-interest bearing	$	93,867	$	85,670
Interest bearing		362,138		364,730
Total deposits		456,005		450,400

Securities sold under agreements to repurchase and overnight borrowings		12,078		18,479
Accrued expenses and other liabilities		5,316		6,351
Other borrowings		6,800		-
Subordinated debentures		5,155		5,155
Common stock subject to repurchase obligation in Employee
Stock Ownership Plan, shares outstanding –124,971 in 2014
(126,931 shares in 2013)		2,356		2,247
Total liabilities		487,710		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 – 2,405,669 shares in 2014 (2,392,630 shares in 2013)
Outstanding (other than ESOP shares) – 2,280,698 shares in 2014 (2,265,699 shares in 2013)		5,696		5,665
Additional paid-in capital		17,377		17,533
Retained earnings		35,919		34,346
Accumulated other comprehensive loss, net		(430)		(717)
Total shareholders' equity		58,562		56,827
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	546,272	$	539,459

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,
	2014		2013		2014		2013
Interest income:
Loans, including fees	$	4,611	$	4,537	$	9,199	$	9,035
Federal funds sold and balances with banks		20		26		40		51
Securities:
Taxable		230		166		423		288
Tax-exempt		199		222		395		447
Total interest income		5,060		4,951		10,057		9,821

Interest expense:
Deposits		325		465		714		970
Other		71		70		145		148
Total interest expense		396		535		859		1,118
Net interest income		4,664		4,416		9,198		8,703
Provision for loan losses		225		175		225		400
Net interest income after provision for loan losses		4,439		4,241		8,973		8,303

Non-interest income:
Service charges on deposit accounts		515		478		1,001		875
Trust fees		279		265		569		545
Net gains on security calls and sales		4		-		37		-
Net gains on loan sales		209		453		405		976
Earnings on life insurance assets		77		86		159		170
ATM and debit card fee income		325		313		615		592
Other		227		192		428		352
Total non-interest income		1,636		1,787		3,214		3,510

Non-interest expense:
Salaries and employee benefits		2,414		2,390		4,778		4,925
Occupancy, net		309		275		676		567
Equipment		158		227		331		435
Printing, postage and supplies		120		124		225		233
Telecommunication expenses		85		68		158		137
Professional and outside services		246		369		590		679
FDIC assessments		92		94		180		182
Software maintenance		235		260		433		532
Amortization of other intangibles		71		74		142		148
Loan related expenses		51		57		392		116
ATM expenses		125		112		241		216
Other		597		460		958		743
Total non-interest expense		4,503		4,510		9,104		8,913
INCOME BEFORE INCOME TAXES		1,572		1,518		3,083		2,900
Federal income tax provision		426		439		835		766
NET INCOME	$	1,146	$	1,079	$	2,248	$	2,134

Basic Earnings Per Common Share	$	0.48	$	0.45	$	0.94	$	0.89
Diluted Earnings Per Common Share		0.48		0.45		0.93		0.89
Dividends Declared Per Common Share		0.15		0.12		0.28		0.24