Southern Michigan Bancorp, Inc. Announces Second Quarter 2015 Earnings

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Jul 21, 2015, 08:00 ET

COLDWATER, Mich., July 21, 2015 /PRNewswire/ -- Southern Michigan Bancorp, Inc. (OTC Pink: SOMC) announced second quarter 2015 net income of $1,880,000, or $0.79 per share, compared to net income of $1,146,000, or $0.48 per share, for the second quarter of 2014. Southern's net income for the six month period ended June 30, 2015 increased 37.4% to $3,089,000, or $1.29 per share, compared to net income of $2,248,000, or $0.93 per share, for the same six month period a year ago.

During the second quarter of 2015 Southern recorded $555,000 of tax free income from death benefits on bank owned life insurance policies. Excluding this income, net income for the three and six month periods ended June 30, 2015 totaled $1,325,000 and $2,534,000, respectively, an increase of 15.62% and 12.72% over the respective three and six month prior year periods.

During the second quarter of 2015 the Board of Directors authorized the termination of the previously frozen defined benefit pension plan. Southern recorded $625,000 of pension expense through June 30, 2015 to ensure the plan will be fully funded as of the anticipated termination date of September 1, 2015.

Total consolidated assets at June 30, 2015 were $557.0 million compared to $543.3 million at December 31, 2014.

Southern provided $150,000 for loan losses during the six month period ended June 30, 2015 resulting in an allowance for loan losses of $5,196,000, or 1.26% of loans. This compared to $225,000 of provision for loan losses expense for the same six month period of 2014. Net charge offs totaled $131,000 or annualized 0.06% of loans for the six month period ending June 30, 2015, compared to $227,000 for the same six month period of 2014.

The annualized return on average assets for the six month periods ended June 30, 2015 and 2014 was 1.11% and 0.81%, respectively. The annualized return on average equity was 10.03% for the first six months of 2015 compared to 7.74% for the same period of 2014. The tax equivalent net interest margin for the six month periods ending June 30, 2015 and 2014 was 3.92% and 3.79%, respectively.

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. stated, "We are pleased to report strong core earnings, heightened mortgage lending activity and favorable asset quality metrics which are contributing to our overall success."

Southern Michigan Bancorp, Inc. is a bank holding company and the parent company of Southern Michigan Bank & Trust. It operates 14 branches within Branch, Calhoun, Hillsdale and St. Joseph Counties, and a loan production office in Steuben County, providing a broad range of consumer, business and wealth management services throughout the region.

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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, 2015		December 31, 2014
ASSETS
Cash and cash equivalents	$	17,434	$	15,374
Federal funds sold		257		247
Securities available for sale		83,908		72,880
Loans held for sale		878		483
Loans, net of allowance for loan losses of $5,196 - 2015 ($5,177 – 2014)		406,598		404,935
Premises and equipment, net		11,967		11,898
Accrued interest receivable		2,376		2,378
Net cash surrender value of life insurance		11,762		11,299
Goodwill		13,422		13,422
Other intangible assets, net		625		761
Other assets		7,809		9,668
TOTAL ASSETS	$	557,036	$	543,345

LIABILITIES
Deposits :
Non-interest bearing	$	96,641	$	90,191
Interest bearing		359,553		354,079
Total deposits		456,194		444,270

Securities sold under agreements to repurchase and overnight borrowings		13,490		14,644
Accrued expenses and other liabilities		7,140		6,116
Other borrowings		10,000		10,000
Subordinated debentures		5,155		5,155
Common stock subject to repurchase obligation in Employee
Stock Ownership Plan, shares outstanding –130,435 in 2015
(133,227 shares in 2014)		3,000		2,804
Total liabilities		494,979		482,989

SHAREHOLDERS' EQUITY
Preferred stock, 100,000 shares authorized; none issued or outstanding		-		-
Common stock, $2.50 par value:
Authorized - 4,000,000 shares
Issued – 2,404,344 shares in 2015 (2,404,469 shares in 2014)
Outstanding (other than ESOP shares) – 2,273,909 shares in 2015 (2,271,242 shares in 2014)		5,680		5,678
Additional paid-in capital		16,638		17,145
Retained earnings		40,082		37,741
Accumulated other comprehensive loss, net		(55)		(208)
Unearned Employee Stock Ownership Plan shares		(288)		-
Total shareholders' equity		62,057		60,356
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	557,036	$	543,345

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,
	2015		2014		2015		2014
Interest income:
Loans, including fees	$	4,845	$	4,611	$	9,586	$	9,199
Federal funds sold and balances with banks		14		20		21		40
Securities:
Taxable		175		230		354		423
Tax-exempt		215		199		413		395
Total interest income		5,249		5,060		10,374		10,057

Interest expense:
Deposits		318		325		617		714
Other		82		71		163		145
Total interest expense		400		396		780		859
Net interest income		4,849		4,664		9,594		9,198
Provision for loan losses		75		225		150		225
Net interest income after provision for loan losses		4,774		4,439		9,444		8,973

Non-interest income:
Service charges on deposit accounts		449		515		865		1,001
Trust fees		343		279		665		569
Net gains on security calls and sales		-		4		24		37
Net gains on loan sales		319		209		547		405
Earnings on life insurance assets		631		77		714		159
ATM and debit card fee income		345		325		655		615
Other		239		227		466		428
Total non-interest income		2,326		1,636		3,936		3,214

Non-interest expense:
Salaries and employee benefits		2,859		2,414		5,450		4,778
Occupancy, net		269		309		562		676
Equipment		203		158		365		331
Printing, postage and supplies		107		120		226		225
Telecommunication expenses		65		85		125		158
Professional and outside services		279		246		546		590
FDIC assessments		78		92		165		180
Software maintenance		210		235		418		433
Amortization of other intangibles		66		71		136		142
Loan related expenses		70		51		191		392
ATM expenses		130		125		254		241
Other		379		597		890		958
Total non-interest expense		4,715		4,503		9,328		9,104
INCOME BEFORE INCOME TAXES		2,385		1,572		4,052		3,083
Federal income tax provision		505		426		963		835
NET INCOME	$	1,880	$	1,146	$	3,089	$	2,248

Basic Earnings Per Common Share	$	0.79	$	0.48	$	1.29	$	0.94
Diluted Earnings Per Common Share		0.79		0.48		1.29		0.93
Dividends Declared Per Common Share		0.16		0.15		0.31		0.28