Southern Michigan Bancorp, Inc. Announces Second Quarter 2017 Earnings

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Jul 28, 2017, 08:00 ET

COLDWATER, Mich., July 28, 2017 /PRNewswire/ -- Southern Michigan Bancorp, Inc. (OTC Pink: SOMC) announced second quarter 2017 net income of $1,493,000, or $0.63 per share, compared to net income of $1,398,000, or $0.58 per share, for the second quarter of 2016. Southern earned $2,939,000, or $1.22 per share, for the six-month period ended June 30, 2017 compared to $2,772,000, or $1.15 per share, for the same six-month period a year ago.

Total consolidated assets at June 30, 2017 were $664.9 million compared to $641.5 million at December 31, 2016.

No provision for loan losses was required during the first six months of 2017. The allowance for loan losses was $4,897,000, or 1.00% of loans at June 30, 2017. This compared to $100,000 provision for loan losses during the six month period ended June 30, 2016 resulting in an allowance for loan losses of $4,916,000, or 1.18% of loans. Net recoveries totaled $112,000 for the second quarter of 2017, compared to net charge offs of $266,000 for the second quarter of 2016. For the six month period ending June 30, 2017, net recoveries totaled $55,000, compared to net charge offs of $457,000 for the first six months of 2016. Non-performing asset totals as of June 30, 2017 were $2.6 million, just .39% of total assets.

The annualized return on average assets for the six-month periods ended June 30, 2017 and 2016 was 0.90% and 0.93%, respectively. The annualized return on average equity was 8.28% for the first six months of 2017 compared to 7.99% for the same period of 2016. The tax equivalent net interest margin for the six-month periods ending June 30, 2017 and 2016 was 3.80% and 3.83%, respectively.

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. stated, "We are pleased with our second quarter and year to date results. Commercial loan growth and continued strong asset quality both positively contributed to the 6% increase in profitability for the first half of 2017."

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, Kalamazoo 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.

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, 2017		December 31, 2016
ASSETS
Cash and cash equivalents	$	23,451	$	16,320
Federal funds sold		202		18,486
Securities available for sale		104,185		109,963
Loans held for sale		880		84
Loans, net of allowance for loan losses of $4,897 - 2017 ($4,842 – 2016)		483,902		444,973
Premises and equipment, net		13,525		12,798
Accrued interest receivable		2,574		2,871
Net cash surrender value of life insurance		14,610		14,422
Goodwill		13,422		13,422
Other intangible assets, net		115		229
Other assets		7,997		7,964
TOTAL ASSETS	$	664,863	$	641,532

LIABILITIES
Deposits :
Non-interest bearing	$	117,593	$	107,410
Interest bearing		423,679		428,435
Total deposits		541,272		535,845

Securities sold under agreements to repurchase and overnight borrowings		11,414		13,311
Accrued expenses and other liabilities		7,897		6,890
Other borrowings		30,200		10,200
Subordinated debentures		5,155		5,155
Total liabilities		595,938		571,401

SHAREHOLDERS' EQUITY
Preferred stock, 100,000 shares authorized; none issued or outstanding		-		-
Common stock, $2.50 par value:
Authorized - 4,000,000 shares
Issued and outstanding – 2,317,574 shares in 2017 (2,406,538 shares in 2016)		5,792		6,011
Additional paid-in capital		15,060		19,246
Retained earnings		48,238		46,282
Accumulated other comprehensive income/(loss), net		187		(1,004)
Unearned Employee Stock Ownership Plan shares		(352)		(404)
Total shareholders' equity		68,925		70,131
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	664,863	$	641,532

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,
	2017		2016		2017		2016
Interest income:
Loans, including fees	$	5,535	$	4,916	$	10,779	$	9,956
Federal funds sold and balances with banks		64		40		111		69
Securities:
Taxable		294		238		592		434
Tax-exempt		221		212		452		442
Total interest income		6,114		5,406		11,934		10,901

Interest expense:
Deposits		363		305		724		605
Other		172		129		310		256
Total interest expense		535		434		1,034		861
Net interest income		5,579		4,972		10,900		10,040
Provision for loan losses		-		-		-		100
Net interest income after provision for loan losses		5,579		4,972		10,900		9,940

Non-interest income:
Service charges on deposit accounts		398		371		793		751
Trust fees		396		335		763		848
Net gains on security calls and sales		-		-		1		42
Net gains on loan sales		185		253		323		471
Earnings on life insurance assets		93		109		189		157
ATM and debit card fee income		351		353		686		686
Other		94		204		334		418
Total non-interest income		1,517		1,625		3,089		3,373

Non-interest expense:
Salaries and employee benefits		3,055		2,636		5,944		5,252
Occupancy, net		350		321		705		664
Equipment		236		217		482		426
Printing, postage and supplies		87		106		205		234
Telecommunication expenses		72		69		148		145
Professional and outside services		359		337		661		752
FDIC assessments		53		69		112		143
Software maintenance		298		228		591		461
Amortization of other intangibles		57		65		114		130
ATM expenses		88		226		230		376
Other		462		433		893		927
Total non-interest expense		5,117		4,707		10,085		9,510
INCOME BEFORE INCOME TAXES		1,979		1,890		3,904		3,803
Federal income tax provision		486		492		965		1,031
NET INCOME	$	1,493	$	1,398	$	2,939	$	2,772

Basic Earnings Per Common Share	$	0.63	$	0.58	$	1.22	$	1.15
Diluted Earnings Per Common Share		0.63		0.58		1.22		1.15
Dividends Declared Per Common Share		0.21		0.18		0.41		0.36