Southern Michigan Bancorp, Inc. Announces Third Quarter 2014 Earnings

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Oct 21, 2014, 08:00 ET

COLDWATER, Mich., Oct. 21, 2014 /PRNewswire/ -- Southern Michigan Bancorp, Inc. (OTCQB: SOMC) announced third quarter 2014 net income increased 7.0% to $1,292,000, or $0.54 per share, compared to net income of $1,207,000, or $0.50 per share, for the third quarter of 2013. Southern's net income for the nine month period ended September 30, 2014 increased 6.0% to $3,540,000, or $1.47 per share, compared to net income of $3,341,000, or $1.40 per share, for the same nine month period a year ago.

Total consolidated assets at September 30, 2014 were $543.8 million compared to $539.5 million at December 31, 2013.

Southern provided $325,000 for loan losses during the nine month period ended September 30, 2014 resulting in an allowance for loan losses of $5,254,000, or 1.32% of loans. This compared to $650,000 of provision for loan losses expense for the same nine month period of 2013. Net charge offs totaled $309,000, or annualized 0.10% of loans, for the nine month period ending September 30, 2014, compared to $708,000 for the same nine month period of 2013.

The annualized return on average assets for the nine month periods ended September 30, 2014 and 2013 was 0.85% and 0.84%, respectively. The annualized return on average equity was 7.92% for the first nine months of 2014 compared to 7.97% for the same period of 2013. The tax equivalent net interest margin for the nine month periods ending September 30, 2014 and 2013 was 3.84% and 3.81%, respectively.

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. stated, "We are pleased to report continued improvement in our financial performance. Third quarter net income of $1,292,000 represents record quarterly earnings for Southern. As expected, loan balances increased $13.1 million during the third quarter of 2014, contributing to higher net interest income. These loans were funded by low cost core deposit growth and lower yielding investment securities. Additional loan growth is expected during the fourth quarter of 2014 and into 2015 as loans in the commercial loan pipeline begin to fund."

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)

	September 30, 2014		December 31, 2013
ASSETS
Cash and cash equivalents	$	15,830	$	32,366
Federal funds sold		248		148
Securities available for sale		85,091		76,005
Loans held for sale		732		115
Loans, net of allowance for loan losses of $5,254 - 2014 ($5,238 – 2013)		392,313		380,773
Premises and equipment, net		11,898		12,366
Accrued interest receivable		2,799		2,351
Net cash surrender value of life insurance		11,216		10,979
Goodwill		13,422		13,422
Other intangible assets, net		832		1,045
Other assets		9,527		9,889
TOTAL ASSETS	$	543,908	$	539,459

LIABILITIES
Deposits:
Non-interest bearing	$	88,641	$	85,670
Interest bearing		369,801		364,730
Total deposits		458,442		450,400

Securities sold under agreements to repurchase and overnight borrowings		12,515		18,479
Accrued expenses and other liabilities		5,798		6,351
Other borrowings		-		-
Subordinated debentures		5,155		5,155
Common stock subject to repurchase obligation in Employee
Stock Ownership Plan, shares outstanding –130,115 in 2014
(126,931 shares in 2013)		2,602		2,247
Total liabilities		484,512		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) – 2,275,554 shares in 2014 (2,265,699 shares in 2013)		5,683		5,665
Additional paid-in capital		17,201		17,533
Retained earnings		36,850		34,346
Accumulated other comprehensive loss, net		(338)		(717)
Total shareholders' equity		59,396		56,827
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	543,908	$	539,459

SOUTHERN MICHIGAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Interest income:
Loans, including fees	$	4,667	$	4,647	$	13,866	$	13,682
Federal funds sold and balances with banks		8		18		48		69
Securities:
Taxable		224		170		647		458
Tax-exempt		204		215		599		662
Total interest income		5,103		5,050		15,160		14,871

Interest expense:
Deposits		314		451		1,028		1,421
Other		74		69		219		217
Total interest expense		388		520		1,247		1,638
Net interest income		4,715		4,530		13,913		13,233
Provision for loan losses		100		250		325		650
Net interest income after provision for loan losses		4,615		4,280		13,588		12,583

Non-interest income:
Service charges on deposit accounts		521		594		1,522		1,469
Trust fees		297		304		866		849
Net gains on security calls and sales		44		12		81		12
Net gains on loan sales		223		389		628		1,365
Earnings on life insurance assets		78		79		237		249
ATM and debit card fee income		339		311		954		903
Other		229		201		657		553
Total non-interest income		1,731		1,890		4,945		5,400

Non-interest expense:
Salaries and employee benefits		2,629		2,708		7,407		7,633
Occupancy, net		306		222		982		789
Equipment		148		105		479		540
Printing, postage and supplies		121		133		346		366
Telecommunication expenses		69		67		227		204
Professional and outside services		335		292		925		971
FDIC assessments		93		88		273		270
Software maintenance		179		328		612		860
Amortization of other intangibles		71		74		213		222
Loan related expenses		150		43		542		159
ATM expenses		125		126		366		342
Other		331		325		1,289		1,068
Total non-interest expense		4,557		4,511		13,661		13,424
INCOME BEFORE INCOME TAXES		1,789		1,659		4,872		4,559
Federal income tax provision		497		452		1,332		1,218
NET INCOME	$	1,292	$	1,207	$	3,540	$	3,341

Basic Earnings Per Common Share	$	0.54	$	0.50	$	1.47	$	1.40
Diluted Earnings Per Common Share		0.54		0.50		1.47		1.40
Dividends Declared Per Common Share		0.15		0.13		0.43		0.37