Southern Michigan Bancorp, Inc. Announces Third Quarter 2017 Earnings

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Oct 26, 2017, 08:00 ET

COLDWATER, Mich., Oct. 26, 2017 /PRNewswire/ -- Southern Michigan Bancorp, Inc. (OTC Pink: SOMC) announced third quarter 2017 net income of $1,743,000, or $0.75 per share, compared to net income of $1,658,000, or $0.69 per share, for the third quarter of 2016. Southern earned $4,682,000, or $1.97 per share, for the nine-month period ended September 30, 2017 compared to $4,430,000, or $1.84 per share, for the same nine-month period a year ago.

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. stated, "We are pleased to report Southern's expansion into the Kalamazoo market in 2016 has resulted in record high loan, deposit and total asset footings at September 30, 2017. Balance sheet growth has led to record earnings for the third quarter and nine month period of 2017."

Total consolidated assets at September 30, 2017 were $712.3 million, exceeding $700.0 million for the first time in Company history. This compared to $641.5 million at December 31, 2016. Loans totaled $500.8 million at September 30, 2017, $51.0 million more than year end 2016.

Growth in the loan portfolio resulted in Southern providing $175,000 for loan losses during the third quarter of 2017. The allowance for loan losses totaled $5,013,000, or 1.00% of loans at September 30, 2017. This compared to $100,000 of provision for loan losses for the nine-month period ending September 30, 2016. Net charge offs totaled $4,000, or annualized 0.0% of loans, for the nine-month period ending September 30, 2017 compared to net charges offs of $484,000, or 0.15% of loans annualized, for the same period of 2016.

The annualized return on average assets for the nine-month periods ended September 30, 2017 and 2016 was 0.94% and 0.98%, respectively. The annualized return on average equity was 8.82% for the first nine months of 2017 compared to 8.45% for the same period of 2016. The tax equivalent net interest margin for the nine-month periods ending September 30, 2017 and 2016 was 3.79% and 3.80%, respectively.

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)

	September 30, 2017		December 31, 2016
ASSETS
Cash and cash equivalents	$	58,947	$	16,320
Federal funds sold		254		18,486
Securities available for sale		102,103		109,963
Loans held for sale		815		84
Loans, net of allowance for loan losses of $5,013 - 2017 ($4,842 – 2016)		495,794		444,973
Premises and equipment, net		14,227		12,798
Accrued interest receivable		3,192		2,871
Net cash surrender value of life insurance		14,703		14,422
Goodwill		13,422		13,422
Other intangible assets, net		57		229
Other assets		8,811		7,964
TOTAL ASSETS	$	712,325	$	641,532

LIABILITIES
Deposits :
Non-interest bearing	$	117,058	$	107,410
Interest bearing		458,978		428,435
Total deposits		576,036		535,845

Securities sold under agreements to repurchase and overnight borrowings		13,019		13,311
Accrued expenses and other liabilities		8,059		6,890
Other borrowings		39,750		10,200
Subordinated debentures		5,155		5,155
Total liabilities		642,019		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 – 2,317,141 shares in 2017 (2,406,538 shares in 2016)		5,792		6,011
Additional paid-in capital		15,237		19,246
Retained earnings		49,495		46,282
Accumulated other comprehensive income/(loss), net		114		(1,004)
Unearned Employee Stock Ownership Plan shares		(332)		(404)
Total shareholders' equity		70,306		70,131
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	712,325	$	641,532

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,
	2017		2016		2017		2016
Interest income:
Loans, including fees	$	5,976	$	4,924	$	16,755	$	14,880
Federal funds sold and balances with banks		102		43		213		112
Securities:
Taxable		285		283		877		717
Tax-exempt		224		211		676		653
Total interest income		6,587		5,461		18,521		16,362

Interest expense:
Deposits		472		326		1,195		931
Other		362		133		673		389
Total interest expense		834		459		1,868		1,320
Net interest income		5,753		5,002		16,653		15,042
Provision for loan losses		175		-		175		100
Net interest income after provision for loan losses		5,578		5,002		16,478		14,942

Non-interest income:
Service charges on deposit accounts		423		420		1,216		1,171
Trust fees		433		354		1,196		1,202
Net gains on security calls and sales		2		58		3		100
Net gains on loan sales		211		273		534		744
Earnings on life insurance assets		92		92		281		249
ATM and debit card fee income		348		352		1,034		1,038
Other		161		179		495		597
Total non-interest income		1,670		1,728		4,759		5,101

Non-interest expense:
Salaries and employee benefits		2,902		2,559		8,846		7,811
Occupancy, net		314		368		1,019		1,032
Equipment		212		199		694		625
Printing, postage and supplies		105		97		310		331
Telecommunication expenses		73		70		221		215
Professional and outside services		322		207		982		959
FDIC assessments		53		73		165		216
Software maintenance		305		260		896		721
Amortization of other intangibles		57		65		172		195
ATM expenses		134		162		364		538
Other		427		443		1,320		1,370
Total non-interest expense		4,904		4,503		14,989		14,013
INCOME BEFORE INCOME TAXES		2,344		2,227		6,248		6,030
Federal income tax provision		601		569		1,566		1,600
NET INCOME	$	1,743	$	1,658	$	4,682	$	4,430

Basic Earnings Per Common Share	$	0.76	$	0.69	$	1.97	$	1.85
Diluted Earnings Per Common Share		0.75		0.69		1.97		1.84
Dividends Declared Per Common Share		0.21		0.20		0.62		0.56