Southern Michigan Bancorp, Inc. Announces Third Quarter Earnings

Oct 29, 2010, 08:00 ET from Southern Michigan Bancorp, Inc.

COLDWATER, Mich., Oct. 29 /PRNewswire-FirstCall/ -- Southern Michigan Bancorp, Inc. (OTC Bulletin Board: SOMC) announced net income of $870,000, or $0.38 per diluted share, for the three months ended September 30, 2010. This compares to net income of $771,000, or $0.34 per diluted share, for the three months ended September 30, 2009.  Southern's net income for the nine months ended September 30, 2010 was $2,375,000, or $1.03 per diluted share, compared to net income of $1,251,000, or $0.55 per diluted share, for the same nine month period a year ago.  

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Southern provided $425,000 for loan losses during the third quarter of 2010 compared to $350,000 for the third quarter of 2009.  Net charge offs totaled $423,000 during the third quarter of 2010 compared to $254,000 in the third quarter of 2009.  For the nine month period ended September 30, 2010, net charge offs totaled $1,122,000 compared to $2,684,000 for the same nine month period in 2009.

Southern's allowance for loan losses totaled $5.7 million, or 1.79% of total loans at September 30, 2010, compared to $6.1 million, or 1.82% of total loans at December 31, 2009.  Non-performing loans totaled $6,869,000, or 2.18% of total loans at September 30, 2010, compared to $7,599,000, or 2.28% of total loans at December 31, 2009, and $8,151,000, or 2.43% of total loans at September 30, 2009.

Southern's net interest margin decreased slightly from 4.14% for the nine month period ended September 30, 2009 to 4.02% for the same period of 2010.  Reduced net interest income resulted from lower rates and balances for investment securities and loans, which were partially offset by lower deposit rates.

John Castle, Chairman & CEO, stated, "Residential mortgage activity along with expense control initiatives contributed to continued earnings improvement in the third quarter of 2010.  Southern maintained a favorable net interest margin at September 30, 2010, largely by aggressively working to reduce non-earning assets.  In addition, we continue to monitor the outcomes from the recent banking legislation.  While it remains uncertain what the final rules and regulations will say, we expect that the banking industry will bear significantly increased compliance costs and a higher cost of capital."

The annualized return on average assets for the nine month periods ended September 30, 2010 and 2009 was 0.67% and 0.36%, respectively.  The annualized return on average equity for the same periods was 6.76% and 3.70%, respectively.

Southern Michigan Bancorp, Inc. is a bank holding company headquartered in Coldwater, Michigan with 18 branches within Branch, Calhoun, Cass, Hillsdale and St. Joseph Counties which provide 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 "uncertain", "expect", "continue" and other similar words or expressions.  These statements include, among others, statements related to the future effect of recently passed banking legislation.  All statements with references to future time periods are forward-looking.  Management's determination of the provision and allowance for loan losses, the appropriate carrying value of intangible assets (including goodwill 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.  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.

Risk factors include, but are not limited to, the risk factors described in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2009 and in "Part II, Item 1A – Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.  These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.

Southern Michigan Bancorp, Inc.

Consolidated Balance Sheets (Unaudited)

(In thousands, except share data)

September 30, 2010

December 31, 2009

ASSETS

     Cash and cash equivalents

$

64,411

$

24,814

     Federal funds sold

221

2,540

     Securities available for sale

58,057

56,948

     Loans held for sale

1,115

605

     Loans, net of allowance for loan losses of  $5,728 - 2010 ($6,075 – 2009)

314,542

327,004

     Premises and equipment, net

12,712

12,914

     Accrued interest receivable

2,366

2,054

     Net cash surrender value of life insurance

9,859

9,881

     Goodwill

13,422

13,422

     Other intangible assets, net

2,093

2,355

     Other assets

8,700

9,872

TOTAL ASSETS

$

487,498

$

462,409

LIABILITIES

     Deposits :

          Non-interest bearing

$

56,501

$

55,250

          Interest bearing

345,487

325,655

     Total deposits

401,988

380,905

     Securities sold under agreements to repurchase and overnight borrowings

16,876

14,799

     Accrued expenses and other liabilities

4,183

4,039

     Other borrowings

10,318

10,832

     Subordinated debentures

5,155

5,155

     Common stock subject to repurchase obligation in Employee

         Stock Ownership Plan, shares outstanding – 104,514 in 2010

         (101,999 shares in 2009)

1,233

945

Total liabilities

439,753

416,675

SHAREHOLDERS' EQUITY

     Preferred stock, 100,000 shares authorized; none issued or outstanding

-

-

     Common stock, $2.50 par value:

         Authorized - 4,000,000 shares

         Issued – 2,340,717 shares in 2010 (2,323,410 shares in 2009)

          Outstanding (other than ESOP shares) – 2,236,203 shares in 2010           (2,221,411 shares in 2009)

5,591

5,553

     Additional paid-in capital

18,152

18,363

     Retained earnings

24,086

22,062

     Accumulated other comprehensive income, net

243

193

     Unearned Employee Stock Ownership Plan shares

(327)

(437)

     Total shareholders' equity

47,745

45,734

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

487,498

$

462,409

Southern Michigan Bancorp, Inc.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2010

2009

2010

2009

Interest income:

     Loans, including fees

$

4,878

$

4,966

$

14,427

$

14,881

     Federal funds sold and balances with banks

42

22

99

42

     Securities:

          Taxable

151

228

474

895

          Tax-exempt

178

231

580

684

Total interest income

5,249

5,447

15,580

16,502

Interest expense:

     Deposits

928

1,128

2,863

3,561

     Other

172

142

515

544

Total interest expense

1,100

1,270

3,378

4,105

Net interest income

4,149

4,177

12,202

12,397

Provision for loan losses

425

350

775

2,300

Net interest income after provision for loan losses

3,724

3,827

11,427

10,097

Non-interest income:

     Service charges on deposit accounts

652

786

1,834

2,091

     Trust fees

244

237

740

716

    Net gains on security calls and sales

-

-

207

407

     Net gains on loan sales

403

173

684

603

     Earnings on life insurance assets

93

83

243

251

    Gain on life insurance proceeds

-

-

156

-

     Income and fees from automated teller machines

235

181

660

514

     Other

211

214

652

718

Total non-interest income

1,838

1,674

5,176

5,300

Non-interest expense:

     Salaries and employee benefits

2,529

2,413

7,467

7,355

     Occupancy, net

324

325

1,068

1,047

     Equipment

229

217

683

672

     Printing, postage and supplies

146

158

437

470

    Telecommunication expenses

107

88

281

263

     Professional and outside services

160

339

685

999

    FDIC assessments

157

157

473

676

    Software maintenance

94

101

302

315

    Amortization of other intangibles

87

91

262

272

     Other

595

672

2,017

2,113

Total non-interest expense

4,428

4,561

13,675

14,182

INCOME BEFORE INCOME TAXES

1,134

940

2,928

1,215

Federal income tax provision (credit)

264

169

553

(36)

NET INCOME

$

870

$

771

$

2,375

$

1,251

Basic Earnings Per Common Share

$

0.38

$

0.34

$

1.03

$

0.55

Diluted Earnings Per Common Share

0.38

.34

1.03

.55

Dividends Declared Per Common Share

.05

.05

.15

.15

SOURCE Southern Michigan Bancorp, Inc.



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