Southern Michigan Bancorp, Inc. Announces Third Quarter Earnings

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.

SOURCE Southern Michigan Bancorp, Inc.