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Southern Michigan Bancorp, Inc. Announces Third Quarter 2017 Earnings

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


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SOURCE Southern Michigan Bancorp, Inc.