Southern Michigan Bancorp, Inc. Announces Fourth Quarter and Full Year 2017 Earnings

COLDWATER, Mich., Feb. 16, 2018 (GLOBE NEWSWIRE) -- Southern Michigan Bancorp, Inc. (OTC Pink:SOMC) reported net income of $5,421,000 for 2017 compared to $6,097,000 for 2016. Results were impacted by the passage of tax reform legislation on December 22, 2017. As a result of the legislation, an income tax charge of $989,000, or $0.42 per share, was recorded in the fourth quarter after deferred tax assets were revalued as a result of the reduction of corporate tax rates from 34% to 21%. We anticipate future benefits from corporate tax reform and for 2018 expect nearly $700,000 in income tax savings. Earnings per share were $2.30 for 2017 compared to $2.54 in 2016. Fourth quarter 2017 net income was $739,000, or $0.32 per share, compared to $1,667,000, or $0.70 per share in the fourth quarter of 2016.

Total consolidated assets at December 31, 2017 were $712.3 million compared to $641.5 million at December 31, 2016. Loans reached a record high of $523.4 million as of December 31, 2017, an increase of $73.6 million or 16.4%, as compared to $449.8 million at year end 2016. Deposits also reached a year-end high at December 31, 2017, increasing $41.3 million or 7.7%, as compared to year end 2016.

“We continue to be pleased with our results. Record year-end loan and deposit totals drove 2017 net interest income up 11.7%, and excluding the one-time tax charge of $989,000, net income for the year grew 5.1% to $6,410,000,” commented John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. “In addition, asset quality remains strong with loan delinquency at just 0.31% of gross loans at December 31, 2017. We are well positioned for continued balance sheet and income growth in 2018.”

Southern provided $175,000 for loan losses in 2017, with an allowance for loan losses at December 31, 2017 of $5,009,000, or 0.96% of loans. This compared to a provision for loan losses of $100,000 for 2016, with an allowance for loan losses at December 31, 2016 of $4,842,000, or 1.08% of loans. The 2017 provision for loan losses resulted from growth in the loan portfolio. Net charge-offs for 2017 totaled just $8,000, or 0.0% of loans, down from $531,000, or .12% of loans in 2016.

The annualized return on average assets for 2017 was 0.80% compared to 1.00% for 2016. The annualized return on average equity was 7.64% for 2017 compared to 8.69% for 2016.

Southern Michigan Bancorp, Inc. is a bank holding company and the parent company of Southern Michigan Bank & Trust. It operates 14 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 “continued”, “anticipate”, “expect’, “long term”, “strategic”, “objectives”, “trends”, “planned” 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 to meet the challenges presented by economic and regulatory conditions, realize our long term strategic objectives, 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. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)December 31,
2017 2016
ASSETS
Cash$4,177 $3,966
Due from banks 13,244 12,354
Cash and cash equivalents 17,421 16,320
Federal funds sold 18,492 18,486
Securities available for sale 105,184 109,963
Loans held for sale 515 84
Loans, net of allowance for loan losses of $5,009 - 2017 ($4,842 - 2016) 518,438 444,973
Premises and equipment, net 14,265 12,798
Accrued interest receivable 3,211 2,871
Cash surrender value of life insurance 14,796 14,422
Goodwill 13,422 13,422
Other intangible assets, net - 229
Other assets 6,601 7,964
Total Assets$712,345 $641,532
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Deposits
Non-interest bearing$129,098 $107,410
Interest bearing 448,046 428,435
Total deposits 577,144 535,845
Securities sold under agreements to repurchase and overnight borrowings 13,950 13,311
Accrued expenses and other liabilities 6,559 6,890
Other borrowings 39,500 10,200
Subordinated debentures 5,155 5,155
Total Liabilities 642,308 571,401
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 – 2,316,779 shares in 2017
(2,406,538 shares in 2016) 5,787 6,011
Additional paid-in capital 15,415 19,246
Retained earnings 49,747 46,282
Accumulated other comprehensive loss, net (613) (1,004)
Unearned Employee Stock Ownership Plan shares (299) (404)
Total Shareholders’ Equity 70,037 70,131
Total Liabilities and Shareholders’ Equity$712,345 $641,532


SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share amounts)Three Months Ended
December 31,
Year Ended
December 31,
2017 2016 2017 2016
Interest income:
Loans, including fees$6,189 $5,104 $22,944 $19,984
Securities:
Taxable 306 306 1,183 1,023
Tax-exempt 230 221 906 874
Other 105 38 318 150
Total interest income 6,830 5,669 25,351 22,031
Interest expense:
Deposits 557 353 1,753 1,284
Other 343 141 1,015 530
Total interest expense 900 494 2,768 1,814
Net interest income 5,930 5,175 22,583 20,217
Provision for loan losses - - 175 100
Net interest income after provision for loan losses 5,930 5,175 22,408 20,117
Non-interest income:
Service charges on deposit accounts 426 423 1,642 1,594
Trust fees 462 347 1,658 1,549
Net securities gains - 2 3 102
Net gains on loan sales 215 302 749 1,046
Earnings on life insurance assets 93 128 374 377
ATM and debit card fee income 340 341 1,374 1,379
Other 113 207 607 804
Total non-interest income 1,649 1,750 6,408 6,851
Non-interest expense:
Salaries and employee benefits 3,204 2,718 12,050 10,529
Occupancy, net 311 303 1,330 1,335
Equipment 273 209 967 834
Printing, postage and supplies 111 94 421 425
Telecommunication 76 68 297 283
Professional and outside services 393 319 1,375 1,278
Software maintenance 344 322 1,240 1,043
Amortization of other intangibles 57 65 229 260
ATM expenses 125 138 489 676
Advertising and marketing 100 85 317 350
FDIC deposit assessments 54 16 219 232
Other real estate owned expense 39 22 39 106
Loss (gain) on sale of other real estate owned (10) 1 (10) 47
Other 287 363 1,390 1,338
Total non-interest expense 5,364 4,723 20,353 18,736
INCOME BEFORE INCOME TAXES 2,215 2,202 8,463 8,232
Federal income tax provision 1,476 535 3,042 2,135
NET INCOME $739 $1,667 $5,421 $6,097
Basic Earnings Per Common Share$0.32 $0.70 $2.30 $2.54
Diluted Earnings Per Common Share$0.32 $0.70 $2.29 $2.54
Dividends Declared Per Common Share$0.21 $0.20 $0.83 $0.76

CONTACT: John H. Castle, CEO (517) 279-5500

Source:Southern Michigan Bancorp Inc