Southern Michigan Bancorp, Inc. Announces Fourth Quarter and Full Year 2019 Earnings

COLDWATER, Mich., Feb. 13, 2020 (GLOBE NEWSWIRE) -- Southern Michigan Bancorp, Inc. (OTC Pink: SOMC) reported net income of $8,622,000 for 2019 compared to $8,125,000 for 2018.  Diluted earnings per share were $3.74 for 2019 compared to $3.51 for 2018.  Fourth quarter 2019 net income was $1,836,000, or $0.80 per share, compared to $1,824,000, or $0.79 per share for the fourth quarter of 2018.

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. stated, “We are pleased to report record earnings of $8,622,000 for 2019, an increase of 6.1% over 2018.  The primary drivers for the increase to net income included our ongoing disciplined approach to credit quality and growth of the balance sheet.  We remain focused on delivering long-term value to our shareholders.  At year end our book value and tangible book value per share were $36.00 and $30.08, respectively, reflecting increases of 10.4 percent and 12.7 percent from December 31, 2018.”

Total consolidated assets at December 31, 2019 were $809.7 million.  This compared to $738.8 million at December 31, 2018.  Loan totals grew from December 31, 2018 levels of $532.0 million to $562.9 million.  Deposits also increased totaling $655.8 million at December 31, 2019, an increase of $49.9 million or 8.2 percent, as compared to year end 2018.

Southern provided $225,000 for loan losses in 2019, with an allowance for loan losses at December 31, 2019 of $5,184,000, or 0.92% of loans.  This compared to a provision for loan losses of $250,000 for 2018, with an allowance for loan losses at December 31, 2018 of $5,117,000, or 0.96% of loans.  Net charge offs totaled $158,000, or annualized 0.03% of loans, for 2019 compared to $142,000, or 0.03% of loans for 2018.   

The return on average assets for 2019 was 1.09% compared to 1.11% for 2018.  The return on average equity was 10.74% for 2019 compared to 11.21% for 2018.  The tax equivalent net interest margin for 2019 and 2018 were 3.66% and 3.84%, respectively.

Southern Michigan Bancorp, Inc. is a bank holding company and the parent company of Southern Michigan Bank & Trust.  It operates 13 branches within Branch, Calhoun, Hillsdale, Kalamazoo and St. Joseph Counties, 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 to 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)

	December 31, 2019				December 31, 2018
ASSETS
Cash and cash equivalents	$	68,723			$		54,741
Federal funds sold		265					1,065
Securities available for sale		123,436					101,439
Loans held for sale		1,171					-
Loans, net of allowance for loan losses of $5,184 - 2019 ($5,117 – 2018)		557,680					526,857
Premises and equipment, net		14,515					14,296
Accrued interest receivable		3,380					3,294
Net cash surrender value of life insurance		15,633					15,685
Goodwill		13,422					13,422
Other intangible assets, net		291					327
Other assets		11,200					7,705
TOTAL ASSETS	$	809,716			$		738,831
LIABILITIES
Deposits :
Non-interest bearing	$	136,430			$		129,923
Interest bearing		519,332					475,970
Total deposits		655,762					605,893
Securities sold under agreements to repurchase and overnight borrowings		15,401					15,342
Accrued expenses and other liabilities		12,553					8,414
Other borrowings		37,500					28,500
Subordinated debentures		5,155					5,155
Total liabilities		726,371					663,304
SHAREHOLDERS’ EQUITY
Preferred stock, 100,000 shares authorized; none issued or outstanding		-					-
Common stock, $2.50 par value:
Authorized - 5,000,000 shares
Issued and outstanding – 2,314,878 shares in 2019
(2,315,505 shares in 2018)		5,781					5,783
Additional paid-in capital		15,521					15,246
Retained earnings		62,484					55,972
Accumulated other comprehensive loss, net		(52	)				(1,301		)
Unearned Employee Stock Ownership Plan shares		(389	)				(173		)
Total shareholders’ equity		83,345					75,527
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	809,716			$		738,831

Southern Michigan Bancorp, Inc.
condensed consolidated statements of income (unaudited)
(In thousands, except per share data)

	Three Months Ended December 31,						Year Ended December 31,
	2019			2018			2019			2018
Interest income:
Loans, including fees	$	7,151		$	6,960		$	28,265		$	26,912
Federal funds sold and balances with banks		295			288			1,482			659
Securities:
Taxable		698			361			2,185			1,328
Tax-exempt		105			205			621			883
Total interest income		8,249			7,814			32,553			29,782
Interest expense:
Deposits		1,331			1,031			5,128			3,274
Other		336			289			1,299			1,224
Total interest expense		1,667			1,320			6,427			4,498
Net interest income		6,582			6,494			26,126			25,284
Provision for loan losses		75			250			225			250
Net interest income after provision for loan losses		6,507			6,244			25,901			25,034
Non-interest income:
Service charges on deposit accounts		494			542			2,003			1,751
Trust fees		544			548			2,085			2,027
Net gains on loan sales		246			137			683			604
Earnings on life insurance assets		97			97			443			389
ATM and debit card fee income		393			361			1,460			1,422
Net securities gains		-			(161	)		366			(161	)
Other		133			173			615			423
Total non-interest income		1,907			1,697			7,655			6,455
Non-interest expense:
Salaries and employee benefits		3,589			3,226			13,828			12,843
Occupancy, net		331			325			1,384			1,406
Equipment		335			344			1,205			1,150
Printing, postage and supplies		105			103			428			409
Telecommunication expenses		123			114			426			338
Professional and outside services		540			461			1,617			1,492
Software maintenance		338			422			1,565			1,513
ATM expenses		187			130			570			522
Other		650			631			2,224			2,256
Total non-interest expense		6,198			5,756			23,247			21,929
INCOME BEFORE INCOME TAXES		2,216			2,185			10,309			9,560
Federal income tax provision		380			361			1,687			1,435
NET INCOME	$	1,836		$	1,824		$	8,622		$	8,125
Basic Earnings Per Common Share	$	0.80		$	0.79		$	3.74		$	3.52
Diluted Earnings Per Common Share		0.80			0.79			3.74			3.51
Dividends Declared Per Common Share		0.23			0.22			0.91			0.87

CONTACT: CONTACT:  John H. Castle, CEO
[phone]