Southern Michigan Bancorp, Inc. Announces Fourth Quarter and Full Year 2020 Earnings

COLDWATER, Mich., Feb. 12, 2021 (GLOBE NEWSWIRE) -- Southern Michigan Bancorp, Inc. (OTC Pink: SOMC) reported net income of $7,386,000 for 2020 compared to $8,622,000 for 2019.   Earnings per share were $3.21 for 2020 compared to $3.74 for 2019. Fourth quarter 2020 net income was $2,024,000, or $0.88 per share, compared to $1,836,000, or $0.80 per share for the fourth quarter of 2019.

Total consolidated assets at December 31, 2020 increased 23.2%, reaching $997.6 million compared to $809.7 million at December 31, 2019.   Loan totals grew 13.0%, from December 31, 2019 levels of $562.9 million to $635.9 million. Deposits also increased totaling $838.3 million at December 31, 2020, an increase of $182.5 million or 27.8 percent, as compared to year end 2019.

“Southern finished 2020 with solid financial performance despite the unique challenges presented by COVID-19,” commented John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc., continuing, “Net income was a record for the fourth quarter, 10.2% higher than the previous fourth quarter high. Total assets, loans and deposits all expanded to new record highs at year end 2020.”

Castle continued, “While we have not identified any specific asset quality concerns, we have elected to increase provision expense and the allowance for loan losses through December 31, 2020 due to the economic uncertainty caused by the pandemic.”

Southern provided $2.6 million for loan losses in 2020, with an allowance for loan losses at December 31, 2020 of $7,789,000, or 1.22% of loans. This compared to a provision for loan losses of $225,000 for 2019, with an allowance for loan losses at December 31, 2019 of $5,184,000, or 0.92% of loans. Net loan loss recoveries totaled $5,000 for 2020 compared to net loan charge offs of $158,000 for 2019.

The return on average assets for 2020 was 0.82% compared to 1.09% for 2019. The return on average equity was 8.36% for 2020 compared to 11.21% for 2019. The tax equivalent net interest margins for 2020 and 2019 were 3.22% and 3.66%, 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, 2020				December 31, 2019
ASSETS
Cash and cash equivalents	$	99,610			$		68,723
Federal funds sold		231					265
Securities available for sale		208,380					123,436
Loans held for sale		1,691					1,171
Loans, net of allowance for loan losses of $7,789 - 2020 ($5,184 – 2019)		628,081					557,680
Premises and equipment, net		13,698					14,515
Accrued interest receivable		4,749					3,380
Net cash surrender value of life insurance		16,016					15,633
Goodwill		13,422					13,422
Other intangible assets, net		255					291
Other assets		11,441					11,200
TOTAL ASSETS	$	997,574			$		809,716
LIABILITIES
Deposits :
Non-interest bearing	$	220,786			$		136,430
Interest bearing		617,512					519,332
Total deposits		838,298					655,762
Securities sold under agreements to repurchase and overnight borrowings		20,083					15,401
Accrued expenses and other liabilities		14,561					12,553
Other borrowings		26,500					37,500
Subordinated debentures		5,155					5,155
Total liabilities		904,597					726,371
SHAREHOLDERS’ EQUITY
Preferred stock, 100,000 shares authorized; none issued or outstanding		-					-
Common stock, $2.50 par value:
Authorized - 10,000,000 shares
Issued and outstanding – 2,301,269 shares in 2020    (2,314,878 shares in 2019)		5,748					5,781
Additional paid-in capital		15,416					15,521
Retained earnings		67,741					62,484
Accumulated other comprehensive income/(loss), net		4,362					(52		)
Unearned Employee Stock Ownership Plan shares		(290	)				(389		)
Total shareholders’ equity		92,977					83,345
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	997,574			$		809,716

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,
	2020			2019			2020			2019
Interest income:
Loans, including fees	$	7,202		$	7,151		$	28,377		$	28,265
Federal funds sold and balances with banks		33			295			314			1,482
Securities:
Taxable		643			698			2,482			2,185
Tax-exempt		185			105			645			621
Total interest income		8,063			8,249			31,818			32,553
Interest expense:
Deposits		800			1,331			4,025			5,128
Other		246			336			1,116			1,299
Total interest expense		1,046			1,667			5,141			6,427
Net interest income		7,017			6,582			26,677			26,126
Provision for loan losses		350			75			2,600			225
Net interest income after provision for loan losses		6,667			6,507			24,077			25,901
Non-interest income:
Service charges on deposit accounts		334			494			1,373			2,003
Trust fees		513			544			2,048			2,085
Net gains on loan sales		636			246			2,389			683
Earnings on life insurance assets		98			97			383			443
ATM and debit card fee income		394			393			1,543			1,460
Net securities gains		-			-			-			366
Other		236			133			642			615
Total non-interest income		2,211			1,907			8,378			7,655
Non-interest expense:
Salaries and employee benefits		4,157			3,589			14,580			13,828
Occupancy, net		352			331			1,519			1,384
Equipment		300			335			1,180			1,205
Printing, postage and supplies		84			105			386			428
Telecommunication expenses		89			123			451			426
Professional and outside services		423			540			1,532			1,617
Software maintenance		400			338			1,552			1,565
ATM expenses		138			187			578			570
Other		497			650			1,888			2,224
Total non-interest expense		6,440			6,198			23,666			23,247
INCOME BEFORE INCOME TAXES		2,438			2,216			8,789			10,309
Federal income tax provision		414			380			1,403			1,687
NET INCOME	$	2,024		$	1,836		$	7,386		$	8,622
Basic Earnings Per Common Share	$	0.88		$	0.80		$	3.21		$	3.74
Diluted Earnings Per Common Share		0.88			0.80			3.21			3.74
Dividends Declared Per Common Share		0.23			0.23			0.92			0.91

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