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

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COLDWATER, Mich., Feb. 16, 2018 (GLOBE NEWSWIRE) -- Southern Michigan Bancorp, Inc. 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

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