Market Overview

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


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

(In thousands, except share data) December 31,  
  2017   2016  
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  
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  

(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   $
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