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Southern Michigan Bancorp, Inc. Announces Second Quarter 2018 Earnings

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COLDWATER, Mich., July 25, 2018 (GLOBE NEWSWIRE) -- Southern Michigan Bancorp, Inc. (OTC:SOMC) announced second quarter 2018 net income of $2,216,000, or $0.96 per share, compared to net income of $1,493,000, or $0.63 per share, for the second quarter of 2017.  Southern earned $4,018,000, or $1.74 per share, for the six-month period ended June 30, 2018 compared to $2,939,000, or $1.22 per share, for the same six-month period a year ago.   

John H. Castle, Chairman and Chief Executive Officer of Southern Michigan Bancorp, Inc. stated, "We are extremely pleased with the strong growth in quarterly and year to date earnings.  Commercial loan growth, continued strong asset quality and a lower effective income tax rate all positively contributed to the 36.7% increase in profitability for the first half of 2018."

Total consolidated assets at June 30, 2018 were $733.7 million compared to $712.3 million at December 31, 2017.    

No provision for loan losses was required during the first six months of 2018 or 2017.  The allowance for loan losses was $4,987,000, or 0.91% of loans at June 30, 2018 and $4,897,000, or 1.00% of loans at June 30, 2017.  Net charge offs totaled $6,000 for the second quarter of 2018, compared to net charge recoveries of $112,000 for the second quarter of 2017.  For the six month period ending June 30, 2018, net charge offs totaled $22,000, compared to net recoveries of $55,000 for the first six months of 2017.  Non-performing assets as of June 30, 2018 totaled just $2.2 million or .30% of total assets, a decrease of $400,000 from $2.6 million as of June 30, 2017. 

The annualized return on average assets for the six-month periods ended June 30, 2018 and 2017 was 1.12% and 0.90%, respectively.  The annualized return on average equity was 11.36% for the first six months of 2018 compared to 8.28% for the same period of 2017.  The tax equivalent net interest margin for the six-month periods ending June 30, 2018 and 2017 was 3.83% and 3.80%, respectively.

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, 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 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.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share data)

  June 30,
2018
  December 31,
2017
 
ASSETS            
Cash and cash equivalents $ 35,507   $ 17,421  
Federal funds sold   1,776     18,492  
Securities available for sale   100,604     105,184  
Loans held for sale   670     515  
Loans, net of allowance for loan losses of  $4,987 - 2018 ($5,009 – 2017)   541,142     518,438  
Premises and equipment, net   14,206     14,265  
Accrued interest receivable   2,958     3,211  
Net cash surrender value of life insurance   15,492     14,796  
Goodwill   13,422     13,422  
Other intangible assets, net   345     -  
Other assets   7,561     6,601  
TOTAL ASSETS $ 733,683   $ 712,345  
             
LIABILITIES            
Deposits:            
Non-interest bearing $ 127,428   $ 129,098  
Interest bearing   471,152     448,046  
Total deposits   598,580     577,144  
               
Securities sold under agreements to repurchase and overnight borrowings   10,652     13,950  
Accrued expenses and other liabilities   8,463     6,559  
Other borrowings   39,000     39,500  
Subordinated debentures    5,155     5,155  
Total liabilities   661,850     642,308  
             
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 – 2,321,462 shares in 2018
   (2,316,779 shares in 2017)
  5,798     5,787  
Additional paid-in capital   15,048     15,415  
Retained earnings   52,764     49,747  
Accumulated other comprehensive loss, net   (1,531 )   (613 )
Unearned Employee Stock Ownership Plan shares   (246 )   (299 )
Total shareholders' equity   71,833     70,037  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 733,683   $ 712,345  
             

SOUTHERN MICHIGAN BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)

  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
  2018   2017   2018   2017  
Interest income:                        
Loans, including fees $ 6,716   $ 5,535   $ 13,054   $ 10,779  
Federal funds sold and balances with banks   75     64     162     111  
Securities:                        
Taxable   311     294     638     592  
Tax-exempt   226     221     457     452  
Total interest income   7,328     6,114     14,311     11,934  
                         
Interest expense:                        
Deposits   705     363     1,296     724  
Other   316     172     627     310  
Total interest expense   1,021     535     1,923     1,034  
Net interest income   6,307     5,579     12,388     10,900  
Provision for loan losses   -     -     -     -  
Net interest income after provision for loan losses   6,307     5,579     12,388     10,900  
                         
Non-interest income:                        
Service charges on deposit accounts   385     398     767     793  
Trust fees   473     396     957     763  
Net gains on loan sales   180     185     311     323  
Earnings on life insurance assets   101     93     196     189  
ATM and debit card fee income   365     351     704     686  
Other   115     94     130     335  
Total non-interest income   1,619     1,517     3,065     3,089  
                         
Non-interest expense:                        
Salaries and employee benefits   3,199     3,055     6,356     5,944  
Occupancy, net   359     350     756     705  
Equipment   286     236     558     482  
Printing, postage and supplies   78     87     200     205  
Telecommunication expenses   73     72     146     148  
Professional and outside services   413     359     735     661  
Software maintenance   368     298     735     591  
ATM expenses   124     88     267     230  
Other   523     572     1,070     1,119  
Total non-interest expense   5,423     5,117     10,823     10,085  
INCOME BEFORE INCOME TAXES   2,503     1,979     4,630     3,904  
Federal income tax provision   287     486     612     965  
NET INCOME $ 2,216   $ 1,493   $ 4,018   $ 2,939  
                         
Basic Earnings Per Common Share $ 0.96   $ 0.63   $ 1.74   $ 1.22  
Diluted Earnings Per Common Share   0.96     0.63     1.74     1.22  
Dividends Declared Per Common Share   0.22     0.21     0.43     0.41  
                         

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

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