Southern Michigan Bancorp, Inc. Announces Second Quarter 2020 Earnings


COLDWATER, Mich., July 29, 2020 (GLOBE NEWSWIRE) -- Southern Michigan Bancorp, Inc. (OTC Pink: SOMC) announced second quarter 2020 net income of $1,831,000, or $0.79 per share, compared to net income of $2,326,000, or $1.01 per share, for the second quarter of 2019.  Southern earned $3,344,000, or $1.45 per share, for the six-month period ending June 30, 2020 compared to $4,246,000, or $1.84 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, “During these challenging times created by the COVID-19 pandemic, we have continued to focus on the needs of our customers.  We provided temporary relief to both our commercial and retail customers by modifying over 350 loans since the start of the pandemic.  In addition, we were able to process 660 Payroll Protection Program (PPP) loans during the second quarter totaling more than $75 million.  The ability of our customers to retain jobs was vital to the sustainability of those businesses, as well as for the employees and their families.  PPP also allowed us to positively impact many other businesses from within and outside of our market area as well.  This program resulted in significant loan and deposit growth during the second quarter.  During the remainder of this year we will be working with these customers as they apply for PPP loan forgiveness.”

Gross loans totaled $633.7 million at June 30, 2020, compared to $562.9 million at December 31, 2019.  Total deposits increased from $655.8 million at December 31, 2019 to $766.5 million.

Castle continued, “We prudently increased the allowance for loan losses in the second quarter, adding an additional $750,000 to the allowance.  As a result, our allowance for loan losses to nonperforming loans ratio was 168% at June 30, 2020, compared to 94% at June 30, 2019.”            

The allowance for loan losses was $6,936,000, or 1.09% of loans at June 30, 2020 and $5,184,000, or 0.91% of loans at December 31, 2019.  Excluding SBA guaranteed PPP loans the allowance at June 30 was 1.24% of gross loans.  Net recoveries totaled $9,000 for the second quarter of 2020, compared to net charge offs of $107,000 for the second quarter of 2019.  For the six-month period ending June 30, 2020, net recoveries totaled $2,000, compared to net charge offs of $110,000 for the same period of 2019.  Southern provided $750,000 for loan losses during the second quarter of 2020, bringing the six-month total to $1,750,000.  For the first six months of 2019, $150,000 of loan loss provision was recorded. 

The annualized return on average assets for the six-month periods ending June 30, 2020 and 2019 was 0.78% and 1.10%, respectively.  The annualized return on average equity was 7.80% for the first six months of 2020 compared to 10.94% for the same period of 2019.  The tax equivalent net interest margin for the six-month periods ending June 30, 2020 and 2019 was 3.31% and 3.73%, 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 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,
2020
 December 31,
2019
 
ASSETS      
Cash and cash equivalents$77,496 $68,723 
Federal funds sold 263  265 
Securities available for sale 146,101  123,436 
Loans held for sale 2,108  1,171 
Loans, net of allowance for loan losses of $6,936 - 2020 ($5,184 – 2019) 626,749  557,680 
Premises and equipment, net 14,067  14,515 
Accrued interest receivable 4,440  3,380 
Net cash surrender value of life insurance 15,822  15,633 
Goodwill 13,422  13,422 
Other intangible assets, net 273  291 
Other assets 14,122  11,200 
TOTAL ASSETS$914,863 $809,716 
       
LIABILITIES       
Deposits :      
Non-interest bearing$194,299 $136,430 
Interest bearing 572,186  519,332 
Total deposits 766,485  655,762 
       
Securities sold under agreements to repurchase and overnight borrowings 14,815  15,401 
Accrued expenses and other liabilities 13,317  12,553 
Other borrowings 27,000  37,500 
Subordinated debentures   5,155  5,155 
Total liabilities 826,772  726,371 
       
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 – 2,311,307 shares in 2020
   (2,314,878 shares in 2019)
 5,773  
5,781
 
Additional paid-in capital 15,277  15,521 
Retained earnings 64,761  62,484 
Accumulated other comprehensive income/(loss), net 2,620  (52)
Unearned Employee Stock Ownership Plan shares (340) (389)
Total shareholders’ equity 88,091  83,345 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$914,863 $809,716 


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,
 
 2020 2019 2020 2019 
Interest income:            
Loans, including fees$7,260 $7,178 $14,187 $14,023 
Federal funds sold and balances with banks 29  373  256  762 
Securities:            
Taxable 567  448  1,274  847 
Tax-exempt 169  193  285  396 
Total interest income 8,025  8,192  16,002  16,028 
             
Interest expense:            
Deposits 1,032  1,297  2,289  2,448 
Other 302  316  621  621 
Total interest expense 1,334  1,613  2,910  3,069 
Net interest income 6,691  6,579  13,092  12,959 
Provision for loan losses 750  -  1,750  150 
Net interest income after provision for loan losses 5,941  6,579  11,342  12,809 
             
Non-interest income:            
Service charges on deposit accounts 255  496  718  982 
Trust fees 504  514  1,021  1,017 
Net gains on loan sales 538  92  787  180 
Net gains on investment security sales -  161  -  207 
Earnings on life insurance assets 95  98  189  195 
ATM and debit card fee income 380  361  728  680 
Other 113  165  263  307 
Total non-interest income 1,885  1,887  3,706  3,568 
             
Non-interest expense:            
Salaries and employee benefits 3,309  3,433  6,567  6,830 
Occupancy, net 375  325  772  714 
Equipment 277  266  590  530 
Printing, postage and supplies 109  99  212  205 
Telecommunication expenses 122  93  250  195 
Professional and outside services 400  374  737  690 
Software maintenance 388  397  768  801 
ATM expenses 157  137  288  244 
Other 482  519  882  1,086 
Total non-interest expense 5,619  5,643  11,066  11,295 
INCOME BEFORE INCOME TAXES 2,207  2,823  3,982  5,082 
Federal income tax provision 376  497  638  836 
NET INCOME$1,831 $2,326 $3,344 $4,246 
             
Basic Earnings Per Common Share$0.79 $1.01 $1.45 $1.84 
Diluted Earnings Per Common Share 0.79  1.01  1.45  1.84 
Dividends Declared Per Common Share 0.23  0.23  0.46  0.45 
 

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