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Press Release
SOUTHERN MICHIGAN BANCORP, INC. ANNOUNCES SECOND QUARTER EARNINGS
July 28, 2008
Coldwater, Michigan, July 28, 2008: Southern Michigan Bancorp, Inc. (OTCBB: SOMC.OB) announced net income of $1,550,000, or $0.68 per diluted share, for the six months ended June 30, 2008. This compares to $2,047,000, or $1.15 per diluted share, for the six months ended June 30, 2007. Southern’s net income for the three months ended June 30, 2008, was $349,000, or $0.16 per diluted share, compared to $1,069,000, or $0.60 per diluted share, for the same three month period a year ago.
John H. Castle, Chairman & Chief Executive Officer, stated, “We are disappointed with our second quarter earnings. The deterioration in local real estate values and ongoing weakness in the Michigan economy necessitated increasing our loan loss reserves,” Castle continued, “In addition, higher than anticipated conversion expenses and other costs of affiliating the banks negatively impacted FNB Financial’s results as we remake the bank.”
Southern provided $800,000 for loan losses during the second quarter of 2008 compared to no provision for the second quarter of 2007. Net charge offs totaled $501,000 for the quarter. Specific loss reserves increased $281,000 since the March 31, 2008 reporting period. Two thirds of the increase occurred at FNB Financial. CEO Castle stated, “We have been conservative while assessing the risk in our loan portfolio and remain confident in our ability to successfully address the credit issues we are facing.”
Southern’s allowance for loan losses totaled $5.6 million or 1.66% of total loans at June 30, 2008 compared to $5.3 million or 1.58% at March 31, 2008. Non-performing loans totaled $9,318,000 at June 30, 2008, or 2.77% of total loans. This was an increase of $2,067,000, or 28.5% from March 31, 2008.
Southern’s 4.41% net interest margin for the six month period ending June 30, 2008 remained strong when compared to peers. This compared to 4.87% for the comparable 2007 period. The decline in margin is attributable to the declining rate environment as well as the reversal of interest related to loans placed on non accrual status during the period. Net interest income for the 2008 six month period was $1,842,000 greater than in 2007 due to the additional loans, investments and deposits acquired from FNB.
Non-interest income for the second quarter of 2008 was $521,000 greater than the comparable period in 2007. The increase is attributable to FNB non-interest income. Non-interest expense for the second quarter of 2008 was $1,605,000 greater than 2007. The increase was largely due to the FNB acquisition. Non-interest expense for the second quarter also includes approximately $107,000 of costs incurred relating to the core processing and trust system conversions at FNB Financial.
The annualized return on average assets for the six month periods ending June 30, 2008 and 2007 was 0.64% and 1.23%, respectively. The annualized return on average equity was 6.75% for the 2008 period compared to 13.84% for the 2007 period.
Financial results for 2008 were influenced by the acquisition of FNB Financial on December 1, 2007. In accordance with the purchase method of accounting, FNB’s results of operations were included in Southern’s consolidated statements of income from the date of acquisition. As a result of the merger, Southern recorded additional net loans of $76.8 million, securities of $40.2 million and additional deposits of $118.6 million at the time of the acquisition.
Southern Michigan Bancorp, Inc. is a two bank holding company. Its subsidiary banks are Southern Michigan Bank & Trust and FNB Financial. Its 19 offices throughout southern Michigan provide a broad range of consumer, business and wealth management services throughout the region. For more information, please visit our website, www.smb-t.com.
***
This press release contains forward-looking statements. Accounting estimates, such as the provision and allowance for loan losses, are inherently forward-looking. There can be no assurance that future loan losses will be limited to the amounts estimated. Additional information about factors that may adversely affect the matters addressed in forward-looking statements are contained in Southern’s reports filed with the Securities and Exchange Commission. Other risk factors exist and new risk factors may emerge at any time. Investors should not place undue reliance on forward-looking statements as predictions of future results. Southern undertakes no obligation to update or revise any forward-looking statements to reflect developments or information obtained after the date of this press release.
Southern Michigan Bancorp, Inc.
Unaudited Interim Financial Statements
Consolidated Balance Sheets
(In thousands, except share data)
June 30, |
|
December 31, |
|||
ASSETS |
|||||
Cash and cash equivalents |
$ |
11,754 |
|
$ |
14,470 |
Federal funds sold |
|
20,683 |
|
|
6,449 |
Securities available for sale |
|
60,955 |
|
|
77,515 |
Loans held for sale, net of valuation of -0- in 2008 and 2007 |
|
721 |
|
|
624 |
Loans, net of allowance for loan losses of $5,608 - 2008 ($5,156 – 2007) |
|
331,380 |
|
|
330,822 |
Premises and equipment, net |
|
13,196 |
|
|
13,335 |
Accrued interest receivable |
|
2,320 |
|
|
3,387 |
Net cash surrender value of life insurance |
|
9,335 |
|
|
10,015 |
Goodwill |
|
13,422 |
|
|
13,422 |
Other intangible assets |
|
2,904 |
|
|
3,091 |
Other assets |
|
7,785 |
|
|
7,048 |
TOTAL ASSETS |
$ |
474,455 |
|
$ |
480,178 |
LIABILITIES |
|||||
Deposits : |
|
|
|
|
|
Non-interest bearing |
$ |
56,354 |
|
$ |
57,027 |
Interest bearing |
|
338,815 |
|
|
342,142 |
Total deposits |
|
395,169 |
|
|
399,169 |
Securities sold under agreements to repurchase and overnight borrowings |
|
9,300 |
|
|
9,776 |
Accrued expenses and other liabilities |
|
5,533 |
|
|
5,077 |
Other borrowings |
|
12,945 |
|
|
14,753 |
Subordinated debentures |
|
5,155 |
|
|
5,155 |
Total liabilities |
|
428,102 |
|
|
433,930 |
|
|
|
|
|
|
Common stock subject to repurchase obligation in |
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Preferred stock, 100,000 shares authorized; none issued or outstanding |
|
- |
|
|
- |
Common stock, $2.50 par value: |
|
|
|
|
|
Authorized - 4,000,000 shares |
|
|
|
|
|
Issued - 2,313,459 shares in 2008 (2,307,924 shares in 2007) |
|
|
|
|
|
Outstanding (other than ESOP shares) - 2,212,472 shares in 2008 |
|
|
|
|
|
Additional paid-in capital |
|
17,611 |
|
|
17,087 |
Retained earnings |
|
22,257 |
|
|
21,629 |
Accumulated other comprehensive income, net |
|
120 |
|
|
122 |
Unearned restricted stock compensation |
|
(146 |
) |
|
(55 |
Unearned Employee Stock Ownership Plan shares |
|
(686 |
) |
|
(103 |
Total shareholders’ equity |
|
44,687 |
|
|
44,219 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
474,455 |
|
$ |
480,178 |
Southern Michigan Bancorp, Inc.
Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
|
Three Months Ended |
|
Six Months Ended |
||||||||
|
2008 |
|
2007 |
|
2008 |
|
2007 |
||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
$ |
5,570 |
|
$ |
5,051 |
|
$ |
11,714 |
|
$ |
10,052 |
Federal funds sold |
|
96 |
|
|
156 |
|
|
223 |
|
|
323 |
Securities: |
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
497 |
|
|
361 |
|
|
1,135 |
|
|
611 |
Tax-exempt |
|
240 |
|
|
154 |
|
|
483 |
|
|
306 |
Total interest income |
|
6,403 |
|
|
5,722 |
|
|
13,555 |
|
|
11,292 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
1,686 |
|
|
1,887 |
|
|
3,838 |
|
|
3,704 |
Other |
|
358 |
|
|
186 |
|
|
656 |
|
|
369 |
Total interest expense |
|
2,044 |
|
|
2,073 |
|
|
4,494 |
|
|
4,073 |
Net Interest Income |
|
4,359 |
|
|
3,649 |
|
|
9,061 |
|
|
7,219 |
Provision for loan losses |
|
800 |
|
|
- |
|
|
1,150 |
|
|
200 |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses |
|
3,559 |
|
|
3,649 |
|
|
7,911 |
|
|
7,019 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest income: |
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
691 |
|
|
464 |
|
|
1,350 |
|
|
894 |
Trust fees |
|
260 |
|
|
184 |
|
|
548 |
|
|
359 |
Net gains on security calls and sales |
|
2 |
|
|
2 |
|
|
15 |
|
|
2 |
Net gains on loan sales |
|
96 |
|
|
116 |
|
|
215 |
|
|
221 |
Earnings on life insurance assets |
|
83 |
|
|
69 |
|
|
171 |
|
|
137 |
Gain on life insurance proceeds |
|
19 |
|
|
- |
|
|
390 |
|
|
- |
Income and fees from automated teller machines |
|
161 |
|
|
84 |
|
|
309 |
|
|
159 |
Other |
|
204 |
|
|
76 |
|
|
468 |
|
|
177 |
Total non-interest income |
|
1,516 |
|
|
995 |
|
|
3,466 |
|
|
1,949 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest expense: |
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
|
2,575 |
|
|
1,864 |
|
|
5,262 |
|
|
3,740 |
Occupancy, net |
|
388 |
|
|
240 |
|
|
775 |
|
|
448 |
Equipment |
|
322 |
|
|
193 |
|
|
620 |
|
|
374 |
Printing, postage and supplies |
|
169 |
|
|
94 |
|
|
320 |
|
|
181 |
Telecommunication expenses |
|
88 |
|
|
54 |
|
|
196 |
|
|
103 |
Professional and outside services |
|
453 |
|
|
170 |
|
|
772 |
|
|
305 |
Software maintenance |
|
88 |
|
|
57 |
|
|
222 |
|
|
111 |
Amortization of other intangibles |
|
94 |
|
|
- |
|
|
187 |
|
|
- |
Other |
|
598 |
|
|
498 |
|
|
1,316 |
|
|
904 |
Total non-interest expense |
|
4,775 |
|
|
3,170 |
|
|
9,670 |
|
|
6,166 |
INCOME BEFORE INCOME TAXES |
|
300 |
|
|
1,474 |
|
|
1,707 |
|
|
2,802 |
Federal income taxes |
|
(49 |
) |
|
405 |
|
|
157 |
|
|
755 |
NET INCOME |
$ |
349 |
|
$ |
1,069 |
|
$ |
1,550 |
|
$ |
2,047 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Common Share |
$ |
.16 |
|
$ |
.61 |
|
$ |
.68 |
|
$ |
1.16 |
Diluted Earnings Per Common Share |
$ |
.16 |
|
$ |
.60 |
|
$ |
.68 |
|
$ |
1.15 |
Dividends Declared Per Common Share |
$ |
.20 |
|
$ |
.20 |
|
$ |
.40 |
|
$ |
.40 |
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