Southern Michigan Bancorp, Inc., Announces Fourth Quarter and Full Year 2022 Earnings

Southern Michigan Bancorp, Inc.

COLDWATER, Mich., Feb. 15, 2023 (GLOBE NEWSWIRE) -- Southern Michigan Bancorp, Inc. (OTC Pink: SOMC) reported net income of $13,491,000 for 2022 compared to $11,757,000 for 2021. Diluted earnings per share were $2.97 for 2022 compared to $2.58 for 2021. Fourth quarter 2022 net income was $3,584,000, or $0.79 per share, compared to $2,522,000, or $0.56 per share for the fourth quarter of 2021.

Total consolidated assets at December 31, 2022 reached $1.28 billion compared to $1.16 billion at December 31, 2021. Loan totals grew 19.6 percent, from December 31, 2021 levels of $741.4 million to $886.6 million. Deposits also increased to $1.09 billion at December 31, 2022, an increase of $116.7 million or 12.0 percent, as compared to year end 2021.

Southern Michigan Bancorp, Inc., Chairman and Chief Executive Officer John H. Castle stated, “We are pleased to report continued strong operating results with net income reaching $13,491,000 for the year, 14.7 percent higher than the previous high of $11,757,000 reported in 2021. Our steadfast, disciplined credit culture resulted in total delinquencies ending the year of 13 basis points, or $1,190,000, net charge-offs of $7,000 for the full year, and a reserve coverage ratio of more than 848 percent at year end.”

Castle continued, “Looking ahead, we expect the strength of our balance sheet and positive momentum to enable us to meet the changing economic conditions and ongoing interest rate fluctuations, which are inevitable.”

Southern provided $275,000 for loan losses in 2022, with an allowance for loan losses at December 31, 2022 of $9,588,000, or 1.08% of loans. This compared to a provision for loan losses of $1.5 million for 2021, with an allowance for loan losses at December 31, 2021 of $9,320,000, or 1.26% of loans. Net loan losses totaled $7,000 for 2022 compared to net loan loss recoveries of $31,000 for 2021.

The return on average assets for 2022 was 1.10% compared to 1.06% for 2021. The return on average equity was 15.68% for 2022 compared to 12.32% for 2021. The tax equivalent net interest margins for 2022 and 2021 were 3.33% and 3.27%, 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, and a loan production office in Jackson 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 “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 to 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)

	December 31, 2022				December 31, 2021
ASSETS
Cash and cash equivalents	$	77,255			$		119,389
Federal funds sold		253					271
Securities available-for-sale, at fair value		178,154					245,846
Securities held-to-maturity, at amortized cost		69,661					-
Loans held for sale		-					1,146
Loans, net of allowance for loan losses of $9,588 - 2022 ($9,320 – 2021)		877,038					732,088
Premises and equipment, net		16,545					13,115
Accrued interest receivable		5,535					4,193
Net cash surrender value of life insurance		18,124					18,671
Goodwill		13,422					13,422
Other intangible assets, net		183					219
Other assets		20,353					12,794
TOTAL ASSETS	$	1,276,523			$		1,161,154
LIABILITIES
Deposits:
Non-interest bearing	$	268,704			$		262,980
Interest bearing		822,347					711,372
Total deposits		1,091,051					974,352
Securities sold under agreements to repurchase and overnight borrowings		11,179					20,609
Accrued expenses and other liabilities		13,545					13,930
Other borrowings		40,000					20,000
Subordinated debentures, net of issuance costs		34,584					34,514
Total liabilities		1,190,359					1,063,405
SHAREHOLDERS’ EQUITY
Preferred stock, 100,000 shares authorized; none issued or outstanding		-					-
Common stock, $2.50 par value:
Authorized - 10,000,000 shares
Issued and outstanding – 4,519,179 shares in 2022  (4,516,377 shares in 2021)		11,294					11,287
Additional paid-in capital		14,066					14,235
Retained earnings		82,705					71,581
Accumulated other comprehensive income (loss), net		(21,901	)				856
Unearned Employee Stock Ownership Plan shares		-					(210		)
Total shareholders’ equity		86,164					97,749
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,276,523			$		1,161,154

Southern Michigan Bancorp, Inc.
condensed consolidated statements of income (unaudited)
(In thousands, except per share data)

	Three Months Ended December 31,						Year Ended December 31,
	2022			2021			2022			2021
Interest income:
Loans, including fees	$	10,802		$	8,535		$	36,583		$	32,593
Federal funds sold and balances with banks		490			41			1,249			148
Securities:
Taxable		1,527			843			4,948			3,330
Tax-exempt		401			269			1,354			1,069
Total interest income		13,220			9,688			44,134			37,140
Interest expense:
Deposits		2,045			485			4,118			2,268
Other		555			460			1,914			1,553
Total interest expense		2,600			945			6,032			3,821
Net interest income		10,620			8,743			38,102			33,319
Provision for loan losses		275			450			275			1,500
Net interest income after provision for loan losses		10,345			8,293			37,827			31,819
Non-interest income:
Service charges on deposit accounts		401			373			1,516			1,286
Trust fees		589			586			2,264			2,267
Net gains (losses) on securities		(666	)		-			(666	)		5
Net gains on loan sales		41			381			606			2,293
Earnings on life insurance assets		125			122			472			464
Gain from life insurance		747			62			747			231
ATM and debit card fee income		430			463			1,749			1,823
Other		138			173			692			640
Total non-interest income		1,805			2,160			7,380			9,009
Non-interest expense:
Salaries and employee benefits		5,162			4,612			18,134			16,492
Occupancy, net		431			368			1,675			1,565
Equipment		340			313			1,294			1,174
Printing, postage and supplies		106			100			413			390
Telecommunication expenses		63			90			303			356
Professional and outside services		450			596			1,742			1,814
Software maintenance		491			449			1,911			1,677
ATM expenses		208			177			755			670
Other		793			771			2,907			2,570
Total non-interest expense		8,044			7,476			29,134			26,708
INCOME BEFORE INCOME TAXES		4,106			2,977			16,073			14,120
Federal income tax provision		522			455			2,582			2,363
NET INCOME	$	3,584		$	2,522		$	13,491		$	11,757
Basic Earnings Per Common Share	$	0.79		$	0.56		$	2.98		$	2.59
Diluted Earnings Per Common Share		0.79			0.56			2.97			2.58
Dividends Declared Per Common Share		0.13			0.12			0.52			0.48

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