-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FCMMjNoKUpQZdcfI+u24A1DCDjS8rPTf/QNnjZ5VJS1MdgHOTi6+7pLsYGbAx2G6 g4fHEPHFCAiweokOmEtnSQ== 0000950124-97-005900.txt : 19971113 0000950124-97-005900.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950124-97-005900 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN MICHIGAN BANCORP INC CENTRAL INDEX KEY: 0000703699 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 382407501 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 002-78178 FILM NUMBER: 97715461 BUSINESS ADDRESS: STREET 1: 51 W PEARL ST CITY: COLDWATER STATE: MI ZIP: 49036 BUSINESS PHONE: 5172795500 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 1997 Commission file number 2-78178 ------------------ ------- Southern Michigan Bancorp, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Michigan 38-2407501 - -------------------------------- -------------------------- (State or other jurisdiction of (IRS Employer corporation or organization) Identification Number) 51 West Pearl Street, Coldwater, Michigan 49036 - ----------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (517) 279-5500 ------------------ Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $2.50 Par Value - 1,916,921 shares at October 31, 1997 1 2 CONDENSED CONSOLIDATED BALANCE SHEETS SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDIARY
September 30 December 31 1997 1996 -------------------------------------- (Unaudited) (A) (In thousands) ASSETS Cash and due from banks $ 10,033 $ 13,520 Investment securities available-for-sale 15,019 24,089 Investment securities held to maturity (fair value of $32,146,000 in 1997 and $32,796,000 in 1996) 32,162 32,510 Loans 161,626 152,678 Less allowance for loan losses (1,898) (1,814) -------- -------- 159,728 150,864 Premises and equipment 5,461 5,227 Other assets 9,854 9,352 -------- -------- TOTAL ASSETS $232,257 $235,562 ======== ======== LIABILITES AND SHAREHOLDERS' EQUITY Deposits: Non-interest bearing $ 30,030 $ 35,230 Interest bearing 172,903 174,238 -------- -------- 202,933 209,468 Federal funds purchased 1,500 Accounts payable and other liabilities 2,647 2,922 -------- -------- TOTAL LIABILITIES 207,080 212,390 Common stock subject to repurchase obligation in ESOP 4,272 3,555 Shareholder's equity Common stock, $2.50 par value: Authorized --- 4,000,000 shares (2,000,000 shares in 1996) Outstanding --- 1,760,818 shares (1996---869,550 shares) 4,402 2,174 Capital surplus 2,472 2,735 Retained earnings 14,015 14,687 Net unrealized appreciation on available-for-sale securities, net of tax of $8,000 (1996 -- $11,000) 16 21 -------- -------- TOTAL SHAREHOLDERS' EQUITY 20,905 17,443 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $232,257 $233,388 ======== ========
(A) The balance sheet at December 31, 1996 has been derived from the audited consolidated financial statements at that date. See notes to condensed consolidated financial statements. 2 3 CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDAIRY
Three Months Ended Nine Months Ended September 30 September 30 1997 1996 1997 1996 ------------------------------------------------- (In thousands, except per share amounts) Interest income: $4,085 $3,485 $11,753 $10,046 Loans, including fees Investment securities Taxable 510 564 1,719 1,899 Tax exempt 213 196 636 581 Other 8 20 32 52 Total interest income -------- -------- --------- --------- 4,816 4,265 14,140 12,578 Interest expense: Deposits 1,865 1,624 5,450 4,765 Capital notes and other 43 34 135 102 ------- -------- --------- --------- Total interest expense 1,908 1,658 5,585 4,867 NET INTEREST INCOME 2,908 2,607 8,555 7,711 Provision for loan losses 145 33 295 267 ------- -------- --------- --------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,763 2,574 8,260 7,444 Non-interest income: Service charges on deposit accounts 215 175 627 536 Trust department 125 138 416 414 Security gains 0 5 5 10 Other 196 80 500 136 ------- -------- --------- --------- 536 398 1,548 1,096 ------- -------- --------- --------- 3,299 2,972 9,808 8,540 Non-interest expenses: Salaries and benefits 1,067 950 3,182 2,826 Occupancy 186 156 531 430 Equipment 188 165 557 514 Other 772 537 2,275 1,784 ------- -------- --------- --------- 2,213 1,808 6,545 5,554 ------- -------- --------- --------- INCOME BEFORE INCOME TAXES 1,086 1,164 3,263 2,986 Federal income taxes 277 282 817 717 ------- -------- --------- ----=---- NET INCOME $809 $882 $2,446 $2,269 ======= ======== ========= ========= Net income per share $0.42 $047 $128 $1.21 ======= ======== ========= ========= Dividends declared per share $0.13 $012 $0.38 $0.36 ======= ======== ========= =========
See notes to condensed consolidated financial statements. 3 4 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDIARY
Nine Months Ended September 30 1997 1996 ------------------------ (In thousands) OPERATING ACTIVITIES Net Income $ 2,446 $ 2,269 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 295 267 Unrealized loss on loans held for sale 62 Provision for depreciation 380 266 Increase in other assets (500) (227) Decrease in accounts payable and other liabilities (200) (546) ------- ------- Net cash provided by operating activities 2,421 2,091 INVESTING ACTIVITIES Proceeds from maturities of investment securities 12,737 20,198 Purchase of investment securities (3,326) (12,229) Decrease in federal funds sold 4,500 Net increase in loans (9,159) (20,366) Purchases of premises and equipment (614) (1,162) ------- ------- Net cash used in investing activities (362) (9,129) FINANCING ACTIVITIES Net decrease in deposits (6,535) (567) Increase in federal funds purchased 1,500 5,700 Payment of capital note (1,000) Common stock issued 290 378 Cash dividends (801) (787) ------- ------- Net cash provided by (used in) financing activities (5,546) 3,724 ------- ------- Decrease in cash and cash equivalents (3,487) (3,314) Cash and cash equivalents at beginning of period 13,520 17,180 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $10,033 $13,866 ======= =======
See notes to condensed consolidated financial statements. 4 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SOUTHERN MICHIGAN BANCORP, INC. AND SUBSIDIARY September 30, 1997 NOTE A -- BASIS OF PRESENTATION The accompanying year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1996. All per share amounts have been adjusted for a September 1997 stock split effected in the form of a 100% stock dividend. 5 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FINANCIAL CONDITION Total deposits decreased by 3.1% during the first nine months of 1997. This decline occurred as short-term municipal and school deposits matured and as depositors sought higher yielding instruments with other competitors. The Company traditionally experiences a growth in deposits in the fourth quarter of the year. Loans have increased 5.9% during the first nine months of 1997. The loan growth occurred in all loan categories and is the result of seasonal commercial borrowings and increased loan demand. The Company was required to purchase federal funds in order to meet its increased loan demand. The Company anticipates loan volume to remain fairly steady for the fourth quarter of 1997 as seasonal borrowings are reduced and offset new loans. There were no loans held for sale at September 30, 1997. Investment securities decreased by 16.6% during the first nine months of 1997. The funds received from maturing securities were used to fund the loan growth experienced in 1997. The Company has committed approximately $1,7000,000 for the construction of a new branch office in Hillsdale, Michigan. This office is expected to open in the second quarter of 1998. CAPITAL RESOURCES The Federal Reserve Board (FRB) has adopted risk-based capital guidelines applicable to the Company. These guidelines require that bank holding companies maintain capital commensurate with both on and off balance sheet credit risks of their operations. Under the guidelines, a bank holding company must have a minimum ratio of total capital to risk-weighted assets of 8.0 percent. In addition, a bank holding company must maintain a minimum ratio of Tier 1 capital equal to 4.0 percent of risk-weighted assets. Tier 1 capital includes common shareholders' equity, qualifying perpetual preferred stock and minority interests in equity accounts of consolidated subsidiaries less goodwill. As a supplement to the risk-based capital requirements, the FRB has also adopted leverage capital ratio requirements. The leverage ratio requirements establish a minimum ratio of Tier 1 capital to total assets less goodwill of 3 percent for the most highly rated bank holding companies. All other bank holding companies are required to maintain additional Tier 1 capital yielding a leverage ratio of 4 percent to 5 percent, depending on the particular circumstances and risk profile of the institution. 6 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation---Continued The following table summarizes the Company's capital ratios as of September 30, 1997: Tier 1 risk-based capital ratio 13.02% Total risk-based capital ratio 14.08% Leverage ratio 10.03% The table above indicates that the Company's capital ratios are above the regulatory minimum requirements. RESULTS OF OPERATIONS Net Interest Income Net interest income increased by $301,000 and $844,000 for the three and nine month periods ended September 30, 1997 compared to the same periods in 1996. This increase is due to the reinvestment of funds received from maturing investment securities into the higher yielding loan portfolio and loan rates rising at a faster pace than the rates paid on deposits. Provision for Loan Losses The provision for loan losses is based on an analysis of outstanding loans. In assessing the adequacy of the allowance, management reviews the characteristics of the loan portfolio in order to determine the overall quality and risk profile. Some factors considered by management in determining the level at which the allowance is maintained include a continuing evaluation of those loans identified as being subject to possible problems in collection, results of examinations by regulatory agencies, current economic conditions and historical loan loss experience. The provision for loan losses increased by $112,000 and $28,000 for the three and nine month periods ended September 30, 1997 compared to the same periods in 1996. This increase occurred in response to increased consumer loan charge-offs and commercial loan delinquencies. Some increase in losses was to be expected with the significant loan growth that occurred in the last two years. Several customers, including a large commercial borrower, have recently declared bankruptcy, which has also contributed to increased losses during the third quarter of 1997. These trends could lead to an increased provision in the fourth quarter of 1997. 7 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations---Continued Non-interest Income Non-interest income, which includes service charges on deposit accounts, trust fee income, security gains and losses and other miscellaneous charges and fees increased by $138,000 and $452,000 during the three and nine month periods ended September 30, 1997 compared to the same periods in 1996. This increase is due to increased service charges on deposit accounts in 1997 as a result of the additional deposits purchased in connection with the acquisition of two branches in late 1996, increased gains recognized on the sale of secondary market real estate mortgage loans in 1997, increased fees from the sale of nondepository investment products in 1997 and unrecognized losses on real estate mortgage loans held for sale recorded in 1996. Non-interest Expense Non-interest expense increased by $405,000 and $991,000 for the three and nine month periods ended September 30, 1997 compared to the same periods in 1996. This increase is due to additional personnel costs, occupancy costs, marketing and advertising expenditures, training costs and intangible asset amortization as a result of the acquisition of two branches in late 1996. Trust department expenses also increased in 1997 as professional consultants and new trust administrators were added in order to increase the trust department's market share. 8 9 PART II - OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 6. Exhibits and Reports on Form 8-K a. Listing of Exhibits: EXHIBIT 27 Financial Data Schedule b. There were no reports on Form 8-K filed in the third quarter of 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Southern Michigan Bancorp, Inc. ---------------------------------- (Registrant) November 13, 1997 /s/ Jerry L. Towns ------------------------ ---------------------------------- (Date) Jerry L. Towns, President and Chief Executive Officer November 13, 1997 /s/ James T. Grohalski ------------------------ ----------------------------------- (Date) James T. Grohalski, Executive Vice President (Principal Financial and Accounting Officer) 9 10 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - ----------- ----------- EX-27 Financial Data Schedule EX-27 2 EX-27
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 10,033 0 0 0 15,019 32,162 32,146 161,626 1,898 232,257 202,933 1,500 6,919 0 0 0 4,402 16,503 232,257 11,753 2,355 32 14,140 5,450 135 8,555 295 5 1,543 3,263 3,263 0 0 2,446 1.28 1.28 5.46 788 428 0 3,616 1,814 288 77 1,898 856 0 1,042 ALL PER SHARE AMOUNTS REFLECT A SEPTEMBER 1997 STOCK SPLIT EFFECTED IN THE FORM OF A 100% STOCK DIVIDEND.
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