Sturgis Bancorp Reports Earnings for First Quarter 2014

STURGIS, MI--(Marketwired - Apr 23, 2014) - Sturgis Bancorp, Inc. (OTCBB: STBI) today announced net income of $547,000 for the first quarter of 2014.

Sturgis Bancorp is the holding company for Sturgis Bank & Trust Company (Bank), and its subsidiaries Oakleaf Financial Services, Inc. and Oak Mortgage, LLC. Sturgis Bancorp provides a full array of trust, commercial and consumer banking services from 11 banking centers in Sturgis, Bronson, Centreville, Climax, Colon, South Haven, Three Rivers and White Pigeon, Mich. Oakleaf Financial Services offers a complete range of investment and financial advisory services. Oak Mortgage offers residential mortgages in all markets of the Bank.

Key Highlights for the first quarter of 2014:

• Net income for the first quarter of 2014 increased to $547,000, compared to $502,000 for the first quarter of 2013.
• The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 capital at 9.39%. Total capital at March 31, 2014 was 15.80% of risk-weighted assets.
• Nonaccrual and past due loans decreased.
• Total deposits increased 8.3% to $248.0 million, mostly in temporary municipal deposits.
• Allowance for loan losses was 1.60% of loans, down slightly from 1.74% at the end of 2013.

Three months ended March 31, 2014 vs. three months ended March 31, 2013 - Net income for the three months ended March 31, 2014 was $574,000, or $0.27 per share, compared to net income of $502,000, or $0.25 per share, for the three months ended March 31, 2013. The tax equivalent net interest margin increased to 3.60% in 2014 from 3.54% in 2013. 

Noninterest income was $1.1 million in the first quarter of 2014, compared to $1.3 million in the first quarter of 2013. Mortgage banking activities decreased to $145,000 in 2014, as loan sale volume slowed significantly. Commission income also decreased to $398,000 in the first three months of 2014, compared to $464,000 in the first three months of 2013.

Noninterest expense was $2.9 million in 2014, compared to $3.2 million in 2013. Real estate owned expense decreased to $72,000 in 2014, compared to $303,000 in 2013. Real estate owned expense in 2014 included $30,000 written down for the carrying value of foreclosed assets, compared to $202,000 in 2013. 

The Company provided ($214,000) to the allowance for loan losses in the first three months of 2014, compared to ($88,000) in the same quarter of 2013. Net charge-offs were $121,000 in 2014, compared to $77,000 in 2013. 

Total assets increased to $324.0 million at March 31, 2014 from $305.0 million at December 31, 2013, primarily in securities. Loans decreased $115,000 from December 31, 2013, despite $3.3 million of government-guaranteed loans purchased. Most of the decrease in loans was in Home Equity Lines of Credit and Commercial Real Estate Loans. 

Noninterest-bearing deposits increased to $43.9 million at March 31, 2014 from $41.7 million at December 31, 2013. Interest-bearing deposits also increased to $204.1 million at March 31, 2014 from $187.3 million at December 31, 2013. These increases in deposit accounts are typical for the first quarter of each year, as municipalities deposit property tax revenues. Municipalities historically have either used or reinvested those funds elsewhere during the second quarter of the year, and Management expects that pattern to continue for 2014. 

Total equity was $29.2 million at March 31, 2014, compared to $28.5 million at December 31, 2013. Book value per share increased to $14.16 ($10.94 tangible) at March 31, 2014 from $13.21 ($10.67 tangible) at December 31, 2013.

This release contains statements that constitute forward-looking statements. These statements appear in several places in this release and include statements regarding intent, belief, outlook, objectives, efforts, estimates or expectations of Bancorp, primarily with respect to future events and the future financial performance of the Bancorp. Any such forward-looking statements are not guarantees of future events or performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statement. Factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement include, but are not limited to, changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking laws and regulations; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; government and regulatory policy changes; the outcome of any pending and future litigation and contingencies; trends in consumer behavior and ability to repay loans; and changes of the world, national and local economies. Bancorp undertakes no obligation to update, amend or clarify forward-looking statements as a result of new information, future events, or otherwise. The numbers presented herein are unaudited.

For additional information, visit our website at www.sturgisbank.com.

CONSOLIDATED BALANCE SHEETS
March 31, 2014 and December 31, 2013
(Amounts in thousands, except share and per share data)
						March 31, 2014				Dec. 31, 2013
ASSETS
	Cash and due from banks					$	18,392			$	14,236
	Other short-term investments						13,224				6,638
		Total cash and cash equivalents					31,616				20,874
	Interest-earning deposits in banks						16,408				14,914
	Securities - Available for sale						2,468				1,575
	Securities - Held to maturity						6,678				-
	Federal Home Loan Bank stock, at cost						4,064				4,064
	Loans held for sale						525				1,034
	Loans, net of allowance of $4,974 and $4,146						234,434				234,549
	Premises and equipment, net						7,071				7,113
	Goodwill						5,109				5,109
	Originated mortgage servicing rights						1,518				1,501
	Real estate owned						654				630
	Bank-owned life insurance						9,603				9,537
	Accrued interest receivable						868				828
	Other assets						2,989				3,252
		Total assets				$	324,005			$	304,980
LIABILITIES AND STOCKHOLDERS' EQUITY
	Liabilities
		Deposits
			Noninterest-bearing			$	43,884			$	41,706
			Interest-bearing				204,067				187,314
				Total deposits			247,951				229,020
		Federal Home Loan Bank advances and other borrowings					44,494				44,585
		Accrued interest payable					263				272
		Other liabilities					2,138				2,568
			Total liabilities				294,846				276,445
Stockholders' equity
		Preferred stock - $1 par value: authorized - 1,000,000 shares issued and outstanding - 0 shares
		Common stock - $1 par value: authorized - 9,000,000 shares issued and outstanding 2,059,538 shares at March 31, 2014 and 2,055,025 at December 31, 2013					2,060				2,055
		Additional paid-in capital					7,128				7,094
		Retained earnings					20,085				19,580
		Accumulated other comprehensive income (loss)					(114	)			(194	)
			Total stockholders' equity				29,159				28,535
				Total liabilities and stockholders' equity		$	324,005			$	304,980

CONSOLIDATED STATEMENTS OF INCOME
Three Months ended March 31, 2014 and 2013
(Amounts in thousands, except share and per share data)
				Three Months ended March 31,
				2014				2013
Interest income
	Loans			$	2,757			$	2,974
	Investment securities:
		Taxable			80				41
		Tax-exempt			14				16
	Dividends				56				39
		Total interest income			2,907				3,070
Interest expense
	Deposits				222				267
	Borrowed funds				316				411
		Total interest expense			538				678
Net interest income					2,369				2,392
Provision for loan losses					(214	)			(88	)
Net interest income after provision for loan losses					2,583				2,480
Noninterest income:
	Service charges and other fees				338				344
	Investment brokerage commission income				398				464
	Mortgage banking activities				183				328
	Trust fee income				88				85
	Increase in value of bank owned life insurance				66				70
	Other income				(5	)			7
		Total noninterest income			1,068				1,298
Noninterest expenses:
	Salaries and employee benefits				1,692				1,696
	Occupancy and equipment				463				403
	Data processing				176				176
	Professional services				107				117
	Real estate owned expense				72				303
	Advertising				31				28
	Other				407				433
		Total noninterest expenses			2,948				3,156
Income (loss) before income tax expense (benefit)					703				622
Provision for income tax					156				120
Net income (loss)				$	547			$	502
Earnings per share				$	0.27			$	0.25
Dividends declared per share				$	0.02			$	0.00
		Key Ratios:
Return on average equity					7.71	%			7.59	%
Return on average assets					0.69	%			0.63	%
Net interest margin (tax equivalent)					3.60	%			3.54	%