SOURCE: Sturgis Bancorp Inc.

April 24, 2012 09:39 ET

Sturgis Bancorp Reports Earnings for First Quarter 2012

STURGIS, MI--(Marketwire - Apr 24, 2012) - Sturgis Bancorp, Inc. (OTCBB: STBI) today announced a net income of $502,000 for the first quarter of 2012.

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 2012:

  • Net income for the first quarter of 2012 increased to $502,000, or $0.25 per share, compared to a loss of $117,000, or $0.06 per share, in the first quarter of 2011.
  • The Bank further increased capital ratios, exceeding "well-capitalized" requirements, with Tier 1 capital at 8.16%. Total capital at March 31, 2012 was 12.61% of risk-weighted assets.
  • Provision for loan losses was down significantly.
  • Total deposits increased 4.7% to $245.5 million, mostly in temporary municipal deposits.
  • Allowance for loan losses was 2.25% of loans, down slightly from 2.28% at the end of 2011.

Nonaccrual loans peaked in June 2011 at $14.5 million, up $9.3 million from December 31, 2010. Since June 2011, nonaccrual loans were reduced to $10.5 million at December 31, 2011 and further to $10.3 million at March 31, 2012.

President and CEO Eric L. Eishen stated: "I am pleased to provide a very positive first quarter financial performance. Loan quality is improving and core earnings are stable. The net interest income, non-interest income and non-interest expense have all been managed very closely. Our first quarter income is equivalent to the full year income for 2011. Income continues to be suppressed by sustained low interest rates and poor loan demand. However, fewer credit quality issues resulted in a significant reduction in the provision for loan losses in the first quarter. The Bank continues to maintain a significant reserve in our Allowance for Loan and Lease Losses. It was only modestly reduced in the quarter. As the economy improves the Bank expects continued improvement in credit quality and therefore earnings. Management continues to focus on our core business. Earnings in the first quarter were also enhanced by strong mortgage refinance activity as rates continue to remain at historic lows."

Three months ended March 31, 2012 vs. three months ended March 31, 2011 - Net income for the three months ended March 31, 2012 was $502,000, or $0.25 per share, compared to a net loss of $117,000, or $0.06 per share, for the three months ended March 31, 2011. The tax equivalent net interest margin increased to 3.52% in 2012 from 3.02% in 2011. The increase in tax equivalent net interest margin is primarily due to the Bank's sales of low-margin investment securities, mostly in the third quarter of 2011.

Noninterest income was $1.1 million in the first quarters of 2012 and 2011. Mortgage banking activities increased to $259,000, as loan sale volume continued relatively strong.

Noninterest expense decreased $84,000 in 2012, compared to 2011. Salaries and employee benefits decreased $81,000, or 4.9%, to $1.6 million. Real estate owned expense increased to $135,000, as the Company wrote down the carrying value of foreclosed assets.

The Company provided $2,000 to the allowance for loan losses in the first three months of 2012, compared to $882,000 in the same quarter or 2011. Net charge-offs were $95,000 in 2012, compared to $734,000 in 2011. The $95,000 net charge-offs in the first quarter of 2012 represent the lowest quarterly net charge-offs in over three years. The net activity in the ALLL decreased the total allowance to 2.25% of gross loans at March 31, 2012, compared to 2.28% at December 31, 2011.

Total assets increased to $326.4 million at March 31, 2012 from $314.3 million at December 31, 2011, primarily in cash and cash equivalents. Loans decreased $1.3 million from December 31, 2011, primarily in Home Equity Lines of Credit and Commercial Nonmortgage Loans.

Noninterest-bearing deposits increased to $37.4 million at March 31, 2012 from $33.6 million at December 31, 2011. Interest-bearing deposits also increased to $208.1 million at March 31, 2012 from $201.0 million at December 31, 2011. These increases in deposit accounts are typical for the first quarter of each year, as municipalities deposit property tax revenues. Municipalities historically have reinvested those funds elsewhere during the second quarter of the year, and Management expects that pattern to continue for 2012. The number of checking accounts continues to increase, as the Bank continues to expand its customer base.

Total equity was $25.4 million at March 31, 2012, compared to $24.9 million at December 31, 2011. Book value per share increased to $12.56 at March 31, 2012 from $12.34 at December 31, 2011.

During the worst part of the national financial crisis, the Company began including expanded ratios for the Bank's asset quality in quarterly press releases. Because the Company believes these ratios are meaningful and relevant to investors, the Company has elected to continue providing them.

Percentage of Gross Loans Percentage of Total Assets
Past due and still accruing: Mar. 31
2012
Dec. 31 2011 Mar. 31 2012 Dec. 31 2011
Past due one month 0.49 % 0.53 % 0.39 % 0.43 %
Past due two months 0.10 % 0.18 % 0.08 % 0.15 %
Past due three or more months 0.19 % 0.14 % 0.15 % 0.12 %
Nonaccrual loans 4.00 % 4.07 % 3.14 % 3.34 %
Real Estate Owned 0.70 % 0.81 % 0.55 % 0.66 %

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, 2012 and December 31, 2011
(Amounts in thousands, except share and per share data)
March 31, 2012 Dec. 31, 2011
ASSETS
Cash and due from banks $ 17,890 $ 7,297
Other short-term investments 18,295 15,443
Total cash and cash equivalents 36,185 22,740
Interest-earning deposits in banks 4,760 4,760
Securities - Available for sale 265 265
Federal Home Loan Bank stock, at cost 4,064 4,064
Loans held for sale 1,417 986
Loans, net of allowance of $5,782 and $5,875 250,720 252,001
Premises and equipment, net 7,758 7,855
Goodwill 5,109 5,109
Originated mortgage servicing rights 1,291 1,279
Real estate owned 1,791 2,082
Bank-owned life insurance 9,046 8,976
Accrued interest receivable 1,112 1,191
Prepaid FDIC assessment 720 814
Other assets 2,143 2,136
Total assets $ 326,381 $ 314,258
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 37,421 $ 33,642
Interest-bearing 208,096 200,957
Total deposits 245,517 234,599
Federal Home Loan Bank advances and other borrowings 52,575 52,575
Accrued interest payable 342 344
Other liabilities 2,504 1,830
Total liabilities 300,938 289,348
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 2,025,057 shares at March 31, 2012 and 2,019,235 at December 31, 2011 2,025 2,019
Additional paid-in capital 6,906 6,881
Retained earnings 16,588 16,087
Accumulated other comprehensive income (loss) (76 ) (77 )
Total stockholders' equity 25,443 24,910
Total liabilities and stockholders' equity $ 326,381 $ 314,258
CONSOLIDATED STATEMENTS OF INCOME
Three Months ended March 31, 2012 and 2011
(Amounts in thousands, except share and per share data)
Three Months ended March 31,
2012 2011
Interest income
Loans $ 3,138 $ 3,193
Investment securities:
Taxable 22 338
Tax-exempt 4 15
Dividends 36 30
Total interest income 3,200 3,576
Interest expense
Deposits 371 689
Borrowed funds 424 454
Total interest expense 795 1,143
Net interest income 2,405 2,433
Provision for loan losses 2 882
Net interest income after provision for loan losses 2,403 1,551
Noninterest income:
Service charges and other fees 374 345
Investment brokerage commission income 299 278
Mortgage banking activities 259 249
Trust fee income 79 91
Increase in value of bank owned life insurance 69 69
Other income (12 ) 26
Total noninterest income 1,068 1,058
Noninterest expenses:
Salaries and employee benefits 1,569 1,650
Occupancy and equipment 354 371
Data processing 175 171
Professional services 118 112
Real estate owned expense 135 66
Advertising 27 35
FDIC premiums 98 110
Other 326 371
Total noninterest expenses 2,802 2,886
Income (loss) before income tax expense (benefit) 669 (277 )
Provision for income tax 167 (160 )
Net income (loss) $ 502 $ (117 )
Earnings per share $ 0.25 $ (0.06 )
Dividends declared per share $ 0.00 $ 0. 01
Key Ratios:
Return on average equity 7.93 % (2.04 %)
Return on average assets 0.63 % (0.13 %)
Net interest margin (tax equivalent) 3.52 % 3.02 %

Contact Information

  • Contacts:
    Sturgis Bancorp
    Eric Eishen
    President & CEO
    or
    Brian P. Hoggatt
    CFO
    P: 269 651-9345