SOURCE: Sturgis Bancorp Inc.

July 17, 2015 11:11 ET

Sturgis Bancorp Reports Earnings for Second Quarter 2015

STURGIS, MI--(Marketwired - Jul 17, 2015) - Sturgis Bancorp, Inc. (OTCQX: STBI) today announced net income of $706,000 for the second quarter of 2015. 

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 12 banking centers in Sturgis, Bangor, 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 as of June 30, 2015:

  • Net income was $706,000 for the second quarter of 2015, compared to $554,000 for the second quarter of 2014.
  • The Bank successfully completed its acquisition of The West Michigan Savings Bank in Bangor, Michigan, which is now operating as a branch office of the Bank.
  • The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 capital at 8.40%. Total capital at June 30, 2015 was 14.33% of risk-weighted assets.
  • Total deposits increased by $39.2 million in the first half of 2015, to $273.5 million, mostly due to the $32.6 million deposits assumed in the bank acquisition.
  • Nonaccrual and past due loans decreased in the first half of 2015.
  • Allowance for loan losses was 1.38% of loans, down from 1.43% at the end of 2014.

Three months ended June 30, 2015 vs. three months ended June 30, 2014 - Net income for the three months ended June 30, 2015 was $706,000, or $0.34 per share, compared to net income of $554,000, or $0.27 per share, for the three months ended June 30, 2014. The tax equivalent net interest margin decreased to 3.55% in 2015 from 3.65% in 2014. 

Net interest income increased by $189,000 in the second quarter of 2015, primarily due to growth in net interest-bearing assets from the bank acquisition. 

Noninterest income was $1.9 million in the second quarter of 2015, compared to $1.3 million in the second quarter of 2014. The Bank received $700,000 of death benefit in excess of recorded cash value from bank-owned life insurance in the second quarter of 2015. Mortgage banking activities decreased to $133,000 in 2015, as loan sale volume slowed. 

Noninterest expense was $3.8 million in 2015, compared to $2.9 million in 2014. Salaries and employee benefits increased $173,000, due to higher pension expense and staff for the acquired bank. Data processing expense increased for conversion of the acquired bank to the Bank's computer system. 

The Company provided $113,000 to the allowance for loan losses in the second quarter of 2015, compared to $19,000 in the same quarter of 2014. Net charge-offs were $140,000 in the second quarter of 2015, compared to $49,000 in the second quarter of 2014.

Six months ended June 30, 2015 vs. six months ended June 30, 2014 - Net income for the six months ended June 30, 2015 was $1.1 million, or $0.53 per share, unchanged from the first six months of 2014. The tax equivalent net interest margin decreased to 3.54% in 2015 from 3.61% in 2014. 

Noninterest income was $3.3 million in the first half of 2015, compared to $2.4 million in the first half of 2014. The Bank received $700,000 of death benefit in excess of recorded cash value from bank-owned life insurance in the first half of 2015. Gain on sale of real estate increased to $93,000 in 2015, compared to a net loss of ($14,000) in 2014. Commission income increased $69,000 to $958,000 in 2015. Trust Fee income increased $35,000 to $247,000 in 2015.

Noninterest expense was $7.1 million in 2015, compared to $5.9 million in 2014. The Bank incurred $563,000 of acquisition-related expense in the first half of 2015. Compensation expense increased $435,000, primarily due to pension funding. The Company made an elective additional contribution to fund pension liabilities in 2015, which increased six-month expense by $219,000, compared to 2014.

The Company provided $28,000 to the allowance for loan losses in the first half of 2015, compared to ($195,000) in the first half of 2014. Net charge-offs were $123,000 in the first half of 2015, compared to $274,000 in the first half of 2014. 

Total assets increased to $353.6 million at June 30, 2015 from $312.5 million at December 31, 2014, primarily due to $35.3 million from the bank acquisition. Most of the increase was in securities available for sale. Loans also increased $14.7 million from December 31, 2014, including $11.2 million from the bank acquisition.

Deposits increased by $39.2 million in the first half of 2015, to $273.5 million, mostly due to the $32.6 million deposits assumed in the bank acquisition. 

Total equity was $31.3 million at June 30, 2015, compared to $30.4 million at December 31, 2014. Book value per share increased to $15.08 at June 30, 2015 from $14.66 at December 31, 2014. 

Acquisition of West Michigan Savings Bank - On April 6, 2015, the Company completed its acquisition of West Michigan Savings Bank in Bangor, Michigan, in an all-cash transaction valued at approximately $3.3 million. Liabilities assumed included $32.6 million of deposits and $690,000 in other liabilities. The assets acquired included $6.1 million of cash and cash equivalents, $17.4 million of available for sale securities, $11.2 million in loans, and $590,000 in other assets. The Company recognized $365,000 core deposit intangible and $950,000 in goodwill. The transaction incurred $755,000 of pre-tax expense, including $563,000 recorded in 2015. Most of the transaction expenses were professional services, data processing termination and conversion, and severance pay.

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
June 30, 2015 and December 31, 2014
(Amounts in thousands, except share and per share data)
 
    June 30, 2015     Dec. 31, 2014  
ASSETS                
  Cash and due from banks   $ 18,497     $ 7,680  
  Other short-term investments     6,534       4,369  
    Total cash and cash equivalents     25,031       12,049  
                 
  Interest-earning deposits in banks     16,073       16,575  
  Securities - Available for sale     23,520       7,044  
  Securities - Held to maturity     2,153       5,792  
  Federal Home Loan Bank stock, at cost     2,632       3,409  
  Loans held for sale     532       1,716  
  Loans, net of allowance of $3,342 and $3,437     251,140       236,371  
  Premises and equipment, net     8,169       7,504  
  Goodwill     6,059       5,109  
  Core deposit intangible     354       -  
  Originated mortgage servicing rights     1,379       1,413  
  Real estate owned     1,342       1,608  
  Bank-owned life insurance     9,603       9,808  
  Accrued interest receivable     1,039       868  
  Other assets     4,597       3,189  
                 
    Total assets   $ 353,623     $ 312,455  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Liabilities                
  Deposits                
    Noninterest-bearing   $ 59,866     $ 51,383  
    Interest-bearing     213,679       182,907  
      Total deposits     273,545       234,290  
  Federal Home Loan Bank advances and other borrowings     44,029       44,218  
  Accrued interest payable     239       238  
  Other liabilities     4,532       3,359  
    Total liabilities     322,345       282,105  
                 
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 2,073,891 shares at June 30, 2015 and 2,069,891 at December 31, 2014     2,074       2,070  
  Additional paid-in capital     7,242       7,204  
  Retained earnings     22,254       21,276  
  Accumulated other comprehensive income (loss)     (292 )     (200 )
    Total stockholders' equity     31,278       30,350  
                 
      Total liabilities and stockholders' equity   $ 353,623     $ 312,455  
                 
   
CONSOLIDATED STATEMENTS OF INCOME  
Three Months ended June 30, 2015 and 2014  
(Amounts in thousands, except share and per share data)  
   
    Three Months ended June 30,  
    2015     2014  
Interest income                
  Loans   $ 2,887     $ 2,796  
  Investment securities:                
    Taxable     138       109  
    Tax-exempt     55       22  
  Dividends     34       38  
    Total interest income     3,114       2,965  
Interest expense                
  Deposits     174       211  
  Borrowed funds     315       318  
    Total interest expense     489       529  
                 
Net interest income     2,625       2,436  
                 
Provision for loan losses     113       19  
                 
Net interest income after provision for loan losses     2,512       2,417  
                 
Noninterest income:                
  Service charges and other fees     226       234  
  Interchange income     173       158  
  Investment brokerage commission income     465       491  
  Mortgage banking activities     133       182  
  Trust fee income     96       124  
  Bank owned life insurance     767       67  
  Other income     36       1  
    Total noninterest income     1,896       1,257  
Noninterest expenses:                
  Salaries and employee benefits     1,858       1,685  
  Occupancy and equipment     426       370  
  Interchange expense     96       87  
  Data processing     276       166  
  Professional services     150       81  
  Real estate owned expense     69       103  
  Advertising     42       37  
  FDIC premiums     61       65  
  Other     810       329  
    Total noninterest expenses     3,788       2,923  
                 
Income (loss) before income tax expense (benefit)     620       751  
                 
Provision for income tax     (86 )     197  
                 
Net income (loss)   $ 706     $ 554  
                 
Earnings per share   $ 0.34     $ 0.27  
Dividends declared per share   $ 0.03     $ 0.02  
Key Ratios:                
Return on average equity     9.09 %     7.63 %
Return on average assets     0.80 %     0.71 %
Net interest margin (tax equivalent)     3.55 %     3.65 %
                 
   
CONSOLIDATED STATEMENTS OF INCOME  
Six Months ended June 30, 2015 and 2014  
(Amounts in thousands, except share and per share data)  
   
    Six Months Ended June 30,  
    2015     2014  
Interest income                
  Loans   $ 5,590     $ 5,554  
  Investment securities:                
    Taxable     229       188  
    Tax-exempt     77       36  
  Dividends     73       94  
    Total interest income     5,969       5,872  
Interest expense                
  Deposits     333       433  
  Borrowed funds     627       634  
    Total interest expense     960       1,067  
                 
Net interest income     5,009       4,805  
                 
Provision for loan losses     28       (195 )
                 
Net interest income after provision for loan losses     4,981       5,000  
                 
Noninterest income:                
  Service charges and other fees     473       468  
  Interchange income     320       295  
  Investment brokerage commission income     958       899  
  Mortgage banking activities     335       365  
  Trust fee income     247       212  
  Bank owned life insurance     834       134  
  Other income     120       (6 )
    Total noninterest income     3,287       2,357  
Noninterest expenses:                
  Salaries and employee benefits     3,811       3,376  
  Occupancy and equipment     837       783  
  Interchange expense     182       166  
  Data processing     453       311  
  Professional services     286       188  
  Real estate owned expense     210       175  
  Advertising     81       81  
  FDIC premiums     126       115  
  Other     1,154       684  
    Total noninterest expenses     7,140       5,879  
                 
Income (loss) before income tax expense (benefit)     1,128       1,478  
                 
Provision for income tax     26       377  
                 
Net income (loss)   $ 1,102     $ 1,101  
                 
Earnings per share   $ 0.53     $ 0.53  
Dividends declared per share   $ 0.06     $ 0.04  
Key Ratios:                
Return on average equity     7.21 %     7.62 %
Return on average assets     0.66 %     0.70 %
Net interest margin (tax equivalent)     3.54 %     3.61 %
                 

Contact Information

  • Contacts:

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