SOURCE: Sturgis Bancorp Inc.

July 20, 2016 10:33 ET

Sturgis Bancorp Reports Earnings for Second Quarter 2016

STURGIS, MI--(Marketwired - Jul 20, 2016) -  Sturgis Bancorp, Inc. (OTCQX: STBI) today announced net income of $705,000 for the second quarter of 2016.

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 for the second quarter of 2016:

  • Net income for the second quarter of 2016 was $705,000, compared to $706,000 for the second quarter of 2015.
  • The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.50%. Total capital at June 30, 2016 was 14.44% of risk-weighted assets. The Bank's risk-weighted assets were $242.0 million at June 30, 2016.
  • Total assets increased 4.6% to $382.9 million, led by $9.1 million growth in loans.
  • Total deposits increased 5.3% to $299.2 million, mostly in municipal deposits.
  • Allowance for loan losses was 1.25% of loans, unchanged from December 31, 2016.

Three months ended June 30, 2016 vs. three months ended June 30, 2015 - Net income for the three months ended June 30, 2016 was $705,000, or $0.34 per share, compared to net income of $706,000, or $0.34 per share, for the three months ended June 30, 2015. The tax equivalent net interest margin increased to 3.78% in the three months ended June 30, 2016 from 3.55% in 2015. 

Net interest income increased by $407,000 in the three months ended June 30, 2016, primarily due to growth in securities and loans. 

Noninterest income was $1.4 million in the second quarter of 2016, compared to $1.9 million in the second quarter of 2015. 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. Income from mortgage banking activities increased to $196,000 from $133,000 in 2015.

Noninterest expense was $3.4 million in the second quarter of 2016, compared to $3.8 million in 2015. Most of the decrease was due to the 2015 acquisition of West Michigan Savings Bank, with most acquisition expenses recorded in the second quarter of 2015. 

Salaries and employee benefits, the largest component of noninterest expense, increased $46,000, partially due to staffing requirements of the acquired Bank. 

The Company provided $88,000 to the allowance for loan losses in the second quarter of 2016, compared to $113,000 in the same quarter of 2015. Net charge-offs were $35,000 in 2016, compared to $140,000 in 2015. 

Six months ended June 30, 2016 vs. six months ended June 30, 2015 - Net income for the six months ended June 30, 2016 was $1.3 million, or $0.62 per share, compared to net income of $1.1 million, or $0.53 per share, for the six months ended June 30, 2015. The tax equivalent net interest margin increased to 3.76% in the first half of 2016 from 3.54% in the first half of 2015. 

Net interest income increased by $978,000 in the first half of 2016, primarily due to net earning assets acquired from West Michigan Savings Bank and additional growth in securities and loans. 

Noninterest income was $2.6 million in the first half of 2016, compared to $3.3 million in the first half of 2015. 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. 

Noninterest expense was $6.8 million in the first half of 2016, compared to $7.1 million in 2015. Most of the decrease was due to the 2015 acquisition of West Michigan Savings Bank, with most acquisition expenses recorded in the second quarter of 2015. Salaries and employee benefits, the largest component of noninterest expense, remained unchanged at $3.8 million. 

The Company provided $182,000 to the allowance for loan losses in the first half of 2016, compared to $28,000 in the first half of 2015. Net charge-offs were $104,000 in 2016, compared to $123,000 in 2015. 

Total assets increased to $382.9 million at June 30, 2016 from $368.6 million at December 31, 2015, primarily in loans. Loans increased $9.1 million from December 31, 2015. Most of the increase in loans was in Commercial loans. 

Noninterest-bearing deposits increased to $69.9 million at June 30, 2016 from $65.0 million at December 31, 2015. Average noninterest-bearing deposits were $65.2 million for the three months ended June 30, 2016 and $64.0 million for the first half of 2016. Interest-bearing deposits also increased to $229.3 million at June 30, 2016 from $219.0 million at December 31, 2015. Average interest-bearing deposits were $233.8 million for the three months ended June 30, 2016 and $228.8 million for the first half of 2016. Brokered deposits increased $5.3 million to $13.0 million at June 30, 2016. The growth in deposits allowed borrowed funds to decrease by $3.7 million to $44.1 million at June 30, 2016.

Total equity was $33.4 million at June 30, 2016, compared to $32.6 million at December 31, 2015. Book value per share increased to $16.04 ($12.48 tangible) at June 30, 2016 from $15.70 ($12.08 tangible) at December 31, 2015. Average equity was $33.1 million for the three months ended June 30, 2016 and $32.9 million for the first half of 2016.

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, 2016 and December 31, 2015  
(Amounts in thousands, except share and per share data)  
   
    June 30, 2016     Dec. 31, 2015  
ASSETS                
  Cash and due from banks   $ 7,005     $ 10,786  
  Other short-term investments     9,472       5,084  
    Total cash and cash equivalents     16,477       15,870  
                   
  Interest-earning deposits in banks     16,061       16,805  
  Securities - Available for sale     27,349       27,635  
  Securities - Held to maturity     24,458       19,245  
  Federal Home Loan Bank stock, at cost     2,632       2,632  
  Loans held for sale     1,723       1,575  
  Loans, net of allowance of $3,291 and $3,213     262,900       253,830  
  Premises and equipment, net     7,983       8,114  
  Goodwill     5,834       5,834  
  Core deposit intangibles     288       320  
  Originated mortgage servicing rights     1,291       1,349  
  Real estate owned     1,229       827  
  Bank-owned life insurance     9,866       9,735  
  Accrued interest receivable     1,315       1,183  
  Other assets     3,537       3,605  
                   
    Total assets   $ 382,943     $ 368,559  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Liabilities                
  Deposits                
    Noninterest-bearing   $ 69,901     $ 65,041  
    Interest-bearing     229,329       218,998  
      Total deposits     299,230       284,039  
  Federal Home Loan Bank advances and other borrowings     44,096       47,812  
  Accrued interest payable     223       243  
  Other liabilities     5,998       3,853  
    Total liabilities     349,547       335,947  
                 
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 2,081,591 shares at June 30, 2016 and 2,077,791 at December 31, 2015     2,082       2,078  
  Additional paid-in capital     7,315       7,277  
  Retained earnings     24,368       23,445  
  Accumulated other comprehensive income (loss)     (369 )     (188 )
    Total stockholders' equity     33,396       32,612  
                     
      Total liabilities and stockholders' equity   $ 382,943     $ 368,559  
                       
                       
                       
CONSOLIDATED STATEMENTS OF INCOME  
Three Months ended June 30, 2016 and 2015  
(Amounts in thousands, except share and per share data)  
   
    Three Months ended June 30,  
    2016     2015  
Interest income                
  Loans   $ 3,079     $ 2,887  
  Investment securities:                
    Taxable     147       138  
    Tax-exempt     220       55  
  Dividends     28       34  
    Total interest income     3,474       3,114  
Interest expense                
  Deposits     172       174  
  Borrowed funds     270       315  
    Total interest expense     442       489  
                 
Net interest income     3,032       2,625  
                 
Provision for loan losses     88       113  
                 
Net interest income after provision for loan losses     2,944       2,512  
                 
Noninterest income:                
  Service charges and other fees     249       226  
  Interchange income     187       173  
  Investment brokerage commission income     510       465  
  Mortgage banking activities     196       133  
  Trust fee income     129       96  
  Increase in value of bank owned life insurance     65       767  
  Gain (loss) on sale of real estate owned     -       5  
  Other income     17       31  
    Total noninterest income     1,353       1,896  
Noninterest expenses:                
  Salaries and employee benefits     1,904       1,858  
  Occupancy and equipment     488       410  
  Interchange expenses     114       96  
  Data processing     198       276  
  Professional services     45       150  
  Real estate owned expense     107       69  
  Advertising     55       42  
  Other     497       887  
    Total noninterest expenses     3,408       3,788  
                 
Income before income tax expense (benefit)     889       620  
                 
Income tax expense     184       (86 )
Net income   $ 705     $ 706  
                 
Earnings per share   $ 0.34     $ 0.34  
Dividends declared per share   $ 0.10     $ 0.03  
      Key Ratios:                
Return on average equity     8.56 %     9.09 %
Return on average assets     0.75 %     0.80 %
Net interest margin (tax equivalent)     3.78 %     3.55 %
                 
                 
                 
CONSOLIDATED STATEMENTS OF INCOME  
Six Months ended June 30, 2016 and 2015  
(Amounts in thousands, except share and per share data)  
   
    Six Months ended June 30,  
    2016     2015  
Interest income                
  Loans   $ 6,086     $ 5,590  
  Investment securities:                
    Taxable     303       229  
    Tax-exempt     424       77  
  Dividends     56       73  
    Total interest income     6,869       5,969  
Interest expense                
  Deposits     338       333  
  Borrowed funds     544       627  
    Total interest expense     882       960  
                 
Net interest income     5,987       5,009  
                 
Provision for loan losses     182       28  
                 
Net interest income after provision for loan losses     5,805       4,981  
                 
  Noninterest income:                
  Service charges and other fees     501       473  
  Interchange income     354       320  
  Investment brokerage commission income     954       958  
  Mortgage banking activities     332       335  
  Trust fee income     208       247  
  Increase in value of bank owned life insurance     130       834  
  Gain (loss) on sale of real estate owned     (1 )     5  
  Other income     115       115  
    Total noninterest income     2,593       3,287  
Noninterest expenses:                
  Salaries and employee benefits     3,812       3,811  
  Occupancy and equipment     894       820  
  Interchange expenses     212       182  
  Data processing     395       453  
  Professional services     106       286  
  Real estate owned expense     167       210  
  Advertising     115       81  
  Other     1,075       1,297  
    Total noninterest expenses     6,776       7,140  
                 
Income before income tax expense (benefit)     1,622       1,128  
                 
Income tax expense     324       26  
Net income   $ 1,298     $ 1,102  
                 
Earnings per share   $ 0.62     $ 0.53  
Dividends declared per share   $ 0.18     $ 0.06  
      Key Ratios:                
Return on average equity     7.93 %     7.21 %
Return on average assets     0.70 %     0.66 %
Net interest margin (tax equivalent)     3.76 %     3.54 %

Contact Information

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