STURGIS, MI--(Marketwire - Oct 30, 2012) - Sturgis Bancorp, Inc. (
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:
- Net income for the third quarter of 2012 was $517,000, or $0.25 per share, compared to net income of $792,000, or $0.39 per share, in the third quarter of 2011. The Company recorded $225,000 net income from securities sales in the third quarter of 2011.
- Net income for the first nine months of 2012 increased to $1.5 million, or $0.75 per share, compared to a loss of $59,000, or ($0.03) per share, in the first nine months of 2011.
- The Bank further increased capital ratios, continuing to exceed "well-capitalized" requirements, with Tier 1 capital at 8.69%. Total capital at September 30, 2012 was 13.26% of risk-weighted assets.
- Provision for loan losses was down significantly for the nine months.
- Total deposits increased $1.5 million, primarily due to $9.0 million increase in noninterest bearing accounts. Brokered CDs were reduced by $3.4 million.
- Allowance for loan losses was 2.12% of loans, down slightly from 2.28% at the end of 2011, due to asset quality improvements.
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 $6.7 million at September 30, 2012.
President and CEO Eric L. Eishen stated: "I am pleased to provide another positive quarterly earnings announcement. Interest 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 2012. The Bank continues to maintain a high reserve in our Allowance for Loan and Lease Losses. It was only modestly reduced in the first nine months of 2012. 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 2012 have been enhanced by strong mortgage refinance activity, as rates continue to remain at historic lows."
President Eishen added, "Consumer and Commercial loan demand continues to be weak. This is being experienced by the industry as a whole. This low rate scenario is positive for the mortgage origination segment of the Bank's business, but creates a very challenging environment for the banking industry. I am concerned that the ever increasing regulations and much tighter credit standards imposed by actions of Congress, Freddie Mac, Fannie Mae and the new Consumer Financial Protection Bureau, primarily related to mortgage finance, pose significant risk to this business line and the economic recovery as a whole. I am pleased we have increased our interest margin on loans originated for portfolio. But I expect this is going to be exceedingly more difficult in the coming months if rates continue at the current levels. The Bank is not going to change its risk profile in an attempt to maintain the interest margin, and as a result we may see pressure on this margin in late 2012 and 2013, due to our adherence to rational pricing and loan quality."
President Eishen concluded, "Bank management continues to focus on building our franchise value and capital, in preparation for the proposed capital rules under consideration. We continue to be focused on controlling expenses as evidenced in our performance. There continues to be much uncertainty on the economy, future regulations and capital standards for the banking industry."
Three months ended September 30, 2012 vs. three months ended September 30, 2011 - Net income for the three months ended September 30, 2012 was $517,000, or $0.25 per share, compared to net income of $792,000, or $0.39 per share, for the three months ended September 30, 2011. Most of the decrease is attributed to gains on sales of securities recorded in the three months ended September 30, 2011. The tax equivalent net interest margin increased to 3.54% in 2012 from 3.33% 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 $1.2 million in the third quarter of 2012, compared to $1.6 million in the third quarter of 2011. Most of the decrease is attributable to $536,000 (pre-tax) of gains on sales of securities recorded in the third quarter of 2011. Investment brokerage commission income increased to $412,000 in the third quarter of 2012, compared to $308,000 in the third quarter of 2011. Mortgage banking activities also increased to $286,000 from $235,000, as loan sale volume continued relatively strong.
Noninterest expense decreased $266,000 in 2012, compared to 2011, primarily due to $195,000 of prepayment penalties on repurchase agreements recorded in 2011. Salaries and employee benefits decreased $167,000, or 9.7%, to $1.6 million.
The Company recorded $63,000 provision for loan losses of in the three months ended September 30, 2012, compared to a negative provision of $156,000 in the same quarter of 2011. Net charge-offs were $43,000 in 2012, compared to $118,000 in 2011. The net activity in the ALLL decreased the total allowance to 2.12% of gross loans at September 30, 2012, compared to 2.28% at December 31, 2011.
Nine months ended September 30, 2012 vs. nine months ended September 30, 2011 - Net income for the nine months ended September 30, 2012 was $1.5 million, or $0.75 per share, compared to a net loss of $59,000, or ($0.03) per share, for the nine months ended September 30, 2011. The tax equivalent net interest margin increased to 3.53% in 2012 from 3.14% 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 $3.4 million in the first nine months of 2012, compared to $3.6 million in the first nine months of 2011, primarily due to $536,000 (pre-tax) gains on sales of securities recorded in 2011. Mortgage banking activities increased $237,000 to $850,000, as loan sale volume continued relatively strong. Investment brokerage commission income also increased by $220,000 to $1.1 million.
Noninterest expense decreased $1.0 million in 2012, compared to 2011. Salaries and employee benefits decreased $451,000, or 8.8%, to $4.7 million. Real estate owned expense decreased by $340,000, to $538,000, as the Company's write downs of the carrying value of foreclosed assets reduced. The Company also recorded $195,000 in 2011 for prepayment penalties on repurchase agreements.
The Company recorded a $54,000 provision for loan losses in the first nine months of 2012, compared to $1.7 million in the first nine months of 2011. Net charge-offs were $454,000 in 2012, compared to $2.0 million in 2011.
Total assets increased to $317.4 million at September 30, 2012 from $314.3 million at December 31, 2011, primarily in interest-earning deposits. Loans also increased $1.0 million from December 31, 2011, primarily in residential mortgage loans.
Noninterest-bearing deposits increased to $42.7 million at September 30, 2012 from $33.6 million at December 31, 2011. Interest-bearing deposits decreased to $193.5 million at September 30, 2012 from $201.0 million at December 31, 2011. The decreases in deposits included $3.4 million decrease in brokered CDs. The number of checking accounts continues to increase, as the Bank continues to expand its customer base. Most consumer checking account customers prefer the Bank's "Free Checking" (noninterest-bearing) account, which charges no monthly account fee.
Total equity was $26.5 million at September 30, 2012, compared to $24.9 million at December 31, 2011. Book value per share increased to $13.04 at September 30, 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 remain 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: | Sept. 30 2012 | Dec. 31 2011 | Sept. 30 2012 | Dec. 31 2011 | |||||||||
| Past due one month | 0.76 | % | 0.53 | % | 0.62 | % | 0.43 | % | |||||
| Past due two months | 0.57 | % | 0.18 | % | 0.46 | % | 0.15 | % | |||||
| Past due three or more months | 0.07 | % | 0.14 | % | 0.06 | % | 0.12 | % | |||||
| Nonaccrual loans | 2.57 | % | 4.07 | % | 2.10 | % | 3.34 | % | |||||
| Real Estate Owned | 0.59 | % | 0.81 | % | 0.48 | % | 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 | |||||||||||
| September 30, 2012 and December 31, 2011 | |||||||||||
| (Amounts in thousands, except share and per share data) | |||||||||||
| Sept. 30, 2012 | Dec. 31, 2011 | ||||||||||
| ASSETS | |||||||||||
| Cash and due from banks | $ | 7,125 | $ | 7,297 | |||||||
| Other short-term investments | 9,271 | 15,443 | |||||||||
| Total cash and cash equivalents | 16,396 | 22,740 | |||||||||
| Interest-earning deposits in banks | 12,199 | 4,760 | |||||||||
| Securities - Available for sale | 1,244 | 265 | |||||||||
| Federal Home Loan Bank stock, at cost | 4,064 | 4,064 | |||||||||
| Loans held for sale | 1,819 | 986 | |||||||||
| Loans, net of allowance of $5,474 and $5,875 | 253,000 | 252,001 | |||||||||
| Premises and equipment, net | 7,660 | 7,855 | |||||||||
| Goodwill | 5,109 | 5,109 | |||||||||
| Originated mortgage servicing rights | 1,289 | 1,279 | |||||||||
| Real estate owned | 1,531 | 2,082 | |||||||||
| Bank-owned life insurance | 9,187 | 8,976 | |||||||||
| Accrued interest receivable | 1,162 | 1,191 | |||||||||
| Prepaid FDIC assessment | 514 | 814 | |||||||||
| Other assets | 2,231 | 2,136 | |||||||||
| Total assets | $ | 317,405 | $ | 314,258 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Liabilities | |||||||||||
| Deposits | |||||||||||
| Noninterest-bearing | $ | 42,619 | $ | 33,642 | |||||||
| Interest-bearing | 193,510 | 200,957 | |||||||||
| Total deposits | 236,129 | 234,599 | |||||||||
| Federal Home Loan Bank advances and other borrowings | 52,500 | 52,575 | |||||||||
| Accrued interest payable | 270 | 344 | |||||||||
| Other liabilities | 1,968 | 1,830 | |||||||||
| Total liabilities | 290,867 | 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 2,034,395 shares at Sept. 30, 2012 and 2,019,235 at December 31, 2011 | 2,034 | 2,019 | |||||||||
| Additional paid-in capital | 6,955 | 6,881 | |||||||||
| Retained earnings | 17,609 | 16,087 | |||||||||
| Accumulated other comprehensive income (loss) | (60 | ) | (77 | ) | |||||||
| Total stockholders' equity | 26,538 | 24,910 | |||||||||
| Total liabilities and stockholders' equity | $ | 317,405 | $ | 314,258 | |||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
| Three Months ended September 30, 2012 and 2011 | ||||||||||
| (Amounts in thousands, except share and per share data) | ||||||||||
| Three Months ended September 30, |
||||||||||
| 2012 | 2011 | |||||||||
| Interest income | ||||||||||
| Loans | $ | 3,095 | $ | 3,238 | ||||||
| Investment securities: | ||||||||||
| Taxable | 41 | 207 | ||||||||
| Tax-exempt | 11 | 8 | ||||||||
| Dividends | 41 | 30 | ||||||||
| Total interest income | 3,188 | 3,483 | ||||||||
| Interest expense | ||||||||||
| Deposits | 324 | 545 | ||||||||
| Borrowed funds | 423 | 433 | ||||||||
| Total interest expense | 747 | 978 | ||||||||
| Net interest income | 2,441 | 2,505 | ||||||||
| Provision for loan losses | 63 | (156 | ) | |||||||
| Net interest income after provision for loan losses | 2,378 | 2,661 | ||||||||
| Noninterest income: | ||||||||||
| Service charges and other fees | 323 | 351 | ||||||||
| Investment brokerage commission income | 412 | 308 | ||||||||
| Mortgage banking activities | 286 | 235 | ||||||||
| Trust fee income | 69 | 69 | ||||||||
| Increase in value of bank owned life insurance | 71 | 71 | ||||||||
| Gain on securities | - | 536 | ||||||||
| Other income | 13 | - | ||||||||
| Total noninterest income | 1,174 | 1,570 | ||||||||
| Noninterest expenses: | ||||||||||
| Salaries and employee benefits | 1,554 | 1,721 | ||||||||
| Occupancy and equipment | 361 | 355 | ||||||||
| Data processing | 176 | 170 | ||||||||
| Professional services | 105 | 111 | ||||||||
| Real estate owned expense | 191 | 183 | ||||||||
| Advertising | 25 | 32 | ||||||||
| FDIC premiums | 103 | 51 | ||||||||
| Prepayment penalties on repurchase agreements | - | 195 | ||||||||
| Other | 347 | 310 | ||||||||
| Total noninterest expenses | 2,862 | 3,128 | ||||||||
| Income (loss) before income tax expense (benefit) | 690 | 1,103 | ||||||||
| Provision for income tax | 173 | 311 | ||||||||
| Net income (loss) | $ | 517 | $ | 792 | ||||||
| Earnings per share | $ | 0.25 | $ | 0.39 | ||||||
| Dividends declared per share | $ | 0.00 | $ | 0. 01 | ||||||
| Key Ratios: | ||||||||||
| Return on average equity | 7.87 | % | 12.91 | % | ||||||
| Return on average assets | 0.66 | % | 0.91 | % | ||||||
| Net interest margin (tax equivalent) | 3.54 | % | 3.33 | % | ||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
| Nine Months ended September 30, 2012 and 2011 | ||||||||||
| (Amounts in thousands, except share and per share data) | ||||||||||
| Nine Months ended Sept. 30, | ||||||||||
| 2012 | 2011 | |||||||||
| Interest income | ||||||||||
| Loans | $ | 9,313 | $ | 9,531 | ||||||
| Investment securities: | ||||||||||
| Taxable | 89 | 871 | ||||||||
| Tax-exempt | 27 | 38 | ||||||||
| Dividends | 111 | 90 | ||||||||
| Total interest income | 9,540 | 10,530 | ||||||||
| Interest expense | ||||||||||
| Deposits | 1,032 | 1,844 | ||||||||
| Borrowed funds | 1,273 | 1,337 | ||||||||
| Total interest expense | 2,305 | 3,181 | ||||||||
| Net interest income | 7,235 | 7,349 | ||||||||
| Provision for loan losses | 54 | 1,699 | ||||||||
| Net interest income after provision for loan losses | 7,181 | 5,650 | ||||||||
| Noninterest income: | ||||||||||
| Service charges and other fees | 1,016 | 1,049 | ||||||||
| Investment brokerage commission income | 1,127 | 907 | ||||||||
| Mortgage banking activities | 850 | 613 | ||||||||
| Trust fee income | 228 | 255 | ||||||||
| Increase in value of bank owned life insurance | 211 | 209 | ||||||||
| Gain on securities | - | 536 | ||||||||
| Other income | (14 | ) | 20 | |||||||
| Total noninterest income | 3,418 | 3,589 | ||||||||
| Noninterest expenses: | ||||||||||
| Salaries and employee benefits | 4,692 | 5,143 | ||||||||
| Occupancy and equipment | 1,075 | 1,094 | ||||||||
| Data processing | 532 | 514 | ||||||||
| Professional services | 293 | 361 | ||||||||
| Real estate owned expense | 538 | 878 | ||||||||
| Advertising | 76 | 97 | ||||||||
| FDIC premiums | 314 | 285 | ||||||||
| Prepayment penalties on repurchase agreements | - | 195 | ||||||||
| Other | 1,056 | 1,057 | ||||||||
| Total noninterest expenses | 8,576 | 9,624 | ||||||||
| Income (loss) before income tax expense (benefit) | 2,023 | (385 | ) | |||||||
| Provision for income tax | 503 | (326 | ) | |||||||
| Net income (loss) | $ | 1,520 | $ | (59 | ) | |||||
| Earnings per share | $ | 0.75 | $ | (0.03 | ) | |||||
| Dividends declared per share | $ | 0.00 | $ | 0. 03 | ||||||
| Key Ratios: | ||||||||||
| Return on average equity | 7.98 | % | (0.25 | %) | ||||||
| Return on average assets | 0.64 | % | (0.02 | %) | ||||||
| Net interest margin (tax equivalent) | 3.53 | % | 3.14 | % | ||||||
Contact Information:
Contacts:
Sturgis Bancorp
Eric Eishen
President & CEO
Brian P. Hoggatt
CFO
P: 269 651-9345