SOURCE: Sturgis Bancorp Inc.

October 14, 2015 17:16 ET

Sturgis Bancorp Reports Earnings for Third Quarter 2015

STURGIS, MI--(Marketwired - Oct 14, 2015) - Sturgis Bancorp, Inc. (OTCQX: STBI) today announced net income of $534,000 for the third 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 September 30, 2015:

  • Net income was $534,000 for the third quarter of 2015, compared to $330,000 for the third 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 8.49%. Total Bank capital at September 30, 2015 was 14.29% of risk-weighted assets.
  • Total deposits increased by $43.7 million in the first nine months of 2015, to $277.9 million, mostly due to the $32.6 million deposits assumed in the bank acquisition.
  • Nonaccrual and past due loans decreased in the first nine months of 2015.
  • Allowance for loan losses was 1.28% of loans, down from 1.43% at the end of 2014.

Three months ended September 30, 2015 vs. three months ended September 30, 2014 - Net income for the three months ended September 30, 2015 was $534,000, or $0.26 per share, compared to net income of $330,000, or $0.16 per share, for the three months ended September 30, 2014. The tax equivalent net interest margin increased to 3.66% in 2015 from 3.65% in 2014. 

Net interest income increased by $379,000 in the third quarter of 2015, primarily due to growth in net interest-bearing assets from the bank acquisition and changes in the Bank's investment portfolio. 

Noninterest income was $1.4 million in the third quarter of 2015, compared to $1.5 million in the third quarter of 2014, primarily due to lower brokerage commission income. Mortgage banking activities increased to $190,000 in 2015, due to more loans originated for sale. 

Noninterest expense was $3.5 million in 2015, compared to $3.2 million in 2014. Salaries and employee benefits increased $106,000, due to higher pension expense and staff for the acquired bank. Data processing expense increased with the acquired accounts now on the Bank's computer system. Real estate owned expense of $242,000 in 2015 included $180,000 written down in the third quarter of 2015, compared to $22,000 written down in the third quarter of 2014.

The Bank provided ($31,000) to the allowance for loan losses in the third quarter of 2015, compared to $307,000 in the same quarter of 2014. Net charge-offs were $15,000 in the third quarter of 2015, compared to $459,000 in the third quarter of 2014.

Nine months ended September 30, 2015 vs. nine months ended September 30, 2014 - Net income for the nine months ended September 30, 2015 was $1.6 million, or $0.79 per share, compared to $1.4 million, or $0.69 per share, in the nine months ended September 30, 2014. The tax equivalent net interest margin decreased to 3.58% in 2015 from 3.59% in 2014. 

Noninterest income was $4.7 million in the first nine months of 2015, compared to $3.8 million in the first nine months 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 $92,000 in 2015, compared to $10,000 in 2014. Commission income decreased $97,000 to $1.6 million in 2015. 

Noninterest expense was $10.7 million in 2015, compared to $9.1 million in 2014. The Bank incurred $563,000 of acquisition-related expense in the first nine months of 2015. Compensation expense increased $541,000, primarily due to pension funding. The Company made an elective additional contribution to fund pension liabilities in 2015, which increased nine-month expense by $274,000, compared to 2014.

The Company provided ($4,000) to the allowance for loan losses in the first nine months of 2015, compared to $112,000 in the first nine months of 2014. Net charge-offs were $138,000 in the first nine months of 2015, compared to $733,000 in the first nine months of 2014. 

Total assets increased to $362.3 million at September 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. Loans also increased $17.2 million from December 31, 2014, including $11.2 million from the bank acquisition.

Deposits increased by $43.7 million in the first nine months of 2015, to $277.9 million, mostly due to the $32.6 million deposits assumed in the bank acquisition. 

Total equity was $31.8 million at September 30, 2015, compared to $30.4 million at December 31, 2014. Book value per share increased to $15.31 at September 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 $962,000 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  
September 30, 2015 and December 31, 2014  
(Amounts in thousands, except share and per share data)  
   
   
    Sept. 30, 2015     Dec. 31, 2014  
ASSETS            
  Cash and due from banks   $ 13,693     $ 7,680  
  Other short-term investments     5,779       4,369  
    Total cash and cash equivalents     19,472       12,049  
                 
  Interest-earning deposits in banks     16,067       16,575  
  Securities - Available for sale     28,205       7,044  
  Securities - Held to maturity     9,520       5,792  
  Federal Home Loan Bank stock, at cost     2,632       3,409  
  Loans held for sale     1,487       1,716  
  Loans, net of allowance of $3,296 and $3,437     253,530       236,371  
  Premises and equipment, net     8,190       7,504  
  Goodwill     6,072       5,109  
  Core deposit intangible     337       -  
  Originated mortgage servicing rights     1,370       1,413  
  Real estate owned     1,036       1,608  
  Bank-owned life insurance     9,669       9,808  
  Accrued interest receivable     1,215       868  
  Other assets     3,518       3,189  
                 
    Total assets   $ 362,320     $ 312,455  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Liabilities                
  Deposits                
    Noninterest-bearing   $ 67,697     $ 51,383  
    Interest-bearing     210,251       182,907  
      Total deposits     277,948       234,290  
  Federal Home Loan Bank advances and other borrowings     43,920       44,218  
  Accrued interest payable     233       238  
  Other liabilities     8,441       3,359  
    Total liabilities     330,542       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 2,075,841 shares at Sept. 30, 2015 and 2,069,891 at December 31, 2014     2,076       2,070  
  Additional paid-in capital     7,259       7,204  
  Retained earnings     22,725       21,276  
  Accumulated other comprehensive income (loss)     (282 )     (200 )
    Total stockholders' equity     31,778       30,350  
                   
      Total liabilities and stockholders' equity   $ 362,320     $ 312,455  
                       
                       
                       
CONSOLIDATED STATEMENTS OF INCOME
Three Months ended Sept. 30, 2015 and 2014
(Amounts in thousands, except share and per share data)
 
 
  Three Months ended Sept. 30,    
  2015   2014  
Interest income            
  Loans $ 3,024   $ 2,779  
  Investment securities:            
    Taxable   137     98  
    Tax-exempt   77     22  
  Dividends   33     38  
    Total interest income   3,271     2,937  
Interest expense            
  Deposits   169     208  
  Borrowed funds   315     321  
    Total interest expense   484     529  
             
Net interest income   2,787     2,408  
             
Provision for loan losses   (31 )   307  
             
Net interest income after provision for loan losses   2,818     2,101  
             
Noninterest income:            
  Service charges and other fees   257     257  
  Interchange income   174     155  
  Investment brokerage commission income   611     778  
  Mortgage banking activities   190     119  
  Trust fee income   75     82  
  Bank owned life insurance   72     68  
  Other income   13     30  
    Total noninterest income   1,392     1,489  
Noninterest expenses:            
  Salaries and employee benefits   1,932     1,826  
  Occupancy and equipment   366     379  
  Interchange expense   100     89  
  Data processing   204     169  
  Professional services   100     180  
  Real estate owned expense   242     67  
  Advertising   33     37  
  FDIC premiums   73     57  
  Other   460     418  
    Total noninterest expenses   3,510     3,222  
             
Income (loss) before income tax expense (benefit)   700     368  
             
Provision for income tax   166     38  
             
Net income (loss) $ 534   $ 330  
             
Earnings per share $ 0.26   $ 0.16  
Dividends declared per share $ 0.03   $ 0.02  
    Key Ratios:            
Return on average equity   6.70 %   4.44 %
Return on average assets   0.59 %   0.43 %
Net interest margin (tax equivalent)   3.66 %   3.64 %
             
             
             
CONSOLIDATED STATEMENTS OF INCOME
Nine Months ended September 30, 2015 and 2014
(Amounts in thousands, except share and per share data)
 
 
  Nine Months Ended Sept. 30,    
  2015   2014  
Interest income            
  Loans $ 8,613   $ 8,333  
  Investment securities:            
    Taxable   366     286  
    Tax-exempt   154     58  
  Dividends   107     132  
    Total interest income   9,240     8,809  
Interest expense            
  Deposits   502     642  
  Borrowed funds   942     954  
    Total interest expense   1,444     1,596  
             
Net interest income   7,796     7,213  
             
Provision for loan losses   (4 )   112  
             
Net interest income after provision for loan losses   7,800     7,101  
             
Noninterest income:            
  Service charges and other fees   730     725  
  Interchange income   494     450  
  Investment brokerage commission income   1,570     1,667  
  Mortgage banking activities   525     484  
  Trust fee income   322     294  
  Bank owned life insurance   906     202  
  Other income   131     24  
    Total noninterest income   4,678     3,846  
Noninterest expenses:            
  Salaries and employee benefits   5,743     5,202  
  Occupancy and equipment   1,203     1,162  
  Interchange expense   283     255  
  Data processing   657     480  
  Professional services   387     369  
  Real estate owned expense   451     242  
  Advertising   114     118  
  FDIC premiums   199     172  
  Other   1,613     1,164  
    Total noninterest expenses   10,650     9,164  
             
Income (loss) before income tax expense (benefit)   1,828     1,783  
             
Provision for income tax   192     353  
             
Net income (loss) $ 1,636   $ 1,430  
             
Earnings per share $ 0.79   $ 0.69  
Dividends declared per share $ 0.09   $ 0.06  
    Key Ratios:            
Return on average equity   7.06 %   6.57 %
Return on average assets   0.64 %   0.61 %
Net interest margin (tax equivalent)   3.58 %   3.59 %

Contact Information

  • Contacts:
    Sturgis Bancorp

    Eric Eishen
    President & CEO

    or

    Brian P. Hoggatt
    CFO
    P: 269 651-9345