SOURCE: Sturgis Bancorp Inc.

October 14, 2016 11:07 ET

Sturgis Bancorp Reports Earnings for Third Quarter 2016

STURGIS, MI--(Marketwired - Oct 14, 2016) - Sturgis Bancorp, Inc. (OTCQX: STBI) today announced net income of $670,000 for the third 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 third quarter of 2016:

  • Net income for the third quarter of 2016 was $670,000, compared to $534,000 for the third quarter of 2015.
  • Net income for the first nine months of 2016 increased to $2.0 million from $1.6 million in the first nine months of 2015. The $331,000 increase was realized despite $700,000 of one-time tax exempt income during 2015 from bank-owned life insurance.
  • The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.31%. Total capital at September 30, 2016 was 14.11% of risk-weighted assets. The Bank's risk-weighted assets were $249.3 million at September 30, 2016.
  • Total assets increased 12.5% from December 31, 2015 to $407.6 million, including $9.1 million growth in loans.
  • Total deposits increased 11.4% to $316.6 million, mostly in municipal deposits.
  • Allowance for loan losses was 1.25% of gross loans, unchanged from December 31, 2015.

Three months ended September 30, 2016 vs. three months ended September 30, 2015 - Net income for the three months ended September 30, 2016 was $670,000, or $0.32 per share, compared to net income of $534,000, or $0.26 per share, for the three months ended September 30, 2015. The tax equivalent net interest margin increased to 3.83% in the three months ended September 30, 2016 from 3.66% in 2015. 

Net interest income increased by $402,000 in the three months ended September 30, 2016, primarily due to growth in securities and loans. 

Noninterest income was $1.4 million in the third quarters of 2016 and 2015. Commission income decreased to $267,000, as Oakleaf Financial Services transitions to Raymond James from LPL. 

Noninterest expense was $3.6 million in the third quarter of 2016, compared to $3.5 million in 2015. The Bank expensed $169,000 consultant fees to negotiate for lower data processing expenses over a new six-year contract. 

The Company provided $102,000 to the allowance for loan losses in the third quarter of 2016, compared to ($31,000) in the same quarter of 2015. Net charge-offs were $118,000 in 2016, compared to $15,000 in 2015. 

Nine months ended September 30, 2016 vs. nine months ended September 30, 2015 - Net income for the nine months ended September 30, 2016 was $2.0 million, or $0.95 per share, compared to net income of $1.6 million, or $0.79 per share, for the nine months ended September 30, 2015. The tax equivalent net interest margin increased to 3.79% in the first nine months of 2016 from 3.58% in the first nine months of 2015. 

Net interest income increased by $1.3 million in the first nine months of 2016, primarily due to net earning assets acquired from West Michigan Savings Bank and additional growth in securities and loans. 

Noninterest income was $3.9 million in the first nine months of 2016, compared to $4.7 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 first nine months of 2015. 

Noninterest expense was $10.4 million in the first nine months of 2016, compared to $10.7 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. 

The Company provided $284,000 to the allowance for loan losses in the first nine months of 2016, compared to ($4,000) in the nine months of 2015. Net charge-offs were $222,000 in 2016, compared to $138,000 in 2015. 

Total assets increased to $407.6 million at September 30, 2016 from $368.6 million at December 31, 2015, primarily in cash equivalents, securities and loans. Cash equivalents increased $16.1 million from December 31, 2015, due to temporary municipal deposit fluctuations. Securities increased $14.6 million from December 31, 2015, primarily held-to-maturity municipal securities. Loans increased $9.1 million from December 31, 2015. Most of the increase in loans was in Commercial loans. 

Noninterest-bearing deposits increased to $68.7 million at September 30, 2016 from $65.0 million at December 31, 2015. Average noninterest-bearing deposits were $69.9 million for the three months ended September 30, 2016 and $66.0 million for the first nine months of 2016. Interest-bearing deposits also increased to $247.9 million at September 30, 2016 from $219.0 million at December 31, 2015. Average interest-bearing deposits were $232.8 million for the three months ended September 30, 2016 and $230.2 million for the first nine months of 2016. Much of the growth in interest-bearing deposits is temporary municipal deposits, which fluctuate seasonally.

Total equity was $33.8 million at September 30, 2016, compared to $32.6 million at December 31, 2015. Book value per share increased to $16.21 ($12.68 tangible) at September 30, 2016 from $15.70 ($12.08 tangible) at December 31, 2015. Average equity was $33.6 million for the three months ended September 30, 2016 and $33.1 million for the first nine months 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)
             
    Sept. 30, 2016     Dec. 31, 2015  
ASSETS            
  Cash and due from banks   $ 19,714     $ 10,786  
  Other short-term investments     12,237       5,084  
    Total cash and cash equivalents     31,951       15,870  
                 
  Interest-earning deposits in banks     16,312       16,805  
  Securities - Available for sale     29,986       27,635  
  Securities - Held to maturity     31,510       19,245  
  Federal Home Loan Bank stock, at cost     2,632       2,632  
  Loans held for sale     1,271       1,575  
  Loans, net of allowance of $3,275 and $3,213     262,961       253,830  
  Premises and equipment, net     8,329       8,114  
  Goodwill     5,834       5,834  
  Core deposit intangibles     273       320  
  Originated mortgage servicing rights     1,249       1,349  
  Real estate owned     627       827  
  Bank-owned life insurance     9,932       9,735  
  Accrued interest receivable     1,461       1,183  
  Other assets     3,241       3,605  
                 
    Total assets   $ 407,569     $ 368,559  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Liabilities                
  Deposits                
    Noninterest-bearing   $ 68,721     $ 65,041  
    Interest-bearing     247,880       218,998  
      Total deposits     316,601       284,039  
  Federal Home Loan Bank advances and other borrowings     50,488       47,812  
  Accrued interest payable     244       243  
  Other liabilities     6,455       3,853  
    Total liabilities     373,788       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 2,083,741 shares at Sept. 30, 2016 and 2,077,791 at December 31, 2015     2,084       2,078  
  Additional paid-in capital     7,339       7,277  
  Retained earnings     24,788       23,445  
  Accumulated other comprehensive income (loss)     (430 )     (188 )
    Total stockholders' equity     33,781       32,612  
                 
      Total liabilities and stockholders' equity   $ 407,569     $ 368,559  
 
 
CONSOLIDATED STATEMENTS OF INCOME
Three Months ended September 30, 2016 and 2015
(Amounts in thousands, except share and per share data)
 
    Three Months ended Sept. 30,  
    2016     2015  
Interest income            
  Loans   $ 3,220     $ 3,024  
  Investment securities:                
    Taxable     168       137  
    Tax-exempt     234       77  
  Dividends     28       33  
    Total interest income     3,650       3,271  
Interest expense                
  Deposits     171       169  
  Borrowed funds     290       315  
    Total interest expense     461       484  
                 
Net interest income     3,189       2,787  
                 
Provision for loan losses     102       (31 )
                 
Net interest income after provision for loan losses     3,087       2,818  
                 
Noninterest income:                
  Service charges and other fees     259       257  
  Interchange income     190       174  
  Investment brokerage commission income     267       611  
  Mortgage banking activities     201       190  
  Trust fee income     143       75  
  Increase in value of bank owned life insurance     66       72  
  Gain (loss) on sale of real estate owned     197       (1 )
  Other income     28       14  
    Total noninterest income     1,351       1,392  
Noninterest expenses:                
  Salaries and employee benefits     2,016       1,932  
  Occupancy and equipment     409       360  
  Interchange expenses     105       100  
  Data processing     209       204  
  Professional services     93       100  
  Real estate owned expense     42       242  
  Advertising     66       33  
  Other     655       539  
    Total noninterest expenses     3,595       3,510  
                 
Income before income tax expense (benefit)     843       700  
                 
Income tax expense     173       166  
Net income   $ 670     $ 534  
                 
Earnings per share   $ 0.32     $ 0.26  
Dividends declared per share   $ 0.12     $ 0.03  
    Key Ratios:                
Return on average equity     8.04 %     6.70 %
Return on average assets     0.68 %     0.59 %
Net interest margin (tax equivalent)     3.83 %     3.66 %
 
 
CONSOLIDATED STATEMENTS OF INCOME
Nine Months ended September 30, 2016 and 2015
(Amounts in thousands, except share and per share data)
 
    Nine Months ended Sept. 30,  
    2016     2015  
Interest income            
  Loans   $ 9,306     $ 8,613  
  Investment securities:                
    Taxable     471       366  
    Tax-exempt     658       154  
  Dividends     84       107  
    Total interest income     10,519       9,240  
Interest expense                
  Deposits     509       502  
  Borrowed funds     834       942  
    Total interest expense     1,343       1,444  
                 
Net interest income     9,176       7,796  
                 
Provision for loan losses     284       (4 )
                 
Net interest income after provision for loan losses     8,892       7,800  
                 
Noninterest income:                
  Service charges and other fees     759       730  
  Interchange income     544       494  
  Investment brokerage commission income     1,222       1,570  
  Mortgage banking activities     533       525  
  Trust fee income     351       322  
  Increase in value of bank owned life insurance     196       906  
  Gain (loss) on sale of real estate owned     196       92  
  Other income     143       39  
    Total noninterest income     3,944       4,678  
Noninterest expenses:                
  Salaries and employee benefits     5,828       5,743  
  Occupancy and equipment     1,302       1,179  
  Interchange expenses     317       283  
  Data processing     604       657  
  Professional services     198       387  
  Real estate owned expense     209       451  
  Advertising     182       114  
  Other     1,731       1,836  
    Total noninterest expenses     10,371       10,650  
                 
Income before income tax expense (benefit)     2,465       1,828  
                 
Income tax expense     498       192  
Net income   $ 1,967     $ 1,636  
                 
Earnings per share   $ 0.95     $ 0.79  
Dividends declared per share   $ 0.30     $ 0.09  
    Key Ratios:                
Return on average equity     7.98 %     7.06 %
Return on average assets     0.69 %     0.64 %
Net interest margin (tax equivalent)     3.79 %     3.58 %
                 

Contact Information

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