Sturgis Bancorp Reports Earnings for Third Quarter 2019 

STURGIS, Mich., Oct. 15, 2019 (GLOBE NEWSWIRE) — Sturgis Bancorp, Inc. (OTCQX: STBI) today announced net income of $3.7 million for the first nine months of 2019 and $1.4 million for the third quarter of 2019.

Sturgis Bancorp is the holding company for Sturgis Bank & Trust Company (Bank), and its subsidiaries Oakleaf Financial Services, Inc., Oak Mortgage, LLC, Oak Insurance Services, LLC, and Oak Title Services, LLC.  The Bank provides a full array of trust, commercial and consumer banking services from banking centers in Sturgis, Bangor, Bronson, Centreville, Climax, Colon, South Haven, Three Rivers and White Pigeon, MI. The Bank also has a loan production office in Portage, Michigan.  Oakleaf Financial Services offers a complete range of investment and financial-advisory services.  Oak Mortgage offers residential mortgages in all markets of the Bank.  Oak Insurance Services offers various competitive commercial and consumer insurance products.  Oak Title Services offers commercial and consumer title insurance.

Key Highlights:

  • Net income increased 17% for the first nine months of 2019 to $3,706,000, compared to $3,168,000 for the first nine months of 2018, primarily due to higher net interest income.
  • The Bank maintained strong capital ratios, exceeding “well-capitalized” requirements, with Tier 1 leverage capital at 8.73%.  Total capital at September 30, 2019 was 13.33% of risk-weighted assets. 
  • Total assets increased 10.4% to $473.1 million, primarily in loans. The Bank’s risk-weighted assets were $322.8 million at September 30, 2019.
  • Net loans increased 9.3% to $339.9 million.
  • Total deposits increased 8.0% to $369.9 million.
  • Allowance for loan losses was 1.0% of loans.

Nine months ended September 30, 2019 vs. nine months ended September 30, 2018 – Net income for the first nine months of 2019 was $3,706,000, or $1.76 per share, compared to net income of $3,168,000, or $1.51 per share, in the first nine months of 2018.  The tax equivalent net interest margin increased to 4.00% in the first nine months of 2019 from 3.80% in the first nine months of 2018. 

Net interest income increased to $11.9 million in 2019 from $10.8 million in 2018.  The growth was primarily due to loan interest income, which increased by $1.8 million.  Total interest income increased $1.8 million to $14.4 million in 2019, and interest expense only increased $579,000 to $2.5 million in 2019.

The Company provided $215,000 to the allowance for loan losses in the first nine months of 2019, compared to $169,000 in the same period of 2018.  Net charge-offs were $56,000 in the first nine months of 2019, compared to ($13,000) in the first nine months of 2018.  

Noninterest income was $3.9 million in the first nine of 2019, compared to $4.0 million in the same period of 2018, primarily due to $96,000 decrease in investment brokerage commission income. Gain on sale of real estate owned also decreased by $76,000.  Noninterest income from mortgage banking activities increased by $122,000, to $672,000.

Noninterest expense was $11.3 million in the first nine months of 2019, compared to $11.0 million in the first nine months of 2018.  Salaries and employee benefits, the largest component of noninterest expense, increased $537,000, or 8.4%. 

Three months ended September 30, 2019 vs. three months ended September 30, 2018 – Net income for the three months ended September 30, 2019 was $1,367,000, or $0.65 per share, compared to net income of $1,257,000, or $0.60 per share, for the three months ended September 30, 2018.  The tax equivalent net interest margin increased to 3.99% in the third quarter of 2019 from 3.87% in the third quarter of 2018. 

Net interest income increased to $4.1 million in 2019 from $3.7 million in 2018.  The growth was primarily due to loan interest income, which increased by $518,000 to $4.4 million.  Total interest income increased $535,000 to $5.0 million in 2019, and interest expense only increased $157,000 to $868,000 in 2019.

The Company provided $102,000 to the allowance for loan losses in the third quarter of 2019, compared to $30,000 in the same quarter of 2018.  Net charge-offs were $56,000 in the third quarter of 2019, compared to ($8,000) in the third quarter of 2018.  

Noninterest income was $1.4 million in the third quarters of 2019 and 2018.  Noninterest income from mortgage banking activities increased $86,000, to $266,000 in the third quarter of 2019.  Gain on sale of real estate owned decreased $70,000.

Noninterest expense was $3.8 million in the third quarter of 2019, compared to $3,7 million in the third quarter of 2018.  Salaries and employee benefits, the largest component of noninterest expense, increased $224,000, or 10.8%. 

Total assets increased to $473.1 million at September 30, 2019 from $431.6 million at December 31, 2018, primarily in loans.  Loans increased $28.9 million from December 31, 2018, including $19.1 million increase in commercial real estate loans.

Interest-bearing deposits increased to $273.8 million at September 30, 2019 from $260.1 million at December 31, 2018.  Brokered deposits, a component of interest-bearing deposits, decreased $14.7 million in the first nine months of 2019, to $20.1 million at September 30, 2019.  The growth in deposits, along with $10.0 million additional borrowed funds, provided the funding for the loan growth realized in the first nine months of 2019.

Total equity was $42.0 million at September 30, 2019, compared to $40.2 million at December 31, 2018. The regular quarterly dividend was continued at a record-high $0.15 per share in the third quarter of 2019.  Book value per share increased to $19.92 ($16.53 tangible) at September 30, 2019 from $19.11 ($15.70 tangible) at December 31, 2018. 

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
(Amounts in thousands, except share and per share data)
             
    September 30,   Dec. 31,
      2019       2018  
ASSETS            
Cash and due from banks   $ 11,910     $ 12,267  
Other short-term investments     22,691       13,133  
Total cash and cash equivalents     34,601       25,400  
Interest-earning deposits in banks     5,368       7,350  
Securities – available for sale     55,822       46,205  
Securities – held to maturity           5,472  
Federal Home Loan Bank stock, at cost     3,393       3,393  
Loans held for sale, at fair value     2,020       67  
Loans, net of allowance of $3,387 and $3,228     339,883       311,050  
Premises and equipment, net     9,181       9,274  
Goodwill     5,834       5,834  
Core deposit intangibles     123       155  
Originated mortgage servicing rights     1,198       1,171  
Real estate owned     301       193  
Bank-owned life insurance     10,722       10,515  
Accrued interest receivable     1,664       1,550  
Other assets     3,020       3,946  
             
Total assets   $ 473,130     $ 431,575  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY            
Liabilities            
Deposits            
Noninterest-bearing   $ 96,139     $ 82,442  
Interest-bearing     273,763       260,058  
Total deposits     369,902       342,500  
Federal Home Loan Bank advances and other borrowings     53,764       44,109  
Accrued interest payable     406       375  
Other liabilities     7,010       4,391  
Total liabilities     431,082       391,375  
             
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 2,111,141 shares at September 30, 2019            
and 2,103,991 at December 31, 2018     2,111       2,104  
Additional paid-in capital     7,841       7,683  
Retained earnings     33,285       30,526  
Accumulated other comprehensive loss     (1,189 )     (113 )
Total stockholders’ equity     42,048       40,200  
             
Total liabilities and stockholders’ equity   $ 473,130     $ 431,575  
                 
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
             
  Three Months Ended Sept. 30,
    2019       2018
Interest income            
Loans $ 4,418     $ 3,900
Investment securities:            
Taxable   291       237
Tax-exempt   204       275
Dividends   79       45
Total interest income   4,992       4,457
             
Interest expense            
Deposits   525       462
Borrowed funds   343       249
Total interest expense   868       711
             
Net interest income   4,124       3,746
             
Provision (benefit) for loan losses   102       30
             
Net interest income after provision (benefit) for loan losses   4,022       3,716
             
Noninterest income:            
Service charges and other fees   321       342
Interchange income   239       219
Investment brokerage commission income   336       316
Mortgage banking activities   266       180
Trust fee income   101       126
Earnings on cash value of bank-owned life insurance   73       65
Gain on sale of real estate owned   (1 )     69
Gain on sale of securities   4      
Other income   37       35
Total noninterest income   1,376       1,352
             
Noninterest expenses:            
Salaries and employee benefits   2,290       2,066
Occupancy and equipment   544       412
Interchange expenses   102       98
Data processing   186       182
Professional services   66       104
Real estate owned expense   8       30
Advertising   99       179
FDIC premiums   (47 )     69
Other expenses   517       520
Total noninterest expenses   3,765       3,660
             
Income before income tax expense   1,633       1,408
             
Income tax expense   266       151
             
Net income $ 1,367     $ 1,257
             
Earnings per share $ 0.65     $ 0.60
Dividends per share   0.15       0.14
             
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
             
  Nine Months Ended Sept. 30,
    2019       2018
Interest income            
Loans $ 12,775     $ 10,955
Investment securities:            
Taxable   830       743
Tax-exempt   640       828
Dividends   178       138
Total interest income   14,423       12,664
             
Interest expense            
Deposits   1,539       1,253
Borrowed funds   945       652
Total interest expense   2,484       1,905
             
Net interest income   11,939       10,759
             
Provision (benefit) for loan losses   215       169
             
Net interest income after provision (benefit) for loan losses   11,724       10,590
             
Noninterest income:            
Service charges and other fees   958       1,017
Interchange income   652       609
Investment brokerage commission income   948       1,044
Mortgage banking activities   672       550
Trust fee income   358       365
Earnings on cash value of bank-owned life insurance   207       190
Gain on sale of real estate owned   60       136
Gain on sale of securities   4      
Other income   90       86
Total noninterest income   3,949       3,997
             
Noninterest expenses:            
Salaries and employee benefits   6,955       6,418
Occupancy and equipment   1,492       1,288
Interchange expenses   289       274
Data processing   579       545
Professional services   246       315
Real estate owned expense   16       104
Advertising   234       296
FDIC premiums   42       202
Other expenses   1,441       1,557
Total noninterest expenses   11,294       10,999
             
Income before income tax expense   4,379       3,588
             
Income tax expense   673       420
             
Net income $ 3,706     $ 3,168
             
Earnings per share $ 1.76     $ 1.51
Dividends per share   0.45       0.42
             
OTHER FINANCIAL INFORMATION 
(Amounts in thousands) 
           
    Three Months Ended Sept. 30, 
    2019     2018 
           
Sturgis Bank & Trust Company:          
Average noninterest-bearing deposits $ 92,947   $ 86,063
Average interest-bearing deposits   263,058     265,620
Average total assets   458,587     434,856
Total risk-weighted assets   322,774     299,564
Sturgis Bancorp:          
Average equity   41,723     39,632
Average total assets   458,660     435,049
Total risk-weighted assets   322,829     299,783
           
Financial ratios for Sturgis Bancorp:          
Return on average assets   1.18%     1.15%
Return on average equity   13.00%     12.58%
Net interest margin   3.92%     3.79%
Tax equivalent net interest margin   3.99%     3.87%
           
           
     Nine Months Ended Sept. 30, 
    2019     2018
           
Sturgis Bank & Trust Company:          
Average noninterest-bearing deposits $ 85,565   $ 83,002
Average interest-bearing deposits   265,200     270,645
Average total assets   446,657     432,328
Sturgis Bancorp:          
Average equity   41,289     38,714
Average total assets   446,773     432,519
           
Financial ratios for Sturgis Bancorp:          
Return on average assets   1.22%     0.98%
Return on average equity   11.91%     11.07%
Net interest margin   3.93%     3.72%
Tax equivalent net interest margin   4.00%     3.80%
         

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

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