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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