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Sturgis Bancorp Reports Earnings for 2019

STURGIS, Mich., Jan. 22, 2020 (GLOBE NEWSWIRE) -- Sturgis Bancorp, Inc. (OTCQX: STBI) today announced record net income of $4.9 million for 2019 and $1.2 million for the fourth 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 loan production offices in Portage and St. Joseph, 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:

  • The Company paid off its holding company loan in 2019.
  • Net income increased 13% for 2019 to $4,927,000, compared to $4,373,000 for 2018, primarily due to higher net interest income.
  • The Bank maintained strong capital ratios, exceeding “well-capitalized” requirements, with Tier 1 leverage capital at 8.41%.  Total capital at December 31, 2019 was 12.67% of risk-weighted assets. 
  • Total assets increased 10.5% to $473.3 million, primarily in loans. The Bank's risk-weighted assets were $336.6 million at December 31, 2019.
  • Net loans increased 13.3% to $352.5 million.
  • Total deposits increased 3.0% to $352.9 million, despite $18.9 million decrease in brokered CDs.
  • Allowance for loan losses was 1.0% of loans.

Year ended December 31, 2019 vs. Year ended December 31, 2018 - Net income for 2019 was $4,927,000, or $2.34 per share, compared to net income of $4,373,000, or $2.08 per share. in 2018.  The tax equivalent net interest margin increased to 3.96% in 2019 from 3.85% in 2018. 

Net interest income increased to $16.0 million in 2019 from $14.6 million in 2018.  The growth was primarily due to loan interest income, which increased by $2.2 million.  Total interest income increased $2.2 million to $19.4 million in 2019, and interest expense only increased $704,000 to $3.4 million in 2019.

The Company provided $284,000 to the allowance for loan losses in 2019, compared to $161,000 in 2018.  Net charge-offs were $60,000 in 2019, compared to $5,000 in 2018. 

Noninterest income was $5.3 million in 2019, compared to $5.1 million in the same period of 2018, primarily due to $197,000 increase in mortgage banking activities. Gain on sale of real estate owned also decreased by $120,000.

Noninterest expense was $15.2 million in 2019, compared to $14.5 million in 2018.  Salaries and employee benefits, the largest component of noninterest expense, increased $676,000, or 7.9%. 

Three months ended December 31, 2019 vs. three months ended December 31, 2018 - Net income for the three months ended December 31, 2019 was $1,221,000, or $0.58 per share, compared to net income of $1,205,000, or $0.58 per share, for the same period in 2018.  The tax equivalent net interest margin decreased to 3.85% in the fourth third quarter of 2019 from 3.94% in the fourth quarter of 2018. 

Net interest income increased to $4.1 million in the fourth quarter of 2019 from $3.8 million in the fourth quarter of 2018.  The growth was primarily due to loan interest income, which increased by $423,000 to $4.4 million.  Total interest income increased $413,000 to $5.0 million in 2019, and interest expense only increased $126,000 to $883,000 in 2019.

The Company provided $68,000 to the allowance for loan losses in the fourth quarter of 2019, compared to ($8,000) in the same quarter of 2018.  Net charge-offs were $4,000 in the fourth quarter of 2019, compared to $18,000 in the fourth quarter of 2018. 

Noninterest income was $1.3 million in the fourth quarter of 2019, compared to $1.1 million in the fourth quarter of 2018.  Noninterest income from mortgage banking activities increased $76,000, to $189,000 in the fourth quarter of 2019. 

Noninterest expense was $3.9 million in the fourth quarter of 2019, compared to $3.5 million in the fourth quarter of 2018.  Salaries and employee benefits, the largest component of noninterest expense, increased $139,000, or 6.4%. 

Total assets increased to $473.4 million at December 31, 2019 from $431.6 million at December 31, 2018, primarily in loans.  Loans increased $41.2 million from December 31, 2018, including $22.8 million increase in commercial real estate loans.

Interest-bearing deposits increased to $263.2 million at December 31, 2019 from $260.1 million at December 31, 2018.  Brokered deposits, a component of interest-bearing deposits, decreased $18.9 million in 2019, to $15.9 million at December 31, 2019.  The growth in deposits, along with $27.5 million additional borrowed funds, provided the funding for the loan growth realized in 2019.

Total equity was $43.6 million at December 31, 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 fourth quarter of 2019.  Book value per share increased to $20.61 ($17.27 tangible) at December 31, 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)
               
    Dec. 31,       Dec. 31,  
    2019       2018  
               
ASSETS              
Cash and due from banks  $     13,301     $ 12,267  
Other short-term investments     9,896       13,133  
Total cash and cash equivalents   23,197       25,400  
Interest-earning deposits in banks   2,720       7,350  
Securities - available for sale   55,850       46,205  
Securities - held to maturity   -       5,472  
Federal Home Loan Bank stock, at cost    3,612       3,393  
Loans held for sale, at fair value   2,977       67  
Loans, net of allowance of $3,451 and $3,228   352,531       311,050  
Premises and equipment, net   9,367        9,274  
Goodwill   5,834       5,834  
Core deposit intangibles   113       155  
Originated mortgage servicing rights   1,112       1,171  
Real estate owned   193        193  
Bank-owned life insurance   10,797       10,515  
Accrued interest receivable   1,610       1,550  
Other assets   3,458       3,946  
               
Total assets   $ 473,371     $ 431,575  
               
LIABILITIES AND STOCKHOLDERS' EQUITY              
Liabilities              
Deposits              
Noninterest-bearing $ 89,747     $ 82,442  
Interest-bearing   263,189       260,058  
Total deposits    352,936       342,500  
Federal Home Loan Bank advances and other borrowings   70,000       44,109  
Accrued interest payable   438       375  
Other liabilities    6,425       4,391  
Total liabilities   429,799       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 2,113,691 shares at December 31, 2019 and 2,103,991 at December 31, 2018   2,114       2,104  
Additional paid-in capital   7,893        7,683  
Retained earnings   34,190       30,526  
Accumulated other comprehensive loss    (625 )     (113 )
Total stockholders' equity   43,572       40,200  
               
Total liabilities and stockholders' equity  $ 473,371     $ 431,575  
               


 
CONSOLIDATED STATEMENTS OF INCOME
 (Amounts in thousands, except share and per share data)
   
  Three Months Ended Dec. 31,
    2019       2018  
Interest income         $    
Loans $ 4,428       4,005  
Investment securities:              
Taxable   245       244  
Tax-exempt   210        267  
Dividends   102       56  
Total interest income   4,985       4,572  
               
Interest expense              
Deposits   517       472  
Borrowed funds   366       285  
Total interest expense   883       757  
               
Net interest income   4,102       3,815  
               
Provision (benefit) for loan losses   68       (8 )
               
Net interest income after provision (benefit) for loan losses   4,034        3,823  
               
Noninterest income:              
Service charges and other fees   315       344  
Interchange income   211       204  
Investment brokerage commission income   352       324  
Mortgage banking activities   189       113  
Trust fee income   127        86  
Earnings on cash value of bank-owned life insurance   75       64  
Gain on sale of real estate owned   44       88  
Loss on sale of securities   (4 )     (159 )
Other income   24       23  
Total noninterest income   1,333       1,087  
               
Noninterest expenses:              
Salaries and employee benefits   2,325       2,186  
Occupancy and equipment   479       420  
Interchange expenses   105       92  
Data processing   197       194  
Professional services   95       84  
Real estate owned expense   8        6  
Advertising   81       46  
FDIC premiums   36        46  
Other expenses   569       441  
Total noninterest expenses   3,895       3,515  
               
Income before income tax expense    1,472       1,395  
               
Income tax expense   251       190  
               
Net income $ 1,221     $ 1,205  
               
Earnings per share  $ 0.58     $ 0.57  
Dividends per share   0.15       0.15  
               


 
CONSOLIDATED STATEMENTS OF INCOME
 (Amounts in thousands, except share and per share data)
 
  Year Ended Dec. 31,
    2019       2018  
Interest income              
Loans $ 17,203     $ 14,960  
Investment securities:              
Taxable   1,075       988  
Tax-exempt    850       1,095  
Dividends   280       194  
Total interest income   19,408       17,237  
               
Interest expense              
Deposits   2,056       1,726  
Borrowed funds   1,311       937  
Total interest expense   3,367       2,663  
               
Net interest income   16,041       14,574  
               
Provision (benefit) for loan losses   284       161  
               
Net interest income after provision (benefit) for loan losses    15,757       14,413  
               
Noninterest income:              
Service charges and other fees   1,274       1,360  
Interchange income   862        812  
Investment brokerage commission income   1,300       1,368  
Mortgage banking activities   860        663  
Trust fee income   485       451  
Earnings on cash value of bank-owned life insurance   282       254  
Gain on sale of real estate owned   104       224  
Loss on sale of securities   -        (159 )
Other income    116       111  
Total noninterest income   5,283       5,084  
               
Noninterest expenses:              
Salaries and employee benefits   9,280       8,604  
Occupancy and equipment   1,971       1,708  
Interchange expenses   394       366  
Data processing   776       740  
Professional services   340       399  
Real estate owned expense   24       111  
Advertising   314       342  
FDIC premiums   78        249  
Other expenses   2,004       1,986  
Total noninterest expenses   15,181       14,505  
               
Income before income tax expense   5,859       4,992  
               
Income tax expense   932       619  
               
Net income $ 4,927     $ 4,373  
               
Earnings per share $ 2.34     $ 2.08  
Dividends per share   0.60       0.57  
               


 
OTHER FINANCIAL INFORMATION
(Amounts in thousands)
 
  Three Months Ended Dec. 31,
    2019       2018  
Sturgis Bank & Trust Company:              
Average noninterest-bearing deposits $ 95,914     $ 86,063  
Average interest-bearing deposits   262,879       265,620  
Average total assets   470,724       434,854  
Total risk-weighted assets   336,608       294,145  
Sturgis Bancorp:              
Average equity   42,758       40,287  
Average total assets   470,790       436,708  
Total risk-weighted assets    336,542       294,364  
               
Financial ratios for Sturgis Bancorp:              
Return on average assets   1.03 %     1.09 %
Return on average equity   11.61 %     11.86 %
Net interest margin   3.79 %     3.86 %
Tax equivalent net interest margin    3.85 %     4.02 %
               
  Year Ended Dec. 31,
    2019        2018  
Sturgis Bank & Trust Company:              
Average noninterest-bearing deposits $ 88,173     $ 83,002  
Average interest-bearing deposits   264,615       270,645  
Average total assets   452,821       432,327  
Sturgis Bancorp:              
Average equity   41,683       39,081  
Average total assets   452,924       432,519  
               
Financial ratios for Sturgis Bancorp:              
Return on average assets   1.20 %     1.01 %
Return on average equity    11.84 %     11.19 %
Net interest margin   3.89 %     3.77 %
Tax equivalent net interest margin   3.96 %     3.93 %
               

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