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Sturgis Bancorp Reports Earnings for Second Quarter 2021

·12 min read

STURGIS, MI / ACCESSWIRE / July 21, 2021 /Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $1.4 million for the second quarter of 2021 and $2.7 million for the first half of 2021.

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

Key Highlights for the first half of 2021:

  • Credit quality is very strong, with 99.84% of loans performing according to loan agreements.

  • The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.62%.

  • Sales of $71.0 million residential mortgages generated $1.9 million of noninterest income in 2021, compared to $1.9 million on $70.0 million of sales in 2020.

  • Total assets increased 9.8% to $706.7 million.

  • Net loans increased 12.2% to $499.2 million, including $39.9 million increase in residential mortgages.

  • An interest rate swap was terminated, generating $407,000 gain.

  • Total deposits increased 12.4% to $571.0 million.

  • Allowance for loan losses was 1.39% of loans.

Eric L. Eishen, President and CEO, stated, "The Bank had a strong first half. Few loans were delinquent and loans with COVID-related accommodations in the past year have paid off or returned to normal payments. Earnings were positively impacted by strong Mortgage Banking activity and the gain on swap termination. Paycheck Protection Program loan originations also continued strong through the first half of 2021, serving local employers and introducing some new customers to the Bank. At the end of 2020, the Company issued $15 million of subordinated debt and immediately invested $10 million of the proceeds in the Bank. The debt was issued in anticipation of strong growth opportunities in Berrien County, Michigan. Two branch offices have recently been opened in St. Joseph, Michigan to service those opportunities, and the Portage, Michigan loan production office was converted to a full service branch. In 2021, the Company invested an additional $3 million in the Bank, supporting further successful growth in southwest Michigan."

Three months ended June 30, 2021 vs. three months ended June 30, 2020 - Net income for the three months ended June 30, 2021 was $1,380,000, or $0.65 per share, compared to net income of $1,355,000, or $0.64 per share, for the three months ended June 30, 2020. The tax equivalent net interest margin increased to 2.95% in the first three months of 2021 from 2.92% in the first three months of 2020.

Net interest income increased to $4.7 million in 2021 from $4.2 million in 2020. The growth was primarily due to loan interest income, which increased by $726,000 to $5.3 million. Total interest income increased $713,000 to $5.8 million in 2021, and interest expense only increased $120,000 to $1.0 million in 2021.

The Company provided $357,000 to the allowance for loan losses in the three months ended June 30, 2021, compared to $974,000 in the same quarter of 2020. The higher 2020 provision was due to COVID uncertainties at that time. Net charge-offs were ($43,000) in the second quarter of 2021 and ($2,000) in the second quarter of 2020.

Noninterest income was $2.0 million in the second quarter of 2021, compared to $2.3 million in the second quarter of 2020. Most of the decrease was due to mortgage banking activities. Loan sales were $19.5 million in the second quarter of 2021 and $36.9 million in the second quarter of 2020. Investment brokerage commission income increased to $483,000 in 2021 from $323,000 in 2020.

Noninterest expense was $4.8 million in 2021, compared to $3.9 million in 2020. Salaries and employee benefits, the largest component of noninterest expense, increased $529,000, or 22.8%. The higher compensation expense includes staff for the Bank's expansion into southwest Michigan.

Six months ended June 30, 2021 vs. six months ended June 30, 2020 - Net income for the six months ended June 30, 2021 was $2,743,000, or $1.29 per share, compared to net income of $2,863,000, or $1.35 per share, for the six months ended June 30, 2020. The tax equivalent net interest margin decreased to 2.86% in the first half of 2021 from 3.44% in the first half months of 2020.

Net interest income increased to $9.1 million in 2021 from $8.3 million in 2020. The growth was primarily due to loan interest income, which increased by $986,000 to $10.1 million. Total interest income increased $1.0 million to $11.2 million in 2021, and interest expense only increased $257,000 to $2.0 million in 2021.

The Company provided $993,000 to the allowance for loan losses in the six months ended June 30, 2021, compared to $1.1 million in the first half of 2020. Provisions in 2021 were primarily due to growth of the loan portfolio. The 2020 provision was primarily due to COVID uncertainties at that time. Net charge-offs were $208,000 in the first half of 2021 and $62,000 in the first half of 2020.

Noninterest income was $4.8 million in the first half of 2021, compared to $4.1 million in the first half of 2020. Most of the increase was due to $407,000 gain on termination of an interest rate swap. Investment brokerage commission income increased to $931,000 in 2021 from $685,000 in 2020.

Noninterest expense was $9.5 million in the first half of 2021, compared to $7.9 million in the first half of 2020. Salaries and employee benefits, the largest component of noninterest expense, increased $900,000, or 18.6%. The higher compensation expense includes staff for the Bank's expansion into southwest Michigan.

Total assets increased to $706.7 million on June 30, 2021 from $643.6 million on December 31, 2020, primarily in loans. Loans increased $54.1 million from December 31, 2020, primarily in residential mortgages.

Interest-bearing deposits increased to $427.2 million on June 30, 2021 from $383.5 million on December 31, 2020. The increase in deposit accounts is partially due increased market penetration in southwest Michigan. Brokered deposits, a component of interest-bearing deposits, decreased $20.0 million to $41.2 million in the first half of 2021.

Total equity was $49.8 million on June 30, 2021, compared to $47.1 million on December 31, 2020. The regular quarterly dividend was maintained during 2020 and into the first half of 2021 at a record-high $0.16 per share. Book value per share was $23.40 ($19.34 tangible) on June 30, 2021.

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.

Contacts:

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

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)


June 30,

Dec. 31,

2021

2020

ASSETS



Cash and due from banks

$

12,692

$

12,060

Other short-term investments

48,897

55,782

Total cash and cash equivalents

61,589

67,842

Interest-earning deposits in banks

1,241

1,241

Securities - available for sale

92,549

73,072

Federal Home Loan Bank stock, at cost

6,026

4,917

Loans held for sale, at fair value

5,058

6,832

Loans, net of allowance of $7,016 and $6,231

499,182

445,091

Premises and equipment, net

12,265

11,844

Goodwill

5,834

5,834

Core deposit intangibles

62

77

Originated mortgage servicing rights

2,735

2,245

Real estate owned

210

341

Bank-owned life insurance

11,234

11,091

Accrued interest receivable

2,163

2,458

Other assets

6,586

10,721

Total assets

$

706,734

$

643,606


LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Deposits

Noninterest-bearing

$

143,783

$

124,434

Interest-bearing

427,215

383,464

Total deposits

570,998

507,898

Federal Home Loan Bank advances and other borrowings

61,500

61,500

Subordinated debentures - $15,000 face amount (less unamortized

debt issuance costs of $369 at June 30, 2021 and $400 at

December 31, 2020)

14,631

14,600

Accrued interest payable

429

477

Other liabilities

9,391

12,019

Total liabilities

656,949

596,494


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 2,127,791 shares at June 30, 2021

and 2,123,291 at December 31, 2020

2,128

2,123

Additional paid-in capital

8,130

8,050

Retained earnings

40,903

38,840

Accumulated other comprehensive loss

(1,376

)

(1,901

)

Total stockholders' equity

49,785

47,112


Total liabilities and stockholders' equity

$

706,734

$

643,606

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)


Three Months


Ended June 30,


2021

2020

Interest income



Loans

$

5,304

$

4,578

Investment securities:

Taxable

289

232

Tax-exempt

134

165

Dividends

84

123

Total interest income

5,811

5,098


Interest expense

Deposits

654

484

Borrowed funds

392

442

Total interest expense

1,046

926


Net interest income

4,765

4,172


Provision (benefit) for loan losses

357

974


Net interest income after provision (benefit) for loan losses

4,408

3,198


Noninterest income:

Service charges and other fees

295

270

Interchange income

305

219

Investment brokerage commission income

483

323

Mortgage banking activities

737

1,122

Trust fee income

101

103

Earnings on cash value of bank-owned life insurance

72

73

Gain (loss) on sale of real estate owned

2

-

Gain on sale of securities

-

157

Gain on termination of interest rate swap

-

-

Other income

14

15

Total noninterest income

2,009

2,282


Noninterest expenses:

Salaries and employee benefits

2,851

2,322

Occupancy and equipment

596

499

Interchange expenses

126

97

Data processing

226

220

Professional services

71

52

Real estate owned expense

3

1

Advertising

124

58

FDIC premiums

77

41

Other expenses

675

566

Total noninterest expenses

4,749

3,856


Income before income tax expense

1,668

1,624


Income tax expense

288

269


Net income

$

1,380

$

1,355


Earnings per share

$

0.65

$

0.64

Dividends per share

$

0.16

$

0.16

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)


Six Months


Ended June 30,


2021

2020

Interest income



Loans

$

10,073

$

9,087

Investment securities:

Taxable

500

489

Tax-exempt

274

394

Dividends

315

174

Total interest income

11,162

10,144


Interest expense

Deposits

1,309

999

Borrowed funds

777

830

Total interest expense

2,086

1,829


Net interest income

9,076

8,315


Provision (benefit) for loan losses

993

1,125


Net interest income after provision (benefit) for loan losses

8,083

7,190


Noninterest income:

Service charges and other fees

593

595

Interchange income

556

430

Investment brokerage commission income

931

685

Mortgage banking activities

1,854

1,898

Trust fee income

185

201

Earnings on cash value of bank-owned life insurance

143

146

Gain (loss) on sale of real estate owned

41

(2

)

Gain on sale of securities

-

157

Gain on termination of interest rate swap

407

-

Other income

40

36

Total noninterest income

4,750

4,146


Noninterest expenses:

Salaries and employee benefits

5,747

4,847

Occupancy and equipment

1,204

1,009

Interchange expenses

239

198

Data processing

440

422

Professional services

185

185

Real estate owned expense

6

3

Advertising

230

127

FDIC premiums

141

86

Other expenses

1,331

1,033

Total noninterest expenses

9,523

7,910


Income before income tax expense

3,310

3,426


Income tax expense

567

563


Net income

$

2,743

$

2,863


Earnings per share

$

1.29

$

1.35

Dividends per share

$

0.32

$

0.32

OTHER FINANCIAL INFORMATION
(Amounts in thousands)


Three Months


Ended June 30,


2021

2020

Sturgis Bank & Trust Company:



Average noninterest-bearing deposits

$

141,526

$

109,060

Average interest-bearing deposits

427,529

298,697

Average total assets

705,217

579,891

Sturgis Bancorp:

Average equity

49,089

43,013

Average total assets

705,376

580,008


Financial ratios for Sturgis Bancorp:

Return on average assets

0.78

%

0.94

%

Return on average equity

11.15

%

12.67

%

Net interest margin

2.91

%

2.87

%

Tax equivalent net interest margin

2.95

%

2.92

%


Six Months


Ended June 30,


2021

2020

Sturgis Bank & Trust Company:



Average noninterest-bearing deposits

$

136,487

$

97,916

Average interest-bearing deposits

423,729

285,925

Average total assets

696,284

540,293

Sturgis Bancorp:

Average equity

48,423

43,250

Average total assets

696,421

540,364


Financial ratios for Sturgis Bancorp:

Return on average assets

0.79

%

1.07

%

Return on average equity

11.36

%

13.31

%

Net interest margin

2.83

%

3.39

%

Tax equivalent net interest margin

2.86

%

3.44

%

SOURCE: Sturgis Bancorp, Inc.



View source version on accesswire.com:
https://www.accesswire.com/656468/Sturgis-Bancorp-Reports-Earnings-for-Second-Quarter-2021