Sturgis Bancorp Reports Earnings for First Quarter 2017

STURGIS, Mich., April 22, 2017 (GLOBE NEWSWIRE) -- Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $662,000 for the first quarter of 2017.

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 first quarter of 2017:

  • Net income increased 12% for the first quarter of 2017 to $662,000, compared to $592,000 for the first quarter of 2016, primarily due to higher net interest income and lower provisions for ALLL.
  • The Bank maintained strong capital ratios, exceeding “well-capitalized” requirements, with Tier 1 leverage capital at 8.22%. Total capital at March 31, 2017 was 14.32% of risk-weighted assets. The Bank's risk-weighted assets were $249.5 million at March 31, 2017.
  • Total deposits increased 4.6% to $311.4 million, mostly in temporary municipal deposits.
  • Allowance for loan losses was 1.20% of loans, unchanged from December 31, 2016.

Three months ended March 31, 2017 vs. three months ended March 31, 2016 - Net income for the three months ended March 31, 2017 was $662,000, or $0.32 per share, compared to net income of $592,000, or $0.28 per share, for the three months ended March 31, 2016. The tax equivalent net interest margin increased to 3.79% in the first three months of 2017 from 3.75% in the first three months of 2016.

Noninterest income was $1.1 million in the first quarter of 2017, compared to $1.2 million in the first quarter of 2016. Most of the decrease was in investment brokerage commission income, which decreased to $330,000 in 2017 from $445,000 in 2016. The decrease in commission income was primarily due to the Department of Labor's Fiduciary Rule and the 2016 conversion to Raymond James from LPL.

Noninterest expense was $3.6 million in 2017 and $3.4 million in 2016. Salaries and employee benefits, the largest component of noninterest expense, increased $278,000, primarily due to higher pension funding in 2017 and cost of living increases. Real estate owned expense decreased to $16,000 in 2017, compared to $60,000 in 2016.

The Company provided ($135,000) to the allowance for loan losses in the first three months of 2017, compared to $94,000 in the same quarter of 2016. Net charge-offs were ($72,000) in 2017, compared to $69,000 in 2016.

Total assets increased to $401.8 million at March 31, 2017 from $398.6 million at December 31, 2016, primarily in cash and cash equivalents. Loans decreased $4.5 million from December 31, 2016. Most of the decrease in loans was in commercial real estate and other commercial loans.

Noninterest-bearing deposits decreased to $63.5 million at March 31, 2017 from $65.5 million at December 31, 2016. Interest-bearing deposits increased to $247.9 million at March 31, 2017 from $232.3 million at December 31, 2016. The increase in total deposit accounts is typical for the first quarter of each year, as municipalities deposit property tax revenues. Municipalities historically have either used or reinvested those funds elsewhere during the second quarter of the year, and Management expects that pattern to continue for 2017. Brokered deposits decreased $3.5 million in the first quarter of 2017, to $6.1 million at March 31, 2017. The growth in deposits allowed borrowed funds to decrease by $10.8 million to $50.3 million at March 31, 2017.

Total equity was $35.3 million at March 31, 2017, compared to $34.7 million at December 31, 2016. Book value per share increased to $16.90 ($13.42 tangible) at March 31, 2017 from $16.65 ($13.14 tangible) at December 31, 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
(Amounts in thousands, except share and per share data)
Mar. 31, Dec. 31,
2017 2016
ASSETS
Cash and due from banks $12,573 $8,150
Other short-term investments 8,178 4,963
Total cash and cash equivalents 20,751 13,113
Interest-earning deposits in banks 15,322 16,068
Securities - available for sale 31,570 32,387
Securities - held to maturity 35,309 33,769
Federal Home Loan Bank stock, at cost 3,117 3,117
Loans held for sale, at fair value 804 1,089
Loans, net of allowance of $3,178 and $3,242 262,344 266,871
Premises and equipment, net 8,788 8,360
Goodwill 5,834 5,834
Core deposit intangibles 244 259
Originated mortgage servicing rights 1,173 1,216
Real estate owned 605 687
Bank-owned life insurance 10,064 9,998
Accrued interest receivable 1,496 1,407
Other assets 4,372 4,454
Total assets $401,793 $398,629
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $63,503 $65,455
Interest-bearing 247,907 232,312
Total deposits 311,410 297,767
Federal Home Loan Bank advances and other borrowings 50,271 61,180
Accrued interest payable 253 243
Other liabilities 4,578 4,712
Total liabilities 366,512 363,902
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 2,088,241 shares at March 31, 2017
and 2,085,991 at December 31, 2016 2,088 2,086
Additional paid-in capital 7,400 7,367
Retained earnings 25,645 25,234
Accumulated other comprehensive loss 148 40
Total stockholders' equity 35,281 34,727
Total liabilities and stockholders' equity $401,793 $398,629

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
Three Months Ended March 31,
2017 2016
Interest income
Loans $3,164 $3,007
Investment securities:
Taxable 214 156
Tax-exempt 267 204
Dividends 28 28
Total interest income 3,673 3,395
Interest expense
Deposits 162 166
Borrowed funds 305 274
Total interest expense 467 440
Net interest income 3,206 2,955
Provision (benefit) for loan losses (135) 94
Net interest income after provision (benefit) for loan losses 3,341 2,861
Noninterest income:
Service charges and other fees 260 251
Interchange income 182 167
Investment brokerage commission income 330 445
Mortgage banking activities 124 135
Trust fee income 109 79
Earnings on cash value of bank-owned life insurance 66 65
(Loss) on sale of real estate owned (9) (1)
Gain on securities - 1
Net gain on cash flow hedges 16 -
Other income 22 99
Total noninterest income 1,100 1,241
Noninterest expenses:
Salaries and employee benefits 2,186 1,908
Occupancy and equipment 445 405
Interchange expenses 97 98
Data processing 158 197
Professional services 114 61
Real estate owned expense 16 60
Advertising 47 61
FDIC premiums 47 63
Other expenses 529 516
Total noninterest expenses 3,639 3,369
Income before income tax expense 802 733
Income tax expense 140 141
Net income $662 $592
Earnings per share $0.32 $0.28
Dividends per share 0.12 0.08


OTHER FINANCIAL INFORMATION
(Amounts in thousands)
Three Months Ended March 31,
2017 2016
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits $68,191 $62,791
Average interest-bearing deposits 237,229 223,884
Average total assets 401,276 370,003
Total risk-weighted assets 249,541 235,810
Sturgis Bancorp:
Average equity 35,005 32,662
Average total assets 401,451 370,105
Total risk-weighted assets 249,787 235,927
Financial ratios for Sturgis Bancorp:
Return on average assets 0.67% 0.63%
Return on average equity 8.10% 7.31%
Net interest margin 3.62% 3.59%
Tax equivalent net interest margin 3.79% 3.75%


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

Source:Sturgis Bancorp, Inc.