Sturgis Bancorp Reports Earnings for Third Quarter 2013

Sturgis Bancorp Reports Earnings for Third Quarter 2013
  
 

STURGIS, MI--(Marketwired - Nov 4, 2013) - Sturgis Bancorp, Inc. (OTCBB: STBI) today announced net income of $467,000 for the third quarter of 2013. 

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 11 banking centers in Sturgis, 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 as of September 30, 2013:

• Net income was $467,000 for the third quarter of 2013, compared to $517,000 for the third quarter of 2012.
• The Bank enhanced strong capital ratios, significantly exceeding "well-capitalized" requirements, with Tier 1 capital at 9.22%. Total capital at September 30, 2013 was 15.25% of risk-weighted assets.
• Nonaccrual loans decreased $1.6 million and real estate owned decreased $918,000 from December 31, 2012.
• Total deposits increased 0.1% to $235.3 million, with noninterest-bearing deposits increasing $1.8 million.
• Allowance for loan losses was 1.89% of loans, down slightly from 2.03% at the end of 2012.
• Oakleaf Financial Services, Inc. recorded commission income of $1.4 million in the nine months ended September 30, an increase of $311,000 from 2012. That increase contributed to an increase in compensation expense.

President and CEO Eric L. Eishen stated: "Credit quality continues to improve and earnings are stable. Capital ratios are the strongest they have been since I took leadership of the Bank. I am pleased we have navigated the financial crisis and come out a stronger bank. Management will continue to focus on improving earnings and expense control. The low sustained rates are problematic for the industry and regulatory expectations are increasing. We are confident the Bank is in excellent position to return to normal operations, as soon as the economic conditions have stabilized. Loan demand is weak and the increase in mortgage rates has slowed down mortgage refinance activity. We continue to be the market leader in St. Joseph County and real estate purchase activity is improving."

Three months ended September 30, 2013 vs. three months ended September 30, 2012 - Net income for the three months ended September 30, 2013 was $467,000, or $0.23 per share, compared to net income of $517,000, or $0.26 per share, for the three months ended September 30, 2012. The tax equivalent net interest margin decreased to 3.37% in 2013 from 3.54% in 2012. 

Noninterest income was $1.3 million in the third quarter of 2013, compared to $1.2 million in the third quarter of 2012. Investment brokerage commission income increased to $481,000 in the third quarter of 2013, compared to $412,000 in the third quarter of 2012. Mortgage banking activities decreased slightly to $267,000 in 2013, as loan sale volume slowed. 

Noninterest expense increased to $3.1 million in 2013, compared to $2.9 million in 2012. Real estate owned expense of $76,000 in 2013 included $31,000 written down for the carrying value of foreclosed assets, compared to $191,000 in 2012 with $95,000 in assets written down. 

The Company provided $8,000 to the allowance for loan losses in the third quarter of 2013, compared to $63,000 in the same quarter of 2013. Net charge-offs were $208,000 in the third quarter of 2013, compared to $43,000 in the third quarter of 2012. 

Nine months ended September 30, 2013 vs. nine months ended September 30, 2012 - Net income for the nine months ended September 30, 2013 was $1.4 million, or $0.69 per share, compared to net income of $1.5 million, or $0.75 per share, for the nine months ended September 30, 2012. The tax equivalent net interest margin decreased to 3.41% in 2013 from 3.53% in 2012. 

Noninterest income was $3.8 million in the first nine months of 2013, compared to $3.4 million in the first nine months of 2012. The increase is primarily in investment brokerage commission income, which increased to $1.4 million in the first nine months of 2013, compared to $1.1 million in the first nine months of 2012. 

Noninterest expense increased to $9.4 million in 2013, compared to $8.6 million in 2012. Real estate owned expense of $561,000 in 2013 included $358,000 written down for the carrying value of foreclosed assets, compared to $538,000 in 2012 with $316,000 of assets written down.

The Company provided ($234,000) to the allowance for loan losses in the first nine months of 2013, compared to $54,000 in the first nine months of 2012. Net charge-offs were $360,000 in the first nine months of 2013, compared to $454,000 in the first nine months of 2012. Asset quality improvements and the net reduction in loans were the primary factors permitting the negative provision in 2013.

Total assets increased to $318.5 million at September 30, 2013 from $317.0 million at December 31, 2012, primarily in cash and cash equivalents. Cash and cash equivalents increased $14.6 million to $34.4 million. Loans decreased $13.1 million from December 31, 2012, primarily in commercial mortgage and commercial nonmortgage loans. Real estate owned of $334,000 on September 30, 2013 is the lowest inventory in eight years.

Noninterest-bearing deposits increased by $1.8 million at September 30, 2013 from $41.3 million at December 31, 2012. Interest-bearing deposits decreased to $192.2 million at September 30, 2013 from $193.7 million at December 31, 2012. The decrease in interest-bearing deposits includes $5.6 million decrease in brokered certificates of deposit. The number of checking accounts continues to increase, as the Bank continues to expand its customer base. 

Total equity was $28.2 million at September 30, 2013, compared to $26.9 million at December 31, 2012. Book value per share increased to $13.74 at September 30, 2013 from $13.21 at December 31, 2012.

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
September 30, 2013 and December 31, 2012
(Amounts in thousands, except share and per share data)
				Sept. 30, 2013			Dec. 31, 2012
ASSETS
	Cash and due from banks			$	19,700		$	10,237
	Other short-term investments				14,698			9,611
		Total cash and cash equivalents			34,398			19,848
	Interest-earning deposits in banks				14,914			12,196
	Securities - Available for sale				1,588			1,242
	Federal Home Loan Bank stock, at cost				4,064			4,064
	Loans held for sale				800			2,261
	Loans, net of allowance of $4,744 and $5,138				235,400			248,520
	Premises and equipment, net				7,147			7,044
	Goodwill				5,109			5,109
	Originated mortgage servicing rights				1,336			1,273
	Real estate owned				334			1,252
	Bank-owned life insurance				9,469			9,259
	Accrued interest receivable				910			861
	Prepaid FDIC assessment				-			414
	Other assets				3,018			3,702
		Total assets		$	318,487		$	317,045
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
	Deposits
		Noninterest-bearing		$	43,043		$	41,261
		Interest-bearing			192,227			193,662
		Total deposits			235,270			234,923
	Federal Home Loan Bank advances and other borrowings				52,175			52,440
	Accrued interest payable				262			333
	Other liabilities				2,595			2,425
		Total liabilities			290,302			290,121

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 2,051,093 shares at September 30, 2013 and 2,038,395 at December 31, 2012				2,051				2,038
	Additional paid-in capital				7,066				6,979
	Retained earnings				19,358				17,953
	Accumulated other comprehensive income (loss)				(290	)			(46	)
		Total stockholders' equity			28,185				26,924
		Total liabilities and stockholders' equity		$	318,487			$	317,045

CONSOLIDATED STATEMENTS OF INCOME
Three Months ended September 30, 2013 and 2012
(Amounts in thousands, except share and per share data)
				Three Months ended September 30,
				2013				2012
Interest income
	Loans			$	2,874			$	3,095
	Investment securities:
		Taxable			42				41
		Tax-exempt			15				11
	Dividends				47				41
		Total interest income			2,978				3,188
Interest expense
	Deposits				241				324
	Borrowed funds				419				423
		Total interest expense			660				747
Net interest income					2,318				2,441
Provision for loan losses					8				63
Net interest income after provision for loan losses					2,310				2,378
Noninterest income:
	Service charges and other fees				390				323
	Investment brokerage commission income				481				412
	Mortgage banking activities				267				286
	Trust fee income				85				69
	Increase in value of bank owned life insurance				71				71
	Other income				1				13
		Total noninterest income			1,295				1,174
Noninterest expenses:
	Salaries and employee benefits				1,711				1,554
	Occupancy and equipment				434				361
	Data processing				180				176
	Professional services				77				105
	Real estate owned expense				76				191
	Advertising				26				25
	FDIC premiums				108				103
	Other				443				347
		Total noninterest expenses			3,055				2,862
Income (loss) before income tax expense (benefit)					550				690
Provision for income tax					83				173
Net income (loss)				$	467			$	517
Earnings per share				$	0.23			$	0.26
Dividends declared per share				$	0.00			$	0.00
		Key Ratios:
Return on average equity					6.71	%			7.87	%
Return on average assets					0.59	%			0.66	%
Net interest margin (tax equivalent)					3.37	%			3.54	%

CONSOLIDATED STATEMENTS OF INCOME
Nine Months ended September 30, 2013 and 2012
(Amounts in thousands, except share and per share data)
				Nine Months Ended September 30,
				2013				2012
Interest income
	Loans			$	8,704			$	9,313
	Investment securities:
		Taxable			135				89
		Tax-exempt			46				27
	Dividends				134				111
		Total interest income			9,019				9,540
Interest expense
	Deposits				759				1,032
	Borrowed funds				1,245				1,273
		Total interest expense			2,004				2,305
Net interest income					7,015				7,235
Provision for loan losses					(234	)			54
Net interest income after provision for loan losses					7,249				7,181
Noninterest income:
	Service charges and other fees				1,106				1,016
	Investment brokerage commission income				1,438				1,127
	Mortgage banking activities				809				850
	Trust fee income				282				228
	Increase in value of bank owned life insurance				210				211
	Other income				(53	)			(14	)
		Total noninterest income			3,792				3,418
Noninterest expenses:
	Salaries and employee benefits				5,123				4,692
	Occupancy and equipment				1,263				1,075
	Data processing				533				532
	Professional services				301				293
	Real estate owned expense				561				538
	Advertising				81				76
	FDIC premiums				323				314
	Other				1,166				1,056
		Total noninterest expenses			9,351				8,576
Income (loss) before income tax expense (benefit)					1,690				2,023
Provision for income tax					285				503
Net income (loss)				$	1,405			$	1,520
Earnings per share				$	0.69			$	0.75
Dividends declared per share				$	0.00			$	0.00
		Key Ratios:
Return on average equity					6.86	%			7.90	%
Return on average assets					0.59	%			0.64	%
Net interest margin (tax equivalent)					3.41	%			3.53	%

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