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Sturgis Bancorp Reports Earnings for Second Quarter 2019

By GlobeNewswire,  July 15, 2019, 04:37:00 PM EDT


STURGIS, Mich., July 15, 2019 (GLOBE NEWSWIRE) -- Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $2.3 million for the first half of 2018 and $1.3 million for the second 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 22% for the first half of 2019 to $2,339,000, compared to $1,911,000 for the first half 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 June 30, 2019 was 13.44% of risk-weighted assets. 

  • Total assets increased 4.6% to $450.0 million. The Bank's risk-weighted assets were $311.8 million at June 30, 2019.

  • Net loans increased 5.9% to $329.5 million.

  • Total deposits increased 2.0% to $349.3 million.

  • Allowance for loan losses was 1.0% of loans.

Six months ended June 30, 2019 vs. six months ended June 30, 2018 - Net income for the first half of 2019 was $2,339,000, or $1.11 per share, compared to net income of $1,911,000, or $0.91 per share, in the first half of 2018.  The tax equivalent net interest margin increased to 4.01% in the first half of 2019 from 3.77% in the first half of 2018. 

Net interest income increased to $7.8 million in 2019 from $7.0 million in 2018.  The growth was primarily due to loan interest income, which increased by $1.3 million.  Total interest income increased $1.2 million to $9.4 million in 2019, and interest expense only increased $420,000 to $1.6 million in 2019.

The Company provided $113,000 to the allowance for loan losses in the first six months of 2019, compared to $139,000 in the same period of 2018.  Net charge-offs were $0 in the first half of 2019, compared to ($5,000) in the first half of 2018.  

Noninterest income was $2.6 million in the first half of 2019 and 2018, despite $112,000 decrease in investment brokerage commission income.

Noninterest expense was $7.5 million in the first six months of 2019, compared to $7.3 million in the first six months of 2018.  Salaries and employee benefits, the largest component of noninterest expense, increased $313,000, or 7.2%. 

Three months ended June 30, 2019 vs. three months ended June 30, 2018 - Net income for the three months ended June 30, 2019 was $1,297,000, or $0.62 per share, compared to net income of $1,154,000, or $0.36 per share, for the three months ended June 30, 2018.  The tax equivalent net interest margin increased to 4.02% in the second quarter of 2019 from 3.91% in the second quarter of 2018. 

Net interest income increased to $4.0 million in 2019 from $3.7 million in 2018.  The growth was primarily due to loan interest income, which increased by $619,000 to $4.3 million.  Total interest income increased $567,000 to $4.8 million in 2019, and interest expense only increased $218,000 to $836,000 in 2019.

The Company provided $75,000 to the allowance for loan losses in the second quarter of 2019, compared to $17,000 in the same quarter of 2018.  Net charge-offs were $3,000 in the second quarter of 2019, compared to ($3,000) in the second quarter of 2018.  

Noninterest income was $1.4 million in the second quarter of 2019, compared to $1.3 million in the second quarter of 2018, with increases primarily in gain on sale of securities and trust fee income.

Noninterest expense was $3.8 million in the second quarter of 2019, compared to$3,6 million in the second quarter of 2018.  Salaries and employee benefits, the largest component of noninterest expense, increased $118,000, or 5.5%. 

Total assets increased to $450.0 million at June 30, 2019 from $431.6 million at December 31, 2018, primarily in loans.  Loans increased $18.5 million from December 31, 2018, primarily in commercial real estate loans.

Interest-bearing deposits increased to $263.0 million at June 30, 2019 from $260.1 million at December 31, 2018.  Brokered deposits, a component of interest-bearing deposits, decreased $11.2 million in the first half of 2019, to $23.6 million at June 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 six months of 2019.

Total equity was $41.4 million at June 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.  Book value per share increased to $19.64 ($16.25 tangible) at June 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)

    June 30,     Dec. 31,  
    2019     2018  
             
ASSETS        
Cash and due from banks   $ 8,550     $ 12,267  
Other short-term investments     17,477       13,133  
Total cash and cash equivalents     26,027       25,400  
Interest-earning deposits in banks     6,109       7,350  
Securities - available for sale     46,599       46,205  
Securities - held to maturity     4,714       5,472  
Federal Home Loan Bank stock, at cost     3,393       3,393  
Loans held for sale, at fair value     1,811       67  
Loans, net of allowance of $3,341 and $3,228     329,521       311,050  
Premises and equipment, net     9,185       9,274  
Goodwill     5,834       5,834  
Core deposit intangibles     133       155  
Originated mortgage servicing rights     1,194       1,171  
Real estate owned     301       193  
Bank-owned life insurance     10,648       10,515  
Accrued interest receivable     1,641       1,550  
Other assets     2,922       3,946  
                 
         
Total assets   $ 450,032     $ 431,575  
                 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Liabilities        
Deposits        
Noninterest-bearing   $ 86,330     $ 82,442  
Interest-bearing     263,012       260,058  
Total deposits     349,342       342,500  
Federal Home Loan Bank advances and other borrowings     53,879       44,109  
Accrued interest payable     365       375  
Other liabilities     5,026       4,391  
Total liabilities     408,612       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 2,108,591 shares at June 30, 2019        
  and 2,103,991 at December 31, 2018     2,109       2,104  
Additional paid-in capital     7,791       7,683  
Retained earnings     32,233       30,526  
Accumulated other comprehensive loss     (713 )     (113 )
Total stockholders' equity     41,420       40,200  
                 
         
Total liabilities and stockholders' equity   $ 450,032     $ 431,575  
 

 

CONSOLIDATED STATEMENTS OF INCOME

 (Amounts in thousands, except share and per share data)

    Three Months Ended June 30,

 
    2019   2018  
           
Interest income        
Loans   $ 4,314   $ 3,695  
Investment securities:        
Taxable     259     268  
Tax-exempt     215     276  
Dividends     55     37  
Total interest income     4,843     4,276  
         
Interest expense        
Deposits     511     417  
Borrowed funds     325     201  
Total interest expense     836     618  
               
         
Net interest income     4,007     3,658  
         
Provision (benefit) for loan losses     75     17  
               
         
Net interest income after provision (benefit) for loan losses     3,932     3,641  
         
Noninterest income:        
Service charges and other fees     313     330  
Interchange income     220     210  
Investment brokerage commission income     321     337  
Mortgage banking activities     194     181  
Trust fee income     164     126  
Earnings on cash value of bank-owned life insurance     72     63  
Gain on sale of real estate owned     59     70  
Gain on sale of securities     44     -  
Other income     22     23  
Total noninterest income     1,409     1,340  
         
Noninterest expenses:        
Salaries and employee benefits     2,257     2,139  
Occupancy and equipment     477     443  
Interchange expenses     99     89  
Data processing     198     183  
Professional services     70     90  
Real estate owned expense     3     42  
Advertising     76     69  
FDIC premiums     46     73  
Other expenses     573     511  
Total noninterest expenses     3,799     3,639  
               
         
Income before income tax expense     1,542     1,342  
         
Income tax expense     245     188  
               
         
Net income   $ 1,297   $ 1,154  
               
         
Earnings per share   $ 0.62   $ 0.55  
Dividends per share     0.15     0.14  
               



CONSOLIDATED STATEMENTS OF INCOME

 (Amounts in thousands, except share and per share data)

    Six Months Ended June 30,

 
    2019   2018

 
           
Interest income        
Loans   $ 8,355   $ 7,056  
Investment securities:        
Taxable     539     506  
Tax-exempt     437     553  
Dividends     100     93  
Total interest income     9,431     8,208  
         
Interest expense        
Deposits     1,013     793  
Borrowed funds     602     402  
Total interest expense     1,615     1,195  
               
               
               
               
               
         
Net interest income     7,816     7,013  
         
Provision (benefit) for loan losses     113     139  
               
               
               
               
               
         
Net interest income after provision (benefit) for loan losses     7,703     6,874  
         
Noninterest income:        
Service charges and other fees     637     675  
Interchange income     413     389  
Investment brokerage commission income     612     728  
Mortgage banking activities     406     369  
Trust fee income     258     239  
Earnings on cash value of bank-owned life insurance     134     125  
Gain on sale of real estate owned     61     67  
Gain on sale of securities     1     -  
Other income     52     52  
Total noninterest income     2,574     2,644  
         
Noninterest expenses:        
Salaries and employee benefits     4,665     4,352  
Occupancy and equipment     949     875  
Interchange expenses     186     176  
Data processing     394     363  
Professional services     180     212  
Real estate owned expense     8     75  
Advertising     134     117  
FDIC premiums     89     133  
Other expenses     926     1,035  
Total noninterest expenses     7,531     7,338  
               
               
               
               
               
         
Income before income tax expense     2,746     2,180  
         
Income tax expense     407     269  
               
               
               
               
               
         
Net income   $ 2,339   $ 1,911  
               
               
               
               
               
         
Earnings per share   $ 1.11   $ 0.91  
Dividends per share     0.30     0.28  
               



OTHER FINANCIAL INFORMATION

(Amounts in thousands)

    Three Months Ended June 30,

 
     2019      2018  
             
         
Sturgis Bank & Trust Company:        
Average noninterest-bearing deposits   $ 83,926     $ 81,874  
Average interest-bearing deposits     265,464       275,261  
Average total assets     446,180       434,115  
Total risk-weighted assets     311,843       286,956  
Sturgis Bancorp:        
Average equity     41,437       38,669  
Average total assets     446,279       434,298  
Total risk-weighted assets     311,923       287,169  
         
Financial ratios for Sturgis Bancorp:        
Return on average assets     1.17 %     1.07 %
Return on average equity     12.55 %     11.98 %
Net interest margin     3.96 %     3.74 %
Tax equivalent net interest margin     4.02 %     3.83 %
         
         
    Six Months Ended June 30,

 
     2019      2018  
             
         
Sturgis Bank & Trust Company:        
Average noninterest-bearing deposits   $ 81,813     $ 81,079  
Average interest-bearing deposits     266,288       273,119  
Average total assets     440,543       431,046  
Sturgis Bancorp:        
Average equity     41,060       38,250  
Average total assets     440,730       431,236  
         
Financial ratios for Sturgis Bancorp:        
Return on average assets     1.18 %     0.89 %
Return on average equity     11.49 %     10.07 %
Net interest margin     3.94 %     3.68 %
Tax equivalent net interest margin     4.01 %     3.77 %



Contacts:

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

Source: Sturgis Bancorp, Inc.

This article appears in: News Headlines

Referenced Stocks: STBI










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