CST: 27/09/2016 01:57:03   

Sturgis Bancorp Reports Earnings for 2015

241 Days ago

STURGIS, MI--(Marketwired - Jan 29, 2016) - Sturgis Bancorp, Inc. (OTCQX: STBI) announced a net income of $2.5 million for 2015, and net income of $824,000 for the fourth quarter of 2015, Eric L. Eishen, President and CEO, announced today. 

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 2015:

  • Net income for 2015 was $2.5 million, or $1.19 per share, compared to net income of $1.9 million, or $0.91 per share, in 2014.
  • The Bank increased capital ratios, exceeding "well-capitalized" requirements and ending 2015 with Tier 1 capital at 8.64% of average assets and 13.52% of risk-weighted assets. Total capital at December 31, 2015 was 14.77% of risk-weighted assets. 
  • Nonaccrual loans decreased by $659,000 to $3.1 million.
  • Acquisition of another financial institution with $32.6 million of deposits and $11.2 million in loans.
  • Loans charged off, net of recoveries, decreased to $5,000 in 2015 from $813,000 in 2014. The allowance for loan losses decreased to 1.25% of total (gross) loans from 1.43% at the end of 2014, primarily due to improvements in credit quality.

President and CEO Eishen stated, "The Bank completed its first full bank acquisition in 2015 with the purchase of West Michigan Savings Bank (WMSB) in Bangor Michigan. Despite recognizing higher expenses related to this transaction, the Bank still realized an improvement in earnings from 2014. Full integration of WMSB was accomplished during the year, and the transaction is expected to be accretive to earnings in 2016. The purchase expands the Bank's market presence in Van Buren County Michigan to three offices, making the Bank the fourth largest bank, as measured by deposits. 

"The Bank continues to realize improvements to credit quality and expects this trend to continue. Net charge-offs were at a historical low, primarily due to two commercial loan recoveries in 2015. This demonstrates the Bank's proactive credit management processes."

Year 2015 vs. 2014 - Net income for the year ended December 31, 2015 increased to $2.5 million, or $1.19 per share from net income of $1.9 million, or $0.91 per share, for 2014. Net interest income increased 11.5% to $10.7 million, from $9.6 million for 2014. The increase in net interest income is primarily due to growth in loans and investments. 

The average rate paid on interest-bearing liabilities decreased to 0.74% in 2015 from 0.89% in 2014. Average interest-earning assets increased to $303.5 million in 2015 from $272.7 million in 2014. The tax equivalent net interest margin increased to 3.62% in 2015 from 3.59% in 2014. 

The provision for loan losses was ($219,000) for the year ended December 31, 2015, compared to $104,000 for the year ended December 31, 2014. The provision for loan losses was based upon management's assessment of relevant factors, including types and amounts of non-performing loans, historical and anticipated loss experience on such types of loans, and economic conditions. Loans charged off during 2015, net of recoveries, were $5,000, compared to $813,000 during 2014.

Noninterest income was $6.0 million in 2015, compared to $5.2 million in 2014. The Bank received $700,000 of death benefit in excess of recorded cash value from bank-owned life insurance in 2015. Investment brokerage commission income decreased $157,000 to $2.1 million, primarily due to market performance and annuity sales. Mortgage banking activities increased $48,000 to $700,000, as loan sale volume increased. 

Noninterest expense was $14.1 million in 2015, compared to $12.4 million in 2014. The Bank incurred $825,000 pre-tax expenses in 2015 related to the acquisition of another Bank, compared to $192,000 in 2014. The largest component of noninterest expense is salaries and employee benefits, which increased $800,000. This increase is primarily due to staff for the acquired Bank location and pension expense in terminating the acquired Bank's plan. Real estate owned expense increased $219,000 to $541,000, including $354,000 to write down values to market prices. Management actively minimizes noninterest expense, although certain noninterest expenses are outside of Management's direct control. 

Total assets increased to $368.6 million at December 31, 2015 from $312.5 million at December 31, 2014, primarily in securities. Net loans increased $17.5 million, to $253.8 million at December 31, 2015.

Deposits were $284.0 million at December 31, 2015 compared to $234.3 million at December 31, 2014, an increase of $49.7 million. Interest-bearing deposits increased to $219.0 million at December 31, 2015 from $182.9 million at December 31, 2014. Brokered certificates of deposit increased to $7.7 million at December 31, 2015 from $2.7 million at December 31, 2014. Non-brokered jumbo certificates decreased to $13.0 million at December 31, 2015 from $11.1 million at December 31, 2014. The Bank uses brokered and jumbo certificates as sources of liquidity. Interest-bearing transaction savings accounts and checking accounts increased $26.2 million, or 15.6%. Transaction savings accounts and checking accounts represent 59.1% of deposits at December 31, 2015, compared to 60.46% of deposits at December 31, 2014. Bank management is actively attempting to increase core deposit account relationships. Transaction savings accounts and checking accounts provide relatively inexpensive funding for future growth, compared to alternative certificates of deposit and borrowed funds at higher interest rates. The Bank offers competitive rates on its time deposits and uses brokered certificates or borrowed funds, when that strategy enhances net interest income.

The stockholders' equity of Bancorp was $32.6 million at December 31, 2015 compared to $30.4 million at December 31, 2014, an increase of $2.2 million, or 7.38%. The primary component of this increase was retained earnings. Cash dividends of $290,000, or $0.14 per share, were paid in 2015, compared to $0.09 in 2014. The stockholders' equity was 8.85% of total assets at December 31, 2015. Book value per share increased to $15.70 at December 31, 2015 from $14.66 at December 31, 2014. 

Mr. Eishen added, "The Board increased the cash dividend in 2015. Another increase by $0.03 per share in the first quarter of 2016 increases the quarterly dividend to $0.08. The increases are well supported with core earnings improvements in the last year and remains in line with the Company's historical payout ratio."

Fourth Quarter of 2015 vs. 2014 - Net income for the quarter ended December 31, 2015 increased to $824,000, or $0.40 per share, from $452,000, or $0.22 per share, for the fourth quarter of 2014. The primary components of the increase are net interest income and provision for loan losses. 

Net interest income increased $523,000, to $3.0 million in the fourth quarter of 2015. The increase is primarily due to reductions in rates paid on average interest-bearing liabilities and growth in average interest-earning assets. The tax-equivalent net interest margin increased to 3.73% in 2015 from 3.58% in the last quarter of 2014.

Net charge-offs for the fourth quarter of 2015 were ($133,000), compared to $79,000 a year ago. The Company recorded ($215,000) provision tor loan losses in the fourth quarter of 2015, compared to ($8,000) for the same quarter of 2014.

Noninterest income decreased $10,000 in the fourth quarter of 2015. The primarily component of noninterest income was commission income, which decreased $60,000. 

Noninterest expense increased $244,000, primarily due to $207,000 pension expense to terminate the acquired Bank's plan. 

Acquisition of West Michigan Savings Bank - On April 6, 2015, the Company completed its acquisition of West Michigan Savings Bank in Bangor, Michigan, in an all-cash transaction valued at approximately $3.3 million. Liabilities assumed included $32.6 million of deposits and $612,000 in other liabilities. The assets acquired included $6.1 million of cash and cash equivalents, $17.4 million of available for sale securities, $11.2 million in loans, and $732,000 in other assets. The Company recognized $365,000 core deposit intangible and $724,000 in goodwill. The transaction incurred $1.0 million of pre-tax expense ($672,000 after tax), including $825,000 ($555,000 after tax) recorded in 2015. Most of the transaction expenses were professional services, data processing termination and conversion, pension termination, and severance pay.

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  
December 31, 2015 and 2014  
(Amounts in thousands, except share and per share data)  
   
   
    2015     2014  
ASSETS                
  Cash and due from banks   $ 10,786     $ 7,680  
  Other short-term investments     5,084       4,369  
    Total cash and cash equivalents     15,870       12,049  
                 
  Interest-earning deposits in banks     16,805       16,575  
  Securities - available for sale     27,635       7,044  
  Securities - held to maturity     19,245       5,792  
  Federal Home Loan Bank stock, at cost     2,632       3,409  
  Loans held for sale, at fair value     1,575       1,716  
  Loans, net of allowance of $3,213 and $3,437     253,830       236,371  
  Premises and equipment, net     8,114       7,504  
  Goodwill     5,834       5,109  
  Core deposit intangibles     320       -  
  Originated mortgage servicing rights     1,349       1,413  
  Real estate owned     827       1,608  
  Bank-owned life insurance     9,735       9,808  
  Accrued interest receivable     1,183       868  
  Other assets     3,605       3,189  
                 
    Total assets   $ 368,559     $ 312,455  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Liabilities                
  Deposits                
    Noninterest-bearing   $ 65,041     $ 51,383  
    Interest-bearing     218,998       182,907  
      Total deposits     284,039       234,290  
  Federal Home Loan Bank advances and other borrowings     47,812       44,218  
  Accrued interest payable     243       238  
  Other liabilities     3,853       3,359  
    Total liabilities     335,947       282,105  
                 
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 2,077,791 shares at December 31, 2015 and 2,069,891 at December 31, 2014    

2,078
     

2,070
 
  Additional paid-in capital     7,277       7,204  
  Retained earnings     23,445       21,276  
  Accumulated other comprehensive loss     (188 )     (200 )
    Total stockholders' equity     32,612       30,350  
                 
      Total liabilities and stockholders' equity   $ 368,559     $ 312,455  
 
 
 
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2015 and 2014
(Amounts in thousands, except share and per share data)
 
 
    2015     2014  
Interest income                
  Loans   $ 11,658     $ 11,101  
  Investment securities:                
    Taxable     521       386  
    Tax-exempt     316       80  
  Dividends     135       170  
    Total interest income     12,630       11,737  
                 
Interest expense                
  Deposits     669       820  
  Borrowed funds     1,212       1,274  
    Total interest expense     1,881       2,094  
                 
Net interest income     10,749       9,643  
                 
Provision for loan losses     (219 )     104  
                 
Net interest income after provision for loan losses     10,968       9,539  
                 
Noninterest income:                
  Service charges and other fees     967       946  
  Interchange income     669       630  
  Investment brokerage commission income     2,097       2,254  
  Mortgage banking activities     700       652  
  Trust fee income     426       379  
  Increase in cash value of bank owned life insurance     973       271  
  Gain (loss) on sale of real estate owned     113       41  
  Other income     98       28  
    Total noninterest income     6,043       5,201  
                 
Noninterest expenses:                
  Salaries and employee benefits     7,748       6,948  
  Occupancy and equipment     1,601       1,543  
  Interchange expenses     376       379  
  Data processing     872       648  
  Professional services     513       554  
  Real estate owned expense     541       322  
  Advertising     187       159  
  Realized loss on sale of available-for-sale securities     2       -  
  FDIC premiums     258       235  
  Other     2,022       1,622  
    Total noninterest expenses     14,120       12,410  
                 
Income before income tax expense     2,891       2,330  
                 
Income tax expense     431       448  
                 
Net income   $ 2,460     $ 1,882  
                 
Earnings per share   $ 1.19     $ 0.91  
Dividends declared per share   $ 0.14     $ 0.09  
    Key Ratios:                
Return on average equity     7.86 %     6.46 %
Return on average assets     0.70 %     0.60 %
Net interest margin (tax equivalent)     3.62 %     3.59 %
Efficiency ratio     84.09 %     83.56 %
 
 
 
CONSOLIDATED STATEMENTS OF INCOME
Three months ended December 31, 2015 and 2014
(Amounts in thousands, except share and per share data)
 
 
Interest income   2015     2014  
  Loans   $ 3,045     $ 2,768  
  Investment securities:                
    Taxable     155       100  
    Tax-exempt     162       22  
  Dividends     28       38  
    Total interest income     3,390       2,928  
                 
Interest expense                
  Deposits     167       178  
  Borrowed funds     270       320  
    Total interest expense     437       498  
                 
Net interest income     2,953       2,430  
                 
Provision for loan losses     (215 )     (8 )
                 
Net interest income after provision for loan losses     3,168       2,438  
                 
Noninterest income:                
  Service charges and other fees     237       221  
  Interchange income     175       179  
  Investment brokerage commission income     527       587  
  Mortgage banking activities     175       168  
  Trust fee income     104       85  
  Increase in cash value of bank owned life insurance     67       69  
  Gain on sale of available-for-sale securities     4       -  
  Gain on sale of real estate owned     20       30  
  Other income     60       16  
    Total noninterest income     1,369       1,355  
                 
Noninterest expenses:                
  Salaries and employee benefits     2,005       1,745  
  Occupancy and equipment     398       381  
  Interchange expenses     94       124  
  Data processing     215       168  
  Professional services     126       186  
  Real estate owned expense     90       80  
  Advertising     72       41  
  FDIC premiums     60       63  
  Other     414       451  
    Total noninterest expenses     3,474       3,239  
                 
Income before income tax expense     1,063       554  
                 
Income tax expense     239       102  
                 
Net income   $ 824     $ 452  
                 
Earnings per share   $ 0.40     $ 0.22  
Dividends declared per share   $ 0.05     $ 0.03  
    Key Ratios:                
Return on average equity     10.16 %     5.92 %
Return on average assets     0.90 %     0.57 %
Net interest margin (tax equivalent)     3.73 %     3.58 %
Efficiency ratio     80.38 %     85.58 %

Contacts:
Sturgis Bancorp
Eric Eishen
President & CEO

Brian P. Hoggatt
CFO
P: 269 651-9345