STURGIS, Mich., Jan. 16, 2019 (GLOBE NEWSWIRE) -- Sturgis Bancorp, Inc. (OTCQX: STBI) announced net income of $4.4 million for 2018, and net income of $1.2 million for the fourth quarter of 2018, 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., 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 for 2018:
- Net income for 2018 was $4.4 million, or $2.08 per share, compared to net income of $3.2 million, or $1.52 per share, in 2017.
- The Bank capital ratios exceeded “well-capitalized” requirements and ended 2018 with Tier 1 capital at 8.56% of average assets and 12.51% of risk-weighted assets. Total capital at December 31, 2018 was 13.61% of risk-weighted assets.
- The allowance for loan losses decreased to 1.03% of total (gross) loans on December 31, 2018 from 1.09% at the end of 2017, primarily due to improvements in asset quality and minimal loss experience. Net charge offs in 2018 were $5,000, compared to ($43,000) in 2017.
Year 2018 vs. 2017 - Net income for the year ended December 31, 2018 increased to $4.4 million, or $2.08 per share from net income of $3.2 million, or $1.52 per share, for 2017. Net interest income increased 12.6% to $14.6 million, from $12.9 million for 2017. The increase in net interest income is primarily due to growth in loans.
The average rate earned on interest-earning assets increased to 4.45% in 2018 from 4.15% in 2017. The average rate paid on interest-bearing liabilities increased to 0.87% in 2018 from 0.70% in 2017. Average interest-earning assets increased to $387.0 million in 2018 from $361.3 million in 2017, including $27.6 million growth in average loans. The tax equivalent net interest margin increased to 3.93% in 2018 from 3.76% in 2017.
The provision for loan losses was $161,000 for the year ended December 31, 2018, compared to ($213,000) for the year ended December 31, 2017. 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 2018, net of recoveries, were $5,000, compared to ($43,000) in 2017.
Noninterest income was $5.2 million in 2018, compared to $5.5 million in 2017. Most of the decrease is due to $258,000 net gain on cash flow hedges realized in 2017. The Bank realized $224,000 gain on sale of real estate owned in 2018, compared to $34,000 in 2017.
Noninterest expense was $14.7 million in 2018, compared to $15.3 million in 2017. Salaries and employee benefits, the largest component of noninterest expense, decreased $132,000. The Bank realized $159,000 losses on sales of available-for-sale securities in 2018, compared to $441,000 in 2017. Occupancy and equipment expensed decreased $103,000 to $1.7 million in 2018. Management actively minimizes noninterest expense, although certain noninterest expenses are outside of Management’s direct control.
Total assets increased to $431.6 million at December 31, 2018 from $414.4 million at December 31, 2017, primarily in loans. Net loans increased $30.5 million, to $311.1 million at December 31, 2018. Most of the net loan growth was in commercial real estate loans.
Deposits were $342.5 million at December 31, 2018 compared to $337.1 million at December 31, 2017, an increase of $5.4 million. Interest-bearing deposits increased to $260.1 million at December 31, 2018 from $255.5 million at December 31, 2017. Brokered certificates of deposit, a component of interest-bearing deposits, decreased to $34.9 million at December 31, 2018 from $43.5 million at December 31, 2017, as the Bank replaced brokered funds with borrowings. Non-brokered jumbo certificates increased to $21.6 million at December 31, 2018 from $12.9 million at December 31, 2017. The Bank uses brokered, jumbo certificates, and borrowings as sources of liquidity. 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 is expected to enhance net interest income.
Federal Home Loan Bank advances and other borrowings increased $10.0 million. Matured brokered deposits were refinanced with new borrowings.
The stockholders’ equity of Bancorp was $40.2 million at December 31, 2018 compared to $37.3 million at December 31, 2017, an increase of $2.9 million, or 8.4%. The primary component of this increase was retained earnings. Cash dividends of $1.2 million, or $0.57 per share, were paid in 2018. The stockholders’ equity was 9.31% of total assets at December 31, 2018. Book value per share increased to $19.09 at December 31, 2018 from $17.78 at December 31, 2017.
The regular quarterly dividend for Bancorp was increased to $0.14 per share in the first quarter of 2018, compared to $0.12 per share for each quarter of 2017. The regular quarterly dividend was further increased to $0.15 in the fourth quarter of 2018. These increases were well supported by earnings enhancements, and were in line with historical payout ratios for Bancorp.
Fourth Quarter of 2018 vs. 2017 - Net income for the quarter ended December 31, 2018 increased to $1.2 million, or $0.57 per share, from $828,000, or $0.40 per share, for the fourth quarter of 2017. The primary components of the increase were net interest income and noninterest expense. Provision for income taxes was $190,000 in the fourth quarter of 2018, compared to ($493,000) in the fourth quarter of 2017. The Bank revalued its net deferred tax positions in the fourth quarter of 2017, using the lower corporate tax rate. Because the Bank has greater deferred tax liabilities than deferred tax assets, the revaluations were a net benefit to the Bank.
Net interest income increased $472,000, to $3.8 million in the fourth quarter of 2018. The increase is primarily due to growth in average interest-earning assets. The tax-equivalent net interest margin increased to 4.02% in the fourth quarter of 2018 from 3.79% in the same quarter of 2017, primarily due to growth in loans and market rate increases.
Net charge-offs for the fourth quarter of 2018 were $18,000, compared to $5,000 a year ago. The Company recorded ($8,000) provision for loan losses in the fourth quarter of 2018, compared to ($31,000) for the same quarter of 2017.
Noninterest income decreased $42,000 in the fourth quarter of 2018 to $1.2 million. The primarily component of the decrease in noninterest income was commission income, which decreased $120,000. The company recorded $88,000 gain on sale of real estate owned in the fourth quarter of 2018, compared to $11,000 in the same quarter of 2017.
Noninterest expense decreased $653,000 in the fourth quarter of 2018, primarily due to 2017 losses on sale of available-for-sale securities and other tax strategies implemented in response to the reduction in corporate tax rates for 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.
| CONSOLIDATED BALANCE SHEETS | ||||||
| December 31, 2018 and 2017 | ||||||
| (Amounts in thousands, except share and per share data) | ||||||
| 2018 | 2017 | |||||
| ASSETS | ||||||
| Cash and due from banks | $ | 12,267 | $ | 14,219 | ||
| Other short-term investments | 13,133 | 10,293 | ||||
| Total cash and cash equivalents | 25,400 | 24,512 | ||||
| Interest-earning deposits in banks | 7,350 | 11,058 | ||||
| Securities - available for sale | 46,205 | 25,313 | ||||
| Securities - held to maturity | 5,472 | 35,578 | ||||
| Federal Home Loan Bank stock, at cost | 3,393 | 3,393 | ||||
| Loans held for sale, at fair value | 67 | 1,117 | ||||
| Loans, net of allowance of $3,228 and $3,072 | 311,050 | 280,586 | ||||
| Premises and equipment, net | 9,274 | 8,985 | ||||
| Goodwill | 5,834 | 5,834 | ||||
| Core deposit intangibles | 155 | 203 | ||||
| Originated mortgage servicing rights | 1,171 | 1,160 | ||||
| Real estate owned | 193 | 453 | ||||
| Bank-owned life insurance | 10,515 | 10,261 | ||||
| Accrued interest receivable | 1,550 | 1,536 | ||||
| Other assets | 3,946 | 4,443 | ||||
| Total assets | $ | 431,575 | $ | 414,432 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Liabilities | ||||||
| Deposits | ||||||
| Noninterest-bearing | $ | 82,442 | $ | 81,641 | ||
| Interest-bearing | 260,058 | 255,473 | ||||
| Total deposits | 342,500 | 337,114 | ||||
| Federal Home Loan Bank advances and other borrowings | 44,109 | 34,447 | ||||
| Accrued interest payable | 375 | 239 | ||||
| Other liabilities | 4,430 | 5,378 | ||||
| Total liabilities | 391,414 | 377,178 | ||||
| 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 2,103,991 shares at December 31, 2018 | ||||||
| and 2,094,991 at December 31, 2017 | 2,104 | 2,095 | ||||
| Additional paid-in capital | 7,683 | 7,514 | ||||
| Retained earnings | 30,526 | 27,351 | ||||
| Accumulated other comprehensive loss | (152) | 294 | ||||
| Total stockholders' equity | 40,161 | 37,254 | ||||
| Total liabilities and stockholders' equity | $ | 431,575 | $ | 414,432 | ||
| CONSOLIDATED STATEMENTS OF INCOME | |||||
| Years ended December 31, 2018 and 2017 | |||||
| (Amounts in thousands, except share and per share data) | |||||
| 2018 | 2017 | ||||
| Interest income | |||||
| Loans | $ | 14,960 | $ | 12,953 | |
| Investment securities: | |||||
| Taxable | 988 | 804 | |||
| Tax-exempt | 1,095 | 1,100 | |||
| Dividends | 194 | 125 | |||
| Total interest income | 17,237 | 14,982 | |||
| Interest expense | |||||
| Deposits | 1,726 | 777 | |||
| Borrowed funds | 937 | 1,261 | |||
| Total interest expense | 2,663 | 2,038 | |||
| Net interest income | 14,574 | 12,944 | |||
| Provision for loan losses | 161 | (213) | |||
| Net interest income after provision for loan losses | 14,413 | 13,157 | |||
| Noninterest income: | |||||
| Service charges and other fees | 1,360 | 1,356 | |||
| Interchange income | 812 | 770 | |||
| Investment brokerage commission income | 1,368 | 1,545 | |||
| Mortgage banking activities | 663 | 679 | |||
| Trust fee income | 451 | 446 | |||
| Earnings on cash value of bank-owned life insurance | 254 | 263 | |||
| Gain on sale of real estate owned | 224 | 34 | |||
| Net gain on cash flow hedges | - | 258 | |||
| Other income | 111 | 100 | |||
| Total noninterest income | 5,243 | 5,451 | |||
| Noninterest expenses: | |||||
| Salaries and employee benefits | 8,604 | 8,736 | |||
| Occupancy and equipment | 1,708 | 1,811 | |||
| Interchange expenses | 366 | 379 | |||
| Data processing | 740 | 669 | |||
| Professional services | 399 | 401 | |||
| Real estate owned expense | 111 | 152 | |||
| Advertising | 342 | 296 | |||
| FDIC premiums | 249 | 191 | |||
| Loss (gain) on sale of securities | 159 | 441 | |||
| Other | 1,986 | 2,251 | |||
| Total noninterest expenses | 14,664 | 15,327 | |||
| Income before income tax expense | 4,992 | 3,281 | |||
| Income tax expense | 619 | 113 | |||
| Net income | $ | 4,373 | $ | 3,168 | |
| Earnings per share | $ | 2.08 | $ | 1.52 | |
| Dividends declared per share | $ | 0.57 | $ | 0.48 | |
| CONSOLIDATED STATEMENTS OF INCOME | |||||
| Three months ended December 31, 2018 and 2017 | |||||
| (Amounts in thousands, except share and per share data) | |||||
| 2018 | 2017 | ||||
| Interest income | |||||
| Loans | $ | 4,005 | $ | 3,387 | |
| Investment securities: | |||||
| Taxable | 244 | 185 | |||
| Tax-exempt | 267 | 280 | |||
| Dividends | 56 | 34 | |||
| Total interest income | 4,572 | 3,886 | |||
| Interest expense | |||||
| Deposits | 472 | 272 | |||
| Borrowed funds | 285 | 271 | |||
| Total interest expense | 757 | 543 | |||
| Net interest income | 3,815 | 3,343 | |||
| Provision for loan losses | (8) | (31) | |||
| Net interest income after provision for loan losses | 3,823 | 3,374 | |||
| Noninterest income: | |||||
| Service charges and other fees | 344 | 355 | |||
| Interchange income | 204 | 193 | |||
| Investment brokerage commission income | 324 | 444 | |||
| Mortgage banking activities | 113 | 101 | |||
| Trust fee income | 86 | 97 | |||
| Earnings on cash value of bank-owned life insurance | 64 | 64 | |||
| Gain on sale of real estate owned | 88 | 11 | |||
| Other income | 23 | 23 | |||
| Total noninterest income | 1,246 | 1,288 | |||
| Noninterest expenses: | |||||
| Salaries and employee benefits | 2,186 | 2,310 | |||
| Occupancy and equipment | 420 | 467 | |||
| Interchange expenses | 92 | 95 | |||
| Data processing | 194 | 174 | |||
| Professional services | 84 | 89 | |||
| Real estate owned expense | 6 | 51 | |||
| Advertising | 46 | 103 | |||
| FDIC premiums | 46 | 53 | |||
| Loss on sale of securities | 159 | 421 | |||
| Other | 441 | 564 | |||
| Total noninterest expenses | 3,674 | 4,327 | |||
| Income before income tax expense | 1,395 | 335 | |||
| Income tax expense | 190 | (493) | |||
| Net income | $ | 1,205 | $ | 828 | |
| Earnings per share | $ | 0.57 | $ | 0.40 | |
| Dividends declared per share | $ | 0.15 | $ | 0.12 | |
| OTHER FINANCIAL INFORMATION | ||
| (Amounts in thousands) | ||
| Three Months Ended Dec. 31, | ||
| 2018 | 2017 | |
| Sturgis Bank & Trust Company: | ||
| Average noninterest-bearing deposits | $ 86,063 | $ 78,740 |
| Average interest-bearing deposits | 265,620 | 240,899 |
| Average total assets | 434,854 | 408,187 |
| Total risk-weighted assets, end of period | 294,145 | 268,526 |
| Sturgis Bancorp: | ||
| Average equity | 40,287 | 36,769 |
| Average total assets | 436,708 | 408,375 |
| Total risk-weighted assets, end of period | 294,364 | 268,801 |
| Financial ratios for Sturgis Bancorp: | ||
| Return on average assets | 1.09% | 0.81% |
| Return on average equity | 11.86% | 8.94% |
| Net interest margin | 3.86% | 3.61% |
| Tax equivalent net interest margin | 4.02% | 3.79% |
| Year Ended December 31, | ||
| 2018 | 2017 | |
| Sturgis Bank & Trust Company: | ||
| Average noninterest-bearing deposits | $ 83,002 | $ 73,693 |
| Average interest-bearing deposits | 270,645 | 235,440 |
| Average total assets | 432,327 | 404,215 |
| Sturgis Bancorp: | ||
| Average equity | 39,081 | 35,592 |
| Average total assets | 432,519 | 404,387 |
| Financial ratios for Sturgis Bancorp: | ||
| Return on average assets | 1.01% | 0.78% |
| Return on average equity | 11.19% | 8.83% |
| Net interest margin | 3.77% | 3.58% |
| Tax equivalent net interest margin | 3.93% | 3.76% |
Contacts:
Sturgis Bancorp -- Eric Eishen, President & CEO, or Brian P. Hoggatt, CFO -- P: 269 651-9345