Sturgis Bancorp Reports Earnings for Second Quarter 2021
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Sturgis Bancorp Reports Earnings for Second Quarter 2021

Wednesday, July 21, 2021 11:25 AM
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STURGIS, MI / ACCESSWIRE / July 21, 2021 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $1.4 million for the second quarter of 2021 and $2.7 million for the first half of 2021.

Sturgis Bancorp is the holding company for Sturgis Bank & Trust Company (Bank), and its subsidiaries Oakleaf Financial Services, Oak Mortgage, Ayres/Oak Insurance, and Oak Title Services. The Bank provides a full array of trust, commercial and consumer banking services from banking centers in Sturgis, Bangor, Bronson, Centreville, Climax, Colon, Portage, South Haven, St. Joseph, Three Rivers and White Pigeon, MI. Oakleaf Financial Services offers a complete range of investment and financial-advisory services. Oak Mortgage offers residential mortgages in all markets of the Bank. Ayres/Oak Insurance offers various competitive commercial and consumer insurance products. Oak Title Services offers commercial and consumer title insurance.

Key Highlights for the first half of 2021:

  • Credit quality is very strong, with 99.84% of loans performing according to loan agreements.
  • The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.62%.
  • Sales of $71.0 million residential mortgages generated $1.9 million of noninterest income in 2021, compared to $1.9 million on $70.0 million of sales in 2020.
  • Total assets increased 9.8% to $706.7 million.
  • Net loans increased 12.2% to $499.2 million, including $39.9 million increase in residential mortgages.
  • An interest rate swap was terminated, generating $407,000 gain.
  • Total deposits increased 12.4% to $571.0 million.
  • Allowance for loan losses was 1.39% of loans.

Eric L. Eishen, President and CEO, stated, "The Bank had a strong first half. Few loans were delinquent and loans with COVID-related accommodations in the past year have paid off or returned to normal payments. Earnings were positively impacted by strong Mortgage Banking activity and the gain on swap termination. Paycheck Protection Program loan originations also continued strong through the first half of 2021, serving local employers and introducing some new customers to the Bank. At the end of 2020, the Company issued $15 million of subordinated debt and immediately invested $10 million of the proceeds in the Bank. The debt was issued in anticipation of strong growth opportunities in Berrien County, Michigan. Two branch offices have recently been opened in St. Joseph, Michigan to service those opportunities, and the Portage, Michigan loan production office was converted to a full service branch. In 2021, the Company invested an additional $3 million in the Bank, supporting further successful growth in southwest Michigan."

Three months ended June 30, 2021 vs. three months ended June 30, 2020 - Net income for the three months ended June 30, 2021 was $1,380,000, or $0.65 per share, compared to net income of $1,355,000, or $0.64 per share, for the three months ended June 30, 2020. The tax equivalent net interest margin increased to 2.95% in the first three months of 2021 from 2.92% in the first three months of 2020.

Net interest income increased to $4.7 million in 2021 from $4.2 million in 2020. The growth was primarily due to loan interest income, which increased by $726,000 to $5.3 million. Total interest income increased $713,000 to $5.8 million in 2021, and interest expense only increased $120,000 to $1.0 million in 2021.

The Company provided $357,000 to the allowance for loan losses in the three months ended June 30, 2021, compared to $974,000 in the same quarter of 2020. The higher 2020 provision was due to COVID uncertainties at that time. Net charge-offs were ($43,000) in the second quarter of 2021 and ($2,000) in the second quarter of 2020.

Noninterest income was $2.0 million in the second quarter of 2021, compared to $2.3 million in the second quarter of 2020. Most of the decrease was due to mortgage banking activities. Loan sales were $19.5 million in the second quarter of 2021 and $36.9 million in the second quarter of 2020. Investment brokerage commission income increased to $483,000 in 2021 from $323,000 in 2020.

Noninterest expense was $4.8 million in 2021, compared to $3.9 million in 2020. Salaries and employee benefits, the largest component of noninterest expense, increased $529,000, or 22.8%. The higher compensation expense includes staff for the Bank's expansion into southwest Michigan.

Six months ended June 30, 2021 vs. six months ended June 30, 2020 - Net income for the six months ended June 30, 2021 was $2,743,000, or $1.29 per share, compared to net income of $2,863,000, or $1.35 per share, for the six months ended June 30, 2020. The tax equivalent net interest margin decreased to 2.86% in the first half of 2021 from 3.44% in the first half months of 2020.

Net interest income increased to $9.1 million in 2021 from $8.3 million in 2020. The growth was primarily due to loan interest income, which increased by $986,000 to $10.1 million. Total interest income increased $1.0 million to $11.2 million in 2021, and interest expense only increased $257,000 to $2.0 million in 2021.

The Company provided $993,000 to the allowance for loan losses in the six months ended June 30, 2021, compared to $1.1 million in the first half of 2020. Provisions in 2021 were primarily due to growth of the loan portfolio. The 2020 provision was primarily due to COVID uncertainties at that time. Net charge-offs were $208,000 in the first half of 2021 and $62,000 in the first half of 2020.

Noninterest income was $4.8 million in the first half of 2021, compared to $4.1 million in the first half of 2020. Most of the increase was due to $407,000 gain on termination of an interest rate swap. Investment brokerage commission income increased to $931,000 in 2021 from $685,000 in 2020.

Noninterest expense was $9.5 million in the first half of 2021, compared to $7.9 million in the first half of 2020. Salaries and employee benefits, the largest component of noninterest expense, increased $900,000, or 18.6%. The higher compensation expense includes staff for the Bank's expansion into southwest Michigan.

Total assets increased to $706.7 million on June 30, 2021 from $643.6 million on December 31, 2020, primarily in loans. Loans increased $54.1 million from December 31, 2020, primarily in residential mortgages.

Interest-bearing deposits increased to $427.2 million on June 30, 2021 from $383.5 million on December 31, 2020. The increase in deposit accounts is partially due increased market penetration in southwest Michigan. Brokered deposits, a component of interest-bearing deposits, decreased $20.0 million to $41.2 million in the first half of 2021.

Total equity was $49.8 million on June 30, 2021, compared to $47.1 million on December 31, 2020. The regular quarterly dividend was maintained during 2020 and into the first half of 2021 at a record-high $0.16 per share. Book value per share was $23.40 ($19.34 tangible) on June 30, 2021.

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.

Contacts:

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

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)

       

 
 June 30,  Dec. 31, 
 
 2021  2020 
ASSETS
 
 
  
 
 
Cash and due from banks
 $12,692  $12,060 
Other short-term investments
  48,897   55,782 
Total cash and cash equivalents
  61,589   67,842 
Interest-earning deposits in banks
  1,241   1,241 
Securities - available for sale
  92,549   73,072 
Federal Home Loan Bank stock, at cost
  6,026   4,917 
Loans held for sale, at fair value
  5,058   6,832 
Loans, net of allowance of $7,016 and $6,231
  499,182   445,091 
Premises and equipment, net
  12,265   11,844 
Goodwill
  5,834   5,834 
Core deposit intangibles
  62   77 
Originated mortgage servicing rights
  2,735   2,245 
Real estate owned
  210   341 
Bank-owned life insurance
  11,234   11,091 
Accrued interest receivable
  2,163   2,458 
Other assets
  6,586   10,721 
Total assets
 $706,734  $643,606 

 
        
LIABILITIES AND STOCKHOLDERS' EQUITY
        
Liabilities
        
Deposits
        
Noninterest-bearing
 $143,783  $124,434 
Interest-bearing
  427,215   383,464 
Total deposits
  570,998   507,898 
Federal Home Loan Bank advances and other borrowings
  61,500   61,500 
Subordinated debentures - $15,000 face amount (less unamortized
        
debt issuance costs of $369 at June 30, 2021 and $400 at
        
December 31, 2020)
  14,631   14,600 
Accrued interest payable
  429   477 
Other liabilities
  9,391   12,019 
Total liabilities
  656,949   596,494 

 
        
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 2,127,791 shares at June 30, 2021
        
and 2,123,291 at December 31, 2020
  2,128   2,123 
Additional paid-in capital
  8,130   8,050 
Retained earnings
  40,903   38,840 
Accumulated other comprehensive loss
  (1,376)  (1,901)
Total stockholders' equity
  49,785   47,112 

 
        
Total liabilities and stockholders' equity
 $706,734  $643,606 
         

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)

    

 
 Three Months 

 
 Ended June 30, 

 
 2021  2020 
Interest income
 
 
  
 
 
Loans
 $5,304  $4,578 
Investment securities:
        
Taxable
  289   232 
Tax-exempt
  134   165 
Dividends
  84   123 
Total interest income
  5,811   5,098 

 
        
Interest expense
        
Deposits
  654   484 
Borrowed funds
  392   442 
Total interest expense
  1,046   926 

 
        
Net interest income
  4,765   4,172 

 
        
Provision (benefit) for loan losses
  357   974 

 
        
Net interest income after provision (benefit) for loan losses
  4,408   3,198 

 
        
Noninterest income:
        
Service charges and other fees
  295   270 
Interchange income
  305   219 
Investment brokerage commission income
  483   323 
Mortgage banking activities
  737   1,122 
Trust fee income
  101   103 
Earnings on cash value of bank-owned life insurance
  72   73 
Gain (loss) on sale of real estate owned
  2   - 
Gain on sale of securities
  -   157 
Gain on termination of interest rate swap
  -   - 
Other income
  14   15 
Total noninterest income
  2,009   2,282 

 
        
Noninterest expenses:
        
Salaries and employee benefits
  2,851   2,322 
Occupancy and equipment
  596   499 
Interchange expenses
  126   97 
Data processing
  226   220 
Professional services
  71   52 
Real estate owned expense
  3   1 
Advertising
  124   58 
FDIC premiums
  77   41 
Other expenses
  675   566 
Total noninterest expenses
  4,749   3,856 

 
        
Income before income tax expense
  1,668   1,624 

 
        
Income tax expense
  288   269 

 
        
Net income
 $1,380  $1,355 

 
        
Earnings per share
 $0.65  $0.64 
Dividends per share
 $0.16  $0.16 
         

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)

    

 
 Six Months 

 
 Ended June 30, 

 
 2021  2020 
Interest income
 
 
  
 
 
Loans
 $10,073  $9,087 
Investment securities:
        
Taxable
  500   489 
Tax-exempt
  274   394 
Dividends
  315   174 
Total interest income
  11,162   10,144 

 
        
Interest expense
        
Deposits
  1,309   999 
Borrowed funds
  777   830 
Total interest expense
  2,086   1,829 

 
        
Net interest income
  9,076   8,315 

 
        
Provision (benefit) for loan losses
  993   1,125 

 
        
Net interest income after provision (benefit) for loan losses
  8,083   7,190 

 
        
Noninterest income:
        
Service charges and other fees
  593   595 
Interchange income
  556   430 
Investment brokerage commission income
  931   685 
Mortgage banking activities
  1,854   1,898 
Trust fee income
  185   201 
Earnings on cash value of bank-owned life insurance
  143   146 
Gain (loss) on sale of real estate owned
  41   (2)
Gain on sale of securities
  -   157 
Gain on termination of interest rate swap
  407   - 
Other income
  40   36 
Total noninterest income
  4,750   4,146 

 
        
Noninterest expenses:
        
Salaries and employee benefits
  5,747   4,847 
Occupancy and equipment
  1,204   1,009 
Interchange expenses
  239   198 
Data processing
  440   422 
Professional services
  185   185 
Real estate owned expense
  6   3 
Advertising
  230   127 
FDIC premiums
  141   86 
Other expenses
  1,331   1,033 
Total noninterest expenses
  9,523   7,910 

 
        
Income before income tax expense
  3,310   3,426 

 
        
Income tax expense
  567   563 

 
        
Net income
 $2,743  $2,863 

 
        
Earnings per share
 $1.29  $1.35 
Dividends per share
 $0.32  $0.32 
         

OTHER FINANCIAL INFORMATION
(Amounts in thousands)


 
 Three Months 

 
 Ended June 30, 

 
 2021  2020 
Sturgis Bank & Trust Company:
 
 
  
 
 
Average noninterest-bearing deposits
 141,526  109,060 
Average interest-bearing deposits
  427,529   298,697 
Average total assets
  705,217   579,891 
Sturgis Bancorp:
        
Average equity
  49,089   43,013 
Average total assets
  705,376   580,008 

 
        
Financial ratios for Sturgis Bancorp:
        
Return on average assets
  0.78%  0.94%
Return on average equity
  11.15%  12.67%
Net interest margin
  2.91%  2.87%
Tax equivalent net interest margin
  2.95%  2.92%
         

 
 Six Months 

 
 Ended June 30, 

 
 2021  2020 
Sturgis Bank & Trust Company:
 
 
  
 
 
Average noninterest-bearing deposits
 $136,487  $97,916 
Average interest-bearing deposits
  423,729   285,925 
Average total assets
  696,284   540,293 
Sturgis Bancorp:
        
Average equity
  48,423   43,250 
Average total assets
  696,421   540,364 

 
        
Financial ratios for Sturgis Bancorp:
        
Return on average assets
  0.79%  1.07%
Return on average equity
  11.36%  13.31%
Net interest margin
  2.83%  3.39%
Tax equivalent net interest margin
  2.86%  3.44%
         

SOURCE: Sturgis Bancorp, Inc.

Sturgis Bancorp, Inc.
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