Sturgis Bancorp Reports Earnings for 2015
/EINPresswire.com/ -- STURGIS, MI -- (Marketwired) -- 01/29/16 -- 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)
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2015 2014
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ASSETS
Cash and due from banks $ 10,786 $ 7,680
Other short-term investments 5,084 4,369
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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
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Total assets $ 368,559 $ 312,455
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 65,041 $ 51,383
Interest-bearing 218,998 182,907
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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
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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)
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Total stockholders' equity 32,612 30,350
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Total liabilities and stockholders' equity $ 368,559 $ 312,455
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CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2015 and 2014
(Amounts in thousands, except share and per share data)
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2015 2014
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Interest income
Loans $ 11,658 $ 11,101
Investment securities:
Taxable 521 386
Tax-exempt 316 80
Dividends 135 170
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Total interest income 12,630 11,737
Interest expense
Deposits 669 820
Borrowed funds 1,212 1,274
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Total interest expense 1,881 2,094
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Net interest income 10,749 9,643
Provision for loan losses (219) 104
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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
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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
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Total noninterest expenses 14,120 12,410
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Income before income tax expense 2,891 2,330
Income tax expense 431 448
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Net income $ 2,460 $ 1,882
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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)
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Interest income 2015 2014
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Loans $ 3,045 $ 2,768
Investment securities:
Taxable 155 100
Tax-exempt 162 22
Dividends 28 38
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Total interest income 3,390 2,928
Interest expense
Deposits 167 178
Borrowed funds 270 320
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Total interest expense 437 498
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Net interest income 2,953 2,430
Provision for loan losses (215) (8)
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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
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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
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Total noninterest expenses 3,474 3,239
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Income before income tax expense 1,063 554
Income tax expense 239 102
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Net income $ 824 $ 452
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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
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