Sturgis Bancorp Reports Earnings for 2016
STURGIS, Mich., Jan. 20, 2017 (GLOBE NEWSWIRE) -- Sturgis Bancorp, Inc. (OTCQX:STBI) announced net income of $2.7 million for 2016, and net income of $695,000 for the fourth quarter of 2016, 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 2016:
- Net income for 2016 was $2.7 million, or $1.28 per share, compared to net income of $2.5 million, or $1.19 per share, in 2015.
- The Bank increased capital ratios, exceeding “well-capitalized” requirements and ending 2016 with Tier 1 capital at 8.32% of average assets and 12.84% of risk-weighted assets. Total capital at December 31, 2016 was 14.09% of risk-weighted assets.
- Nonaccrual loans decreased significantly, by $2.2 million, to $917,000.
- The allowance for loan losses decreased to 1.20% of total (gross) loans from 1.25% at the end of 2015, primarily due to improvements in nonaccrual loans and other measures of credit quality.
Year 2016 vs. 2015 - Net income for the year ended December 31, 2016 increased to $2.7 million, or $1.28 per share from net income of $2.5 million, or $1.19 per share, for 2015. Net interest income increased 14.6% to $12.3 million, from $10.7 million for 2015. 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 0.65% in 2016 from 0.74% in 2015. Average interest-earning assets increased to $342.7 million in 2016 from $303.5 million in 2015. The tax equivalent net interest margin increased to 3.76% in 2016 from 3.62% in 2015.
The provision for loan losses was $357,000 for the year ended December 31, 2016, compared to ($219,000) for the year ended December 31, 2015. 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 2016, net of recoveries, were $329,000. Net charge-offs were at a historical low of $5,000 in 2015, primarily due to two commercial loan recoveries.
Noninterest income was $5.2 million in 2016, compared to $6.0 million in 2015. 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 from subsidiary Oakleaf Financial Services decreased $494,000 to $1.6 million in 2016, primarily due to mid-Summer conversion from LPL to Raymond James. The decrease in first-year revenue and related transition expenses are partially offset by $748,000 of unearned income on December 31, 2016, which will be recognized into income over the next 54 months.
Noninterest expense was $13.8 million in 2016, compared to $14.1 million in 2015. The Bank incurred $825,000 pre-tax expenses in 2015 related to the April 2015 acquisition of another Bank. The largest component of noninterest expense is salaries and employee benefits, which increased $262,000. This increase is primarily due to full-year salaries and employee benefits for the acquired Bank location, health insurance, and other employee benefits. Real estate owned expense decreased $317,000 to $224,000, including $69,000 to write-down values to market prices, compared to $354,000 of similar write-downs in 2015. Management actively minimizes noninterest expense, although certain noninterest expenses are outside of Management’s direct control.
Total assets increased to $398.6 million at December 31, 2016 from $368.6 million at December 31, 2015, primarily in securities. Securities available-for-sale and held-to-maturity increased $4.8 million and $14.5 million, respectively. Net loans increased $13.1 million, to $266.9 million at December 31, 2016.
Deposits were $297.8 million at December 31, 2016 compared to $284.0 million at December 31, 2015, an increase of $13.7 million. Interest-bearing deposits increased to $232.3 million at December 31, 2016 from $219.0 million at December 31, 2015. Brokered certificates of deposit increased to $9.6 million at December 31, 2016 from $7.7 million at December 31, 2015. Non-brokered jumbo certificates remained unchanged at $13.0 million at December 31, 2016 and December 31, 2015. The Bank uses brokered and jumbo certificates as sources of liquidity. Interest-bearing transaction savings accounts and checking accounts increased $13.6 million, or 8.1%. Transaction savings accounts and checking accounts represent 60.9% of deposits at December 31, 2016, compared to 59.1% of deposits at December 31, 2015. 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 $13.4 million, to supplement deposits in funding growth in securities and loans.
The stockholders’ equity of Bancorp was $34.6 million at December 31, 2016 compared to $32.6 million at December 31, 2015, an increase of $2.0 million, or 6.7%. The primary component of this increase was retained earnings. Cash dividends of $873,000, or $0.42 per share, were paid in 2016, compared to $0.14 in 2015. The stockholders’ equity was 8.69% of total assets at December 31, 2016. Book value per share increased to $16.61 at December 31, 2016 from $15.70 at December 31, 2015.
Mr. Eishen added, “The Board increased the cash dividend through 2015 and 2016. The regular quarterly dividend is now $0.12 per share, fully restoring quarterly cash dividends to Bancorp's pre-crisis level. The increases are well supported with core earnings improvements and credit quality improvements in recent years, and remains in line with the Company's historical payout ratio."
Fourth Quarter of 2016 vs. 2015 - Net income for the quarter ended December 31, 2016 decreased to $695,000, or $0.33 per share, from $824,000, or $0.40 per share, for the fourth quarter of 2015. The primary component of the decrease was provision for loan losses.
Net interest income increased $188,000, to $3.1 million in the fourth quarter of 2016. The increase is primarily due to growth in average interest-earning assets. The tax-equivalent net interest margin decreased to 3.68% in the fourth quarter of 2016 from 3.73% in the last quarter of 2015, primarily due to growth in securities.
Net charge-offs for the fourth quarter of 2016 were $107,000, compared to ($133,000) a year ago. The Company recorded $73,000 provision for loan losses in the fourth quarter of 2016, compared to ($215,000) for the same quarter of 2015.
Noninterest income increased $113,000 in the fourth quarter of 2016 to $1.3 million. The primarily component of noninterest income was commission income, which decreased $146,000. The company recorded $99,000 net gain on cash flow hedges in the fourth quarter of 2016.
Noninterest expense decreased $3,000 in the fourth quarter of 2016, primarily in real estate owned expenses. Salaries and employee benefits increased $176,000, due to health insurance and other employee benefits. Real estate owned expenses decreased $76,000 in the fourth quarter of 2016 to $14,000. Data processing expenses decreased $47,000 in the fourth quarter of 2016, due to renegotiated contractual pricing.
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, 2016 and 2015 | |||||||||||||
(Amounts in thousands, except share and per share data) | |||||||||||||
2016 | 2015 |
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ASSETS |
|||||||||||||
Cash and due from banks | $ | 8,150 | $ | 10,786 | |||||||||
Other short-term investments | 4,964 | 5,084 | |||||||||||
Total cash and cash equivalents | 13,114 | 15,870 | |||||||||||
Interest-earning deposits in banks | 16,068 | 16,805 | |||||||||||
Securities - available for sale | 32,387 | 27,635 | |||||||||||
Securities - held to maturity | 33,769 | 19,245 | |||||||||||
Federal Home Loan Bank stock, at cost | 3,117 | 2,632 | |||||||||||
Loans held for sale, at fair value | 1,089 | 1,575 | |||||||||||
Loans, net of allowance of $3,242 and $3,213 | 266,871 | 253,830 | |||||||||||
Premises and equipment, net | 8,360 | 8,114 | |||||||||||
Goodwill | 5,834 | 5,834 | |||||||||||
Core deposit intangibles | 259 | 320 | |||||||||||
Originated mortgage servicing rights | 1,216 | 1,349 | |||||||||||
Real estate owned | 687 | 827 | |||||||||||
Bank-owned life insurance | 9,998 | 9,735 | |||||||||||
Accrued interest receivable | 1,407 | 1,183 | |||||||||||
Other assets | 4,453 | 3,605 | |||||||||||
Total assets | $ | 398,629 | $ | 368,559 | |||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||||||||
Liabilities | |||||||||||||
Deposits | |||||||||||||
Noninterest-bearing | $ | 65,455 | $ | 65,041 | |||||||||
Interest-bearing | 232,312 | 218,998 | |||||||||||
Total deposits | 297,767 | 284,039 | |||||||||||
Federal Home Loan Bank advances and other borrowings | 61,180 | 47,812 | |||||||||||
Accrued interest payable | 243 | 243 | |||||||||||
Other liabilities | 4,796 | 3,853 | |||||||||||
Total liabilities | 363,986 | 335,947 | |||||||||||
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 2,085,991 shares at December 31, 2016 | |||||||||||||
and 2,077,791 at December 31, 2015 | 2,086 | 2,078 | |||||||||||
Additional paid-in capital | 7,367 | 7,277 | |||||||||||
Retained earnings | 25,233 | 23,445 | |||||||||||
Accumulated other comprehensive loss | (43 | ) | (188 | ) | |||||||||
Total stockholders' equity | 34,643 | 32,612 | |||||||||||
Total liabilities and stockholders' equity | $ | 398,629 | $ | 368,559 | |||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
Years ended December 31, 2016 and 2015 | ||||||||||
(Amounts in thousands, except share and per share data) | ||||||||||
2016 | 2015 | |||||||||
Interest income | ||||||||||
Loans | $ | 12,458 | $ | 11,658 | ||||||
Investment securities: | ||||||||||
Taxable | 661 | 521 | ||||||||
Tax-exempt | 909 | 316 | ||||||||
Dividends | 104 | 135 | ||||||||
Total interest income | 14,132 | 12,630 | ||||||||
Interest expense | ||||||||||
Deposits | 676 | 669 | ||||||||
Borrowed funds | 1,140 | 1,212 | ||||||||
Total interest expense | 1,816 | 1,881 | ||||||||
Net interest income | 12,316 | 10,749 | ||||||||
Provision for loan losses | 357 | (219 | ) | |||||||
Net interest income after provision for loan losses | 11,959 | 10,968 | ||||||||
Noninterest income: | ||||||||||
Service charges and other fees | 1,003 | 967 | ||||||||
Interchange income | 728 | 669 | ||||||||
Investment brokerage commission income | 1,603 | 2,097 | ||||||||
Mortgage banking activities | 686 | 700 | ||||||||
Trust fee income | 462 | 426 | ||||||||
Increase in cash value of bank owned life insurance | 263 | 973 | ||||||||
Gain on sale of real estate owned | 196 | 113 | ||||||||
Gain (loss) on sale of securities | 1 | (2 | ) | |||||||
Net gain on cash flow hedges | 99 | - | ||||||||
Other income | 160 | 98 | ||||||||
Total noninterest income | 5,201 | 6,041 | ||||||||
Noninterest expenses: | ||||||||||
Salaries and employee benefits | 8,010 | 7,748 | ||||||||
Occupancy and equipment | 1,698 | 1,601 | ||||||||
Interchange expenses | 424 | 376 | ||||||||
Data processing | 772 | 872 | ||||||||
Professional services | 268 | 513 | ||||||||
Real estate owned expense | 224 | 541 | ||||||||
Advertising | 232 | 187 | ||||||||
FDIC premiums | 235 | 258 | ||||||||
Other | 1,977 | 2,007 | ||||||||
Total noninterest expenses | 13,840 | 14,103 | ||||||||
Income before income tax expense | 3,320 | 2,906 | ||||||||
Income tax expense | 658 | 446 | ||||||||
Net income | $ | 2,662 | $ | 2,460 | ||||||
Earnings per share | $ | 1.28 | $ | 1.19 | ||||||
Dividends declared per share | $ | 0.42 | $ | 0.14 | ||||||
Key Ratios: | ||||||||||
Return on average equity | 8.09 | % | 7.86 | % | ||||||
Return on average assets | 0.69 | % | 0.70 | % | ||||||
Net interest margin (tax equivalent) | 3.76 | % | 3.62 | % | ||||||
Efficiency ratio | 79.02 | % | 84.09 | % | ||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
Three months ended December 31, 2016 and 2015 | ||||||||||
(Amounts in thousands, except share and per share data) | ||||||||||
2016 | 2015 | |||||||||
Interest income | ||||||||||
Loans | $ | 3,152 | $ | 3,045 | ||||||
Investment securities: | ||||||||||
Taxable | 190 | 155 | ||||||||
Tax-exempt | 251 | 162 | ||||||||
Dividends | 20 | 28 | ||||||||
Total interest income | 3,613 | 3,390 | ||||||||
Interest expense | ||||||||||
Deposits | 166 | 167 | ||||||||
Borrowed funds | 306 | 270 | ||||||||
Total interest expense | 472 | 437 | ||||||||
Net interest income | 3,141 | 2,953 | ||||||||
Provision for loan losses | 73 | (215 | ) | |||||||
Net interest income after provision for loan losses | 3,068 | 3,168 | ||||||||
Noninterest income: | ||||||||||
Service charges and other fees | 244 | 237 | ||||||||
Interchange income | 184 | 175 | ||||||||
Investment brokerage commission income | 381 | 527 | ||||||||
Mortgage banking activities | 153 | 175 | ||||||||
Trust fee income | 111 | 104 | ||||||||
Increase in cash value of bank owned life insurance | 67 | 67 | ||||||||
Gain on sale of available-for-sale securities | - | 4 | ||||||||
Gain on sale of real estate owned | - | 20 | ||||||||
Net gain on cash flow hedges | 99 | - | ||||||||
Other income | 17 | 60 | ||||||||
Total noninterest income | 1,256 | 1,369 | ||||||||
Noninterest expenses: | ||||||||||
Salaries and employee benefits | 2,181 | 2,005 | ||||||||
Occupancy and equipment | 396 | 398 | ||||||||
Interchange expenses | 108 | 94 | ||||||||
Data processing | 168 | 215 | ||||||||
Professional services | 70 | 126 | ||||||||
Real estate owned expense | 14 | 90 | ||||||||
Advertising | 51 | 72 | ||||||||
FDIC premiums | 43 | 60 | ||||||||
Other | 440 | 414 | ||||||||
Total noninterest expenses | 3,471 | 3,474 | ||||||||
Income before income tax expense | 853 | 1,063 | ||||||||
Income tax expense | 158 | 239 | ||||||||
Net income | $ | 695 | $ | 824 | ||||||
Earnings per share | $ | 0.33 | $ | 0.40 | ||||||
Dividends declared per share | $ | 0.12 | $ | 0.05 | ||||||
Key Ratios: | ||||||||||
Return on average equity | 8.34 | % | 10.16 | % | ||||||
Return on average assets | 0.70 | % | 0.90 | % | ||||||
Net interest margin (tax equivalent) | 3.68 | % | 3.73 | % | ||||||
Efficiency ratio | 78.95 | % | 80.38 | % | ||||||
Contacts: Sturgis Bancorp -- Eric Eishen, President & CEO, or Brian P. Hoggatt, CFO -- P: 269 651-9345