STURGIS, Mich., Jan. 29, 2018 (GLOBE NEWSWIRE) -- Sturgis Bancorp, Inc. (OTCQX:STBI) announced net income of $3.2 million for 2017, and net income of $828,000 for the fourth quarter of 2017, 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.  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, 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. Oak Insurance Services offers various competitive commercial and consumer insurance products.  Oak Title Services offers commercial and consumer title insurance.

Key Highlights for 2017:

• Net income for 2017 was $3.2 million, or $1.52 per share, compared to net income of $2.7 million, or $1.28 per share, in 2016.
• The Bank capital ratios exceeded “well-capitalized” requirements and ended 2017 with Tier 1 capital at 8.35% of average assets and 12.55% of risk-weighted assets.  Total capital at December 31, 2017 was 13.69% of risk-weighted assets. 
• The allowance for loan losses decreased to 1.09% of total (gross) loans from 1.20% at the end of 2016, primarily due to improvements in asset quality and loss experience.  Net charge offs in 2017 were ($43,000), compared to $329,000 in 2016.

Year 2017 vs. 2016 - Net income for the year ended December 31, 2017 increased to $3.2 million, or $1.52 per share from net income of $2.7 million, or $1.28 per share, for 2016. Net interest income increased 5.1% to $12.9 million, from $12.3 million for 2016. The increase in net interest income is primarily due to growth in loans. 

The average rate paid on interest-bearing liabilities increased to 0.70% in 2017 from 0.65% in 2016.  Average interest-earning assets increased to $361.3 million in 2017 from $342.7 million in 2016.  The tax equivalent net interest margin was 3.76% in both 2017 and 2016. 

The provision for loan losses was ($213,000) for the year ended December 31, 2017, compared to $357,000 for the year ended December 31, 2016.  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 2017, net of recoveries, were ($43,000), compared to $329,000 in 2016.

Noninterest income was $5.5 million in 2017, compared to $5.2 million in 2016.  The Bank increased service charges on deposit accounts to $1.4 million in 2017 from $1.0 million in 2016.  The Bank also realized $258,000 net gain on cash flow hedges in 2017, compared to $99,000 in 2016.

Noninterest expense was $15.3 million in 2017, compared to $13.8 million in 2016. Salaries and employee benefits increased $726,000.  This increase is primarily due to wages, health insurance benefits and pension expense increases.  The Bank realized $441,000 losses on sales of available-for-sale securities in 2017, compared to net gain of ($1,000) in 2016.  The additional pension expense and loss on sale of securities were realized to manage the tax rate change enacted in December 2017.  Management actively minimizes noninterest expense, although certain noninterest expenses are outside of Management’s direct control. 

Total assets increased to $414.4 million at December 31, 2017 from $398.6 million at December 31, 2016, primarily in loans.  Net loans increased $13.7 million, to $280.6 million at December 31, 2017.  Most of the net loan growth was in home equity lines of credit, commercial real estate loans, and nonresidential construction loans.

Deposits were $337.1 million at December 31, 2017 compared to $297.8 million at December 31, 2016, an increase of $39.3 million.  Interest-bearing deposits increased to $255.5 million at December 31, 2017 from $232.3 million at December 31, 2016.  Brokered certificates of deposit increased to $43.5 million at December 31, 2017 from $9.6 million at December 31, 2016, as the Bank replaced borrowed funds with brokered deposits.   Non-brokered jumbo certificates reduced slightly to $12.9 million at December 31, 2017 from $13.0 million at December 31, 2016.  The Bank uses brokered and jumbo certificates 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 decreased $26.7 million.  Matured advances were refinanced with new brokered deposits.

The stockholders’ equity of Bancorp was $37.3 million at December 31, 2017 compared to $34.7 million at December 31, 2016, an increase of $2.5 million, or 7.3%.  The primary component of this increase was retained earnings.  Cash dividends of $873,000, or $0.42 per share, were paid in 2016.  The stockholders’ equity was 8.99% of total assets at December 31, 2017.  Book value per share increased to $17.78 at December 31, 2016 from $16.65 at December 31, 2016.

The regular quarterly dividend for Bancorp was maintained at $0.12 per share in 2017, for $0.48 per share total dividends, compared to $0.42 per share in 2016.  The increases was 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 2017 vs. 2016 - Net income for the quarter ended December 31, 2017 increased to $828,000, or $0.40 per share, from $695,000, or $0.33 per share, for the fourth quarter of 2016. The primary component of the increase was fourth quarter 2017 benefit from federal income taxes of ($548,000), compared to provision of $157,000 in the fourth quarter of 2016.  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 net of revaluations were a benefit to the Bank.

Net interest income increased $202,000, to $3.3 million in the fourth quarter of 2017. The increase is primarily due to growth in average interest-earning assets.  The tax-equivalent net interest margin increased to 3.79 in the fourth quarter of 2017 from 3.68% in the last quarter of 2016, primarily due to growth in loans and market rate increases.

Net charge-offs for the fourth quarter of 2017 were $5,000, compared to $107,000 a year ago.  The Company recorded ($31,000) provision for loan losses in the fourth quarter of 2017, compared to $73,000 for the same quarter of 2016.

Noninterest income increased $32,000 in the fourth quarter of 2017 to $1.3 million.  The primarily component of noninterest income was commission income, which increased $63,000.  The company recorded $99,000 net gain on cash flow hedges in the fourth quarter of 2016.

Noninterest expense increased $855,000 in the fourth quarter of 2017, primarily due to losses on sale of available-for-sale securities and 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, 2017 and 2016
(Amounts in thousands, except share and per share data)
				2017			2016
ASSETS
Cash and due from banks			$	14,219		$	8,150
Other short-term investments				10,293			4,963
Total cash and cash equivalents				24,512			13,113
Interest-earning deposits in banks				11,058			16,068
Securities - available for sale				25,313			32,387
Securities - held to maturity				35,578			33,769
Federal Home Loan Bank stock, at cost				3,393			3,117
Loans held for sale, at fair value				1,117			1,089
Loans, net of allowance of $3,072 and $3,242				280,586			266,871
Premises and equipment, net				8,985			8,360
Goodwill				5,834			5,834
Core deposit intangibles				203			259
Originated mortgage servicing rights				1,160			1,216
Real estate owned				453			687
Bank-owned life insurance				10,261			9,998
Accrued interest receivable				1,536			1,407
Other assets				4,443			4,454
Total assets			$	414,432		$	398,629
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing			$	81,641		$	65,455
Interest-bearing				255,473			232,312
Total deposits				337,114			297,767
Federal Home Loan Bank advances and other borrowings				34,447			61,180
Accrued interest payable				239			243
Other liabilities				5,378			4,712
Total liabilities				377,178			363,902
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 2,094,991 shares at December 31, 2017
and 2,085,991 at December 31, 2016				2,095			2,086
Additional paid-in capital				7,514			7,367
Retained earnings				27,351			25,234
Accumulated other comprehensive loss				294			40
Total stockholders' equity				37,254			34,727
Total liabilities and stockholders' equity			$	414,432		$	398,629

 

CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2017 and 2016
(Amounts in thousands, except share and per share data)
				2017				2016
Interest income
Loans			$	12,953			$	12,458
Investment securities:
Taxable				804				661
Tax-exempt				1,100				909
Dividends				125				104
Total interest income				14,982				14,132
Interest expense
Deposits				777				676
Borrowed funds				1,261				1,140
Total interest expense				2,038				1,816
Net interest income				12,944				12,316
Provision for loan losses				(213	)			357
Net interest income after provision for loan losses				13,157				11,959
Noninterest income:
Service charges and other fees				1,356				1,003
Interchange income				770				728
Investment brokerage commission income				1,545				1,603
Mortgage banking activities				679				686
Trust fee income				446				462
Increase in cash value of bank owned life insurance				263				263
Gain on sale of real estate owned				34				196
Net gain on cash flow hedges				258				99
Other income				100				160
Total noninterest income				5,451				5,200
Noninterest expenses:
Salaries and employee benefits				8,736				8,010
Occupancy and equipment				1,811				1,698
Interchange expenses				379				424
Data processing				669				772
Professional services				401				268
Real estate owned expense				152				224
Advertising				296				232
FDIC premiums				191				235
Loss (gain) on sale of securities				441				(1	)
Other				2,262				1,977
Total noninterest expenses				15,338				13,839
Income before income tax expense				3,270				3,320
Income tax expense				102				658
Net income			$	3,168			$	2,662
Earnings per share			$	1.52			$	1.28
Dividends declared per share			$	0.48			$	0.42

 

CONSOLIDATED STATEMENTS OF INCOME
Three months ended December 31, 2017 and 2016
(Amounts in thousands, except share and per share data)
				2017				2016
Interest income
Loans			$	3,387			$	3,152
Investment securities:
Taxable				185				190
Tax-exempt				280				251
Dividends				34				20
Total interest income				3,886				3,613
Interest expense
Deposits				272				166
Borrowed funds				271				306
Total interest expense				543				472
Net interest income				3,343				3,141
Provision for loan losses				(31	)			73
Net interest income after provision for loan losses				3,374				3,068
Noninterest income:
Service charges and other fees				355				244
Interchange income				193				184
Investment brokerage commission income				444				381
Mortgage banking activities				101				153
Trust fee income				97				111
Increase in cash value of bank owned life insurance				64				67
Gain on sale of real estate owned				11				-
Net gain on cash flow hedges				-				99
Other income				23				17
Total noninterest income				1,288				1,256
Noninterest expenses:
Salaries and employee benefits				2,310				2,181
Occupancy and equipment				467				396
Interchange expenses				95				108
Data processing				174				168
Professional services				89				70
Real estate owned expense				51				14
Advertising				103				51
FDIC premiums				53				43
Loss on sale of securities				421				-
Other				564				440
Total noninterest expenses				4,327				3,471
Income before income tax expense				335				853
Income tax expense				(493	)			158
Net income			$	828			$	695
Earnings per share			$	0.40			$	0.33
Dividends declared per share			$	0.12			$	0.12

 

OTHER FINANCIAL INFORMATION
(Amounts in thousands)
		Three Months Ended Dec. 31,
			2017			2016
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits		$	78,740		$	72,457
Average interest-bearing deposits			240,899			230,370
Average total assets			408,187			394,295
Total risk-weighted assets, end of period			268,526			252,725
Sturgis Bancorp:
Average equity			36,769			34,280
Average total assets			408,375			394,470
Total risk-weighted assets, end of period			268,801			252,950
Financial ratios for Sturgis Bancorp:
Return on average assets			0.81	%		0.70	%
Return on average equity			8.94	%		8.34	%
Net interest margin			3.61	%		3.51	%
Tax equivalent net interest margin			3.79	%		3.68	%
		Year Ended December 31,
			2017			2016
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits		$	73,693		$	67,590
Average interest-bearing deposits			235,440			230,216
Average total assets			404,215			383,653
Sturgis Bancorp:
Average equity			35,592			33,443
Average total assets			404,387			383,779
Financial ratios for Sturgis Bancorp:
Return on average assets			0.78	%		0.69	%
Return on average equity			8.83	%		8.09	%
Net interest margin			3.58	%		3.59	%
Tax equivalent net interest margin			3.76	%		3.76	%

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

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