STURGIS, Mich., July 18, 2018 (GLOBE NEWSWIRE) -- Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $1.9 million for the first half of 2018 and $1.2 million for the second quarter of 2018.

Sturgis Bancorp is the holding company for Sturgis Bank & Trust Company (Bank), and its subsidiaries Oakleaf Financial Services, Inc. and Oak Mortgage, 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, Michigan.  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.

Key Highlights for the second quarter of 2018:

• Net income increased 23% for the second quarter of 2018 to $1.2 million, compared to $939,000 for the second quarter of 2017, primarily due to higher net interest income.
  
• The Bank maintained strong capital ratios, exceeding “well-capitalized” requirements, with Tier 1 leverage capital at 8.12%.  Total capital at June 30, 2018 was 13.26% of risk-weighted assets.  The Bank's risk-weighted assets were $287.0 million at June 30, 2018.
  
• Total deposits increased 4.1% to $351.0 million from December 31, 2017.
  
• Allowance for loan losses was 1.07% of loans.
  

Three months ended June 30, 2018 vs. three months ended June 30, 2017 - Net income for the three months ended June 30, 2018 was $1.2 million, or $0.55 per share, compared to net income of $939,000, or $0.45 per share, for the three months ended June 30, 2017.  The tax equivalent net interest margin increased slightly to 3.91% in the second quarter of 2018 from 3.75% in the second quarter 2017. 

Net interest income increased to $3.7 million in the second quarter of 2018 from $3.2 million in the second quarter of 2017.  The growth was primarily due to loan interest income, which increased by $549,000 to $3.7 million.  Total interest income increased $629,000 to $4.3 million in the second quarter of 2018, and interest expense only increased $134,000 to $618,000 in the second quarter of 2018.

The Company provided $17,000 to the allowance for loan losses in the second quarter of 2018, compared to ($106,000) in the second quarter of 2017.  The increase for 2018 was primarily due to growth in total loans.  Net charge-offs were ($3,000) in the second quarter of 2018, compared to ($24,000) in the second quarter of 2017. 

Noninterest income was $1.3 million in the second quarter of 2018, compared to $1.7 million in the second quarter of 2017.  Most of the decrease was due to $242,000 gain on cash flow hedges in the second quarter of 2017.  Mortgage banking income decreased to $181,000 in the second quarter of 2018 from $294,000 in the second quarter of 2017, primarily due to $25,000 improvement in mortgage servicing rights impairment in the second quarter of 2018 and $108,000 improvement in the second quarter of 2017.  Gain on sale of real estate owned increased to $70,000 in the second quarter of 2018, compared to $17,000 in the second quarter of 2017.

Noninterest expense was $3.6 million in second quarter of 2018 and $3.7 million in the second quarter of 2017.  Salaries and employee benefits, the largest component of noninterest expense, decreased by $39,000, or 1.8%. 

Six months ended June 30, 2018 vs. six months ended June 30, 2017 - Net income for the first half of 2018 was $1.9 million, or $0.91 per share, compared to net income of $1.6 million, or $0.77 per share, for the first half of 2017.  The tax equivalent net interest margin increased slightly to 3.85% in the first half of 2018 from 3.77% in the first half of 2017. 

Net interest income increased $644,000 to $7.0 million in the first half 2018.  The growth was primarily due to loan interest income, which increased by $747,000 to $7.1 million.  Total interest income increased $889,000 to $8.2 million in the first half of 2018, and interest expense only increased $245,000 to $1.2 million in the same period.

The Company provided $139,000 to the allowance for loan losses in the first half of 2018, compared to ($241,000) in the first half of 2017.  The increase for 2018 was primarily due to growth in total loans and significant recoveries in 2017.  Net charge-offs were ($5,000) in the first half of 2018, compared to ($95,000) in the first half of 2017. 

Noninterest income was $2.6 million in the first half of 2018, compared to $2.8 million in the first half 2017.  Most of the decrease was due to $258,000 gain on cash flow hedges in the first half of 2017.  Service charges and other fees increased by $62,000 to $675,000, primarily due to changes in checking account fee income.  Gain on sale of loans increased by $59,000 to $67,000 in the first half of 2018.  Mortgage banking income in the first half of 2018 decreased $49,000 to $369,000.

Noninterest expense was $7.3 million in the first half of 2018 and $7.4 million in the first half 2017.  Salaries and employee benefits, the largest component of noninterest expense, decreased by $12,000, or 0.3%.  Data processing expenses increased $50,000, due to software enhancements that are beneficial to the Bank and its customers. 

Total assets increased to $429.1 million at June 30, 2018 from $414.4 million at December 31, 2017, primarily in loans.  Loans increased $20.0 million from December 31, 2017, primarily due to $18.0 million increase in commercial real estate loans.

Noninterest-bearing deposits increased to $82.6 million at June 30, 2018 from $81.6 million at December 31, 2017.  Interest-bearing deposits increased to $268.4 million at June 30, 2018 from $255.5 million at December 31, 2017, including $5.5 million growth in non-Brokered deposits.  The growth in deposits, including brokered deposits, funded the loan growth realized in the first half of 2018.

Total equity was $39.1 million at June 30, 2018, compared to $37.3 million at December 31, 2017.  Book value per share increased to $18.64 ($15.20 tangible) at June 30, 2018 from $17.78 ($14.35 tangible) at December 31, 2017. 

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
(Amounts in thousands, except share and per share data)
		June 30,			Dec. 31,
		2018			2017
ASSETS
Cash and due from banks		$	8,738		$	14,219
Other short-term investments			11,064			10,293
Total cash and cash equivalents			19,802			24,512
Interest-earning deposits in banks			10,067			11,058
Securities - available for sale			25,947			25,313
Securities - held to maturity			35,200			35,578
Federal Home Loan Bank stock, at cost			3,393			3,393
Loans held for sale, at fair value			492			1,117
Loans, net of allowance of $3,216 and $3,072			300,616			280,586
Premises and equipment, net			9,076			8,985
Goodwill			5,834			5,834
Core deposit intangibles			177			203
Originated mortgage servicing rights			1,211			1,160
Real estate owned			144			453
Bank-owned life insurance			10,386			10,261
Accrued interest receivable			1,548			1,536
Other assets			5,179			4,443
Total assets		$	429,072		$	414,432
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing		$	82,627		$	81,641
Interest-bearing			268,416			255,473
Total deposits			351,043			337,114
Federal Home Loan Bank advances and other borrowings			34,339			34,447
Accrued interest payable			249			239
Other liabilities			4,304			5,378
Total liabilities			389,935			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 2,099,491 shares at June 30, 2018 and 2,094,741 at December 31, 2017			2,099			2,095
Additional paid-in capital			7,596			7,514
Retained earnings			28,674			27,351
Accumulated other comprehensive loss			768			294
Total stockholders' equity			39,137			37,254
Total liabilities and stockholders' equity		$	429,072		$	414,432

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
		Three Months Ended June 30,
		2018			2017
Interest income
Loans		$	3,695		$	3,146
Investment securities:
Taxable			268			198
Tax-exempt			276			275
Dividends			37			28
Total interest income			4,276			3,647
Interest expense
Deposits			417			168
Borrowed funds			201			316
Total interest expense			618			484
Net interest income			3,658			3,163
Provision (benefit) for loan losses			17			(106	)
Net interest income after provision (benefit) for loan losses			3,641			3,269
Noninterest income:
Service charges and other fees			330			353
Interchange income			210			200
Investment brokerage commission income			337			403
Mortgage banking activities			181			294
Trust fee income			126			124
Earnings on cash value of bank-owned life insurance			63			66
Gain on sale of real estate owned			70			17
Net gain on cash flow hedges			-			242
Other income			23			19
Total noninterest income			1,340			1,718
Noninterest expenses:
Salaries and employee benefits			2,139			2,178
Occupancy and equipment			443			439
Interchange expenses			89			90
Data processing			183			156
Professional services			90			88
Real estate owned expense			42			47
Advertising			69			59
FDIC premiums			73			48
Other expenses			511			663
Total noninterest expenses			3,639			3,768
Income before income tax expense			1,342			1,219
Income tax expense			188			280
Net income		$	1,154		$	939
Earnings per share		$	0.55		$	0.45
Dividends per share			0.14			0.12

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
	Six Months Ended June 30,
	2018			2017
Interest income
Loans	$	7,056		$	6,309
Investment securities:
Taxable		506			411
Tax-exempt		553			542
Dividends		93			57
Total interest income		8,208			7,319
Interest expense
Deposits		793			329
Borrowed funds		402			621
Total interest expense		1,195			950
Net interest income		7,013			6,369
Provision (benefit) for loan losses		139			(241	)
Net interest income after provision (benefit) for loan losses		6,874			6,610
Noninterest income:
Service charges and other fees		675			613
Interchange income		389			382
Investment brokerage commission income		728			732
Mortgage banking activities		369			418
Trust fee income		239			232
Earnings on cash value of bank-owned life insurance		125			132
Gain on sale of real estate owned		67			8
Net gain on cash flow hedges		-			258
Other income		52			43
Total noninterest income		2,644			2,818
Noninterest expenses:
Salaries and employee benefits		4,352			4,364
Occupancy and equipment		875			883
Interchange expenses		176			187
Data processing		363			313
Professional services		212			202
Real estate owned expense		75			63
Advertising		117			106
FDIC premiums		133			95
Other expenses		1,035			1,193
Total noninterest expenses		7,338			7,406
Income before income tax expense		2,180			2,022
Income tax expense		269			421
Net income	$	1,911		$	1,601
Earnings per share	$	0.91		$	0.77
Dividends per share		0.28			0.24

OTHER FINANCIAL INFORMATION
(Amounts in thousands)
		Three Months Ended June 30,
		2018				2017
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits		$	81,784			$	69,694
Average interest-bearing deposits			275,261				236,416
Average total assets			434,115				400,718
Total risk-weighted assets			286,956				252,892
Sturgis Bancorp:
Average equity			38,669				35,731
Average total assets			434,298				400,884
Total risk-weighted assets			287,169				253,094
Financial ratios for Sturgis Bancorp:
Return on average assets			1.07	%			0.94	%
Return on average equity			11.98	%			10.55	%
Net interest margin			3.74	%			3.57	%
Tax equivalent net interest margin			3.91	%			3.75	%
		Six Months Ended June 30,
		2018				2017
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits		$	81,079			$	68,920
Average interest-bearing deposits			273,199				236,879
Average total assets			431,046				401,045
Total risk-weighted assets			286,956				252,892
Sturgis Bancorp:
Average equity			37,807				35,381
Average total assets			431,236				401,215
Total risk-weighted assets			287,169				253,094
Financial ratios for Sturgis Bancorp:
Return on average assets			0.89	%			0.80	%
Return on average equity			10.07	%			9.12	%
Net interest margin			3.68	%			3.59	%
Tax equivalent net interest margin			3.85	%			3.77	%

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