Sturgis Bancorp Suspends Cash Dividends
14 Dezember 2011 - 3:30PM
Marketwired
Sturgis Bancorp, Inc. (OTCBB: STBI) suspended
quarterly cash dividends, as announced to stockholders with the
following letter from Eric Eishen, President & CEO:
November 25, 2011
Dear Fellow Shareholders,
This letter is to inform you of a decision made by our Board of
Directors related to cash dividends. In my third quarter earnings
release I indicated that bank investors seem more interested in
stronger capital levels. I also indicated our Bank was going to
reduce non-core business assets to increase capital. We continue to
execute this plan and have reduced assets to approximately $320.0
million. This was accomplished without impacting our core business.
We have sold a portion of the investment portfolio and reduced
other cash holdings that were earning a very low return. The Board
of Directors does not intend to reduce assets any further at this
time. A bank must lend to maintain earnings and any further
reduction in assets would negatively impact the lending function of
the Bank and therefore our core business. Our capital level has
increased significantly but is not yet at our intended goal of
8.00% for Tier One Capital. This level of capital is significantly
above the 5.00% level to be considered "Well Capitalized" by
regulatory definition.
Over the past several years the Board has publicly stated that
we will manage the capital position of the Bank to maintain a level
of at least "Well Capitalized" or 5.00%. We have successfully
managed the Bank to be above this level. During the last six years
we have also managed capital through share repurchases and cash
dividends. When the Bank has exceeded earnings expectations we have
paid special cash dividends and repurchased outstanding shares.
Since 2005 we have repurchased approximately 500,000 shares of
outstanding stock. This increased book value per share and allowed
asset growth without any new capital formation. Our equity to
assets level was reduced from 8.65% in 2005 to 7.16% as of
September 30, 2011. We have reduced cash dividends in the last few
years given the economic challenges the entire country has faced.
These reductions have not been done without great deliberation at
the Board. We recognize that Shareholders may have diverse reasons
for holding bank stock. Some Shareholders are interested in the
cash dividend while others are interested in long-term
appreciation. Still other investors are short-term investors and
are looking for gains in price over a shorter holding period. We
must balance the needs of investors but at the same time keep the
long-term health of the organization a top priority. There are also
regulatory changes impacting this decision-making.
Over the last few years I had the unique opportunity to serve in
a leadership role with the Michigan Bankers Association. This is
the leading bank trade organization in the State of Michigan. This
Association represents a majority of banks in the State and is also
very active at a National level representing the views of the
Michigan banking industry. This role gave me the opportunity to
meet several times with leadership at the FDIC, Federal Reserve and
with Congressional Leaders. There is a philosophical disconnect
between these groups. Congress would like banks to aggressively
lend to small business and consumers in an effort to help in
economic recovery. Congress and the President have also urged banks
to work with consumers and business entities that are having
difficulty in these uncertain economic times. Our Bank views
working with our community and customers as the appropriate method
of running the Bank. At the same time we recognize loans that have
little hope of recovery and take the appropriate action on these
loans. The FDIC believes that Congress and Financial Accounting
Standards Board (FASB) set the rules for credit and capital
management. They are aggressively applying these rules to the
banking industry. The FDIC has also made it clear that the term
"Well Capitalized" should be considered a minimum level of
capitalization for the banking industry. There is a definite push
for the industry to carry higher levels of capital going forward.
There has also been significant discussion related to holding
company capital levels. Even though institutions with less than
$10.0 billion in assets were to be largely exempted from certain
provisions of the Dodd/Frank Act, this does not seem to be the view
of the Federal Regulatory bodies. Management and the Board expect
Regulators to subject small banks to similar provisions outlined in
the Dodd/Frank Act that apply to large bank holding companies.
I share all this with you so you may understand the perspective
of Management and the Board of Directors in making a very difficult
decision at our last board meeting. We have decided to suspend our
cash dividend. Our holding company currently has a loan of $4.0
million dollars. This loan was used to repurchase shares and to
capitalize the bank. Given the information provided above the Board
has decided the repayment of this debt should be a top priority. To
do this we must direct earnings to debt reduction versus cash
dividends. We realize this may have a negative impact on some
Shareholders who had invested in our stock interested in a cash
return on their investment. The alternatives to this action would
be too damaging to long-term value of the institution in our
opinion. The alternative to repayment of this debt from earnings
would be to raise capital by issuing additional shares. In the
current environment this would be damaging to our existing
shareholder value since new stock would be issued below book value.
This would also reduce future dividends per share since they would
be divided by a larger shareholder base.
I remain committed to serving your interests and I am available
for comment. You may call me at (269)651-9345 to share your
thoughts and comments.
Sincerely,
Eric L. Eishen President/CEO
This letter contains statements that constitute forward-looking
statements. These statements appear in several places in this
letter 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.
Contacts: Sturgis Bancorp Eric Eishen President & CEO Brian
P. Hoggatt CFO P: 269 651-9345
Sturgis Bancorp (QX) (USOTC:STBI)
Historical Stock Chart
Von Mai 2024 bis Jun 2024
Sturgis Bancorp (QX) (USOTC:STBI)
Historical Stock Chart
Von Jun 2023 bis Jun 2024