Sturgis Bancorp, Inc. (OTCBB: STBI) today
announced a net income of $502,000 for the second quarter of 2012,
and $1.0 million year-to-date.
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 11 banking centers in Sturgis, 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:
- Net income for the second quarter of 2012 increased to
$502,000, or $0.25 per share, compared to a loss of $734,000, or
$0.36 per share, in the second quarter of 2011.
- Net income for the first half of 2012 increased to $1.0
million, or $0.50 per share, compared to a loss of $851,000, or
$0.42 per share, in the first half of 2011.
- The Bank further increased capital ratios, continuing to exceed
"well-capitalized" requirements, with Tier 1 capital at 8.53%.
Total capital at June 30, 2012 was 13.14% of risk-weighted
assets.
- Provision for loan losses was down significantly.
- Total deposits decreased $2.7 million, or 1.1%, primarily due
to $2.1 million reduction in brokered CDs.
- Allowance for loan losses was 2.13% of loans, down slightly
from 2.28% at the end of 2011, due to asset quality
improvements.
Nonaccrual loans peaked in June 2011 at $14.5 million, up $9.3
million from December 31, 2010. Since June 2011, nonaccrual loans
were reduced to $10.5 million at December 31, 2011 and further to
$7.3 million at June 30, 2012.
President and CEO Eric L. Eishen stated: "I am pleased to
provide a very positive first half financial performance. Loan
quality is improving and core earnings are stable. The net interest
income, non-interest income and non-interest expense have all been
managed very closely. Our 2012 first half income is already double
the full year income for 2011. Interest income continues to be
suppressed by sustained low interest rates and poor loan demand.
However, fewer credit quality issues resulted in a significant
reduction in the provision for loan losses in 2012. The Bank
continues to maintain a significant reserve in our Allowance for
Loan and Lease Losses. It was only modestly reduced in the first
six months of 2012. As the economy improves, the Bank expects
continued improvement in credit quality, and therefore earnings.
Management continues to focus on our core business. Earnings in the
first half were also enhanced by strong mortgage refinance
activity, as rates continue to remain at historic lows."
President Eishen added, "Consumer and Commercial loan demand
continues to be weak. This is being experienced by the industry as
a whole. Mortgage origination volume has been strong in the first
half, due to historically low rates. This low rate scenario is
positive for the mortgage origination segment of the Bank's
business, but creates a very challenging environment for the
banking industry. I am concerned that the ever increasing
regulations and much tighter credit standards imposed by actions of
Congress, Freddie Mac, Fannie Mae and the new Consumer Financial
Protection Agency, primarily related to mortgage finance, pose
significant risk to this business line and the economic recovery as
a whole. I am pleased we have increased our interest margin on
loans originated for portfolio. But I expect this is going to be
exceedingly more difficult in the coming months if rates continue
at the current levels. The Bank is not going to change its risk
profile in an attempt to maintain the interest margin, and as a
result we may see pressure on this margin in late 2012 and 2013,
due to our adherence to rational pricing and loan quality."
President Eishen concluded, "Bank management continues to focus
on building our franchise value and capital, in preparation for the
proposed capital rules under consideration. We continue to be
focused on controlling expenses as evidenced in our
performance."
Three months ended June 30, 2012 vs. three
months ended June 30, 2011 -- Net income for the three months
ended June 30, 2012 was $502,000, or $0.25 per share, compared to a
net loss of $734,000, or $0.36 per share, for the three months
ended June 30, 2011. The tax equivalent net interest margin
increased to 3.55% in 2012 from 3.04% in 2011. The increase in tax
equivalent net interest margin is primarily due to the Bank's sales
of low-margin investment securities, mostly in the third quarter of
2011.
Noninterest income was $1.2 million in the second quarter of
2012, compared to $960,000 in the second quarter of 2011. Mortgage
banking activities increased to $305,000, as loan sale volume
continued relatively strong.
Noninterest expense decreased $698,000 in 2012, compared to
2011. Salaries and employee benefits decreased $202,000, or 11.4%,
to $1.6 million. Real estate owned expense decreased to $212,000,
as the Company's write downs of the carrying value of foreclosed
assets reduced.
The Company recorded a negative provision for loan losses of
$11,000 in the three months ended June 30, 2012, compared to a
positive provision of $974,000 in the same quarter of 2011. Net
charge-offs were $316,000 in 2012, compared to $1.2 million in
2011. The net activity in the ALLL decreased the total allowance to
2.13% of gross loans at June 30, 2012, compared to 2.28% at
December 31, 2011.
Six months ended June 30, 2012 vs. six months
ended June 30, 2011 -- Net income for the six months ended
June 30, 2012 was $1.0 million, or $0.50 per share, compared to a
net loss of $851,000, or $0.42 per share, for the six months ended
June 30, 2011. The tax equivalent net interest margin increased to
3.53% in 2012 from 3.03% in 2011. The increase in tax equivalent
net interest margin is primarily due to the Bank's sales of
low-margin investment securities, mostly in the third quarter of
2011.
Noninterest income was $2.2 million in the first half of 2012,
compared to $2.0 million in the first half of 2011. Mortgage
banking activities increased $186,000 to $564,000, as loan sale
volume continued relatively strong. Investment brokerage commission
income also increased by $117,000 to $716,000.
Noninterest expense decreased $783,000 in 2012, compared to
2011. Salaries and employee benefits decreased $283,000, or 8.3%,
to $3.1 million. Real estate owned expense decreased by $348,000,
to $347,000, as the Company's write downs of the carrying value of
foreclosed assets reduced.
The Company recorded a negative provision for loan losses of
$9,000 in the first half of 2012, compared to a positive provision
of $1.9 million in the first half of 2011. Net charge-offs were
$411,000 in 2012, compared to $1.9 million in 2011.
Total assets decreased to $312.3 million at June 30, 2012 from
$314.3 million at December 31, 2011, primarily in cash and cash
equivalents. Loans also decreased $1.6 million from December 31,
2011, primarily in Home Equity Lines of Credit and Commercial
Loans.
Noninterest-bearing deposits increased to $37.0 million at June
30, 2012 from $33.6 million at December 31, 2011. Interest-bearing
deposits decreased to $194.9 million at June 30, 2012 from $201.0
million at December 31, 2011. The decreases in deposits included
$2.1 million decrease in brokered CDs. The number of checking
accounts continues to increase, as the Bank continues to expand its
customer base.
Total equity was $26.0 million at June 30, 2012, compared to
$24.9 million at December 31, 2011. Book value per share increased
to $12.79 at June 30, 2012 from $12.34 at December 31, 2011.
During the worst part of the national financial crisis, the
Company began including expanded ratios for the Bank's asset
quality in quarterly press releases. Because the Company believes
these ratios remain meaningful and relevant to investors, the
Company has elected to continue providing them.
Percentage of Percentage of
Gross Loans Total Assets
June 30 Dec. 31 June 30, Dec. 31
Past due and still accruing: 2012 2011 2012 2011
-------- -------- -------- --------
Past due one month 0.64% 0.53% 0.53% 0.43%
Past due two months 0.12% 0.18% 0.10% 0.15%
Past due three or more months 0.05% 0.14% 0.04% 0.12%
Nonaccrual loans 2.85% 4.07% 2.33% 3.34%
Real Estate Owned 0.53% 0.81% 0.43% 0.66%
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
June 30, 2012 and December 31, 2011
(Amounts in thousands, except share and per share data)
June 30, Dec. 31,
2012 2011
----------- -----------
ASSETS
Cash and due from banks $ 9,393 $ 7,297
Other short-term investments 9,377 15,443
----------- -----------
Total cash and cash equivalents 18,770 22,740
Interest-earning deposits in banks 8,467 4,760
Securities - Available for sale 1,222 265
Federal Home Loan Bank stock, at cost 4,064 4,064
Loans held for sale 800 986
Loans, net of allowance of $5,455 and $5,875 250,442 252,001
Premises and equipment, net 7,657 7,855
Goodwill 5,109 5,109
Originated mortgage servicing rights 1,306 1,279
Real estate owned 1,351 2,082
Bank-owned life insurance 9,116 8,976
Accrued interest receivable 1,135 1,191
Prepaid FDIC assessment 612 814
Other assets 2,259 2,136
----------- -----------
Total assets $ 312,310 $ 314,258
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 37,024 $ 33,642
Interest-bearing 194,892 200,957
----------- -----------
Total deposits 231,916 234,599
Federal Home Loan Bank advances and other
borrowings 52,500 52,575
Accrued interest payable 298 344
Other liabilities 1,625 1,830
----------- -----------
Total liabilities 286,339 289,348
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
2,029,898 shares at June 30, 2012 and 2,019,235
at December 31, 2011 2,030 2,019
Additional paid-in capital 6,931 6,881
Retained earnings 17,090 16,087
Accumulated other comprehensive income (loss) (80) (77)
----------- -----------
Total stockholders' equity 25,971 24,910
----------- -----------
Total liabilities and stockholders' equity $ 312,310 $ 314,258
=========== ===========
CONSOLIDATED STATEMENTS OF INCOME
Three Months ended June 30, 2012 and 2011
(Amounts in thousands, except share and per share data)
Three Months ended June 30,
2012 2011
------------- -------------
Interest income
Loans $ 3,080 $ 3,099
Investment securities:
Taxable 26 327
Tax-exempt 12 15
Dividends 34 30
------------- -------------
Total interest income 3,152 3,471
Interest expense
Deposits 337 609
Borrowed funds 426 451
------------- -------------
Total interest expense 763 1,060
------------- -------------
Net interest income 2,389 2,411
Provision for loan losses (11) 974
------------- -------------
Net interest income after provision for loan
losses 2,400 1,437
Noninterest income:
Service charges and other fees 319 353
Investment brokerage commission income 417 321
Mortgage banking activities 305 129
Trust fee income 80 95
Increase in value of bank owned life
insurance 70 69
Other income (16) (7)
------------- -------------
Total noninterest income 1,175 960
Noninterest expenses:
Salaries and employee benefits 1,569 1,771
Occupancy and equipment 361 367
Data processing 181 173
Professional services 69 137
Real estate owned expense 212 629
Advertising 24 30
FDIC premiums 211 124
Other 283 377
------------- -------------
Total noninterest expenses 2,910 3,608
------------- -------------
Income (loss) before income tax expense
(benefit) 665 (1,211)
Provision for income tax 163 (477)
------------- -------------
Net income (loss) $ 502 $ (734)
============= =============
Earnings per share $ 0.25 $ (0.36)
Dividends declared per share $ 0.00 $ 0. 01
Key Ratios:
Return on average equity 7.77% (12.60%)
Return on average assets 0.64% (0.79%)
Net interest margin (tax equivalent) 3.55% 3.04%
CONSOLIDATED STATEMENTS OF INCOME
Six Months ended June 30, 2012 and 2011
(Amounts in thousands, except share and per share data)
Six Months ended June 30,
2012 2011
------------ ------------
Interest income
Loans $ 6,218 $ 6,293
Investment securities:
Taxable 48 665
Tax-exempt 15 29
Dividends 71 60
------------ ------------
Total interest income 6,352 7,047
Interest expense
Deposits 708 1,299
Borrowed funds 850 904
------------ ------------
Total interest expense 1,558 2,203
------------ ------------
Net interest income 4,794 4,844
Provision for loan losses (9) 1,855
------------ ------------
Net interest income after provision for loan
losses 4,803 2,989
Noninterest income:
Service charges and other fees 693 698
Investment brokerage commission income 716 599
Mortgage banking activities 564 378
Trust fee income 158 186
Increase in value of bank owned life
insurance 139 138
Other income (27) 19
------------ ------------
Total noninterest income 2,243 2,018
Noninterest expenses:
Salaries and employee benefits 3,138 3,421
Occupancy and equipment 714 739
Data processing 356 344
Professional services 187 249
Real estate owned expense 347 695
Advertising 51 65
FDIC premiums 211 234
Other 708 748
------------ ------------
Total noninterest expenses 5,712 6,495
------------ ------------
Income (loss) before income tax expense
(benefit) 1,334 (1,488)
Provision for income tax 331 (637)
------------ ------------
Net income (loss) $ 1,003 $ (851)
============ ============
Earnings per share $ 0.50 $ (0.42)
Dividends declared per share $ 0.00 $ 0.02
Key Ratios:
Return on average equity 7.93% (7.35%)
Return on average assets 0.63% (0.46%)
Net interest margin (tax equivalent) 3.53% 3.03%
Contacts: Sturgis Bancorp Eric Eishen President & CEO or
Brian P. Hoggatt CFO P: 269 651-9345
Sturgis Bancorp (QX) (USOTC:STBI)
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