Sturgis Bancorp, Inc. (OTCBB: STBI) today
announced a net income of $517,000 for the third quarter of 2012,
and $1.5 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 third quarter of 2012 was $517,000, or $0.25
per share, compared to net income of $792,000, or $0.39 per share,
in the third quarter of 2011. The Company recorded $225,000 net
income from securities sales in the third quarter of 2011.
- Net income for the first nine months of 2012 increased to $1.5
million, or $0.75 per share, compared to a loss of $59,000, or
($0.03) per share, in the first nine months of 2011.
- The Bank further increased capital ratios, continuing to exceed
"well-capitalized" requirements, with Tier 1 capital at 8.69%.
Total capital at September 30, 2012 was 13.26% of risk-weighted
assets.
- Provision for loan losses was down significantly for the nine
months.
- Total deposits increased $1.5 million, primarily due to $9.0
million increase in noninterest bearing accounts. Brokered CDs were
reduced by $3.4 million.
- Allowance for loan losses was 2.12% 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
$6.7 million at September 30, 2012.
President and CEO Eric L. Eishen stated: "I am pleased to
provide another positive quarterly earnings announcement. 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 high reserve in our
Allowance for Loan and Lease Losses. It was only modestly reduced
in the first nine 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 2012 have been 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. 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 Bureau, 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.
There continues to be much uncertainty on the economy, future
regulations and capital standards for the banking industry."
Three months ended September 30, 2012 vs. three
months ended September 30, 2011 - Net income for the three
months ended September 30, 2012 was $517,000, or $0.25 per share,
compared to net income of $792,000, or $0.39 per share, for the
three months ended September 30, 2011. Most of the decrease is
attributed to gains on sales of securities recorded in the three
months ended September 30, 2011. The tax equivalent net interest
margin increased to 3.54% in 2012 from 3.33% 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 third quarter of
2012, compared to $1.6 million in the third quarter of 2011. Most
of the decrease is attributable to $536,000 (pre-tax) of gains on
sales of securities recorded in the third quarter of 2011.
Investment brokerage commission income increased to $412,000 in the
third quarter of 2012, compared to $308,000 in the third quarter of
2011. Mortgage banking activities also increased to $286,000 from
$235,000, as loan sale volume continued relatively strong.
Noninterest expense decreased $266,000 in 2012, compared to
2011, primarily due to $195,000 of prepayment penalties on
repurchase agreements recorded in 2011. Salaries and employee
benefits decreased $167,000, or 9.7%, to $1.6 million.
The Company recorded $63,000 provision for loan losses of in the
three months ended September 30, 2012, compared to a negative
provision of $156,000 in the same quarter of 2011. Net charge-offs
were $43,000 in 2012, compared to $118,000 in 2011. The net
activity in the ALLL decreased the total allowance to 2.12% of
gross loans at September 30, 2012, compared to 2.28% at December
31, 2011.
Nine months ended September 30, 2012 vs. nine
months ended September 30, 2011 - Net income for the nine
months ended September 30, 2012 was $1.5 million, or $0.75 per
share, compared to a net loss of $59,000, or ($0.03) per share, for
the nine months ended September 30, 2011. The tax equivalent net
interest margin increased to 3.53% in 2012 from 3.14% 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 $3.4 million in the first nine months of
2012, compared to $3.6 million in the first nine months of 2011,
primarily due to $536,000 (pre-tax) gains on sales of securities
recorded in 2011. Mortgage banking activities increased $237,000 to
$850,000, as loan sale volume continued relatively strong.
Investment brokerage commission income also increased by $220,000
to $1.1 million.
Noninterest expense decreased $1.0 million in 2012, compared to
2011. Salaries and employee benefits decreased $451,000, or 8.8%,
to $4.7 million. Real estate owned expense decreased by $340,000,
to $538,000, as the Company's write downs of the carrying value of
foreclosed assets reduced. The Company also recorded $195,000 in
2011 for prepayment penalties on repurchase agreements.
The Company recorded a $54,000 provision for loan losses in the
first nine months of 2012, compared to $1.7 million in the first
nine months of 2011. Net charge-offs were $454,000 in 2012,
compared to $2.0 million in 2011.
Total assets increased to $317.4 million at September 30, 2012
from $314.3 million at December 31, 2011, primarily in
interest-earning deposits. Loans also increased $1.0 million from
December 31, 2011, primarily in residential mortgage loans.
Noninterest-bearing deposits increased to $42.7 million at
September 30, 2012 from $33.6 million at December 31, 2011.
Interest-bearing deposits decreased to $193.5 million at September
30, 2012 from $201.0 million at December 31, 2011. The decreases in
deposits included $3.4 million decrease in brokered CDs. The number
of checking accounts continues to increase, as the Bank continues
to expand its customer base. Most consumer checking account
customers prefer the Bank's "Free Checking" (noninterest-bearing)
account, which charges no monthly account fee.
Total equity was $26.5 million at September 30, 2012, compared
to $24.9 million at December 31, 2011. Book value per share
increased to $13.04 at September 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 Gross Percentage of Total
Loans Assets
Sept. 30 Dec. 31 Sept. 30 Dec. 31
Past due and still accruing: 2012 2011 2012 2011
--------- --------- --------- ---------
Past due one month 0.76% 0.53% 0.62% 0.43%
Past due two months 0.57% 0.18% 0.46% 0.15%
Past due three or more months 0.07% 0.14% 0.06% 0.12%
Nonaccrual loans 2.57% 4.07% 2.10% 3.34%
Real Estate Owned 0.59% 0.81% 0.48% 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
September 30, 2012 and December 31, 2011
(Amounts in thousands, except share and per share data)
Sept. 30, 2012 Dec. 31, 2011
-------------- --------------
ASSETS
Cash and due from banks $ 7,125 $ 7,297
Other short-term investments 9,271 15,443
-------------- --------------
Total cash and cash equivalents 16,396 22,740
Interest-earning deposits in banks 12,199 4,760
Securities - Available for sale 1,244 265
Federal Home Loan Bank stock, at cost 4,064 4,064
Loans held for sale 1,819 986
Loans, net of allowance of $5,474 and
$5,875 253,000 252,001
Premises and equipment, net 7,660 7,855
Goodwill 5,109 5,109
Originated mortgage servicing rights 1,289 1,279
Real estate owned 1,531 2,082
Bank-owned life insurance 9,187 8,976
Accrued interest receivable 1,162 1,191
Prepaid FDIC assessment 514 814
Other assets 2,231 2,136
-------------- --------------
Total assets $ 317,405 $ 314,258
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 42,619 $ 33,642
Interest-bearing 193,510 200,957
-------------- --------------
Total deposits 236,129 234,599
Federal Home Loan Bank advances and other
borrowings 52,500 52,575
Accrued interest payable 270 344
Other liabilities 1,968 1,830
-------------- --------------
Total liabilities 290,867 289,348
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
2,034,395 shares at Sept. 30, 2012 and
2,019,235 at December 31, 2011 2,034 2,019
Additional paid-in capital 6,955 6,881
Retained earnings 17,609 16,087
Accumulated other comprehensive income
(loss) (60) (77)
-------------- --------------
Total stockholders' equity 26,538 24,910
-------------- --------------
Total liabilities and stockholders'
equity $ 317,405 $ 314,258
============== ==============
CONSOLIDATED STATEMENTS OF INCOME
Three Months ended September 30, 2012 and 2011
(Amounts in thousands, except share and per share data)
Three Months ended
September 30,
2012 2011
------------- -------------
Interest income
Loans $ 3,095 $ 3,238
Investment securities:
Taxable 41 207
Tax-exempt 11 8
Dividends 41 30
------------- -------------
Total interest income 3,188 3,483
Interest expense
Deposits 324 545
Borrowed funds 423 433
------------- -------------
Total interest expense 747 978
------------- -------------
Net interest income 2,441 2,505
Provision for loan losses 63 (156)
------------- -------------
Net interest income after provision for loan
losses 2,378 2,661
Noninterest income:
Service charges and other fees 323 351
Investment brokerage commission income 412 308
Mortgage banking activities 286 235
Trust fee income 69 69
Increase in value of bank owned life
insurance 71 71
Gain on securities - 536
Other income 13 -
------------- -------------
Total noninterest income 1,174 1,570
Noninterest expenses:
Salaries and employee benefits 1,554 1,721
Occupancy and equipment 361 355
Data processing 176 170
Professional services 105 111
Real estate owned expense 191 183
Advertising 25 32
FDIC premiums 103 51
Prepayment penalties on repurchase
agreements - 195
Other 347 310
------------- -------------
Total noninterest expenses 2,862 3,128
------------- -------------
Income (loss) before income tax expense
(benefit) 690 1,103
Provision for income tax 173 311
------------- -------------
Net income (loss) $ 517 $ 792
============= =============
Earnings per share $ 0.25 $ 0.39
Dividends declared per share $ 0.00 $ 0. 01
Key Ratios:
Return on average equity 7.87% 12.91%
Return on average assets 0.66% 0.91%
Net interest margin (tax equivalent) 3.54% 3.33%
CONSOLIDATED STATEMENTS OF INCOME
Nine Months ended September 30, 2012 and 2011
(Amounts in thousands, except share and per share data)
Nine Months ended Sept. 30,
2012 2011
------------- ------------
Interest income
Loans $ 9,313 $ 9,531
Investment securities:
Taxable 89 871
Tax-exempt 27 38
Dividends 111 90
------------- ------------
Total interest income 9,540 10,530
Interest expense
Deposits 1,032 1,844
Borrowed funds 1,273 1,337
------------- ------------
Total interest expense 2,305 3,181
------------- ------------
Net interest income 7,235 7,349
Provision for loan losses 54 1,699
------------- ------------
Net interest income after provision for loan
losses 7,181 5,650
Noninterest income:
Service charges and other fees 1,016 1,049
Investment brokerage commission income 1,127 907
Mortgage banking activities 850 613
Trust fee income 228 255
Increase in value of bank owned life
insurance 211 209
Gain on securities - 536
Other income (14) 20
------------- ------------
Total noninterest income 3,418 3,589
Noninterest expenses:
Salaries and employee benefits 4,692 5,143
Occupancy and equipment 1,075 1,094
Data processing 532 514
Professional services 293 361
Real estate owned expense 538 878
Advertising 76 97
FDIC premiums 314 285
Prepayment penalties on repurchase
agreements - 195
Other 1,056 1,057
------------- ------------
Total noninterest expenses 8,576 9,624
------------- ------------
Income (loss) before income tax expense
(benefit) 2,023 (385)
Provision for income tax 503 (326)
------------- ------------
Net income (loss) $ 1,520 $ (59)
============= ============
Earnings per share $ 0.75 $ (0.03)
Dividends declared per share $ 0.00 $ 0. 03
Key Ratios:
Return on average equity 7.98% (0.25%)
Return on average assets 0.64% (0.02%)
Net interest margin (tax equivalent) 3.53% 3.14%
Contacts: Sturgis Bancorp Eric Eishen President & CEO Brian
P. Hoggatt CFO P: 269 651-9345
Sturgis Bancorp (QX) (USOTC:STBI)
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