Sturgis Bancorp, Inc. (STBI: OTCQX U.S. Premier) | Sturgis Bancorp Reports Earnings for 2015

Sturgis Bancorp Reports Earnings for 2015

Jan 29, 2016

OTC Disclosure News Service

– Sturgis Bancorp Reports Earnings for 2015

STURGIS, MI–(Marketwired – Jan 29, 2016) – Sturgis Bancorp, Inc. (OTCQX: STBI) announced a net income of $2.5 million for 2015, and net income of $824,000 for the fourth quarter of 2015, 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. and Oak Mortgage, 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, 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 for 2015:

  • Net income for 2015 was $2.5 million, or $1.19 per share, compared to net income of $1.9 million, or $0.91 per share, in 2014.
  • The Bank increased capital ratios, exceeding “well-capitalized” requirements and ending 2015 with Tier 1 capital at 8.64% of average assets and 13.52% of risk-weighted assets. Total capital at December 31, 2015 was 14.77% of risk-weighted assets. 
  • Nonaccrual loans decreased by $659,000 to $3.1 million.
  • Acquisition of another financial institution with $32.6 million of deposits and $11.2 million in loans.
  • Loans charged off, net of recoveries, decreased to $5,000 in 2015 from $813,000 in 2014. The allowance for loan losses decreased to 1.25% of total (gross) loans from 1.43% at the end of 2014, primarily due to improvements in credit quality.

President and CEO Eishen stated, “The Bank completed its first full bank acquisition in 2015 with the purchase of West Michigan Savings Bank (WMSB) in Bangor Michigan. Despite recognizing higher expenses related to this transaction, the Bank still realized an improvement in earnings from 2014. Full integration of WMSB was accomplished during the year, and the transaction is expected to be accretive to earnings in 2016. The purchase expands the Bank’s market presence in Van Buren County Michigan to three offices, making the Bank the fourth largest bank, as measured by deposits. 

“The Bank continues to realize improvements to credit quality and expects this trend to continue. Net charge-offs were at a historical low, primarily due to two commercial loan recoveries in 2015. This demonstrates the Bank’s proactive credit management processes.”

Year 2015 vs. 2014 – Net income for the year ended December 31, 2015 increased to $2.5 million, or $1.19 per share from net income of $1.9 million, or $0.91 per share, for 2014. Net interest income increased 11.5% to $10.7 million, from $9.6 million for 2014. The increase in net interest income is primarily due to growth in loans and investments. 

The average rate paid on interest-bearing liabilities decreased to 0.74% in 2015 from 0.89% in 2014. Average interest-earning assets increased to $303.5 million in 2015 from $272.7 million in 2014. The tax equivalent net interest margin increased to 3.62% in 2015 from 3.59% in 2014. 

The provision for loan losses was ($219,000) for the year ended December 31, 2015, compared to $104,000 for the year ended December 31, 2014. 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 2015, net of recoveries, were $5,000, compared to $813,000 during 2014.

Noninterest income was $6.0 million in 2015, compared to $5.2 million in 2014. The Bank received $700,000 of death benefit in excess of recorded cash value from bank-owned life insurance in 2015. Investment brokerage commission income decreased $157,000 to $2.1 million, primarily due to market performance and annuity sales. Mortgage banking activities increased $48,000 to $700,000, as loan sale volume increased. 

Noninterest expense was $14.1 million in 2015, compared to $12.4 million in 2014. The Bank incurred $825,000 pre-tax expenses in 2015 related to the acquisition of another Bank, compared to $192,000 in 2014. The largest component of noninterest expense is salaries and employee benefits, which increased $800,000. This increase is primarily due to staff for the acquired Bank location and pension expense in terminating the acquired Bank’s plan. Real estate owned expense increased $219,000 to $541,000, including $354,000 to write down values to market prices. Management actively minimizes noninterest expense, although certain noninterest expenses are outside of Management’s direct control. 

Total assets increased to $368.6 million at December 31, 2015 from $312.5 million at December 31, 2014, primarily in securities. Net loans increased $17.5 million, to $253.8 million at December 31, 2015.

Deposits were $284.0 million at December 31, 2015 compared to $234.3 million at December 31, 2014, an increase of $49.7 million. Interest-bearing deposits increased to $219.0 million at December 31, 2015 from $182.9 million at December 31, 2014. Brokered certificates of deposit increased to $7.7 million at December 31, 2015 from $2.7 million at December 31, 2014. Non-brokered jumbo certificates decreased to $13.0 million at December 31, 2015 from $11.1 million at December 31, 2014. The Bank uses brokered and jumbo certificates as sources of liquidity. Interest-bearing transaction savings accounts and checking accounts increased $26.2 million, or 15.6%. Transaction savings accounts and checking accounts represent 59.1% of deposits at December 31, 2015, compared to 60.46% of deposits at December 31, 2014. 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 enhances net interest income.

The stockholders’ equity of Bancorp was $32.6 million at December 31, 2015 compared to $30.4 million at December 31, 2014, an increase of $2.2 million, or 7.38%. The primary component of this increase was retained earnings. Cash dividends of $290,000, or $0.14 per share, were paid in 2015, compared to $0.09 in 2014. The stockholders’ equity was 8.85% of total assets at December 31, 2015. Book value per share increased to $15.70 at December 31, 2015 from $14.66 at December 31, 2014. 

Mr. Eishen added, “The Board increased the cash dividend in 2015. Another increase by $0.03 per share in the first quarter of 2016 increases the quarterly dividend to $0.08. The increases are well supported with core earnings improvements in the last year and remains in line with the Company’s historical payout ratio.”

Fourth Quarter of 2015 vs. 2014 – Net income for the quarter ended December 31, 2015 increased to $824,000, or $0.40 per share, from $452,000, or $0.22 per share, for the fourth quarter of 2014. The primary components of the increase are net interest income and provision for loan losses. 

Net interest income increased $523,000, to $3.0 million in the fourth quarter of 2015. The increase is primarily due to reductions in rates paid on average interest-bearing liabilities and growth in average interest-earning assets. The tax-equivalent net interest margin increased to 3.73% in 2015 from 3.58% in the last quarter of 2014.

Net charge-offs for the fourth quarter of 2015 were ($133,000), compared to $79,000 a year ago. The Company recorded ($215,000) provision tor loan losses in the fourth quarter of 2015, compared to ($8,000) for the same quarter of 2014.

Noninterest income decreased $10,000 in the fourth quarter of 2015. The primarily component of noninterest income was commission income, which decreased $60,000. 

Noninterest expense increased $244,000, primarily due to $207,000 pension expense to terminate the acquired Bank’s plan. 

Acquisition of West Michigan Savings Bank – On April 6, 2015, the Company completed its acquisition of West Michigan Savings Bank in Bangor, Michigan, in an all-cash transaction valued at approximately $3.3 million. Liabilities assumed included $32.6 million of deposits and $612,000 in other liabilities. The assets acquired included $6.1 million of cash and cash equivalents, $17.4 million of available for sale securities, $11.2 million in loans, and $732,000 in other assets. The Company recognized $365,000 core deposit intangible and $724,000 in goodwill. The transaction incurred $1.0 million of pre-tax expense ($672,000 after tax), including $825,000 ($555,000 after tax) recorded in 2015. Most of the transaction expenses were professional services, data processing termination and conversion, pension termination, and severance pay.

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
  December 31, 2015 and 2014
 
(Amounts in thousands, except share and per share data)
 
 
 
 
 
 
 
2015
 
 
2014
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks
 
$
10,786
 
 
$
7,680
 
 
Other short-term investments
 
 
5,084
 
 
 
4,369
 
 
 
Total cash and cash equivalents
 
 
15,870
 
 
 
12,049
 
 
 
 
 
 
 
 
 
 
 
Interest-earning deposits in banks
 
 
16,805
 
 
 
16,575
 
 
Securities – available for sale
 
 
27,635
 
 
 
7,044
 
 
Securities – held to maturity
 
 
19,245
 
 
 
5,792
 
 
Federal Home Loan Bank stock, at cost
 
 
2,632
 
 
 
3,409
 
 
Loans held for sale, at fair value
 
 
1,575
 
 
 
1,716
 
 
Loans, net of allowance of $3,213 and $3,437
 
 
253,830
 
 
 
236,371
 
  Premises and equipment, net
 
 
8,114
 
 
 
7,504
 
 
Goodwill
 
 
5,834
 
 
 
5,109
 
 
Core deposit intangibles
 
 
320
 
 
 

 
 
Originated mortgage servicing rights
 
 
1,349
 
 
 
1,413
 
 
Real estate owned
 
 
827
 
 
 
1,608
 
 
Bank-owned life insurance
 
 
9,735
 
 
 
9,808
 
 
Accrued interest receivable
 
 
1,183
 
 
 
868
 
 
Other assets
 
 
3,605
 
 
 
3,189
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
368,559
 
 
$
312,455
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
  Deposits
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing
 
$
65,041
 
 
$
51,383
 
 
 
Interest-bearing
 
 
218,998
 
 
 
182,907
 
 
 
 
Total deposits
 
 
284,039
 
 
 
234,290
 
 
Federal Home Loan Bank advances and other borrowings
 
 
47,812
 
 
 
44,218
 
 
Accrued interest payable
 
 
243
 
 
 
238
 
 
Other liabilities
 
 
3,853
 
 
 
3,359
 
 
 
Total liabilities
 
 
335,947
 
 
 
282,105
 
 
 
 
 
 
 
 
 
 
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 2,077,791 shares at December 31, 2015 and 2,069,891 at December 31, 2014
 
 

2,078

 
 
 

2,070

 
 
Additional paid-in capital
 
 
7,277
 
 
 
7,204
 
 
Retained earnings
 
 
23,445
 
 
 
21,276
 
 
Accumulated other comprehensive loss
 
 
(188
)
 
 
(200
)
 
 
Total stockholders’ equity
 
 
32,612
 
 
 
30,350
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and stockholders’ equity
 
$
368,559
 
 
$
312,455
 
 
 
 
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2015 and 2014
(Amounts in thousands, except share and per share data)
 
 
 
 
2015
 
 
2014
 
Interest income
 
 
 
 
 
 
 
 
 
Loans
 
$
11,658
 
 
$
11,101
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
 
Taxable
 
 
521
 
 
 
386
 
 
 
Tax-exempt
 
  316
 
 
 
80
 
 
Dividends
 
 
135
 
 
 
170
 
 
 
Total interest income
 
 
12,630
 
 
 
11,737
 
 
 
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
 
 
 
Deposits
 
 
669
 
 
 
820
 
 
Borrowed funds
 
 
1,212
 
 
 
1,274
 
 
 
Total interest expense
 
 
1,881
 
 
 
2,094
 
 
 
 
 
 
 
 
 
 
Net interest income
 
 
10,749
 
 
 
9,643
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
 
 
(219
)
 
 
104
 
 
 
 
 
 
 
 
 
 
Net interest income after provision for loan losses
   
10,968
 
 
 
9,539
 
 
 
 
 
 
 
 
 
 
Noninterest income:
 
 
 
 
 
 
 
 
 
Service charges and other fees
 
 
967
 
 
 
946
 
 
Interchange income
 
 
669
 
 
 
630
 
 
Investment brokerage commission income
 
 
2,097
 
 
 
2,254
 
 
Mortgage banking activities
 
 
700
 
 
 
652
 
 
Trust fee income
 
 
426
 
 
 
379
 
 
Increase in cash value of bank owned life insurance
 
 
973
 
 
 
271
 
 
Gain (loss) on sale of real estate owned
 
 
113
 
 
 
41
 
 
Other income
 
 
98
 
 
 
28
 
 
 
Total noninterest income
 
 
6,043
 
 
 
5,201
 
 
 
 
 
 
 
 
 
 
Noninterest expenses:
 
 
 
   
 
 
 
 
Salaries and employee benefits
 
 
7,748
 
 
 
6,948
 
 
Occupancy and equipment
 
 
1,601
 
 
 
1,543
 
 
Interchange expenses
 
 
376
 
 
 
379
 
 
Data processing
 
 
872
 
 
 
648
 
 
Professional services
 
 
513
 
 
 
554
 
 
Real estate owned expense
 
 
541
 
 
 
322
 
 
Advertising
 
 
187
 
 
 
159
 
 
Realized loss on sale of available-for-sale securities
 
 
2
 
 
 

 
 
FDIC premiums
 
 
258
 
 
 
235
 
 
Other
 
 
2,022
 
 
 
1,622
 
 
 
Total noninterest expenses
 
 
14,120
 
 
 
12,410
 
 
 
 
 
 
 
 
 
 
Income before income tax expense
 
 
2,891
   
 
2,330
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
 
431
 
 
 
448
 
 
 
 
 
 
 
 
 
 
Net income
 
$
2,460
 
 
$
1,882
 
 
 
 
 
 
 
 
 
 
Earnings per share
 
$
1.19
 
 
$
0.91
 
Dividends declared per share
 
$
0.14
 
 
$
0.09
 
 
 
Key Ratios:
 
 
 
 
 
 
 
 
Return on average equity
 
 
7.86
%
 
 
6.46
%
Return on average assets
 
 
0.70
%
 
 
0.60
%
Net interest margin (tax equivalent)
 
 
3.62
%
 
 
3.59
%
Efficiency ratio
 
 
84.09
%
 
 
83.56
%
Interest income
 
2015
 
 
2014
 
 
Loans
 
$
3,045
 
 
$
2,768
 
 
Investment securities:
 
 
 
 
 
 
 
 
 
 
Taxable
 
 
155
 
 
 
100
 
 
 
Tax-exempt
 
 
162
 
 
 
22
 
 
Dividends
 
 
28
 
 
 
38
 
 
 
Total interest income
 
 
3,390
 
 
 
2,928
 
 
 
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
 
 
 
Deposits
 
 
167
 
 
 
178
 
 
Borrowed funds
 
 
270
 
 
 
320
 
 
 
Total interest expense
 
 
437
 
 
 
498
 
 
 
 
 
 
 
   
 
Net interest income
 
 
2,953
 
 
 
2,430
 
 
 
 
 
 
 
 
 
 
Provision for loan losses
 
 
(215
)
 
 
(8
)
 
 
 
 
 
 
 
 
 
Net interest income after provision for loan losses
 
 
3,168
 
 
 
2,438
 
 
 
 
 
 
 
 
 
 
Noninterest income:
 
 
 
 
 
 
 
 
 
Service charges and other fees
 
 
237
 
 
 
221
 
 
Interchange income
 
 
175
 
 
 
179
 
 
Investment brokerage commission income
 
 
527
 
 
 
587
 
 
Mortgage banking activities
 
 
175
 
 
 
168
 
 
Trust fee income
 
 
104
 
 
 
85
 
 
Increase in cash value of bank owned life insurance
 
 
67
 
 
 
69
 
 
Gain on sale of available-for-sale securities  
 
4
 
 
 

 
 
Gain on sale of real estate owned
 
 
20
 
 
 
30
 
 
Other income
 
 
60
 
 
 
16
 
 
 
Total noninterest income
 
 
1,369
 
 
 
1,355
 
 
 
 
 
 
 
 
 
 
Noninterest expenses:
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
 
 
2,005
 
 
 
1,745
 
 
Occupancy and equipment
 
 
398
 
 
 
381
 
 
Interchange expenses
 
 
94
 
 
 
124
 
 
Data processing
 
 
215
 
 
 
168
 
 
Professional services
 
 
126
 
 
 
186
 
 
Real estate owned expense
 
 
90
 
 
 
80
 
 
Advertising
 
 
72
 
 
 
41
 
 
FDIC premiums
 
 
60  
 
 
63
 
 
Other
 
 
414
 
 
 
451
 
 
 
Total noninterest expenses
 
 
3,474
 
 
 
3,239
 
 
 
 
 
 
 
 
 
 
Income before income tax expense
 
 
1,063
 
 
 
554
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
 
239
 
 
 
102
 
 
 
 
 
 
 
 
 
 
Net income
 
$
824
 
 
$
452
 
 
 
 
 
 
 
 
 
 
Earnings per share
 
$
0.40
 
 
$
0.22
 
Dividends declared per share
 
$
0.05
 
 
$
0.03
 
 
 
Key Ratios:
 
 
 
 
 
 
 
 
Return on average equity
 
 
10.16 %
 
 
5.92
%
Return on average assets
 
 
0.90
%
 
 
0.57
%
Net interest margin (tax equivalent)
 
 
3.73
%
 
 
3.58
%
Efficiency ratio
 
 
80.38
%
 
 
85.58
%

Contacts:
Sturgis Bancorp
Eric Eishen
President CEO

Brian P. Hoggatt
CFO
P: 269 651-9345

Copyright © 2016 Marketwired. All Rights Reserved

The above news release has been provided by the above company via the OTC Disclosure and News Service. Issuers of news releases and not OTC Markets Group Inc. are solely responsible for the accuracy of such news releases.

Article source: http://www.otcmarkets.com/stock/STBI/news?id=124215

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