Sturgis Bancorp : Reports Earnings for Second Quarter 2020
July 24, 2020 at 04:46 pm
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STURGIS, Mich., July 24, 2020 (GLOBE NEWSWIRE) -- Sturgis Bancorp, Inc. (OTCQX: STBI) today announced net income of $2.9 million for the first half of 2020 and $1.4 million for the second quarter of 2020.
Sturgis Bancorp is the holding company for Sturgis Bank & Trust Company (Bank), and its subsidiaries Oakleaf Financial Services, Inc., Oak Mortgage, LLC, Oak Insurance Services, LLC, and Oak Title Services, 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, MI. The Bank also has loan production offices in Portage and St. Joseph, 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. Oak Insurance Services offers various competitive commercial and consumer insurance products. Oak Title Services offers commercial and consumer title insurance.
Key Highlights:
Net income increased 22% for the first half of 2020 to $2,863,000, compared to $2,339,000 for the first half of 2019, primarily due to mortgage banking activities.
Sales of $69.9 million residential mortgages generated $1.9 million of noninterest income in the first half of 2020, compared to $406,000 on $12.6 million of sales in the first half of 2019.
Net loans increased 13.2% to $398.9 million.
The Bank supported 515 borrowers with SBA’s Paycheck Protection Program (PPP) loans, for a total of $34.7 million on June 20, 2020.
Total assets increased 30% to $617.5 million. The Bank's risk-weighted assets were $364.7 million at June 30, 2020.
Total deposits increased 22.2% to $431.3 million.
Allowance for loan losses was 1.13% of loans.
Eric L. Eishen, President and CEO, stated, “I am very pleased to report the Bank remained open during the entire stay-at-home orders in the State of Michigan. Although Bank branch lobbies were operating under an appointment-only system, we successfully served all our customer needs during the height of the COVID pandemic. The Bank’s technology investments over the past few years well prepared the Bank for full service, using drive-thru, night deposit, Telebank, Internet, mobile banking, and remote deposit. The Bank had a strong first half, led by mortgage banking activities. The Bank provided $1.1 million to the Allowance for Loan and Lease Losses (ALLL) under GAAP with an incurred loss model. This increase in ALLL addresses the growth in total loans and COVID-impacted industries, such as hotel loans. The Bank has proactively deferred loan payments for several affected borrowers. However, most of these borrowers have indicated they believe they will be able to handle a short-term interruption to service. Many have also utilized the SBA’s Paycheck Protection Program to assist their business. The Bank was able to assist 515 borrowers in obtaining PPP loans, introducing some new commercial clients to the Bank. The Bank has already realized strong deposit growth from these new customers, as well as from existing depositors. Overall credit quality has remained strong. The Bank constantly analyzes the loan portfolio and economic conditions in our market area to determine the extent of required allocations for unidentified loan losses. Appropriate adjustments are realized every quarter, as market conditions change.”
Six months ended June 30, 2020 vs. six months ended June 30, 2019 – Net income for the six months ended June 30, 2020 was $2,863,000, or $1.35 per share, compared to net income of $2,339,000, or $1.11 per share, for the six months ended June 30, 2019. The tax-equivalent net interest margin decreased to 3.44% in the first six months of 2020 from 4.01% in the first six months of 2019.
Net interest income increased to $8.3 million in 2020 from $7.8 million in 2019. The growth was primarily in loan interest income, which increased $732,000 to $9.1 million. Total interest income increased $713,000 to $10.1 million, and interest expense only increased $214,000 to $1.8 million.
The Company provided $1.1 million to the allowance for loan losses in the first six months of 2020, compared to $113,000 in the same period of 2019. Net charge-offs were $62,000 in 2020 and $0 in 2019.
Noninterest income was $4.1 million in the first half of 2020, compared to $2.6 million in the first half of 2019. Most of the increase was due to mortgage banking activities, up $1.5 million, to $1.9 million. Mortgage banking activities included residential loan sales of $69.9 million in 2020, compared to $12.6 million in 2019. Investment brokerage commission income also increased 12% in 2020 to $685,000 in 2020 from $612,000 in 2019. The Bank also realized $157,000 gain on sale of securities in 2020, compared to $1,000 in 2019.
Noninterest expense was $7.9 million in 2020, compared to $7.5 million 2019. Salaries and employee benefits, the largest component of noninterest expense, increased $182,000, or 3.9%.
Three months ended June 30, 2020 vs. three months ended June 30, 2019 - Net income for the three months ended June 30, 2020 was $1,355,000, or $0.64 per share, compared to net income of $1,297,000, or $0.62 per share, for the three months ended June 30, 2019. The tax equivalent net interest margin decreased to 2.92% in the second quarter of 2020 from 4.02% in the second quarter of 2019.
Net interest income increased to $4.2 million in 2020 from $4.0 million in 2019. The growth was primarily due to loan interest income, which increased by $264,000 to $9.2 million. Total interest income increased $255,000 to $5.1 million in 2020, and interest expense only increased $90,000 to $926,000 in 2020.
The Company provided $974,000 to the allowance for loan losses in the second quarter of 2020, compared to $75,000 in the same quarter of 2019. Net charge-offs were ($2,000) in 2020 and $3,000 in 2019.
Noninterest income was $2.3 million in the second quarter of 2020, compared to $1.4 million in the second quarter of 2019. Most of the increase was due to mortgage banking activities, up $928,000, to $1.1 million. Mortgage banking activities included residential loan sales of $36.9 million in 2020, compared to $7.5 million in 2019. The Bank also realized $157,000 gain on sale of securities in 2020, compared to $44,000 in 2019.
Noninterest expense was $3.9 million in 2020, compared to $3.8 million 2019. Salaries and employee benefits, the largest component of noninterest expense, increased $65,000, or 3.0%.
Total assets increased to $617.5 million at June 30, 2020 from $473.4 million at December 31, 2019, primarily in cash and cash equivalents and loans. Loans increased $46.4 million from December 31, 2019, primarily in commercial nonmortgage loans, commercial real estate loans and residential mortgages. At June 30, 2020, the Bank had $34.7 million of PPP loans.
Interest-bearing deposits increased to $312.2 million at June 30, 2020 from $263.2 million at December 31, 2019. Brokered deposits, a component of interest-bearing deposits, decreased $11.9 million in the first half of 2020, to $27.8 million at June 30, 2020.
Total equity was $43.7 million at June 30, 2020, compared to $43.6 million at December 31, 2019. The regular quarterly dividend was increased in the first half of 2020 to a record-high $0.16 per share. Book value per share was $20.62 ($17.05 tangible) at June 30, 2020.
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.
Contacts: Sturgis Bancorp -- Eric Eishen, President & CEO, or Brian P. Hoggatt, CFO -- P: 269 651-9345
CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share and per share data)
June 30,
Dec. 31,
2020
2019
ASSETS
Cash and due from banks
$
12,138
$
13,301
Other short-term investments
74,599
9,896
Total cash and cash equivalents
86,737
23,197
Interest-earning deposits in banks
1,979
2,720
Securities - available for sale
79,107
55,850
Securities - held to maturity
-
-
Federal Home Loan Bank stock, at cost
4,917
3,612
Loans held for sale, at fair value
6,786
2,977
Loans, net of allowance of $4,514 and $3,451
398,910
352,531
Premises and equipment, net
10,422
9,367
Goodwill
5,834
5,834
Core deposit intangibles
94
113
Originated mortgage servicing rights
1,634
1,112
Real estate owned
181
193
Bank-owned life insurance
10,943
10,797
Accrued interest receivable
2,507
1,610
Other assets
7,422
3,458
Total assets
$
617,473
$
473,371
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing
$
119,133
$
89,747
Interest-bearing
312,203
263,189
Total deposits
431,336
352,936
Federal Home Loan Bank advances and other borrowings
132,254
70,000
Accrued interest payable
521
438
Other liabilities
9,671
6,425
Total liabilities
573,782
429,799
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 2,118,791 shares at June 30, 2020 and 2,113,591 shares at December 31, 2019
2,119
2,114
Additional paid-in capital
7,969
7,893
Retained earnings
36,376
34,190
Accumulated other comprehensive loss
(2,773
)
(625
)
Total stockholders' equity
43,691
43,572
Total liabilities and stockholders' equity
$
617,473
$
473,371
CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except share and per share data)
Three Months Ended June 30,
2020
2019
Interest income
Loans
$
4,578
$
4,314
Investment securities:
Taxable
232
259
Tax-exempt
165
215
Dividends
123
55
Total interest income
5,098
4,843
Interest expense
Deposits
484
511
Borrowed funds
442
325
Total interest expense
926
836
Net interest income
4,172
4,007
Provision (benefit) for loan losses
974
75
Net interest income after provision (benefit) for loan losses
3,198
3,932
Noninterest income:
Service charges and other fees
270
313
Interchange income
219
220
Investment brokerage commission income
323
321
Mortgage banking activities
1,122
194
Trust fee income
103
164
Earnings on cash value of bank-owned life insurance
73
72
Gain (loss) on sale of real estate owned
-
59
Loss on sale of securities
157
44
Other income
15
22
Total noninterest income
2,282
1,409
Noninterest expenses:
Salaries and employee benefits
2,322
2,257
Occupancy and equipment
499
477
Interchange expenses
97
99
Data processing
220
198
Professional services
52
70
Real estate owned expense
1
3
Advertising
58
76
FDIC premiums
41
46
Other expenses
566
569
Total noninterest expenses
3,856
3,795
Income before income tax expense
1,624
1,546
Income tax expense
269
249
Net income
$
1,355
$
1,297
Earnings per share
$
0.64
$
0.61
Dividends per share
$
0.16
$
0.15
CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except share and per share data)
Six Months Ended
2020
2019
Interest income
Loans
$
9,087
$
8,355
Investment securities:
Taxable
489
539
Tax-exempt
394
437
Dividends
174
100
Total interest income
10,144
9,431
Interest expense
Deposits
999
1,013
Borrowed funds
830
602
Total interest expense
1,829
1,615
Net interest income
8,315
7,816
Provision (benefit) for loan losses
1,125
113
Net interest income after provision (benefit) for loan losses
7,190
7,703
Noninterest income:
Service charges and other fees
595
637
Interchange income
430
413
Investment brokerage commission income
685
612
Mortgage banking activities
1,898
406
Trust fee income
201
258
Earnings on cash value of bank-owned life insurance
146
134
Gain (loss) on sale of real estate owned
(2
)
61
Loss on sale of securities
157
1
Other income
36
52
Total noninterest income
4,146
2,574
Noninterest expenses:
Salaries and employee benefits
4,847
4,665
Occupancy and equipment
1,009
949
Interchange expenses
198
186
Data processing
422
394
Professional services
185
180
Real estate owned expense
3
8
Advertising
127
134
FDIC premiums
86
89
Other expenses
1,033
920
Total noninterest expenses
7,910
7,525
Income before income tax expense
3,426
2,752
Income tax expense
563
413
Net income
$
2,863
$
2,339
Earnings per share
$
1.35
$
1.11
Dividends per share
$
0.32
$
0.30
OTHER FINANCIAL INFORMATION (Amounts in thousands)
Sturgis Bancorp, Inc. is the holding company for Sturgis Bank & Trust Company (Bank), and its subsidiaries Oakleaf Financial Services, Inc., Oak Mortgage, LLC, Ayres/Oak Insurance, and Oak Title Services. The Bank provides an array of trust, commercial and consumer banking services from banking centers in Sturgis, Bangor, Bronson, Centreville, Climax, Colon, Niles, Portage, South Haven, St. Joseph, Three Rivers and White Pigeon, MI. Oakleaf Financial Services, Inc., offers a range of investment and financial-advisory services. Oak Mortgage, LLC offers residential mortgages in all markets of the Bank. Ayres/Oak Insurance offers various competitive commercial and consumer insurance products. Oak Title Services offers commercial and consumer title insurance. The Bank offers a range of personal banking, business banking, Internet banking and wealth management services.