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 Sturgis Bancorp Reports Earnings for Q3 2009November 6, 2009 STURGIS, Mich., Nov. 6 /PRNewswire-FirstCall/ -- Sturgis Bancorp, Inc. (OTC Bulletin Board: STBI) posted a 36.1% earnings decrease for the first nine months of 2009, compared to 2008, Eric L. Eishen, President and CEO, announced today. Key Highlights for the first nine months of 2009:
-- Bank reports profits and continues to exceed "well-capitalized"
requirements.
-- Net income decreased 36.1% to $1,114,000, or $0.55 per share.
-- Net income decreased 36.1% to $1,114,000, or $0.55 per share.
-- Mortgage banking activities increased 43.2% to $931,000.
-- Total deposits increased 9.9% to $260.9 million.
-- Realized gain on sale of securities was $1.2 million.
-- Secured liabilities of the Bank, comprised of Federal Home Loan Bank
advances and repurchase agreements, were reduced $31.3 million, or
26.8%.
-- Sturgis Bank & Trust Company's regulatory capital ratios were enhanced
with additional capital infusion from Sturgis Bancorp.
-- Allowance for loan losses increased to 1.39% of total loans from 1.01%
at the end of 2008.
-- TARP CPP funds of $7.2 million were preliminarily approved by the U.S.
Treasury - In April 2009, the Company rejected Treasury's offer.
-- Nonaccrual loans increased $2.9 million and delinquent loans also
increased to 1.74% of total loans from 1.59% at December 31, 2008.
First Nine Months of 2009 vs. 2008 - Net income for the nine months ended September 30, 2009 decreased 36.1% to $1,114,000, or $0.55 per share from $1,742,000, or $0.86 per share for 2008. Net interest income decreased $378,000, primarily due to the lower tax-equivalent net interest margin of 2.80% in 2009 from 3.13% in 2008. Average interest-earning assets increased to $353.5 million for the nine months ended September 30, 2009 from $330.0 million for the same period in 2008. Net charge-offs for the first nine months of 2009 were $702,000, compared to $107,000 a year ago. The Company provided $1.8 million for loan losses in the first nine months of 2009, compared to $268,000 in 2008. The increase in provision for loan losses recognizes the deterioration of economic market conditions, increasing the Bank's allowance for loan losses to 1.39% of total loans at September 30, 2009 from 1.00% at December 31, 2008. Noninterest income was $4.6 million for the first nine months of 2009, compared to $3.6 million for same period in 2008. The primary component of this increase was $1.2 million of realized gain on sale of available-for-sale mortgage-backed securities. Mortgage banking activities also increased 43% to $931,000, primarily due to a decrease in mortgage rates during the nine months ended September 30, 2009. Commission income decreased 37% to $786,000, as the market value of brokerage accounts decreased. Noninterest expense decreased $273,000, despite the FDIC special assessment of $182,000 paid in 2009. Total FDIC premiums, including the special assessment, increased $348,000 from the first nine months of 2008. Salaries and employee benefits decreased $711,000. Lower brokerage commission expense and increase in deferral of loan origination expenses contributed to the decline. President and CEO Eishen stated, "The Michigan economy continues to struggle. We are fortunate that our market area continues to be slightly better than other regions within the State. We are hearing positive reports from our commercial clients and hopefully we will see improvements in employment. However, we are seeing more stress on consumers. We have made significant increases to our Allowance for Loan and Lease Losses thus far in 2009. We have also written down troubled loans when it is evident the borrower may not be able to service their obligations. It is troubling that the banking industry continues to receive mixed messages on capital and liquidity levels. Washington D.C. is telling bankers to lend and the Regulatory Agencies are indicating it is a time to further build capital." Third Quarter of 2009 vs. 2008 - Net income for the quarter ended September 30, 2009 decreased 65.7% to $209,000, or $0.10 per share from $610,000, or $0.30 per share for the year-earlier quarter. Net interest income decreased $96,000, primarily due to the lower tax-equivalent net interest margin for the quarters to 2.90% in 2009 from 3.01% in 2008. Average interest-earning assets increased to $343.7 million for the quarter ended September 30, 2009 from $342.4 million for the same quarter in 2008. Net charge-offs for the third quarter of 2009 were $442,000, compared to $6,000 a year ago. The Company provided $359,000 for loan losses in the third quarter of 2009, compared to $37,000 in 2008. The increase in provision for loan losses recognizes the deterioration of economic market conditions. Noninterest income was $1.2 million for the third quarter of 2009, compared to $1.3 million in 2008. An additional $51,000 gain on sale of securities was realized in the third quarter of 2009. Mortgage banking activities increased $50,000. Commission income decreased 41.1% to $299,000. Noninterest expense decreased $98,000, despite $58,000 paid to prepay a FHLB advance and increases in FDIC insurance premiums of $52,000 during the quarter. Salaries and employee benefits decreased by $209,000. Lower brokerage commission expense and increase in deferral of loan origination expenses contributed to the decline. Total assets decreased to $375.0 million at September 30, 2009 from $383.4 million at December 31, 2008, primarily in securities available-for-sale. Loans increased $1.1 million during the first nine months of 2009. Mr. Eishen also stated, "As with most banks in Michigan, we continue to focus on Asset Quality. The chart that follows gives a comparison in loan trends since the beginning of the year. Non accruals and real estate owned (REO) have increased, but past due accounts continue to be at historical levels, despite the deterioration of the economy. Unfortunately, we are not immune to the Michigan economy. Employment continues to be relatively stable in our main market area. Management is implementing plans to reduce REO properties and non-accrual loans." Nonperforming assets increased from December 31, 2008, as follows:
Percentage of
Gross Loans
Past due and still accruing: 09/30/2009 12/31/2008
Past due one month 1.00% 1.07%
Past due two months 0.39% 0.38%
Past due three or more months 0.35% 0.14%
Nonaccrual loans 2.14% 1.12%
Real Estate Owned 0.81% 0.67%
Noninterest-bearing deposits increased to $25.9 million at September 30, 2009 from $25.7 million at December 31, 2008. Interest-bearing deposits also increased to $235.1 million at September 30, 2009 from $211.8 million at December 31, 2008. A majority of the increase, $17.3 million, was in transaction accounts. Brokered certificates of deposit decreased $3.1 million from December 31, 2008. Brokered certificates of deposit are used as an alternative to Federal Home Loan Bank ("FHLB") advances, when the total interest cost is lower. The increase in deposits allowed the Bank to also reduce FHLB advances and repurchase agreements by $25.8 million and $5.5 million, respectively. In the nine months ended September 30, 2009, the Company paid cash dividends of $0.36 per common share, totaling $0.7 million. Total equity was $25.8 million at September 30, 2009 and at December 31, 2008. Book value per share increased to $12.79 at September 30, 2009 from $12.76 at December 31, 2008. Also in the first nine months of 2009, Sturgis Bancorp borrowed $2.3 million to invest in the common stock of Sturgis Bank & Trust Company. This capital infusion, along with retained earnings, enhanced the regulatory capital ratios of the Bank, as follows:
Sept. 30, 2009 December 31, 2008
Total capital to risk-weighted assets 11.99% 11.02%
Tier 1 capital to risk-weighted assets 10.74% 9.84%
Tier 1 capital to adjusted total assets 7.02% 6.11%
Sturgis Bancorp is the holding company for Sturgis Bank & Trust Company, 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, Bronson, Centreville, Climax, Coldwater, 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. 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. (Financial statements follow)
Consolidated Balance Sheets
Sept. 30, 2009 Dec. 31, 2008
-------------- -------------
(In Thousands)
Assets
Cash and due from banks $11,037 $6,930
Other short-term investments 3,752 9
----- ---
Total cash and cash equivalents 14,789 6,939
Interest-earning deposits in banks 6,578 9,334
Securities - Available for sale 29,606 41,896
Securities - Held-to-maturity 8,267 8,777
Federal Home Loan Bank stock, at cost 4,784 4,784
Loans held for sale 161 1,578
Loans, net 281,943 280,867
Premises and equipment, net 8,443 8,710
Goodwill, net of accumulated amortization 5,109 5,109
Originated mortgage servicing rights 1,321 1,409
Real estate owned 2,316 1,913
Bank owned life insurance 8,321 8,072
Accrued interest receivable 1,891 2,286
Investment in limited partnerships 538 618
Other assets 927 1,102
--- -----
Total assets $374,994 $383,394
======== ========
Liabilities and Stockholders' Equity
Liabilities
Deposits
Noninterest-bearing $25,898 $25,710
Interest bearing 235,085 211,807
------- -------
Total Deposits 260,983 237,517
Federal Home Loan Bank advances 60,500 86,287
Repurchase agreements 25,000 30,500
Accrued interest payable 685 868
Other liabilities 2,022 2,472
----- -----
Total liabilities 349,190 357,644
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 - 2,017,245 shares
at September 30, 2009 and
December 31, 2008 2,017 2,017
Additional paid-in capital 6,872 6,872
Accumulated other comprehensive
income (loss) 58 391
Retained earnings 16,857 16,470
------ ------
Total stockholders' equity 25,804 25,750
------ ------
Total liabilities and
stockholders' equity $374,994 $383,394
======== ========
Consolidated Statements of Income
Nine Months Ended September 30,
2009 2008
Interest income (In Thousands)
Loans $11,623 $13,591
Investment securities:
Taxable 1,465 1,584
Tax-exempt 41 40
Dividends 126 219
--- ---
Total interest income 13,255 15,434
Interest expense
Deposits 3,202 4,472
Borrowed funds 2,735 3,266
----- -----
Total interest expense 5,937 7,738
----- -----
Net interest income 7,318 7,696
Provision for loan losses 1,840 268
----- ---
Net interest income - After
provision for loan losses 5,478 7,428
Noninterest income:
Service charges and other fees 1,178 1,176
Investment brokerage commission income 786 1,245
Mortgage banking activities 931 650
Trust fee income 235 308
Increase in value of bank owned life
insurance 249 241
Gain on sale of securities 1,172 -
Other income 14 14
-- --
Total noninterest income 4,565 3,634
Noninterest expenses:
Salaries and employee benefits 4,722 5,433
Occupancy and equipment 1,146 1,048
Data processing 574 615
Professional services 243 263
Real estate owned expense 296 157
Advertising 91 141
FDIC insurance premium 473 125
Other 1,050 1,086
----- -----
Total noninterest expenses 8,595 8,868
----- -----
Income - Before income tax expense 1,448 2,194
Provision for federal income tax 334 452
--- ---
Net income $1,114 $1,742
====== ======
Earnings per share $0.55 $0.86
Dividends declared per share $0.36 $0.36
Return on average equity 5.77% 9.21%
Return on average assets 0.38% 0.63%
Net interest margin (tax equivalent) 2.80% 3.13%
Consolidated Statements of Income
Three Months Ended
September 30,
2009 2008
Interest income (In Thousands)
Loans $3,853 $4,354
Investment securities:
Taxable 428 684
Tax-exempt 17 8
Dividends 46 69
--- ---
Total interest income 4,344 5,115
Interest expense
Deposits 1,021 1,437
Borrowed funds 842 1,101
--- -----
Total interest expense 1,863 2,538
----- -----
Net interest income 2,481 2,577
Provision for loan losses 359 37
--- --
Net interest income - After provision
for loan losses 2,122 2,540
Noninterest income:
Service charges and other fees 376 395
Investment brokerage commission
income 299 508
Mortgage banking activities 273 223
Trust fee income 76 92
Increase in value of bank owned life
insurance 84 80
Gain on sale of securities 51 -
Other income 55 (18)
--- ---
Total noninterest income 1,214 1,280
Noninterest expenses:
Salaries and employee benefits 1,603 1,812
Occupancy and equipment 381 368
Data processing 197 215
Professional services 80 100
Real estate owned expense 121 56
Advertising 30 62
FDIC insurance premium 96 44
Other 447 396
--- ---
Total noninterest expenses 2,955 3,053
----- -----
Income - Before income tax expense 381 767
Provision for federal income tax 172 157
--- ---
Net income $209 $610
==== ====
Earnings per share $0.10 $0.30
Dividends declared per share $0.12 $0.12
Return on average equity 3.22% 9.87%
Return on average assets 0.22% 0.64%
Net interest margin (tax equivalent) 2.90% 3.01%
SOURCE Sturgis Bancorp, Inc. Come And Visit
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