Sturgis Bancorp, Inc. (OTCBB: STBI) announced
a net income of $1.9 million for 2012, and net income of $345,000
for the fourth quarter of 2012, 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 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 for 2012:
- Net income for 2012 increased to $1.9 million, or $0.92 per
share, compared to net income of $501,000, or $0.25 per share, in
2011.
- The Bank further increased capital ratios, exceeding
"well-capitalized" requirements and ending 2012 with Tier 1 capital
at 8.82% and 12.48% of average assets and risk-weighted assets,
respectively. Total capital at December 31, 2012 was 13.75% of
risk-weighted assets.
- Net interest income decreased $137,000.
- Provision for loan losses decreased by $1.1 million to
$545,000.
- Realized gain on sale of securities was $0, compared to
$536,000 in 2011.
- Total deposits increased 0.1% to $235.0 million, including $7.3
million decrease in interest-bearing deposits.
- Brokered certificates of deposit and other jumbo certificates
decreased by $1.6 million and $3.4 million, respectively.
- Loans charged off, net of recoveries, decreased to $1.3 million
in 2012 from $2.4 million in 2011. The allowance for loan losses
decreased to 2.02% of loans from 2.28% at the end of 2011.
Nonaccrual loans decreased to $7.2 million, or 2.83% of gross
loans on December 31, 2012. Nonaccrual loans peaked in June 2011 at
$14.5 million, and were reduced to $10.5 million at December 31,
2011.
President and CEO Eishen stated: "I am pleased to announce
earnings for 2012. They are up significantly from the last few
years and are returning to more normal levels. Credit quality is
improving and the interest margin is stable. Mortgage banking
activity has been a strong part of the Bank's historical earnings
streams. Sturgis Bank & Trust Company and its wholly-owned
subsidiary Oak Mortgage continue to dominate our home market in St.
Joseph County Michigan. Since the Bank retains 100% of the mortgage
servicing, we are building additional relationships while
maintaining existing relationships in our market. This provides the
opportunity to provide other financial services to our customers.
Another wholly-owned subsidiary had a very successful year as well.
Oakleaf Financial Services returned to more normal earnings levels,
partially due to the positive performance of the stock market. Many
of the accounts managed are fee based relationships and this
provides a much more stable income stream to the Bank. The Bank has
also continued to decrease its reliance on non-core funding
sources, with consistent growth of core deposits. All of these
factors have made your Bank more valuable at the end of 2012."
Year 2012 vs. 2011 - Net income for the
year ended December 31, 2012 increased to $1.9 million, or $0.92
per share from net income of $501,000, or $0.25 per share, for
2011. Net interest income decreased 1.4% to $9.6 million, from $9.8
million for 2011. The decrease in net interest income is primarily
due to the decrease in average earning assets to $276.4 million in
2012 from $307.0 million in 2011. The tax equivalent net interest
margin increased to 3.52% in 2012 from 3.22% in 2011. The decrease
in assets was used to fund planned reductions in deposit
liabilities and borrowings, especially in the second half of
2011.
Noninterest income was $4.7 million for 2012, compared to $4.5
million for 2011. The Company realized no gains on sales of
available-for-sale securities in 2012, compared to $536,000 in
2011. Mortgage banking activities increased $460,000 to $1.2
million, as proceeds from loan sales increased to $47.6 million
from $24.4 million in 2011. Commission income from Oakleaf
Financial Services, a Bank-owned subsidiary, increased $359,000 to
$1.5 million in 2012.
Noninterest expense decreased $947,000 for 2012, compared to
2011. The largest component of noninterest expense is salaries and
employee benefits, which decreased $406,000, or 6.1%, to $6.3
million in 2012. Real estate owned expense also decreased $259,000
to $745,000. The early extinguishment of repurchase agreements
incurred a one-time prepayment penalty of $195,000 in 2011.
The Company provided $545,000 to the allowance for loan losses
in 2012, compared to $1.6 million in 2011. Net charge-offs were
$1.3 million in 2012, compared to $2.4 million in 2011. The net
activity in the ALLL decreased the total allowance to 2.02% of
gross loans at December 31, 2012, compared to 2.28% of gross loans
at December 31, 2011.
Total assets increased to $317.0 million at December 31, 2012
from $314.3 million at December 31, 2011, primarily in
interest-earning deposits in banks. Loans decreased $3.5 million
from 2011. Closed-end residential mortgage loans increased, while
net decreases were realized in home equity lines of credit,
commercial and construction loans.
Noninterest-bearing deposits increased to $41.3 million at
December 31, 2012 from $33.6 million at December 31, 2011.
Interest-bearing deposits decreased to $193.7 million at December
31, 2012 from $201.0 million at December 31, 2011. The decrease in
interest-bearing deposits includes $1.6 million in brokered
deposits and $3.4 million in non-brokered certificates of deposit
with balances of $100,000 and greater. Despite the decrease in
balances, the number of checking accounts increased throughout
2012, as the Bank continues to expand its customer base.
The Company paid no cash dividends in 2012, compared to $0.03
per common share, totaling $60,000, in 2011. Total equity was $26.9
million at December 31, 2012, compared to $24.9 million at December
31, 2011. Book value per share increased to $13.21 at December 31,
2012 from $12.34 at December 31, 2011.
Mr. Eishen added, "The question on cash dividend is occasionally
raised with me and I am asked when the Bancorp may return to paying
a cash dividend. As a reminder to past shareholders, the Company
has paid special dividends during very good performance years and
has also redeemed approximately 1,100,000 shares over the past
several years. These actions have been beneficial to the long-term
value of your Bancorp Stock, and have also resulted in the
distribution of equity. My answer to anyone asking this question is
that I will recommend cash dividends once the expectations of our
Regulatory examiners is clear. It was a surprise to the industry
when Basel III was to be applied to even the smallest banks in our
Nation. This is an international capital standard and it is my
understanding that it would only be applied to internationally
significant banks. I was not alone in this expectation. In addition
to this, it is apparent that the Regulators are interested in
having capital levels that far exceed 'well capitalized' under the
regulatory framework for corrective action. The bottom line is that
the banking industry does not have a clear definition of what is
expected. There have been suggestions that Tier One Capital should
be at least 10.0%. Without the repurchase of shares, our Bank would
be significantly above this level. We have operated the Bank under
the premise that capital is scarce and must be properly managed. In
years we did not see reasonable growth potential and could not
leverage excess equity safely, we repurchased shares with the
intention of returning excess equity to investors. There are many
banks that did not follow that business model and they no longer
exist. They leveraged capital by aggressively lending in areas they
did not fully understand. Bank investors can easily identify these
banks and, in hindsight, can see the error they made. While we have
not been unscathed by the crisis, we have made it through the most
difficult economic times witnessed in recent memory and remained
profitable through most of the crisis."
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 at Total Assets at
December 31, December 31,
Past due and still accruing: 2012 2011 2012 2011
-------- -------- -------- --------
Past due one month 0.66% 0.53% 0.53% 0.43%
Past due two months 0.23% 0.18% 0.19% 0.15%
Past due three or more months 0.08% 0.14% 0.06% 0.12%
Nonaccrual loans 2.83% 4.07% 2.26% 3.34%
Real Estate Owned 0.49% 0.81% 0.39% 0.66%
Fourth Quarter of 2012 vs. 2011 - Net
income for the quarter ended December 31, 2012 decreased to
$345,000, or $0.17 per share, from $560,000, or $0.28 per share,
for the fourth quarter of 2011. The primary component of the
decrease is higher provision for loan losses.
Net interest income decreased $23,000, with both quarters
rounded at $2.4 million. The decrease is primarily due to
reductions in average interest-earning assets. The tax-equivalent
net interest margin decreased to 3.48% in 2012 from 3.49% in the
last quarter of 2011.
Noninterest income was $1.3 million in the fourth quarter of
2012, compared to $957,000 for the fourth quarter of 2011. The
largest component of this increase was mortgage banking income,
which increased $222,000 to $369,000. Commissions from Oakleaf
Financial Services also increased $140,000 to $415,000.
Noninterest expense increased $103,000, or 3.7%, primarily due
to $81,000 increase in real estate owned expenses.
Net charge-offs for the fourth quarter of 2012 were $827,000,
compared to $404,000 a year ago. The Company provided $491,000 for
loan losses in the fourth quarter of 2012, compared to ($91,000) in
the fourth quarter of 2011.
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, 2012 and 2011
(Amounts in thousands, except share and per share data)
2012 2011
--------- ---------
ASSETS
Cash and due from banks $ 10,237 $ 7,297
Other short-term investments 9,611 15,443
--------- ---------
Total cash and cash equivalents 19,848 22,740
Interest-earning deposits in banks 12,196 4,760
Securities - Available for sale 1,242 265
Federal Home Loan Bank stock, at cost 4,064 4,064
Loans held for sale 2,261 986
Loans, net of allowance of $5,138 and $5,875 248,520 252,001
Premises and equipment, net 7,044 7,855
Goodwill 5,109 5,109
Originated mortgage servicing rights 1,273 1,279
Real estate owned 1,252 2,082
Bank-owned life insurance 9,259 8,976
Accrued interest receivable 1,328 1,191
Prepaid FDIC assessment 414 814
Other assets 3,235 2,136
--------- ---------
Total assets $ 317,045 $ 314,258
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing $ 41,261 $ 33,642
Interest-bearing 193,662 200,957
--------- ---------
Total deposits 234,923 234,599
Federal Home Loan Bank advances and other borrowings 52,440 52,575
Accrued interest payable 333 344
Other liabilities 2,425 1,830
--------- ---------
Total liabilities 290,121 289,348
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 2,038,395 shares at
December 31, 2012 and 2,019,235 at December 31,
2011 2,038 2,019
Additional paid-in capital 6,979 6,881
Retained earnings 17,953 16,087
Accumulated other comprehensive income (loss) (46) (77)
--------- ---------
Total stockholders' equity 26,924 24,910
--------- ---------
Total liabilities and stockholders' equity $ 317,045 $ 314,258
========= =========
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2012 and 2011
(Amounts in thousands, except share and per share data)
2012 2011
--------- ---------
Interest income
Loans $ 12,362 $ 12,736
Investment securities:
Taxable 131 916
Tax-exempt 36 41
Dividends 150 124
--------- ---------
Total interest income 12,679 13,817
Interest expense
Deposits 1,341 2,273
Borrowed funds 1,694 1,763
--------- ---------
Total interest expense 3,035 4,036
--------- ---------
Net interest income 9,644 9,781
Provision for loan losses 545 1,608
--------- ---------
Net interest income after provision for loan losses 9,099 8,173
Noninterest income:
Service charges and other fees 1,344 1,379
Investment brokerage commission income 1,542 1,183
Mortgage banking activities 1,219 759
Trust fee income 310 322
Increase in value of bank owned life insurance 282 280
Gain on sale of securities - 536
Gain (loss) on sale of real estate owned (24) 19
Other income 55 68
--------- ---------
Total noninterest income 4,728 4,546
Noninterest expenses:
Salaries and employee benefits 6,257 6,663
Occupancy and equipment 1,422 1,436
Data processing 707 690
Professional services 369 469
Real estate owned expense 745 1,004
Advertising 109 126
FDIC premiums 418 389
Prepayment penalty on early debt extinguishment - 195
Other 1,441 1,443
--------- ---------
Total noninterest expenses 11,468 12,415
--------- ---------
Income (loss) before income tax expense (benefit) 2,359 304
Provision for income tax 494 (197)
--------- ---------
Net income (loss) $ 1,865 $ 501
========= =========
Earnings per share $ 0.92 $ 0.25
Dividends declared per share $ - $ 0. 03
Key Ratios:
Return on average equity 7.18% 2.11%
Return on average assets 0.59% 0.14%
Net interest margin (tax equivalent) 3.52% 3.22%
Efficiency ratio 79.80% 86.66%
CONSOLIDATED STATEMENTS OF INCOME
Three months ended December 31, 2012 and 2011
(Amounts in thousands, except share and per share data)
2012 2011
--------- ---------
Interest income
Loans $ 3,049 $ 3,204
Investment securities:
Taxable 43 45
Tax-exempt 9 4
Dividends 38 34
--------- ---------
Total interest income 3,139 3,287
Interest expense
Deposits 309 429
Borrowed funds 421 426
--------- ---------
Total interest expense 730 855
--------- ---------
Net interest income 2,409 2,432
Provision for loan losses 491 (91)
--------- ---------
Net interest income after provision for loan losses 1,918 2,523
Noninterest income:
Service charges and other fees 328 330
Investment brokerage commission income 415 275
Mortgage banking activities 369 147
Trust fee income 82 67
Increase in value of bank owned life insurance 72 72
Gain (loss) on sale of real estate owned 27 54
Other income 18 12
--------- ---------
Total noninterest income 1,311 957
Noninterest expenses:
Salaries and employee benefits 1,565 1,521
Occupancy and equipment 347 343
Data processing 175 176
Professional services 77 108
Real estate owned expense 207 126
Advertising 33 29
FDIC premiums 104 105
Other 386 383
--------- ---------
Total noninterest expenses 2,894 2,791
--------- ---------
Income (loss) before income tax expense (benefit) 335 689
Provision for income tax (10) 129
--------- ---------
Net income (loss) $ 345 $ 560
========= =========
Earnings per share $ 0.17 $ 0. 28
Dividends declared per share $ - $ -
Key Ratios:
Return on average equity 5.11% 8.94%
Return on average assets 0.44% 0.70%
Net interest margin (tax equivalent) 3.48% 3.49%
Efficiency ratio 77.79% 82.37%
Contacts: Sturgis Bancorp Eric Eishen President & CEO Brian
P. Hoggatt CFO P: 269 651-9345
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