Sturgis Bancorp Reports Earnings for First Quarter 2022

STURGIS, MI / ACCESSWIRE / April 26, 2022 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $1.2 million for the first quarter of 2022.

Sturgis Bancorp is the holding company for Sturgis Bank & Trust Company (Bank), and its subsidiaries Oakleaf Financial Services, Oak Mortgage, Ayres/Oak Insurance, and Oak Title Services. The Bank provides a full array of trust, commercial and consumer banking services from banking centers in Sturgis, Bangor, Bronson, Centreville, Climax, Colon, Portage, South Haven, St. Joseph, Three Rivers and White Pigeon, MI. Oakleaf Financial Services offers a complete range of investment and financial-advisory services. Oak Mortgage 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.

Key Highlights:

  • Net income for the first quarter of 2022 was $1,205,000. The decline from 2021 was primarily due to extraordinary items realized in first quarter 2021. In 2021, the Bank had a gain on the termination of an interest rate swap, extraordinarily high mortgage banking revenue, and accreted fee income from Paycheck Protection Program loans. Net interest income for the first quarter of 2022 increased by $966,000.
  • Credit quality is very strong, with 99.97% of loans performing according to loan agreements. Allowance for loan losses was 1.21% of loans on March 31, 2022, compared to 1.28% on December 31, 2021.
  • The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.42%.
  • Sales of $21.4 million residential mortgages generated $638,000 of noninterest income in the first quarter of 2022, compared to $1.1 million on $51.6 million of sales the first quarter of 2021.
  • Total assets increased 8.2% during the first quarter of 2022, to $804.3 million.
  • Net loans increased 6.8% to $579.2 million, including $18.2 million increase in residential mortgages and $14.1 million in commercial real estate loans.
  • Total non-brokered deposits increased 17.4% to $632.7 million on March 31, 2022, compared to $574.2 million on December 31, 2021.

Eric L. Eishen, President and CEO, stated, "Core business for the Bank has expanded significantly in the first quarter. Both loan and deposit growth have been at historic levels. This is primarily the result of our expansion into the Berrien County area and the success of our Western Market team, a team consisting of well-seasoned bankers and strong community boards. This has allowed the Bank to attract customers served by our staff for many years. While higher rates and low housing inventory have reduced mortgage banking revenue, the net interest income component of earnings continues to expand. Other components of fee revenue also continue to increase. The Bank has grown other sources of fee revenue over the past decade to help mitigate the volatility of the mortgage banking revenue. This fee revenue includes Investment Advisory Services, Title Insurance Services and a complete line of Commercial, Home and Auto Insurance. These allow the Bank to leverage existing customer relationships and more effectively serve our customer base. Credit quality is at an all-time high and the overall franchise value of the Bank is expanding."

Three months ended March 31, 2022 vs. three months ended March 31, 2021 - Net income for the three months ended March 31, 2022 was $1,205,000, or $0.57 per share, compared to net income of $1,363,000, or $0.64 per share, for the three months ended March 31, 2021. The tax equivalent net interest margin increased to 2.89% in the first three months of 2022 from 2.78% in the first three months of 2021.

Net interest income increased to $5.1 million in the first quarter of 2022 from $4.1 million in the first quarter of 2021. The growth was primarily in loan interest income, which increased $677,000 to $5.4 million. Total interest income increased $840,000 to $6.0 million, while interest expense decreased $126,000 to $914,000.

The Company made no provision to the allowance for loan losses in the first quarter of 2022, compared to $636,000 in the first quarter of 2021. Net charge-offs were ($84,000) in the first quarter of 2022, compared to $251,000 in the first quarter of 2021.

Noninterest income was $2.0 million in the first quarter of 2022, compared to $2.9 million in the first quarter of 2021. Most of the decrease was due to mortgage banking activities, which decreased $479,000, to $638,000. Mortgage banking activities included residential loan sales of $21.4 million in the first quarter of 2022, compared to $51.6 million in the first quarter of 2021. The Bank realized $407,000 gain in the first quarter of 2021 on termination of an interest rate swap.

Noninterest expense was $5.7 million in the first quarter of 2022, compared to $4.8 million in the first quarter of 2021. Compensation and benefits, the largest component of noninterest expenses, increased $621,000, or 21.4%. The higher compensation expense includes additional staffing for the Bank's expansion into southwest Michigan.

Balance Sheet - Total assets increased to $804.3 million on March 31, 2022 from $751.7 million on December 31, 2021, primarily as a result of the growth in loans. Loans increased $37.0 million to $579.2 million on March 31, 2021, with the largest increase in residential mortgages.

Interest-bearing deposits increased to $506.6 million on March 31, 2022 from $438.7 million on December 31, 2021. The increase in deposit accounts is substantially due increased market penetration in southwest Michigan. Brokered deposits, a component of interest-bearing deposits, increased $27.5 million in the quarter ended March 31, 2022, while borrowed funds decreased $27.5 million.

Total equity was $51.2 million on March 31, 2022, compared to $52.4 million on December 31, 2021. The decrease was due to lower market values on available-for-sale securities, recorded in other comprehensive income. Total dividends paid in the first quarter of 2021 were $362,000, or $0.17 per share. Book value per share was $24.00 ($19.80 tangible) as of March 31, 2022.

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.sturgis.bank.

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)

Mar. 31, Dec. 31,
2022 2021
ASSETS
Cash and due from banks
$16,805 $15,793
Other short-term investments
51,010 23,731
Total cash and cash equivalents
67,815 39,524
Interest-earning deposits in banks
494 494
Securities - available for sale
74,988 83,134
Securities - held to maturity
23,567 24,347
Federal Home Loan Bank stock, at cost
8,381 7,951
Loans held for sale, at fair value
1,992 7,287
Loans, net of allowance of $7,115 and $7,031
579,182 542,196
Premises and equipment, net
14,070 13,231
Goodwill
5,834 5,834
Core deposit intangibles
42 49
Originated mortgage servicing rights
3,077 2,963
Real estate owned
- -
Bank-owned life insurance
15,692 15,598
Accrued interest receivable
1,962 1,894
Other assets
7,273 7,233
Total assets
$804,369 $751,735
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing
$163,591 $145,503
Interest-bearing
506,587 438,690
Total deposits
670,178 584,193
Federal Home Loan Bank advances and other borrowings
61,500 89,000
Subordinated debentures - $15,000 face amount (less unamortized debt issuance costs of $307 at March 31, 2022
and $327 at Dec. 31, 2021)
14,693 14,673
Accrued interest payable
346 425
Other liabilities
6,437 11,008
Total liabilities
753,154 699,299
Stockholders' equity

Common stock - $1 par value: authorized - 9,000,000 shares issued and outstanding 2,134,341 shares at March 31, 2022

and 2,132,291 at Dec. 31, 2021
2,134 2,132
Additional paid-in capital
8,250 8,210
Retained earnings
44,665 43,823
Accumulated other comprehensive loss
(3,834) (1,729)
Total stockholders' equity
51,215 52,436
Total liabilities and stockholders' equity
$804,369 $751,735

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)

Three Months
Ended Mar. 31,
2022 2021
Interest income
Loans
$5,447 $4,770
Investment securities:
Taxable
367 210
Tax-exempt
126 139
Dividends
54 35
Total interest income
5,994 5,154
Interest expense
Deposits
390 655
Borrowed funds
524 385
Total interest expense
914 1,040
Net interest income
5,080 4,114
Provision (benefit) for loan losses
- 636
Net interest income after provision (benefit) for loan losses
5,080 3,478
Noninterest income:
Service charges and other fees
307 298
Interchange income
282 250
Investment brokerage commission income
544 448
Mortgage banking activities
638 1,117
Trust fee income
96 84
Earnings on cash value of bank-owned life insurance
94 72
Gain on termination of interest rate swap
- 407
Other income
74 261
Total noninterest income
2,035 2,937
Noninterest expenses:
Compensation and benefits
3,496 2,896
Occupancy and equipment
695 609
Interchange expenses
128 113
Data processing
239 215
Professional services
89 114
Real estate owned expense
- 3
Advertising
90 106
FDIC premiums
72 63
Other expenses
863 655
Total noninterest expenses
5,672 4,774
Income before income tax expense
1,443 1,641
Income tax expense
238 278
Net income
$1,205 $1,363
Earnings per share
$0.57 $0.64
Dividends per share
$0.17 $0.16

OTHER FINANCIAL INFORMATION
(Amounts in thousands)

Three Months
Ended Mar. 31,
2022 2021
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits
$157,562 $135,974
Average interest-bearing deposits
459,134 419,886
Average total assets
775,887 687,254
Sturgis Bancorp:
Average equity
51,942 47,774
Average total assets
775,215 687,368
Financial ratios for Sturgis Bancorp:
Return on average assets
0.63% 0.79%
Return on average equity
9.41% 11.32%
Net interest margin
2.86% 2.74%
Tax equivalent net interest margin
2.89% 2.78%

SOURCE: Sturgis Bancorp, Inc.



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