Sturgis Bancorp Reports Earnings for First Quarter 2021
STURGIS, MI / ACCESSWIRE / April 28, 2021 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $1.4 million for the first quarter of 2021.
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 for the first quarter of 2021:
Net income decreased 9.6% for the first quarter of 2021 to $1,363,000, compared to $1,507,000 for the first quarter of 2020, primarily due to higher provision for loan losses. The provision was based on qualitative factors that recognized uncertainty related to the impact of COVID on the overall economy.
Asset quality is very strong, with 99.84% of loans current.
The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.59%.
Sales of $51.6 million residential mortgages generated $1.1 million of noninterest income in 2021, compared to $776,000 on $32.3 million of sales in 2020.
Total assets increased 10.2% to $709.0 million.
Net loans increased 6.7% to $475.1 million, including $18.3 million increase in residential mortgages.
An interest rate swap was terminated in the quarter, generating $407,000 gain.
Total deposits increased 10.6% to $561.9 million.
Allowance for loan losses was 1.39% of loans.
Eric L. Eishen, President and CEO, stated, "The Bank had a strong first quarter. Continuing uncertainty regarding the impact of COVID on the overall economy warranted higher provision for loan losses in this quarter. Few loans were delinquent and most residential and consumer loans with COVID-related accommodations in the past year have paid off or returned to normal payments. Hotel loans with COVID-related accommodations also are gradually returning to full payment status. We expect our hotel loans to continue their rebound, especially as summer travel improves vacancy rates. Earnings were positively impacted by strong Mortgage Banking activity and the gain on swap termination. Paycheck Protection Program loan originations also continued strong through the first quarter of 2021."
Three months ended March 31, 2021 vs. three months ended March 31, 2020 - Net income for the three months ended March 31, 2021 was $1,363,000, or $0.64 per share, compared to net income of $1,507,000, or $0.71 per share, for the three months ended March 31, 2020. The tax equivalent net interest margin decreased to 2.78% in the first three months of 2021 from 3.72% in the first three months of 2020.
Net interest income increased to $4.3 million in 2021 from $4.1 million in 2020. The growth was primarily due to loan interest income, which increased by $261,000 to $4.8 million. Total interest income increased $305,000 to $5.4 million in 2021, and interest expense only increased $138,000 to $1.0 million in 2021.
The Company provided $636,000 to the allowance for loan losses in the first three months of 2021, compared to $151,000 in the same quarter of 2020. Net charge-offs were $251,000 in 2021 and $64,000 in 2020.
Noninterest income was $2.7 million in the first quarter of 2021, compared to $1.9 million in the first quarter of 2020. Most of the increase was due to $407,000 gain on termination of an interest rate swap. Mortgage banking activities also increased $341,000, to $1.1 million. Investment brokerage commission income also increased to $448,000 in 2021 from $362,000 in 2020.
Noninterest expense was $4.8 million in 2021, compared to $4.1 million in 2020. Salaries and employee benefits, the largest component of noninterest expense, increased $372,000, or 14.7%. The higher compensation expense includes staff for the Bank's expansion into southwest Michigan.
Total assets increased to $709.0 million on March 31, 2021 from $643.6 million on December 31, 2020, primarily in loans. Loans increased $30.0 million from December 31, 2020, primarily in residential mortgages.
Interest-bearing deposits increased to $423.7 million on March 31, 2021 from $383.5 million on December 31, 2020. The increase in deposit accounts is partially due to typical seasonal patterns for municipalities, as municipalities deposit property tax revenues. Municipalities historically have either used or reinvested those funds elsewhere during the second quarter of the year, and Management expects that pattern to continue for 2021. Brokered deposits of $61.2 million, a component of interest-bearing deposits, remained unchanged during the quarter ended March 31, 2021.
Total equity was $48.5 million on March 31, 2021, compared to $47.8 million on December 31, 2020. The regular quarterly dividend was maintained during 2020 and into the first quarter of 2021 at a record-high $0.16 per share. Book value per share was $22.81 ($18.84 tangible) on March 31, 2021.
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
(Amounts in thousands, except share and per share data)
Mar. 31, | Dec. 31, | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 10,632 | $ | 12,060 | ||||
Other short-term investments | 65,709 | 55,782 | ||||||
Total cash and cash equivalents | 76,341 | 67,842 | ||||||
Interest-earning deposits in banks | 1,241 | 1,241 | ||||||
Securities - available for sale | 96,230 | 73,072 | ||||||
Federal Home Loan Bank stock, at cost | 5,476 | 4,917 | ||||||
Loans held for sale, at fair value | 13,419 | 6,832 | ||||||
Loans, net of allowance of $6,615 and $6,231 | 475,054 | 445,091 | ||||||
Premises and equipment, net | 11,977 | 11,844 | ||||||
Goodwill | 5,834 | 5,834 | ||||||
Core deposit intangibles | 69 | 77 | ||||||
Originated mortgage servicing rights | 2,547 | 2,245 | ||||||
Real estate owned | 210 | 341 | ||||||
Bank-owned life insurance | 11,162 | 11,091 | ||||||
Accrued interest receivable | 2,464 | 2,458 | ||||||
Other assets | 6,939 | 10,721 | ||||||
Total assets | $ | 708,963 | $ | 643,606 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Liabilities | ||||||||
Deposits | ||||||||
Noninterest-bearing | $ | 138,250 | $ | 124,434 | ||||
Interest-bearing | 423,672 | 383,464 | ||||||
Total deposits | 561,922 | 507,898 | ||||||
Federal Home Loan Bank advances and other borrowings | 61,500 | 61,500 | ||||||
Subordinated debentures - $15,000 face amount (less unamortized | ||||||||
debt issuance costs of $389 at March 31, 2021 and $400 at | ||||||||
December 31, 2020) | 14,611 | 14,600 | ||||||
Accrued interest payable | 430 | 477 | ||||||
Other liabilities | 22,009 | 12,019 | ||||||
Total liabilities | 660,472 | 596,494 | ||||||
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 2,125,541 shares at March 31, 2021 | ||||||||
and 2,123,291 at December 31, 2020 | 2,126 | 2,123 | ||||||
Additional paid-in capital | 8,090 | 8,050 | ||||||
Retained earnings | 39,862 | 38,840 | ||||||
Accumulated other comprehensive loss | (1,587) | (1,901) | ||||||
Total stockholders' equity | 48,491 | 47,112 | ||||||
Total liabilities and stockholders' equity | $ | 708,963 | $ | 643,606 | ||||
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Interest income | ||||||||
Loans | $ | 4,770 | $ | 4,509 | ||||
Investment securities: | ||||||||
Taxable | 210 | 257 | ||||||
Tax-exempt | 139 | 229 | ||||||
Dividends | 232 | 51 | ||||||
Total interest income | 5,351 | 5,046 | ||||||
Interest expense | ||||||||
Deposits | 655 | 514 | ||||||
Borrowed funds | 385 | 388 | ||||||
Total interest expense | 1,040 | 902 | ||||||
Net interest income | 4,311 | 4,144 | ||||||
Provision (benefit) for loan losses | 636 | 151 | ||||||
Net interest income after provision (benefit) for loan losses | 3,675 | 3,993 | ||||||
Noninterest income: | ||||||||
Service charges and other fees | 298 | 324 | ||||||
Interchange income | 250 | 211 | ||||||
Investment brokerage commission income | 448 | 362 | ||||||
Mortgage banking activities | 1,117 | 776 | ||||||
Trust fee income | 84 | 98 | ||||||
Earnings on cash value of bank-owned life insurance | 72 | 73 | ||||||
Gain (loss) on sale of real estate owned | 39 | (2) | ||||||
Gain on termination of interest rate swap | 407 | - | ||||||
Other income | 26 | 22 | ||||||
Total noninterest income | 2,741 | 1,864 | ||||||
Noninterest expenses: | ||||||||
Salaries and employee benefits | 2,896 | 2,524 | ||||||
Occupancy and equipment | 609 | 510 | ||||||
Interchange expenses | 113 | 102 | ||||||
Data processing | 215 | 202 | ||||||
Professional services | 114 | 133 | ||||||
Real estate owned expense | 3 | 2 | ||||||
Advertising | 106 | 69 | ||||||
FDIC premiums | 63 | 44 | ||||||
Other expenses | 656 | 469 | ||||||
Total noninterest expenses | 4,775 | 4,055 | ||||||
Income before income tax expense | 1,641 | 1,802 | ||||||
Income tax expense | 278 | 295 | ||||||
Net income | $ | 1,363 | $ | 1,507 | ||||
Earnings per share | $ | 0.64 | $ | 0.71 | ||||
Dividends per share | 0.16 | 0.16 | ||||||
OTHER FINANCIAL INFORMATION
(Amounts in thousands)
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Sturgis Bank & Trust Company: | ||||||||
Average noninterest-bearing deposits | $ | 135,974 | $ | 86,772 | ||||
Average interest-bearing deposits | 419,886 | 273,152 | ||||||
Average total assets | 687,254 | 500,719 | ||||||
Sturgis Bancorp: | ||||||||
Average equity | 47,774 | 43,343 | ||||||
Average total assets | 687,368 | 500,719 | ||||||
Financial ratios for Sturgis Bancorp: | ||||||||
Return on average assets | 0.79 | % | 1.21 | % | ||||
Return on average equity | 11.32 | % | 13.99 | % | ||||
Net interest margin | 2.74 | % | 3.65 | % | ||||
Tax equivalent net interest margin | 2.78 | % | 3.72 | % | ||||
Contacts:
Sturgis Bancorp
Eric Eishen
President & CEO
Brian P. Hoggatt
CFO
P: 269 651-9345
SOURCE: Sturgis Bancorp, Inc.
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