STURGIS,
Sturgis Bancorp, Inc. is the holding company for the Bank, and the Bank's 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, Portage, South Haven, St. Joseph, Three Rivers and White Pigeon, 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:
- Earnings per share increased to $2.84 in 2020 from $2.34 in 2019. Earnings per share increased to $0.74 in the three months ended December 31, 2020 from $0.58 in the three months ended December 31, 2019. Net income increased 22% in 2020 to $6,006,000 from 2019 net income of $4,927,000, primarily due to stronger mortgage banking activities in 2020.
- Sales of $156.7 million residential mortgages generated $4.8 million of noninterest income in 2020, compared to $860,000 on $40.3 million of sales in 2019.
- Net loans increased 26.1% in 2020 to $445.1 million, including $47.8 million of residential mortgages.
- The Bank supported 563 employers with SBA's Paycheck Protection Program (PPP) loans, for a total of $35.9 million. Forgiveness and other payments reduced the balance to $22.3 million on December 31, 2020.
- Total assets increased 42.7% to $643.6 million. The Bank's risk-weighted assets were $398.4 million on December 31, 2020.
- Non-brokered deposits increased 32.5% to $446.7 million.
- Sturgis Bancorp successfully issued $15.0 million of subordinated debt and immediately invested $10.0 million of the proceeds in the Bank to support Bank growth.
- The Bank converted loan production offices in Portage and St. Joseph, Michigan into full branch offices, and will soon open an additional branch office in St. Joseph, Michigan.
- Allowance for loan losses was 1.38% 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 temporarily operated 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 year, led by mortgage banking activities. The Bank provided $2.9 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, and most of those have resumed normal payments and are current. Many 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, and some are eligible for second-draw PPP loans. During 2020, the Bank was able to assist 563 employers in obtaining PPP loans, introducing some new commercial clients to the Bank. The Bank has realized strong deposit growth from these new customers, as well as from other new and 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."
Year ended December 31, 2020 vs. year ended December 31, 2019 - Net income for 2020 was $6.0 million, or $2.84 per share, compared to $4.9 million, or $2.34 per share, for 2019. The tax-equivalent net interest margin decreased to 3.22% in 2020 from 3.96% in 2019.
Net interest income increased to $17.8 million in 2020 from $16.0 million in 2019. The growth was primarily in loan interest income, which increased $1.9 million to $19.2 million. Total interest income increased $2.0 million to $21.4 million, and interest expense only increased $213,000 to $3.6 million.
The Company provided $2.9 million to the allowance for loan losses in 2020, compared to $284,000 in 2019. Net charge-offs were $118,000 in 2020 and $60,000 in 2019.
Noninterest income was $9.3 million in 2020, compared to $5.3 million in 2019. Most of the increase was due to mortgage banking activities, up $3.9 million, to $4.8 million. Mortgage banking activities included residential loan sales of $156.7 million in 2020, compared to $47.8 million in 2019. Investment brokerage commission income also increased 13.3% in 2020 to $1.5 million in 2020 from $1.3 million in 2019. The Bank also realized $157,000 gain on sale of securities in 2020.
Noninterest expense was $17.0 million in 2020, compared to $15.8 million 2019. Salaries and employee benefits, the largest component of noninterest expense, increased $1.1 million, or 11.6%. The higher compensation expense includes staff for Bank expansion into southwest Michigan.
Three months ended December 31, 2020 vs. three months ended December 31, 2019 - Net income for the three months ended December 31, 2020 was $1,560,000, or $0.74 per share, compared to net income of $1,221,000, or $0.58 per share, for the three months ended December 31, 2019. The tax equivalent net interest margin decreased to 3.47% in the fourth quarter of 2020 from 3.85% in the fourth quarter of 2019.
Net interest income increased to $4.9 million in 2020 from $4.1 million in 2019. The growth was primarily due to loan interest income, which increased by $708,000 to $5.1 million. Total interest income increased $768,000 to $5.8 million in 2020, and interest expense decreased $28,000 to $855,000 in 2020.
The Company provided $825,000 to the allowance for loan losses in the fourth quarter of 2020, compared to $68,000 in the same quarter of 2019. Net charge-offs were $18,000 in 2020 and $4,000 in 2019.
Noninterest income was $2.6 million in the third quarter of 2020, compared to $1.3 million in the third quarter of 2019. Most of the increase was due to mortgage banking activities, up $1.2 million, to $1.4 million. Mortgage banking activities included residential loan sales of $44.9 million in 2020, compared to $12.8 million in 2019.
Noninterest expense was $4.7 million in 2020, compared to $3.9 million 2019. Salaries and employee benefits, the largest component of noninterest expense, increased $493,000, or 22.6%.
Total assets increased to $643.6 million on December 31, 2020 from $473.4 million on December 31, 2019, primarily in cash and cash equivalents, securities available-for-sale, and loans. Cash and cash equivalents increased $44.6 million to $67.8 million. Securities increased $17.2 million to $73.1 million. The strong position of cash and cash equivalents and securities, supplemented by over $70 million of unused collateralized borrowing capacity, position the Bank with liquidity to fund growth and address unanticipated deposit fluctuations.
Loans also increased $92.6 million from December 31, 2019, primarily in commercial nonmortgage loans, commercial real estate loans and residential mortgages. At December 31, 2020, commercial nonmortgage loans included $22.3 million of PPP loans.
In response to the COVID-19 pandemic, the Bank provided prudent accommodations to affected borrowers in a variety of ways to facilitate their ability to work through the immediate impact of the virus. The following table summarizes the 224 loan accommodations provided in 2020, distributed by the status of the loans on December 31, 2020.
|
|
Modified Balance | Number | Paid Off | Current | Real Estate Owned | Continuing Accommodation | ||||||||||||||||||
|
Residential
|
$ | 9,944 | 89 | $ | 1,329 | $ | 7,244 | $ | 50 | $ | 1,321 | |||||||||||||
|
Commercial
|
11,448 | 32 | 2,283 | 8,470 | - | 695 | ||||||||||||||||||
|
Commercial real estate
|
23,848 | 53 | 1,534 | 21,572 | - | 742 | ||||||||||||||||||
|
Hotels
|
41,843 | 21 | - | 11,521 | - | 30,322 | ||||||||||||||||||
|
Consumer
|
465 | 29 | 44 | 386 | - | 35 | ||||||||||||||||||
|
Total
|
$ | 87,548 | 224 | $ | 5,190 | $ | 49,193 | $ | 50 | $ | 33,115 | |||||||||||||
|
Number
|
224 | 38 | 155 | 1 | 30 | |||||||||||||||||||
|
|
||||||||||||||||||||||||
Of the $87.5 million modified loans, only $33.1 million were in active deferral or repayment plans on December 31, 2020. Those $33.1 million modified loans had December 31, 2020 balances of $32.7 million, as summarized in the following table.
|
|
Percent of
12/31/20 Segment
|
Number | Full Payment Deferral | Interest Only Payments | Repayment Plan | Total | ||||||||||||||||||
|
Residential
|
0.58 | % | 14 | $ | 729 | $ | - | $ | 555 | $ | 1,284 | |||||||||||||
|
Commercial
|
0.52 | % | 2 | 204 | 116 | - | 320 | |||||||||||||||||
|
Commercial real estate
|
0.63 | % | 3 | 761 | - | - | 761 | |||||||||||||||||
|
Hotels
|
73.85 | % | 7 | 4,245 | 26,065 | - | 30,310 | |||||||||||||||||
|
Consumer
|
0.43 | % | 4 | 31 | - | - | 31 | |||||||||||||||||
|
Total
|
30 | $ | 5,970 | $ | 26,181 | $ | 555 | $ | 32,706 | |||||||||||||||
|
Percent of gross loans
|
1.32 | % | 5.81 | % | 0.12 | % | 7.25 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||
The largest loan segment with continuing payment deferments is hotel loans, primarily a component of commercial real estate loans. The Bank has thoroughly analyzed this segment, evaluating it with stress testing of cashflow, loan-to-value ratios, and historical occupancy. Bank staff also interviewed all of the hotel borrowers on their mitigation plans. We remain confident this portfolio can withstand the recent decline in revenue and is positioned to recover.
Interest-bearing deposits increased to $383.5 million on December 31, 2020 from $263.2 million on December 31, 2019. Brokered deposits, a component of interest-bearing deposits, increased $45.3 million in 2020, to $61.2 million on December 31, 2020. In the same period, borrowings decreased $8.5 million to $61.5 million.
Total equity was $47.1 million on December 31, 2020, compared to $43.6 million on December 31, 2019. The regular quarterly dividend was increased in 2020 to a record-high $0.16 per share. Book value per share was $22.19 ($18.35 tangible) on December 31, 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.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
|
|
Dec. 31, | Dec. 31, | ||||||
|
|
2020 | 2019 | ||||||
|
ASSETS
|
||||||||
|
Cash and due from banks
|
$ | 12,060 | $ | 13,301 | ||||
|
Other short-term investments
|
55,782 | 9,896 | ||||||
|
Total cash and cash equivalents
|
67,842 | 23,197 | ||||||
|
Interest-earning deposits in banks
|
1,241 | 2,720 | ||||||
|
Securities - available for sale
|
73,072 | 55,850 | ||||||
|
Securities - held to maturity
|
- | - | ||||||
|
Federal Home Loan Bank stock, at cost
|
4,917 | 3,612 | ||||||
|
Loans held for sale, at fair value
|
6,832 | 2,977 | ||||||
|
Loans, net of allowance of $6,231 and $3,451
|
445,091 | 352,531 | ||||||
|
Premises and equipment, net
|
11,844 | 9,367 | ||||||
|
Goodwill
|
5,834 | 5,834 | ||||||
|
Core deposit intangibles
|
77 | 113 | ||||||
|
Originated mortgage servicing rights
|
2,245 | 1,112 | ||||||
|
Real estate owned
|
341 | 193 | ||||||
|
Bank-owned life insurance
|
11,091 | 10,797 | ||||||
|
Accrued interest receivable
|
2,458 | 1,610 | ||||||
|
Other assets
|
10,721 | 3,458 | ||||||
|
|
||||||||
|
Total assets
|
$ | 643,606 | $ | 473,371 | ||||
|
|
||||||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
|
Liabilities
|
||||||||
|
Deposits
|
||||||||
|
Noninterest-bearing
|
$ | 124,434 | $ | 89,747 | ||||
|
Interest-bearing
|
383,464 | 263,189 | ||||||
|
Total deposits
|
507,898 | 352,936 | ||||||
|
Federal Home Loan Bank advances and other borrowings
|
76,100 | 70,000 | ||||||
|
Accrued interest payable
|
477 | 438 | ||||||
|
Other liabilities
|
12,019 | 6,425 | ||||||
|
Total liabilities
|
596,494 | 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 2,123,291 shares at Dec. 31, 2020 and 2,113,591 shares at December 31, 2019
|
2,123 | 2,114 | ||||||
|
Additional paid-in capital
|
8,049 | 7,893 | ||||||
|
Retained earnings
|
38,841 | 34,190 | ||||||
|
Accumulated other comprehensive loss
|
(1,901 | ) | (625 | ) | ||||
|
Total stockholders' equity
|
47,112 | 43,572 | ||||||
|
|
||||||||
|
Total liabilities and stockholders' equity
|
$ | 643,606 | $ | 473,371 | ||||
|
|
||||||||
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
|
|
Three Months Ended Dec. 31, | |||||||
|
|
2020 | 2019 | ||||||
|
Interest income
|
||||||||
|
Loans
|
$ | 5,136 | $ | 4,428 | ||||
|
Investment securities:
|
||||||||
|
Taxable
|
222 | 245 | ||||||
|
Tax-exempt
|
139 | 210 | ||||||
|
Dividends
|
256 | 102 | ||||||
|
Total interest income
|
5,753 | 4,985 | ||||||
|
|
||||||||
|
Interest expense
|
||||||||
|
Deposits
|
667 | 517 | ||||||
|
Borrowed funds
|
188 | 366 | ||||||
|
Total interest expense
|
855 | 883 | ||||||
|
|
||||||||
|
Net interest income
|
4,898 | 4,102 | ||||||
|
|
||||||||
|
Provision (benefit) for loan losses
|
825 | 68 | ||||||
|
|
||||||||
|
Net interest income after provision (benefit) for loan losses
|
4,073 | 4,034 | ||||||
|
|
||||||||
|
Noninterest income:
|
||||||||
|
Service charges and other fees
|
292 | 315 | ||||||
|
Interchange income
|
261 | 211 | ||||||
|
Investment brokerage commission income
|
398 | 352 | ||||||
|
Mortgage banking activities
|
1,421 | 189 | ||||||
|
Trust fee income
|
101 | 127 | ||||||
|
Earnings on cash value of bank-owned life insurance
|
74 | 75 | ||||||
|
Gain (loss) on sale of real estate owned
|
1 | 44 | ||||||
|
Gain on sale of securities
|
- | (4 | ) | |||||
|
Other income
|
16 | 24 | ||||||
|
Total noninterest income
|
2,564 | 1,333 | ||||||
|
|
||||||||
|
Noninterest expenses:
|
||||||||
|
Salaries and employee benefits
|
2,818 | 2,325 | ||||||
|
Occupancy and equipment
|
582 | 479 | ||||||
|
Interchange expenses
|
117 | 105 | ||||||
|
Data processing
|
221 | 197 | ||||||
|
Professional services
|
113 | 95 | ||||||
|
Real estate owned expense
|
5 | 8 | ||||||
|
Advertising
|
102 | 81 | ||||||
|
FDIC premiums
|
180 | 36 | ||||||
|
Other expenses
|
587 | 569 | ||||||
|
Total noninterest expenses
|
4,725 | 3,895 | ||||||
|
|
||||||||
|
Income before income tax expense
|
1,912 | 1,472 | ||||||
|
|
||||||||
|
Income tax expense
|
352 | 251 | ||||||
|
|
||||||||
|
Net income
|
$ | 1,560 | $ | 1,221 | ||||
|
|
||||||||
|
Earnings per share
|
$ | 0.74 | $ | 0.58 | ||||
|
Dividends per share
|
$ | 0.16 | $ | 0.15 | ||||
|
|
||||||||
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
|
|
Year Ended Dec. 31, | |||||||
|
|
2020 | 2019 | ||||||
|
Interest income
|
||||||||
|
Loans
|
$ | 19,150 | $ | 17,203 | ||||
|
Investment securities:
|
||||||||
|
Taxable
|
954 | 1,075 | ||||||
|
Tax-exempt
|
673 | 850 | ||||||
|
Dividends
|
646 | 280 | ||||||
|
Total interest income
|
21,423 | 19,408 | ||||||
|
|
||||||||
|
Interest expense
|
||||||||
|
Deposits
|
2,262 | 2,056 | ||||||
|
Borrowed funds
|
1,318 | 1,311 | ||||||
|
Total interest expense
|
3,580 | 3,367 | ||||||
|
|
||||||||
|
Net interest income
|
17,843 | 16,041 | ||||||
|
|
||||||||
|
Provision (benefit) for loan losses
|
2,897 | 284 | ||||||
|
|
||||||||
|
Net interest income after provision (benefit) for loan losses
|
14,946 | 15,757 | ||||||
|
|
||||||||
|
Noninterest income:
|
||||||||
|
Service charges and other fees
|
1,195 | 1,274 | ||||||
|
Interchange income
|
970 | 862 | ||||||
|
Investment brokerage commission income
|
1,473 | 1,300 | ||||||
|
Mortgage banking activities
|
4,788 | 860 | ||||||
|
Trust fee income
|
371 | 485 | ||||||
|
Earnings on cash value of bank-owned life insurance
|
294 | 282 | ||||||
|
Gain (loss) on sale of real estate owned
|
- | 104 | ||||||
|
Gain on sale of securities
|
157 | - | ||||||
|
Other income
|
82 | 116 | ||||||
|
Total noninterest income
|
9,330 | 5,283 | ||||||
|
|
||||||||
|
Noninterest expenses:
|
||||||||
|
Salaries and employee benefits
|
10,353 | 9,280 | ||||||
|
Occupancy and equipment
|
2,146 | 1,971 | ||||||
|
Interchange expenses
|
427 | 394 | ||||||
|
Data processing
|
869 | 776 | ||||||
|
Professional services
|
373 | 340 | ||||||
|
Real estate owned expense
|
15 | 24 | ||||||
|
Advertising
|
313 | 314 | ||||||
|
FDIC premiums
|
323 | 78 | ||||||
|
Other expenses
|
2,198 | 2,004 | ||||||
|
Total noninterest expenses
|
17,017 | 15,181 | ||||||
|
|
||||||||
|
Income before income tax expense
|
7,259 | 5,859 | ||||||
|
|
||||||||
|
Income tax expense
|
1,253 | 932 | ||||||
|
|
||||||||
|
Net income
|
$ | 6,006 | $ | 4,927 | ||||
|
|
||||||||
|
Earnings per share
|
$ | 2.84 | $ | 2.34 | ||||
|
Dividends per share
|
$ | 0.64 | $ | 0.60 | ||||
|
|
||||||||
OTHER FINANCIAL INFORMATION
(Amounts in thousands)
|
|
Three Months Ended Dec. 31, | |||||||
|
|
2020 | 2019 | ||||||
|
|
||||||||
|
Sturgis Bank & Trust Company:
|
||||||||
|
Average noninterest-bearing deposits
|
$ | 126,119 | $ | 95,914 | ||||
|
Average interest-bearing deposits
|
371,387 | 262,879 | ||||||
|
Average total assets
|
614,379 | 470,724 | ||||||
|
Total risk-weighted assets
|
398,394 | 336,608 | ||||||
|
Sturgis Bancorp:
|
||||||||
|
Average equity
|
46,190 | 42,758 | ||||||
|
Average total assets
|
614,495 | 470,790 | ||||||
|
Total risk-weighted assets
|
398,485 | 336,542 | ||||||
|
|
||||||||
|
Financial ratios for Sturgis Bancorp:
|
||||||||
|
Return on average assets
|
1.01 | % | 1.03 | % | ||||
|
Return on average equity
|
13.43 | % | 11.61 | % | ||||
|
Net interest margin
|
3.43 | % | 3.79 | % | ||||
|
Tax equivalent net interest margin
|
3.47 | % | 3.85 | % | ||||
|
|
||||||||
|
|
||||||||
| Year Ended Dec. 31, | ||||||||
|
|
2020 | 2019 | ||||||
|
|
||||||||
|
Sturgis Bank & Trust Company:
|
||||||||
|
Average noninterest-bearing deposits
|
$ | 123,696 | $ | 88,173 | ||||
|
Average interest-bearing deposits
|
350,321 | 264,615 | ||||||
|
Average total assets
|
608,064 | 452,821 | ||||||
|
Sturgis Bancorp:
|
||||||||
|
Average equity
|
44,376 | 41,683 | ||||||
|
Average total assets
|
608,177 | 452,924 | ||||||
|
|
||||||||
|
Financial ratios for Sturgis Bancorp:
|
||||||||
|
Return on average assets
|
0.99 | % | 1.20 | % | ||||
|
Return on average equity
|
13.53 | % | 11.84 | % | ||||
|
Net interest margin
|
3.18 | % | 3.89 | % | ||||
|
Tax equivalent net interest margin
|
3.22 | % | 3.96 | % | ||||
|
|
||||||||
Contacts:
Sturgis Bancorp - Eric Eishen, President & CEO, or Brian P. Hoggatt, CFO - P: 269 651-9345
SOURCE: Sturgis Bancorp, Inc.