STURGIS, MI / ACCESSWIRE / February 16, 2022 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $6.3 million for 2021 and $1.8 million for the fourth 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:
- Earnings per share increased to $2.98 in 2021 from $2.84 in 2020. Earnings per share increased to $0.83 in the three months ended December 31, 2021 from $0.74 in the three months ended December 31, 2020. Net income increased 5.6% in 2021 to $6,344,000 from 2020 net income of $6,006,000, primarily due to higher net interest income in 2021.
- Credit quality is very strong, with 99.88% of loans performing according to loan agreements. Allowance for loan losses was 1.28% of loans on December 31, 2021, compared to 1.38% on December 31, 2020.
- The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.75%.
- Sales of $128.3 million residential mortgages generated $3.6 million of noninterest income in 2021, compared to $4.8 million on $156.7 million of sales in 2020.
- Total assets increased 16.8% to $751.7 million.
- Net loans increased 21.8% to $542.2 million, including $68.6 million increase in residential mortgages.
- An interest rate swap was terminated, generating $407,000 gain.
- Total non-brokered deposits increased 28.6% to $574.2 million on December 31, 2021, compared to $446.7 million on December 31, 2020.
Eric L. Eishen, President and CEO, stated, "The Bank had record high earnings in 2021. Few loans were delinquent and loans with COVID-related accommodations in the past year have paid off or returned to normal payments. Earnings were positively impacted by strong Mortgage Banking activity and the gain on swap termination. Paycheck Protection Program ("PPP") loan originations also continued strong through the Spring of 2021, serving local employers and introducing some new customers to the Bank. At the end of 2020, the Company issued $15 million of subordinated debt and immediately invested $10 million of the proceeds in the Bank. The debt was issued in anticipation of strong growth opportunities in Berrien County, Michigan. Two branch offices have recently been opened in St. Joseph, Michigan to service those opportunities, and the Portage, Michigan loan production office was converted to a full service branch. In 2021, the Company invested an additional $3 million in the Bank, supporting further successful growth in southwest Michigan."
Year ended December 31, 2021 vs. year ended December 31, 2020 - Net income for 2021 was $6.3 million, or $2.98 per share, compared to $6.0 million, or $2.84 per share, for 2020. The tax-equivalent net interest margin decreased to 2.96% in 2021 from 3.14% in 2020.
Net interest income increased to $19.6 million in 2021 from $17.4 million in 2020. The growth was primarily in loan interest income, which increased $2.6 million to $21.7 million. Total interest income increased $2.7 million to $23.7 million, while interest expense increased only $538,000 to $4.1 million.
The Company provided $1.1 million to the allowance for loan losses in 2021, compared to $2.9 million in 2020. Net charge-offs were $275,000 in 2021 and $118,000 in 2020.
Noninterest income was $9.7 million in 2021, compared to $9.8 million in 2020. Most of the decrease was due to mortgage banking activities, which decreased $1.2 million, to $3.6 million. Mortgage banking activities included residential loan sales of $128.3 million in 2021, compared to $156.7 million in 2020. Investment brokerage commission income also increased 28.3% in 2021 to $1.9 million in 2021 from $1.5 million in 2020. The Bank realized $407,000 gain in 2021 on termination of an interest rate swap.
Noninterest expense was $20.5 million in 2021, compared to $17.0 million 2020. Salaries and employee benefits, the largest component of noninterest expenses, increased $2.3 million, or 22.4%. The higher compensation expense includes additional staffing for the Bank's expansion into southwest Michigan.
Three months ended December 31, 2021 vs. three months ended December 31, 2020 - Net income for the three months ended December 31, 2021 was $1,775,000, or $0.83 per share, compared to net income of $1,560,000, or $0.73 per share, for the three months ended December 31, 2020. The tax equivalent net interest margin decreased to 2.87% in the last three months of 2021 from 3.31% in the last three months of 2020.
Net interest income increased to $4.9 million in the three months ended December 31, 2021 from $4.7 million in the same period for 2020. The growth was primarily due to loan interest income, which increased $222,000 to $5.4 million. Total interest income increased $358,000 to $5.9 million in the fourth quarter of 2021, while interest expense increased only $146,000 to $1.0 million.
The Company made no provisions to the allowance for loan losses in the three months ended December 31, 2021, compared to $825,000 in the same quarter of 2021. The higher 2020 provision was due to the economic COVID uncertainties at that time. Net charge-offs were $66,000 in the fourth quarter of 2021 and $18,000 in the fourth quarter of 2020.
Noninterest income was $3.0 million in the fourth quarter of 2021, compared to $2.8 million in the fourth quarter of 2020. Most of the increase was the result of trust fee income, which increased $124,000 to $225,000 in the fourth quarter of 2021. Investment brokerage commission income also increased to $461,000 in 2021 from $398,000 in 2020.
Noninterest expense was $5.7 million for the three months ended December 31, 2021, compared to $4.7 million in the same period for 2020. Salaries and employee benefits, the largest component of noninterest expense, increased $842,000, or 29.9%. The higher compensation expense includes additional staffing for the Bank's expansion into southwest Michigan.
Balance Sheet - Total assets increased to $751.7 million on December 31, 2021 from $643.6 million on December 31, 2020, primarily as a result of the growth in loans. Loans increased $97.1 million from December 31, 2021, with the largest increase in residential mortgages.
Interest-bearing deposits increased to $438.7 million on December 31, 2021 from $383.5 million on December 31, 2020. The increase in deposit accounts is substantially due increased market penetration in southwest Michigan. Brokered deposits, a component of interest-bearing deposits, decreased $51.2 million in 2021, to $10.0 million on December 31, 2021.
Total equity was $52.4 million on December 31, 2021, compared to $47.1 million on December 31, 2020. Total dividends paid in 2021 were $1.4 million, or $0.64 per share. Due to strong asset quality and earnings, the regular quarterly dividend was increased to a record $0.17 per share in the first quarter of 2022. Book value per share was $24.59 ($20.47 tangible) as of December 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.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)
| Dec. 31, | Dec. 31, | |||||||
| 2021 | 2020 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 15,793 | $ | 12,060 | ||||
Other short-term investments | 23,731 | 55,782 | ||||||
Total cash and cash equivalents | 39,524 | 67,842 | ||||||
Interest-earning deposits in banks | 494 | 1,241 | ||||||
Securities - available for sale | 83,134 | 73,072 | ||||||
Securities - held to maturity | 24,347 | - | ||||||
Federal Home Loan Bank stock, at cost | 7,951 | 4,917 | ||||||
Loans held for sale, at fair value | 7,287 | 6,832 | ||||||
Loans, net of allowance of $7,031 and $6,231 | 542,196 | 445,091 | ||||||
Premises and equipment, net | 13,231 | 11,844 | ||||||
Goodwill | 5,834 | 5,834 | ||||||
Core deposit intangibles | 49 | 77 | ||||||
Originated mortgage servicing rights | 2,963 | 2,245 | ||||||
Real estate owned | - | 341 | ||||||
Bank-owned life insurance | 15,598 | 11,091 | ||||||
Accrued interest receivable | 1,894 | 2,458 | ||||||
Other assets | 7,233 | 10,721 | ||||||
Total assets | $ | 751,735 | $ | 643,606 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Liabilities | ||||||||
Deposits | ||||||||
Noninterest-bearing | $ | 145,503 | $ | 124,434 | ||||
Interest-bearing | 438,690 | 383,464 | ||||||
Total deposits | 584,193 | 507,898 | ||||||
Federal Home Loan Bank advances and other borrowings | 89,000 | 61,500 | ||||||
Subordinated debentures - $15,000 face amount (less unamortized debt issuance costs of $327 at Dec. 31, 2021 and $400 at Dec. 31, 2020) | 14,673 | 14,600 | ||||||
Accrued interest payable | 425 | 477 | ||||||
Other liabilities | 11,008 | 12,019 | ||||||
Total liabilities | 699,299 | 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 2,132,291 shares at Dec. 31, 2021 | ||||||||
and 2,123,291 at Dec. 31, 2020 | 2,132 | 2,123 | ||||||
Additional paid-in capital | 8,210 | 8,050 | ||||||
Retained earnings | 43,823 | 38,840 | ||||||
Accumulated other comprehensive loss | (1,729 | ) | (1,901 | ) | ||||
Total stockholders' equity | 52,436 | 47,112 | ||||||
Total liabilities and stockholders' equity | $ | 751,735 | $ | 643,606 | ||||
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
| Year | ||||||||
| Ended Dec. 31, | ||||||||
| 2021 | 2020 | |||||||
Interest income | ||||||||
Loans | $ | 21,743 | $ | 19,151 | ||||
Investment securities: | ||||||||
Taxable | 1,242 | 954 | ||||||
Tax-exempt | 528 | 673 | ||||||
Dividends | 171 | 161 | ||||||
Total interest income | 23,684 | 20,939 | ||||||
Interest expense | ||||||||
Deposits | 2,527 | 2,262 | ||||||
Borrowed funds | 1,591 | 1,318 | ||||||
Total interest expense | 4,118 | 3,580 | ||||||
Net interest income | 19,566 | 17,359 | ||||||
Provision (benefit) for loan losses | 1,074 | 2,897 | ||||||
Net interest income after provision (benefit) for loan losses | 18,492 | 14,462 | ||||||
Noninterest income: | ||||||||
Service charges and other fees | 1,216 | 1,195 | ||||||
Interchange income | 1,183 | 970 | ||||||
Investment brokerage commission income | 1,890 | 1,473 | ||||||
Mortgage banking activities | 3,554 | 4,788 | ||||||
Trust fee income | 505 | 371 | ||||||
Earnings on cash value of bank-owned life insurance | 307 | 294 | ||||||
Gain on sale of securities | - | 157 | ||||||
Gain on termination of interest rate swap | 407 | - | ||||||
Other income | 635 | 566 | ||||||
Total noninterest income | 9,697 | 9,814 | ||||||
Noninterest expenses: | ||||||||
Salaries and employee benefits | 12,673 | 10,353 | ||||||
Occupancy and equipment | 2,553 | 2,146 | ||||||
Interchange expenses | 496 | 427 | ||||||
Data processing | 901 | 869 | ||||||
Professional services | 322 | 373 | ||||||
Real estate owned expense | 7 | 15 | ||||||
Advertising | 593 | 313 | ||||||
FDIC premiums | 272 | 323 | ||||||
Other expenses | 2,697 | 2,198 | ||||||
Total noninterest expenses | 20,514 | 17,017 | ||||||
Income before income tax expense | 7,675 | 7,259 | ||||||
Income tax expense | 1,331 | 1,253 | ||||||
Net income | $ | 6,344 | $ | 6,006 | ||||
Earnings per share | $ | 2.98 | $ | 2.84 | ||||
Dividends per share | $ | 0.64 | $ | 0.64 | ||||
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
| Three Months | ||||||||
| Ended Dec. 31, | ||||||||
| 2021 | 2020 | |||||||
Interest income | ||||||||
Loans | $ | 5,358 | $ | 5,136 | ||||
Investment securities: | ||||||||
Taxable | 359 | 222 | ||||||
Tax-exempt | 125 | 139 | ||||||
Dividends | 50 | 37 | ||||||
Total interest income | 5,892 | 5,534 | ||||||
Interest expense | ||||||||
Deposits | 581 | 667 | ||||||
Borrowed funds | 420 | 188 | ||||||
Total interest expense | 1,001 | 855 | ||||||
Net interest income | 4,891 | 4,679 | ||||||
Provision (benefit) for loan losses | - | 825 | ||||||
Net interest income after provision (benefit) for loan losses | 4,891 | 3,854 | ||||||
Noninterest income: | ||||||||
Service charges and other fees | 324 | 292 | ||||||
Interchange income | 311 | 261 | ||||||
Investment brokerage commission income | 461 | 398 | ||||||
Mortgage banking activities | 1,465 | 1,421 | ||||||
Trust fee income | 225 | 101 | ||||||
Earnings on cash value of bank-owned life insurance | 91 | 74 | ||||||
Other income | 131 | 236 | ||||||
Total noninterest income | 3,008 | 2,783 | ||||||
Noninterest expenses: | ||||||||
Salaries and employee benefits | 3,660 | 2,818 | ||||||
Occupancy and equipment | 680 | 582 | ||||||
Interchange expenses | 131 | 117 | ||||||
Data processing | 232 | 221 | ||||||
Professional services | 86 | 113 | ||||||
Real estate owned expense | - | 5 | ||||||
Advertising | 145 | 102 | ||||||
FDIC premiums | 78 | 180 | ||||||
Other expenses | 708 | 587 | ||||||
Total noninterest expenses | 5,720 | 4,725 | ||||||
Income before income tax expense | 2,179 | 1,912 | ||||||
Income tax expense | 404 | 352 | ||||||
Net income | $ | 1,775 | $ | 1,560 | ||||
Earnings per share | $ | 0.83 | $ | 0.73 | ||||
Dividends per share | $ | 0.16 | $ | 0.16 | ||||
OTHER FINANCIAL INFORMATION
(Amounts in thousands)
| Three Months | ||||||||
| Ended Dec. 31, | ||||||||
| 2021 | 2020 | |||||||
Sturgis Bank & Trust Company: | ||||||||
Average noninterest-bearing deposits | $ | 151,881 | $ | 126,119 | ||||
Average interest-bearing deposits | 443,501 | 371,387 | ||||||
Average total assets | 735,966 | 614,379 | ||||||
Sturgis Bancorp: | ||||||||
Average equity | 51,571 | 46,190 | ||||||
Average total assets | 736,145 | 614,495 | ||||||
Financial ratios for Sturgis Bancorp: | ||||||||
Return on average assets | 0.96 | % | 1.01 | % | ||||
Return on average equity | 13.66 | % | 13.43 | % | ||||
Net interest margin | 2.84 | % | 3.28 | % | ||||
Tax equivalent net interest margin | 2.87 | % | 3.31 | % | ||||
| Year | ||||||||
| Ended Dec. 31, | ||||||||
| 2021 | 2020 | |||||||
Sturgis Bank & Trust Company: | ||||||||
Average noninterest-bearing deposits | $ | 148,277 | $ | 123,696 | ||||
Average interest-bearing deposits | 433,175 | 350,321 | ||||||
Average total assets | 719,416 | 608,064 | ||||||
Sturgis Bancorp: | ||||||||
Average equity | 49,725 | 44,376 | ||||||
Average total assets | 719,583 | 608,177 | ||||||
Financial ratios for Sturgis Bancorp: | ||||||||
Return on average assets | 0.88 | % | 0.99 | % | ||||
Return on average equity | 12.76 | % | 13.53 | % | ||||
Net interest margin | 2.93 | % | 3.09 | % | ||||
Tax equivalent net interest margin | 2.96 | % | 3.14 | % | ||||
SOURCE: Sturgis Bancorp, Inc.