STURGIS, MI / ACCESSWIRE / July 19, 2023 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $1.7 million for the quarter ended June 30, 2023 and $3.2 million for the first half of 2023.
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, Marshall, Niles, 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 second quarter of 2023 was $1,705,000, an increase of $252,000. The increase from 2022 is primarily due to $1.5 million increase in net interest income. Net income for the first half of 2023 was $3,249,000, an increase of $590,000.
- Credit quality remains strong, with 99.4% of loans performing according to loan agreements. Allowance for credit losses was 1.30% of loans on June 30, 2023, compared to Allowance for Loan and Lease Losses of 1.01% on December 31, 2022. Net charge-offs were ($235,000) in the second quarter of 2023, compared to ($162,000) in 2022.
- The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.10%.
- Sales of $14.1 million residential mortgages generated $343,000 of noninterest income in the second quarter of 2023, compared to $376,000 on $9.4 million of sales in the second quarter of 2022. Sales of $22.2 million residential mortgages generated $593,000 of noninterest income in the first half of 2023, compared to $1.0 million on $31.1 million of sales in the first half of 2022.
- Total assets increased 4.6% to $894.5 million.
- Net loans increased $24.1 million in the first half of 2023, primarily in residential mortgages.
- Total non-brokered deposits increased 5.3% to $695.1 million in the first half of 2023.
Eric L. Eishen, President and CEO, stated, "Core business for the Bank has continued to expand in 2023. Most of our increase is attributed to 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. We recently opened branches in Portage, Niles, and Marshall Michigan, relocated one of our South Haven branches to better facilities, and added a loan production office in Battle Creek Michigan. 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 has continued strong, despite national and regional stress from higher interest rates and inflation. The overall franchise value of the Bank is expanding."
Three months ended June 30, 2023 vs. three months ended June 30, 2022 - Net income for the three months ended June 30, 2023 was $1,705,000, or $0.80 per share, compared to net income of $1,453,000, or $0.68 per share, for the same period in 2022. The tax equivalent net interest margin increased to 3.59% in the second quarter of 2023 from 3.15% in the second quarter of 2022.
Net interest income increased to $7.2 million in the second quarter of 2023 from $5.7 million in the second quarter of 2022. The growth was primarily in loan interest income, which increased $3.4 million to $9.3 million. Total interest income increased $3.4 million to $9.9 million, while interest expense increased only $1.9 million to $2.7 million.
The Company provided ($12,000) to the allowance for credit losses in the second quarter of 2023, compared to $0 in the second quarter of 2022. Net charge-offs were ($235,000) in the second quarter of 2023, compared to ($162,000) in the second quarter of 2022.
Noninterest income was $1.8 million in the second quarter of 2023, compared to $1.8 million in the same period 2022. Mortgage banking activities decreased $33,000 to $343,000. Commission income, the largest component of noninterest income, increased $49,000 to $541,000.
Noninterest expense was $6.9 million in the second quarter of 2023, compared to $5.7 million in the second quarter of 2022. Compensation and benefits, the largest component of noninterest expenses, increased $445,000, or 12.7%. The higher compensation expense includes additional staffing for the Bank's expansion since the second quarter of 2022 in Berrien, Calhoun, and Kalamazoo Counties. The Bank realized $133,000 loss on sale of securities in the second quarter of 2023.
Six months ended June 30, 2023 vs. six months ended June 30, 2022 - Net income for the six months ended June 30, 2023 was $3,249,000, or $1.52 per share, compared to net income of $2,659,000, or $1.25 per share, for the same period in 2022. The tax equivalent net interest margin increased to 3.59% in the first half of 2023 from 3.02% in the first half of 2022.
Net interest income increased to $14.4 million in the first half of 2023 from $10.8 million in the first half of 2022. The growth was primarily in loan interest income, which increased $6.7 million to $18.0 million. Total interest income increased $6.8 million to $19.4 million, while interest expense increased only $3.3 million to $5.0 million.
The Company provided $227,000 to the allowance for credit losses in the first half of 2023, compared to $0 in the first half of 2022. Net charge-offs were ($221,000) in the first half of 2023, compared to ($246,000) in the first half of 2022.
Noninterest income was $3.5 million in the first half of 2023, compared to $3.8 million in the same period of 2022. Most of the decrease was due to mortgage banking activities, which decreased $421,000 to $593,000. Mortgage banking activities included residential loan sales of $22.2 million in the first half of 2023, compared to $31.1 million in the first half of 2022. The Bank realized $114,000 gain on sale of fixed assets in the six months ended June 30, 2023.
Noninterest expense was $14.0 million in the first half of 2023, compared to $11.4 million in the first half of 2022. Compensation and benefits, the largest component of noninterest expenses, increased $1.1 million, or 15.4%. The higher compensation expense includes additional staffing for the Bank's expansion since the first half of 2022 in Berrien, Calhoun, and Kalamazoo Counties.
Balance Sheet - Total assets increased to $894.5 million on June 30, 2023, from $864.8 million on December 31, 2022, primarily the result of the growth in loans. In the six months ended June 30, 2023, loans increased $24.0 million, to $723.4 million. Most of the growth was in residential mortgages.
Interest-bearing deposits increased to $636.7 million on June 30, 2023 from $556.5 million on December 31, 2022. Noninterest-bearing deposit accounts decreased $3.4 million to $159.6 million. The increase in deposit accounts is substantially due increased market penetration in southwest Michigan. Brokered deposits, a component of interest-bearing deposits, increased $41.6 million in the first half of 2023, while borrowed funds decreased $51.0 million.
Total equity was $54.5 million on June 30, 2023 and $52.5 million on December 31, 2022. The day-one CECL ACL reduction adjustment to equity was $1,552,000 ($1,964,000 pre-tax) and partially offset retained earnings growth from net income. Quarterly dividends paid in the first and second quarters of 2023 continued at $0.17 per share. Book value per share was $25.40 ($21.32 tangible) as of June 30, 2023.
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)
| Jun. 30, | Dec. 31, | |||||||
| 2023 | 2022 | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 12,617 | $ | 14,008 | ||||
Other short-term investments | 11,518 | 977 | ||||||
Total cash and cash equivalents | 24,135 | 14,985 | ||||||
Securities - available for sale | 53,477 | 63,159 | ||||||
Securities - held to maturity | 21,375 | 22,070 | ||||||
Federal Home Loan Bank stock | 8,381 | 8,381 | ||||||
Loans held for sale | 6,446 | 664 | ||||||
Net loans | 723,407 | 699,443 | ||||||
Premises and equipment, net | 17,597 | 17,431 | ||||||
Goodwill | 5,834 | 5,834 | ||||||
Mortgage servicing rights | 2,908 | 2,967 | ||||||
Real estate owned | 285 | 380 | ||||||
Bank-owned life insurance | 16,185 | 15,988 | ||||||
Accrued interest receivable | 2,763 | 2,691 | ||||||
Other assets | 11,737 | 10,812 | ||||||
Total assets | $ | 894,530 | $ | 864,805 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Liabilities | ||||||||
Deposits | ||||||||
Noninterest-bearing | $ | 159,615 | $ | 162,978 | ||||
Interest-bearing | 535,444 | 556,538 | ||||||
Total deposits | 101,214 | 719,516 | ||||||
Federal Home Loan Bank advances and other borrowings | 20,000 | 71,000 | ||||||
Subordinated debentures - $15,000 face amount (less | ||||||||
unamortized debt issuance costs of $205 at Jun. 30, 2023 | ||||||||
and $245 at Dec. 31, 2022) | 14,795 | 14,755 | ||||||
Accrued interest payable | 1,510 | 760 | ||||||
Other liabilities | 7,460 | 6,226 | ||||||
Total liabilities | 840,038 | 812,257 | ||||||
Stockholders' equity | ||||||||
Common stock - $1 par value: authorized - 9,000,000 shares | ||||||||
issued and outstanding 2,145,691 shares at Jun. 30, 2023 | ||||||||
and 2,141,141 at Dec. 31, 2022 | 2,146 | 2,141 | ||||||
Additional paid-in capital | 8,477 | 8,387 | ||||||
Retained earnings | (6,090 | ) | 48,990 | |||||
Accumulated other comprehensive loss | 49,959 | (6,970 | ) | |||||
Total stockholders' equity | 54,492 | 52,548 | ||||||
Total liabilities and stockholders' equity | $ | 894,530 | $ | 864,805 | ||||
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
| Three Months | ||||||||
| Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
Interest income | ||||||||
Loans | $ | 9,292 | $ | 5,925 | ||||
Investment securities: | ||||||||
Taxable | 415 | 400 | ||||||
Tax-exempt | 98 | 125 | ||||||
Dividends | 110 | 70 | ||||||
Total interest income | 9,915 | 6,520 | ||||||
Interest expense | ||||||||
Deposits | 2,295 | 491 | ||||||
Borrowed funds | 411 | 349 | ||||||
Total interest expense | 2,706 | 840 | ||||||
Net interest income | 7,209 | 5,680 | ||||||
Provision (benefit) for loan losses | (12 | ) | - | |||||
Net interest income after provision (benefit) for loan losses | ||||||||
Noninterest income: | ||||||||
Service charges on deposits and other fees | 336 | 315 | ||||||
Interchange income | 342 | 330 | ||||||
Investment brokerage commission income | 541 | 492 | ||||||
Mortgage banking activities | 343 | 376 | ||||||
Trust fee income | 110 | 110 | ||||||
Earnings on cash value of bank-owned life insurance | 99 | 96 | ||||||
Proportionate net income from unconsolidated subsidiaries | 26 | 44 | ||||||
Other income | 15 | 18 | ||||||
Total noninterest income | 1,812 | 1,781 | ||||||
Noninterest expenses: | ||||||||
Compensation and benefits | 3,945 | 3,500 | ||||||
Occupancy and equipment | 919 | 709 | ||||||
Interchange expenses | 152 | 144 | ||||||
Data processing | 270 | 253 | ||||||
Professional services | 95 | 92 | ||||||
Advertising | 183 | 168 | ||||||
FDIC premiums | 211 | 86 | ||||||
Realized loss on AFS securities | 133 | - | ||||||
Other expenses | 1,041 | 750 | ||||||
Total noninterest expenses | 6,949 | 5,702 | ||||||
Income before income tax expense | 2,084 | 1,759 | ||||||
Income tax expense | 379 | 306 | ||||||
Net income | $ | 1,705 | $ | 1,453 | ||||
Earnings per share | $ | 0.80 | $ | 0.68 | ||||
Dividends per share | $ | 0.17 | $ | 0.17 | ||||
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
| Six Months | ||||||||
| Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
Interest income | ||||||||
Loans | $ | 18,010 | $ | 11,373 | ||||
Investment securities: | ||||||||
Taxable | 914 | 767 | ||||||
Tax-exempt | 222 | 251 | ||||||
Dividends | 217 | 123 | ||||||
Total interest income | 19,363 | 12,514 | ||||||
Interest expense | ||||||||
Deposits | 4,166 | 881 | ||||||
Borrowed funds | 839 | 873 | ||||||
Total interest expense | 5,005 | 1,754 | ||||||
Net interest income | 14,358 | 10,760 | ||||||
Provision (benefit) for loan losses | 227 | - | ||||||
Net interest income after provision (benefit) for loan losses | 14,131 | 10,760 | ||||||
Noninterest income: | ||||||||
Service charges on deposits and other fees | 655 | 622 | ||||||
Interchange income | 654 | 611 | ||||||
Investment brokerage commission income | 961 | 1,036 | ||||||
Mortgage banking activities | 593 | 1,014 | ||||||
Trust fee income | 247 | 206 | ||||||
Earnings on cash value of bank-owned life insurance | 197 | 190 | ||||||
Proportionate net income from unconsolidated subsidiaries | 57 | 102 | ||||||
Other income | 158 | 35 | ||||||
Total noninterest income | 3,522 | 3,816 | ||||||
Noninterest expenses: | ||||||||
Compensation and benefits | 7,980 | 6,915 | ||||||
Occupancy and equipment | 1,770 | 1,404 | ||||||
Interchange expenses | 301 | 272 | ||||||
Data processing | 528 | 492 | ||||||
Professional services | 227 | 181 | ||||||
Advertising | 355 | 258 | ||||||
FDIC premiums | 338 | 158 | ||||||
Realized loss on AFS securities | 133 | - | ||||||
Other expenses | 2,063 | 1,694 | ||||||
Total noninterest expenses | 13,695 | 11,374 | ||||||
Income before income tax expense | 3,958 | 3,202 | ||||||
Income tax expense | 709 | 543 | ||||||
Net income | $ | 3,249 | $ | 2,659 | ||||
Earnings per share | $ | 1.52 | $ | 1.25 | ||||
Dividends per share | $ | 0.34 | $ | 0.34 | ||||
OTHER FINANCIAL INFORMATION
(Amounts in thousands)
| Three Months | ||||||||
| Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
Sturgis Bank & Trust Company: | ||||||||
Average noninterest-bearing deposits | $ | 159,522 | $ | 158,335 | ||||
Average interest-bearing deposits | 617,939 | 518,454 | ||||||
Average total assets | 873,278 | 788,165 | ||||||
Sturgis Bancorp: | ||||||||
Average equity | 53,394 | 50,822 | ||||||
Average total assets | 873,553 | 788,412 | ||||||
Financial ratios for Sturgis Bancorp: | ||||||||
Return on average assets | 0.94 | % | 0.73 | % | ||||
Return on average equity | 15.49 | % | 11.47 | % | ||||
Net interest margin | 3.57 | % | 3.13 | % | ||||
Tax equivalent net interest margin | 3.59 | % | 3.15 | % | ||||
| Six Months | ||||||||
| Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
Sturgis Bank & Trust Company: | ||||||||
Average noninterest-bearing deposits | $ | 159,687 | $ | 157,931 | ||||
Average interest-bearing deposits | 617,939 | 462,374 | ||||||
Average total assets | 872,990 | 781,777 | ||||||
Sturgis Bancorp: | ||||||||
Average equity | 53,009 | 51,406 | ||||||
Average total assets | 873,213 | 781,999 | ||||||
Financial ratios for Sturgis Bancorp: | ||||||||
Return on average assets | 0.74 | % | 0.69 | % | ||||
Return on average equity | 12.36 | % | 10.43 | % | ||||
Net interest margin | 3.57 | % | 3.00 | % | ||||
Tax equivalent net interest margin | 3.60 | % | 3.02 | % | ||||
SOURCE: Sturgis Bancorp, Inc.