STURGIS, Mich., April 22 /PRNewswire-FirstCall/ -- Sturgis Bancorp, Inc. (BULLETIN BOARD: STBI) posted a 27.8% earnings decrease for the first quarter of 2008, compared to 2007, primarily due to lower interest margin, Eric L. Eishen, President and CEO, announced today.
Sturgis Bancorp is the holding company for Sturgis Bank & Trust Company, and its subsidiaries Oakleaf Financial Services, Inc. and Oak Mortgage, LLC. Sturgis Bancorp provides a full array of trust, commercial and consumer banking services from 12 banking centers in Sturgis, Bronson, Centreville, Climax, Coldwater, Colon, South Haven, Three Rivers and White Pigeon, Mich. Oakleaf Financial Services offers a complete range of investment and financial-advisory services. Oak Mortgage offers residential mortgages in all markets of the Bank.
First Quarter of 2008 vs. 2007 - Net income for the quarter ended March 31, 2008 decreased 27.8% to $651,000, or $0.30 per share, basic and diluted, from $902,000, or $0.38 per share, basic and diluted, for the year-earlier quarter. Net interest income decreased 7.8% to $2.6 million, from $2.8 million for the first quarter of 2007. The decrease chiefly reflects the decrease in net interest margin for the quarters to 3.25% in 2008 from 3.99% in 2007. Average interest-earning assets increased to $321.3 million for the quarter ended March 31, 2008 from $288.8 million for the same quarter in 2007.
Noninterest income was $1.3 million for the first quarter of 2008, compared to $1.2 million for 2007. The primary components of this increase were mortgage banking activities and other noninterest income. Mortgage banking activities increased $35,000 to $207,000, primarily due to a short term decrease in mortgage rates during the three months ended March 31, 2008. Other noninterest income included a $31,000 gain on sale of real estate owned in 2008, compared to $16,000 loss in 2007. Noninterest expense increased $270,000, primarily in salaries and employee benefits, which increased due to annual cost of living, benefit and other compensation changes. Net charge-offs for the first quarter of 2008 were $19,000, compared to $33,000 a year ago. The Company provided $82,000 for loan losses in the first quarter of 2008, compared to $53,000 in 2007.
Mr. Eishen said, "We had a profitable first quarter, even though it was down from the first quarter of 2007. Despite softness in the real estate market, strong competition and significant compression of the net interest margin, we have contained loan losses, especially in light of the current business cycle and Michigan economy. Even with the lower net income, the Company still is performing better than many of its Michigan peers. The Company is continuing to diligently investigate the loan portfolio for early indications of weakness in any segment."
Mr. Eishen added, "Loan activity remains strong, although the Company has resisted weakening our underwriting standards or stretching for yield as rates have fallen. Our lending team is working hard to add quality customers and market share. We are continuing our strategic focus on restructuring our balance sheet to reflect a more commercial bank structure and building fee income from our brokerage operations."
Total assets increased to $362.8 million at March 31, 2008 from $347.2 million at December 31, 2007, primarily in securities and short-term interest-earning deposits. Loans also increased $3.1 million for the quarter.
Noninterest-bearing deposits increased to $19.5 million at March 31, 2008 from $18.6 million at December 31, 2007. Interest-bearing deposits increased to $217.7 million at March 31, 2008 from $201.5 million at December 31, 2007. The increase is certificates of deposit. Brokered certificates of deposit are used as an alternative to Federal Home Loan Bank advances, when the total interest cost is lower.
In the quarter ended March 31, 2008, the Company redeemed 247,422 shares of common stock for $3.7 million and paid cash dividends of $0.12 per common share, totaling $0.3 million. Total equity was $24.3 million at March 31, 2008, compared to $27.7 million at December 31, 2007. Book value per share decreased to $12.08 at March 31, 2008 from $12.20 at December 31, 2007.
South Haven Expansion - Based on the Company's success in South Haven, Michigan, along with perceived growth opportunities for the South Haven community, the Bank opened its second full-service office in South Haven on April 16, 2008. The grand opening for the new South Haven branch office will be scheduled soon.
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 http://www.sturgisbank.com/. Consolidated Balance Sheets Mar. 31, 2008 Dec. 31, 2007 (In Thousands) Assets Cash and due from banks $10,828 $11,781 Other short-term investments 7,759 2,349 Total cash and cash equivalents 18,587 14,130 Interest-earning deposits in banks 12,253 11,160 Securities - Available for sale 13,625 14,380 Securities - Held-to-maturity 11,682 4,401 Federal Home Loan Bank stock, at cost 4,611 4,611 Loans held for sale 1,232 645 Loans, net 273,253 270,200 Premises and equipment, net 7,928 7,404 Goodwill, net of accumulated amortization 5,109 5,109 Originated mortgage servicing rights 1,308 1,367 Real estate owned 1,415 1,702 Bank owned life insurance 7,829 7,748 Accrued interest receivable 2,207 2,313 Investment in limited partnerships 725 759 Other assets 998 1,273 Total assets $362,762 $347,202 Liabilities and Stockholders' Equity Liabilities Deposits Noninterest-bearing $19,477 $18,598 Interest bearing 217,652 201,524 Total Deposits 237,129 220,122 Federal Home Loan Bank advances 85,160 83,000 Repurchase agreements 13,000 13,000 Accrued interest payable 993 1,150 Other liabilities 2,144 2,249 Total liabilities 338,426 319,521 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 - 2,015,364 shares and 2,268,607 shares at March 31, 2008 and December 31, 2007, respectively 2,015 2,269 Additional paid-in capital 6,864 10,377 Accumulated other comprehensive income (loss) (83) (100) Retained earnings 15,540 15,135 Total stockholders' equity 24,336 27,681 Total liabilities and stockholders' equity $362,762 $347,202 Consolidated Statements of Income Three Months Ended March 31, 2008 2007 Interest income (In Thousands) Loans $4,776 $4,680 Investment securities: Taxable 477 501 Tax-exempt 18 26 Dividends 64 54 Total interest income 5,335 5,261 Interest expense Deposits 1,594 1,552 Borrowed funds 1,148 893 Total interest expense 2,742 2,445 Net interest income 2,593 2,816 Provision for loan losses 82 53 Net interest income - After provision for loan losses 2,511 2,763 Noninterest income: Service charges and other fees 389 422 Investment brokerage commission income 408 406 Mortgage banking activities 207 172 Trust fee income 136 130 Increase in value of bank owned life insurance 80 78 Other income 31 (16) Total noninterest income 1,251 1,192 Noninterest expenses: Salaries and employee benefits 1,887 1,742 Occupancy and equipment 350 315 Data processing 186 164 Professional services 74 90 Real estate owned expense 55 11 Advertising 31 28 Other 337 300 Total noninterest expenses 2,920 2,650 Income - Before income tax expense 842 1,305 Provision for federal income tax 191 403 Net income $651 $902 Basic earnings per share $0.30 $0.38 Diluted earnings per share $0.30 $0.38 Dividends declared per share $0.12 $0.12 Return on average equity 10.04% 13.22% Return on average assets 0.73% 1.11% Net interest margin (tax equivalent) 3.25% 3.99% Efficiency ratio 75.97% 66.14%
