STURGIS, Mich., Nov. 1, 2010 /PRNewswire-FirstCall/ -- Sturgis Bancorp, Inc. (BULLETIN BOARD: STBI) recorded net loss of $781,000 for the first nine months of 2010 and $631,000 for the quarter ended September 30, 2010, Eric L. Eishen, President and CEO, announced today.
Key Highlights for the first nine months of 2010: -- Net loss of $781,000, or $0.39 per share - with $0.09 paid in cash dividends -- Total deposits increased 9.2% to $283.1 million. -- Noninterest-bearing deposits increased $8.4 million, or 33.7%. -- Realized gain on sale of securities was $126,000, compared to $1.2 million for the prior year. -- Secured liabilities of the Bank, comprised of Federal Home Loan Bank advances and repurchase agreements, were reduced $4.9 million, or 6.0%. -- Sturgis Bank & Trust Company's regulatory capital ratios remain in the regulatory "well capitalized" status. -- Allowance for loan losses increased to 2.00% of total loans from 1.41% at the end of 2009. -- Nonaccrual loans decreased $864,000 and delinquent loans decreased to 1.25% of total loans from 1.56% at December 31, 2009.
First Nine Months of 2010 vs. 2009 - The net loss for the nine months ended September 30, 2010 was $781,000, or $0.39 per share, compared to net income of $1.1 million, or $0.55 per share for 2009. The decrease was primarily due to higher provisions for loan losses and lower gain on sale of securities. Net interest income increased $158,000, primarily due to the higher tax-equivalent net interest margin of 2.98% in 2010 from 2.80% in 2009. Average interest-earning assets decreased to $339.0 million for the nine months ended September 30, 2010 from $353.5 million for the same period in 2009.
Net charge-offs for the first nine months of 2010 were $2.0 million, compared to $702,000 a year ago. The 2010 charge-offs include one relationship for $1.3 million. The Company provided $3.6 million for loan losses in the first nine months of 2010, compared to $1.8 million in 2009. The provision for loan losses in excess of net charge-offs recognizes the deterioration of economic market conditions, increasing the Bank's allowance for loan losses to 2.00% of total loans at September 30, 2010 from 1.41% at December 31, 2009. The large provision in 2010 also funds allowances for losses related to modified loans.
Noninterest income was $3.4 million for the first nine months of 2010, compared to $4.6 million for same period in 2009. The primary component of this decrease was realized gain on sale of available-for-sale mortgage-backed securities. Mortgage banking activities also decreased 20% to $741,000, primarily due to slower residential mortgage activity and related sales. Much of the decrease in mortgage banking activities relates to more restrictive underwriting standards imposed by the secondary market. Commission income increased 9% to $857,000, as the market value of brokerage accounts increased.
Noninterest expense increased $239,000, or 2.8%. Salaries and employee benefits increased $246,000, primarily due to a decrease in deferral of loan origination expenses with slower loan volume. Real estate owned expense also increased by $278,000, primarily due to carrying costs and write-downs of the carrying value of real estate owned.
Mr. Eishen stated, "The Bank has followed the desire of Congress and the President to work with borrowers in these difficult times. This is something we believe is the proper thing for a Community Bank to do even without the urging of our Legislators. However, the consequences for working with borrowers is that we must place additional money in our allowance for loan and lease losses (ALLL) as required by both Regulatory and Accounting Standards. The ALLL was significantly increased to recognize concessions granted to those borrowers and the continuing uncertainty in the general economy. The Company diligently investigates the loan portfolio for early indications of weakness and will make loan modifications, if it is prudent and the modification will minimize the Bank's expected losses."
Third Quarter of 2010 vs. 2009 - The net loss for the quarter ended September 30, 2010 was $631,000, or $0.31 per share, compared to net income of $209,000, or $0.10 per share, in the third quarter of 2009. Net interest income increased $21,000, primarily due to the higher tax-equivalent net interest margin of 2.97% in 2010 from 2.90% in 2009. Average interest-earning assets decreased to $337.8 million for the three months ended September 30, 2010 from $343.7 million for the same period in 2009.
Net charge-offs for the third quarter of 2010 were $1.3 million, compared to $442,000 a year ago. The Company provided $1.8 million for loan losses in the third quarter of 2010, compared to $359,000 in 2009.
Noninterest income was $1.2 million for the third quarters of both 2010 and 2009. The $67,000 increase in mortgage banking activities to $340,000 in 2010 was substantially offset by the $51,000 reduction in realized gains on securities sales.
Noninterest expense decreased $1,000. Real estate owned expense increased by $101,000, primarily due to carrying costs and write-downs of the carrying value of real estate owned.
Total assets increased to $389.7 million at September 30, 2010 from $369.9 million at December 31, 2009, primarily in cash and cash equivalents. Loans decreased $10.0 million during the first nine months of 2010.
Over the last several quarters, we have provided the chart below to help you follow asset quality, in particular, trends in the loan portfolio. I know shareholders' largest concern relates to risk in the loan portfolio and the trends associated with past due loans. We have not seen a meaningful improvement in the local economy. There are a few examples of improvements with local manufacturing companies and real estate values seem to be stabilizing. However, there continues to be a great deal of stress in both the commercial and mortgage portfolios. The chart below indicates slight improvement in past due and nonaccrual loans. We hope to see the continuing improvements in nonperforming assets, but further improvements are highly dependent on concurrent improvements in employment and stability in real estate markets.
Percentage of Gross Percentage of Total Loans Assets Past due and still accruing: Sept. 30, Dec. 31 Sept. 30, Dec. 31 2010 2009 2010 2009 ---- ---- --- ---- Past due one month 0.63% 0.59% 0.45% 0.45% Past due two months 0.32% 0.51% 0.23% 0.39% Past due three or more months 0.30% 0.46% 0.21% 0.35% Nonaccrual loans 2.18% 2.43% 1.55% 1.86% Real Estate Owned 0.72% 0.74% 0.51% 0.56%
Noninterest-bearing deposits increased to $33.2 million at September 30, 2010 from $24.9 million at December 31, 2009. Interest-bearing deposits also increased to $249.9 million at September 30, 2010 from $234.3 million at December 31, 2009. Brokered certificates of deposit and other certificates of deposit in excess of $100,000 increased $2.6 million from December 31, 2009. Brokered certificates of deposit are used as an alternative to Federal Home Loan Bank ("FHLB") advances, when the total interest cost is lower. The increase in deposits allowed the Bank to reduce FHLB advances and other borrowings by $4.9 million.
In the nine months ended September 30, 2010, the Company paid cash dividends of $0.09 per common share, totaling $182,000. Total equity was $25.1 million at September 30, 2010, compared to $25.4 million at December 31, 2009. Book value per share decreased to $12.45 at September 30, 2010 from $12.60 at December 31, 2009.
SUBSEQUENT EVENT - On October 19, 2010, the Bank sold $23.7 million of mortgage-backed securities at a gain of $657,000, after taxes. The proceeds were reinvested in mortgage-backed securities.
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 11 banking centers in Sturgis, Bronson, Centreville, Climax, 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.
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/. (Financial statements follow) Consolidated Balance Sheets Dec. 31, Sept. 30, 2010 2009 (In Thousands) Assets Cash and due from banks $19,232 $8,448 Other short-term investments 10,016 528 ------ --- Total cash and cash equivalents 29,248 8,976 Interest-earning deposits in banks 18,200 7,565 Securities -Available for sale 28,517 31,908 Securities - Held-to- maturity 6,856 7,607 Federal Home Loan Bank stock, at cost 4,784 4,784 Loans held for sale 2,850 595 Loans, net 268,178 278,227 Premises and equipment, net 7,847 8,010 Premises and equipment held for sale, net - 317 Goodwill, net of accumulated amortization 5,109 5,109 Originated mortgage servicing rights 1,324 1,277 Real estate owned 1,993 2,086 Bank owned life insurance 8,624 8,401 Accrued interest receivable 1,655 1,795 Prepaid FDIC assessment 1,292 1,619 Other assets 3,220 1,645 ----- ----- Total assets $389,697 $369,921 ======== ======== Liabilities and Stockholders' Equity Liabilities Deposits Noninterest-bearing $33,224 $24,855 Interest bearing 249,866 234,296 ------- ------- Total Deposits 283,090 259,151 Federal Home Loan Bank advances and other borrowings 53,000 57,942 Repurchase agreements 25,000 25,000 Accrued interest payable 464 687 Other liabilities 3,018 1,714 ----- ----- Total liabilities 364,572 344,494 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 - 2,017,245 shares at Sept. 30, 2010 and December 31, 2009 2,017 2,017 Additional paid-in capital 6,872 6,872 Accumulated other comprehensive income (loss) 601 (60) Retained earnings 15,635 16,598 ------ ------ Total stockholders' equity 25,125 25,427 ------ ------ Total liabilities and stockholders' equity $389,697 $369,921 ======== ======== Consolidated Statements of Income Nine Months Ended Sept. 30, 2010 2009 Interest income (In Thousands) Loans $10,762 $11,623 Investment securities: Taxable 1,011 1,465 Tax-exempt 48 41 Dividends 77 126 --- --- Total interest income 11,898 13,255 Interest expense Deposits 2,616 3,202 Borrowed funds 1,806 2,735 ----- ----- Total interest expense 4,422 5,937 ----- ----- Net interest income 7,476 7,318 Provision for loan losses 3,584 1,840 ----- ----- Net interest income -After provision for loan losses 3,892 5,478 Noninterest income: Service charges and other fees 1,091 1,178 Investment brokerage commission income 857 786 Mortgage banking activities 741 931 Trust fee income 257 235 Increase in value of bank owned life insurance 224 249 Gain on sale of securities 126 1,172 Other income 150 14 --- --- Total noninterest income 3,446 4,565 Noninterest expenses: Salaries and employee benefits 4,968 4,722 Occupancy and equipment 1,097 1,146 Data processing 498 574 Professional services 265 243 Real estate owned expense 574 296 Advertising 92 91 FDIC insurance premium 353 473 Other 987 1,050 --- ----- Total noninterest expenses 8,834 8,595 ----- ----- Income -Before income tax expense (1,496) 1,448 Provision for federal income tax (715) 334 ---- --- Net income $(781) $1,114 ===== ====== Earnings per share $(0.39) $0.55 Dividends declared per share $0.09 $0.36 Return on average equity (4.05)% 5.77% Return on average assets (0.28)% 0.38% Net interest margin (tax equivalent) 2.98% 2.80% Consolidated Statements of Income Three Months Ended Sept. 30, 2010 2009 Interest income (In Thousands) Loans $3,571 $3,853 Investment securities: Taxable 333 428 Tax-exempt 17 17 Dividends 19 46 --- --- Total interest income 3,940 4,344 Interest expense Deposits 853 1,021 Borrowed funds 585 842 --- --- Total interest expense 1,438 1,863 ----- ----- Net interest income 2,502 2,481 Provision for loan losses 1,838 359 ----- --- Net interest income -After provision for loan losses 664 2,122 Noninterest income: Service charges and other fees 386 376 Investment brokerage commission income 270 299 Mortgage banking activities 340 273 Trust fee income 81 76 Increase in value of bank owned life insurance 75 84 Gain on sale of securities - 51 Other income 28 4 --- --- Total noninterest income 1,180 1,163 Noninterest expenses: Salaries and employee benefits 1,612 1,603 Occupancy and equipment 382 381 Data processing 165 197 Professional services 86 80 Real estate owned expense 222 121 Advertising 29 30 FDIC insurance premium 116 96 Other 291 396 --- --- Total noninterest expenses 2,903 2,904 ----- ----- Income -Before income tax expense (1,059) 381 Provision for federal income tax (428) 172 ---- --- Net income $(631) $209 ===== ==== Earnings per share $(0.31) $0.10 Dividends declared per share $0.03 $0.12 Return on average equity (9.71%) 3.22% Return on average assets (0.66%) 0.22% Net interest margin (tax equivalent) 2.97% 2.90%
Sturgis Bancorp, Inc.
CONTACT: Eric Eishen, President & CEO, or Brian P. Hoggatt, CFO, both of
Sturgis Bancorp, +1-269-651-9345
Web Site: http://www.sturgisbank.com/
