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Sturgis Bancorp Reports Earnings for Third Quarter 2022

STURGIS, MI / ACCESSWIRE / October 31, 2022 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $2.1 million for the third quarter of 2022 and $4.8 million for the first nine months of 2022.

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, 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 third quarter of 2022 was $2,097,000, an increase of $271,000. The increase from 2021 was primarily net interest income, which increased $742,000.
  • Credit quality is very strong, with 99.79% of loans performing according to loan agreements. Allowance for loan losses was 1.05% of loans on September 30, 2022, compared to 1.28% on December 31, 2021. Net charge-offs were ($100,000) in the first nine months of 2022, compared to $209,000 in the first nine months of 2021.
  • The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.25%.
  • Sales of $35.7 million residential mortgages generated $1.2 million of noninterest income in the first nine months of 2022, compared to $2.1 million on $89.1 million of sales the first nine months of 2021.
  • Total assets increased 22.7% during the first nine months of 2022, to $842.2 million.
  • Net loans increased 47.6% to $669.3 million in the first nine months of 2022, including $69.1 million increase in residential mortgages and $35.3 million in commercial real estate loans.
  • Total non-brokered deposits increased 19.4% to $685.8 million on September 30, 2022, compared to $574.2 million on December 31, 2021.

Eric L. Eishen, President and CEO, stated, "Core business for the Bank has expanded significantly in the first nine months of this year. Both loan and deposit growth have been at historic levels. This is primarily the result of our expansion into 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 were glad to open full-service branches in Portage and Niles Michigan, relocate one of our South Haven branches to better facilities, and add loan production offices in Marshall and 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 is at an all-time high and the overall franchise value of the Bank is expanding."

Three months ended September 30, 2022 vs. three months ended September 30, 2021 - Net income for the three months ended September 30, 2022 was $2,097,000, or $0.98 per share, compared to net income of $1,826,000, or $0.86 per share, for the three months ended September 30, 2021. The tax equivalent net interest margin decreased to 3.49% in the quarter ended September 30, 2022, from 3.59% in the quarter ended September 30, 2021.

Net interest income increased to $6.6 million in the third quarter of 2022 from $5.8 million in the third quarter of 2021. The growth was primarily in loan interest income, which increased $684,000 to $7.0 million. Total interest income increased $748,000 to $7.6 million, while interest expense increased $6,000 to $1.0 million.

The Company made no provision to the allowance for loan losses in the third quarter of 2022, compared to $81,000 in the third quarter of 2021. Credit quality remains strong, with 99.79% of loans performing in accordance with loan terms.

Noninterest income was $1.6 million in the third quarter of 2022, compared to $1.7 million in the third quarter of 2021. Brokerage commissions, the largest component of noninterest income, decreased to $409,000. Most of the decrease in noninterest income was due to mortgage banking activities, which decreased $96,000, to $139,000. Mortgage banking activities included residential loan sales of $4.6 million in the third quarter of 2022, compared to $18.1 million in the third quarter of 2021. Although residential loan sales decreased, residential loans originated for portfolio increased to $39.6 million in the third quarter of 2022, compared to $35.8 million in the third quarter of 2021.

Noninterest expense was $5.7 million in the third quarter of 2022, compared to $5.3 million in the third quarter of 2021. Compensation and benefits, the largest component of noninterest expenses, increased $565,000, or 17.3%. The higher compensation expense includes additional staffing for the Bank's expansion into Berrien, Calhoun, and Kalamazoo Counties in southwest Michigan.

Nine months ended September 30, 2022 vs. nine months ended September 30, 2021 - Net income for the nine months ended September 30, 2022 was $4,755,000, or $2.23 per share, compared to net income of $4,568,000, or $2.15 per share, for the nine months ended September 30, 2021. The tax equivalent net interest margin increased to 3.15% in the nine months ended September 30, 2022 from 3.11% in the nine months ended September 30, 2021.

Net interest income increased to $17.3 million in the first nine months of 2022 from $14.7 million in the first nine months of 2021. The growth was primarily in loan interest income, which increased $2.0 million to $18.4 million. Total interest income increased $2.3 million to $20.1 million, while interest expense decreased $326,000 to $2.8 million.

The Company made no provision to the allowance for loan losses in the first nine months of 2022, compared to $1.1 million in the first nine months of 2021. Net charge-offs were ($100,000) in the first nine months of 2022, compared to $209,000 in the first nine months of 2021.

Noninterest income was $5.4 million in the first nine months of 2022, compared to $6.7 million in the first nine months of 2021. Most of the decrease was due to mortgage banking activities, which decreased $936,000, to $1.2 million. Mortgage banking activities included residential loan sales of $35.7 million in the first nine months of 2022, compared to $89.1 million in the first nine months of 2021. In addition, in 2021 the Company realized $407,000 gain on termination of an interest rate swap.

Noninterest expense was $17.0 million in the first nine months of 2022, compared to $14.8 million in the first nine months of 2021. Compensation and benefits, the largest component of noninterest expenses, increased $1.9 million, or 21.2%. The higher compensation expense includes additional staffing for the Bank's expansion in Berrien, Calhoun, and Kalamazoo Counties in southwest Michigan.

Balance Sheet - Total assets increased to $842.2 million on September 30, 2022, from $751.7 million on December 31, 2021, primarily the result of the growth in loans. Loans increased $127.1 million to $669.3 million on September 30, 2022, including increases of $69.1 million in residential mortgages and $35.3 million in CRE.

Interest-bearing deposits increased to $586.4 million on September 30, 2022 from $438.7 million on December 31, 2021. Noninterest-bearing deposit accounts also increased $13.8 million to $159.3 million. The increase in deposit accounts is substantially due increased market penetration in southwest Michigan. Brokered deposits, a component of interest-bearing deposits, increased $49.8 million in the nine months ended September 30, 2022, while borrowed funds decreased $64.0 million.

Total equity was $50.7 million on September 30, 2022, compared to $52.4 million on December 31, 2021. The decrease was due to lower market values on available-for-sale securities, recorded in other comprehensive income. Total dividends paid in the first nine months of 2022 were $1.1 million, or $0.51 per share. Book value per share was $23.72 ($19.47 tangible) as of September 30, 2022.

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.

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
September 30, Dec. 31,
2022 2021
ASSETS
Cash and due from banks
$ 13,295 $ 15,793
Other short-term investments
7,500 23,731
Total cash and cash equivalents
20,795 39,524
Interest-earning deposits in banks
- 494
Securities - available for sale
63,664 83,134
Securities - held to maturity
22,308 24,347
Federal Home Loan Bank stock, at cost
8,381 7,951
Loans held for sale, at fair value
1,276 7,287
Loans, net of allowance of $7,131 and $7,031
669,260 542,196
Premises and equipment, net
17,371 13,231
Goodwill
5,834 5,834
Core deposit intangibles
31 49
Originated mortgage servicing rights
3,006 2,963
Real estate owned
375 -
Bank-owned life insurance
15,888 15,598
Accrued interest receivable
2,303 1,894
Other assets
11,744 7,233
Total assets
$ 842,236 $ 751,735
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing
$ 159,287 $ 145,503
Interest-bearing
586,357 438,690
Total deposits
745,644 584,193
Federal Home Loan Bank advances and other borrowings
25,000 89,000
Subordinated debentures - $15,000 face amount (less unamortized debt issuance costs of $266 at Sept. 30, 2022
and $327 at Dec. 31, 2021)
14,734 14,673
Accrued interest payable
527 425
Other liabilities
5,592 11,008
Total liabilities
791,497 699,299
Stockholders' equity
Common stock - $1 par value: authorized - 9,000,000 shares
issued and outstanding 2,138,941 shares at Sept. 30, 2022 and 2,132,291 at Dec. 31, 2021
2,139 2,132
Additional paid-in capital
8,345 8,210
Retained earnings
47,489 43,823
Accumulated other comprehensive loss
(7,234 ) (1,729
Total stockholders' equity
50,739 52,436
Total liabilities and stockholders' equity
$ 842,236 $ 751,735

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
Three Months
Ended September 30,
2022 2021
Interest income
Loans
$ 6,995 $ 6,311
Investment securities:
Taxable
417 383
Tax-exempt
125 129
Dividends
81 47
Total interest income
7,618 6,870
Interest expense
Deposits
698 636
Borrowed funds
338 394
Total interest expense
1,036 1,030
Net interest income
6,582 5,840
Provision (benefit) for loan losses
- 81
Net interest income after provision (benefit) for loan losses
6,582 5,759
Noninterest income:
Service charges and other fees
314 298
Interchange income
349 317
Investment brokerage commission income
409 498
Mortgage banking activities
139 235
Trust fee income
118 96
Earnings on cash value of bank-owned life insurance
100 73
Other income
173 181
Total noninterest income
1,602 1,698
Noninterest expenses:
Compensation and benefits
3,831 3,266
Occupancy and equipment
842 669
Interchange expenses
154 126
Data processing
(241 ) 228
Professional services
67 50
Real estate owned expense
3 1
Advertising
144 218
FDIC premiums
98 53
Other expenses
770 660
Total noninterest expenses
5,668 5,271
Income before income tax expense
2,516 2,186
Income tax expense
419 360
Net income
$ 2,097 $ 1,826
Earnings per share
$ 0.98 $ 0.86
Dividends per share
$ 0.17 $ 0.16

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
Nine Months
Ended September 30,
2022 2021
Interest income
Loans
$ 18,367 $ 16,386
Investment securities:
Taxable
1,184 882
Tax-exempt
376 402
Dividends
205 121
Total interest income
20,132 17,791
Interest expense
Deposits
1,578 1,945
Borrowed funds
1,212 1,171
Total interest expense
2,790 3,116
Net interest income
17,342 14,675
Provision (benefit) for loan losses
- 1,074
Net interest income after provision (benefit) for loan losses
17,342 13,601
Noninterest income:
Service charges and other fees
936 892
Interchange income
960 872
Investment brokerage commission income
1,445 1,429
Mortgage banking activities
1,153 2,089
Trust fee income
324 281
Earnings on cash value of bank-owned life insurance
290 307
Gain on termination of interest rate swap
- 407
Other income
310 503
Total noninterest income
5,418 6,689
Noninterest expenses:
Compensation and benefits
10,920 9,013
Occupancy and equipment
2,246 1,873
Interchange expenses
426 365
Data processing
251 668
Professional services
248 236
Real estate owned expense
3 7
Advertising
402 448
FDIC premiums
256 193
Other expenses
2,291 1,991
Total noninterest expenses
17,043 14,794
Income before income tax expense
5,717 5,496
Income tax expense
962 928
Net income
$ 4,755 $ 4,568
Earnings per share
$ 2.23 $ 2.15
Dividends per share
$ 0.51 $ 0.48

OTHER FINANCIAL INFORMATION
(Amounts in thousands)
Three Months Ended
September 30,


2022 2021
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits
$ 163,797 $ 149,670
Average interest-bearing deposits
556,580 428,433
Average total assets
817,780 716,912
Sturgis Bancorp:
Average equity
51,449 50,445
Average total assets
817,995 717,074
Financial ratios for Sturgis Bancorp:
Return on average assets
1.01 % 1.01 %
Return on average equity
16.17 % 14.36 %
Net interest margin
3.46 % 3.56 %
Tax equivalent net interest margin
3.49 % 3.59 %
Nine Months Ended
September 30,
2022 2021
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits
$ 160,821 $ 140,930
Average interest-bearing deposits
537,622 425,314
Average total assets
803,179 703,235
Sturgis Bancorp:
Average equity
51,503 49,095
Average total assets
803,410 703,381
Financial ratios for Sturgis Bancorp:
Return on average assets
0.79 % 0.87 %
Return on average equity
12.34 % 12.40 %
Net interest margin
3.12 % 3.08 %
Tax equivalent net interest margin
3.15 % 3.11 %

Contacts:

Sturgis Bancorp
Eric Eishen, President & CEO
Brian P. Hoggatt, CFO
P: 269 651-9345

SOURCE: Sturgis Bancorp, Inc.



View source version on accesswire.com:
https://www.accesswire.com/723055/Sturgis-Bancorp-Reports-Earnings-for-Third-Quarter-2022

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