Sturgis Bancorp Reports Earnings for First Quarter 2022

Rhea-AI Summary

Sturgis Bancorp reported a net income of $1.2 million for Q1 2022, a decline from $1.36 million in Q1 2021, primarily due to extraordinary items last year. Net interest income rose by $966,000 to $5.1 million, driven by strong loan growth. Despite strong credit quality, with 99.97% of loans performing, noninterest income fell to $2 million from $2.9 million due to a drop in mortgage banking revenue. Total assets increased 8.2% to $804.3 million.

Positive

• Net interest income increased by $966,000 to $5.1 million.
• Total assets grew by 8.2% to $804.3 million.
• Strong credit quality with 99.97% of loans performing.

Negative

• Net income decreased to $1.2 million from $1.36 million year-over-year.
• Noninterest income fell from $2.9 million to $2 million, largely due to reduced mortgage banking revenue.
• Compensation and benefits expenses rose 21.4% to $5.7 million.

STURGIS, MI / ACCESSWIRE / April 26, 2022 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $1.2 million for the first quarter 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, 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 first quarter of 2022 was $1,205,000. The decline from 2021 was primarily due to extraordinary items realized in first quarter 2021. In 2021, the Bank had a gain on the termination of an interest rate swap, extraordinarily high mortgage banking revenue, and accreted fee income from Paycheck Protection Program loans. Net interest income for the first quarter of 2022 increased by $966,000.
• Credit quality is very strong, with 99.97% of loans performing according to loan agreements. Allowance for loan losses was 1.21% of loans on March 31, 2022, compared to 1.28% on December 31, 2021.
• The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.42%.
• Sales of $21.4 million residential mortgages generated $638,000 of noninterest income in the first quarter of 2022, compared to $1.1 million on $51.6 million of sales the first quarter of 2021.
• Total assets increased 8.2% during the first quarter of 2022, to $804.3 million.
• Net loans increased 6.8% to $579.2 million, including $18.2 million increase in residential mortgages and $14.1 million in commercial real estate loans.
• Total non-brokered deposits increased 17.4% to $632.7 million on March 31, 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 quarter. 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. 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 March 31, 2022 vs. three months ended March 31, 2021 - Net income for the three months ended March 31, 2022 was $1,205,000, or $0.57 per share, compared to net income of $1,363,000, or $0.64 per share, for the three months ended March 31, 2021. The tax equivalent net interest margin increased to 2.89% in the first three months of 2022 from 2.78% in the first three months of 2021.

Net interest income increased to $5.1 million in the first quarter of 2022 from $4.1 million in the first quarter of 2021. The growth was primarily in loan interest income, which increased $677,000 to $5.4 million. Total interest income increased $840,000 to $6.0 million, while interest expense decreased $126,000 to $914,000.

The Company made no provision to the allowance for loan losses in the first quarter of 2022, compared to $636,000 in the first quarter of 2021. Net charge-offs were ($84,000) in the first quarter of 2022, compared to $251,000 in the first quarter of 2021.

Noninterest income was $2.0 million in the first quarter of 2022, compared to $2.9 million in the first quarter of 2021. Most of the decrease was due to mortgage banking activities, which decreased $479,000, to $638,000. Mortgage banking activities included residential loan sales of $21.4 million in the first quarter of 2022, compared to $51.6 million in the first quarter of 2021. The Bank realized $407,000 gain in the first quarter of 2021 on termination of an interest rate swap.

Noninterest expense was $5.7 million in the first quarter of 2022, compared to $4.8 million in the first quarter of 2021. Compensation and benefits, the largest component of noninterest expenses, increased $621,000, or 21.4%. The higher compensation expense includes additional staffing for the Bank's expansion into southwest Michigan.

Balance Sheet - Total assets increased to $804.3 million on March 31, 2022 from $751.7 million on December 31, 2021, primarily as a result of the growth in loans. Loans increased $37.0 million to $579.2 million on March 31, 2021, with the largest increase in residential mortgages.

Interest-bearing deposits increased to $506.6 million on March 31, 2022 from $438.7 million on December 31, 2021. The increase in deposit accounts is substantially due increased market penetration in southwest Michigan. Brokered deposits, a component of interest-bearing deposits, increased $27.5 million in the quarter ended March 31, 2022, while borrowed funds decreased $27.5 million.

Total equity was $51.2 million on March 31, 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 quarter of 2021 were $362,000, or $0.17 per share. Book value per share was $24.00 ($19.80 tangible) as of March 31, 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.

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)

		Mar. 31,				Dec. 31,
		2022				2021
ASSETS
Cash and due from banks		$	16,805			$	15,793
Other short-term investments			51,010				23,731
Total cash and cash equivalents			67,815				39,524
Interest-earning deposits in banks			494				494
Securities - available for sale			74,988				83,134
Securities - held to maturity			23,567				24,347
Federal Home Loan Bank stock, at cost			8,381				7,951
Loans held for sale, at fair value			1,992				7,287
Loans, net of allowance of $7,115 and $7,031			579,182				542,196
Premises and equipment, net			14,070				13,231
Goodwill			5,834				5,834
Core deposit intangibles			42				49
Originated mortgage servicing rights			3,077				2,963
Real estate owned			-				-
Bank-owned life insurance			15,692				15,598
Accrued interest receivable			1,962				1,894
Other assets			7,273				7,233
Total assets		$	804,369			$	751,735
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing		$	163,591			$	145,503
Interest-bearing			506,587				438,690
Total deposits			670,178				584,193
Federal Home Loan Bank advances and other borrowings			61,500				89,000
Subordinated debentures - $15,000 face amount (less unamortized debt issuance costs of $307 at March 31, 2022
and $327 at Dec. 31, 2021)			14,693				14,673
Accrued interest payable			346				425
Other liabilities			6,437				11,008
Total liabilities			753,154				699,299
Stockholders' equity
Common stock - $1 par value: authorized - 9,000,000 shares issued and outstanding 2,134,341 shares at March 31, 2022
and 2,132,291 at Dec. 31, 2021			2,134				2,132
Additional paid-in capital			8,250				8,210
Retained earnings			44,665				43,823
Accumulated other comprehensive loss			(3,834	)			(1,729	)
Total stockholders' equity			51,215				52,436
Total liabilities and stockholders' equity		$	804,369			$	751,735

CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)

		Three Months
		Ended Mar. 31,
		2022				2021
Interest income
Loans		$	5,447			$	4,770
Investment securities:
Taxable			367				210
Tax-exempt			126				139
Dividends			54				35
Total interest income			5,994				5,154
Interest expense
Deposits			390				655
Borrowed funds			524				385
Total interest expense			914				1,040
Net interest income			5,080				4,114
Provision (benefit) for loan losses			-				636
Net interest income after provision (benefit) for loan losses			5,080				3,478
Noninterest income:
Service charges and other fees			307				298
Interchange income			282				250
Investment brokerage commission income			544				448
Mortgage banking activities			638				1,117
Trust fee income			96				84
Earnings on cash value of bank-owned life insurance			94				72
Gain on termination of interest rate swap			-				407
Other income			74				261
Total noninterest income			2,035				2,937
Noninterest expenses:
Compensation and benefits			3,496				2,896
Occupancy and equipment			695				609
Interchange expenses			128				113
Data processing			239				215
Professional services			89				114
Real estate owned expense			-				3
Advertising			90				106
FDIC premiums			72				63
Other expenses			863				655
Total noninterest expenses			5,672				4,774
Income before income tax expense			1,443				1,641
Income tax expense			238				278
Net income		$	1,205			$	1,363
Earnings per share		$	0.57			$	0.64
Dividends per share		$	0.17			$	0.16

OTHER FINANCIAL INFORMATION
(Amounts in thousands)

		Three Months
		Ended Mar. 31,
		2022				2021
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits		$	157,562			$	135,974
Average interest-bearing deposits			459,134				419,886
Average total assets			775,887				687,254
Sturgis Bancorp:
Average equity			51,942				47,774
Average total assets			775,215				687,368
Financial ratios for Sturgis Bancorp:
Return on average assets			0.63	%			0.79	%
Return on average equity			9.41	%			11.32	%
Net interest margin			2.86	%			2.74	%
Tax equivalent net interest margin			2.89	%			2.78	%

SOURCE: Sturgis Bancorp, Inc.

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FAQ

What are the net income results for Sturgis Bancorp (STBI) in Q1 2022?

Sturgis Bancorp reported a net income of $1.2 million for Q1 2022, down from $1.36 million in Q1 2021.

How did net interest income change for STBI in the first quarter of 2022?

Net interest income for STBI increased by $966,000 to $5.1 million in Q1 2022.

What was the status of loan performance for Sturgis Bancorp (STBI)?

As of March 31, 2022, 99.97% of Sturgis Bancorp's loans were performing according to loan agreements.

How much did total assets increase for Sturgis Bancorp (STBI) in Q1 2022?

Total assets increased by 8.2% to $804.3 million during the first quarter of 2022.

What impact did mortgage banking activities have on STBI's noninterest income?

Noninterest income for STBI fell to $2 million in Q1 2022, primarily due to a decrease in mortgage banking activities.