Sturgis Bancorp Reports Earnings for First Quarter 2021

Rhea-AI Summary

Sturgis Bancorp reported net income of $1.4 million for Q1 2021, a decline of 9.6% from $1.5 million in Q1 2020, largely due to a higher provision for loan losses linked to COVID uncertainty. Total assets rose 10.2% to $709 million, with net loans increasing 6.7% to $475.1 million. Significant gains included $1.1 million from mortgage sales and a $407,000 profit from an interest rate swap termination. The tax equivalent net interest margin fell to 2.78% from 3.72%. The company's strong capital ratios exceed "well-capitalized" requirements, with Tier 1 leverage capital at 8.59%.

Positive

• Noninterest income increased to $2.7 million, up from $1.9 million in Q1 2020.
• Total assets increased 10.2% to $709 million.
• Net loans grew 6.7% to $475.1 million.
• Strong mortgage banking activities contributed $1.1 million to noninterest income.
• The company maintained a quarterly dividend of $0.16 per share.

Negative

• Net income decreased by 9.6% year-over-year.
• Provision for loan losses surged to $636,000 from $151,000 in Q1 2020.
• Net interest margin declined to 2.78% from 3.72%.

STURGIS, MI / ACCESSWIRE / April 28, 2021 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $1.4 million for the first quarter of 2021.

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 for the first quarter of 2021:

• Net income decreased 9.6% for the first quarter of 2021 to $1,363,000, compared to $1,507,000 for the first quarter of 2020, primarily due to higher provision for loan losses. The provision was based on qualitative factors that recognized uncertainty related to the impact of COVID on the overall economy.
• Asset quality is very strong, with 99.84% of loans current.
• The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.59%.
• Sales of $51.6 million residential mortgages generated $1.1 million of noninterest income in 2021, compared to $776,000 on $32.3 million of sales in 2020.
• Total assets increased 10.2% to $709.0 million.
• Net loans increased 6.7% to $475.1 million, including $18.3 million increase in residential mortgages.
• An interest rate swap was terminated in the quarter, generating $407,000 gain.
• Total deposits increased 10.6% to $561.9 million.
• Allowance for loan losses was 1.39% of loans.

Eric L. Eishen, President and CEO, stated, "The Bank had a strong first quarter. Continuing uncertainty regarding the impact of COVID on the overall economy warranted higher provision for loan losses in this quarter. Few loans were delinquent and most residential and consumer loans with COVID-related accommodations in the past year have paid off or returned to normal payments. Hotel loans with COVID-related accommodations also are gradually returning to full payment status. We expect our hotel loans to continue their rebound, especially as summer travel improves vacancy rates. Earnings were positively impacted by strong Mortgage Banking activity and the gain on swap termination. Paycheck Protection Program loan originations also continued strong through the first quarter of 2021."

Three months ended March 31, 2021 vs. three months ended March 31, 2020 - Net income for the three months ended March 31, 2021 was $1,363,000, or $0.64 per share, compared to net income of $1,507,000, or $0.71 per share, for the three months ended March 31, 2020. The tax equivalent net interest margin decreased to 2.78% in the first three months of 2021 from 3.72% in the first three months of 2020.

Net interest income increased to $4.3 million in 2021 from $4.1 million in 2020. The growth was primarily due to loan interest income, which increased by $261,000 to $4.8 million. Total interest income increased $305,000 to $5.4 million in 2021, and interest expense only increased $138,000 to $1.0 million in 2021.

The Company provided $636,000 to the allowance for loan losses in the first three months of 2021, compared to $151,000 in the same quarter of 2020. Net charge-offs were $251,000 in 2021 and $64,000 in 2020.

Noninterest income was $2.7 million in the first quarter of 2021, compared to $1.9 million in the first quarter of 2020. Most of the increase was due to $407,000 gain on termination of an interest rate swap. Mortgage banking activities also increased $341,000, to $1.1 million. Investment brokerage commission income also increased to $448,000 in 2021 from $362,000 in 2020.

Noninterest expense was $4.8 million in 2021, compared to $4.1 million in 2020. Salaries and employee benefits, the largest component of noninterest expense, increased $372,000, or 14.7%. The higher compensation expense includes staff for the Bank's expansion into southwest Michigan.

Total assets increased to $709.0 million on March 31, 2021 from $643.6 million on December 31, 2020, primarily in loans. Loans increased $30.0 million from December 31, 2020, primarily in residential mortgages.

Interest-bearing deposits increased to $423.7 million on March 31, 2021 from $383.5 million on December 31, 2020. The increase in deposit accounts is partially due to typical seasonal patterns for municipalities, as municipalities deposit property tax revenues. Municipalities historically have either used or reinvested those funds elsewhere during the second quarter of the year, and Management expects that pattern to continue for 2021. Brokered deposits of $61.2 million, a component of interest-bearing deposits, remained unchanged during the quarter ended March 31, 2021.

Total equity was $48.5 million on March 31, 2021, compared to $47.8 million on December 31, 2020. The regular quarterly dividend was maintained during 2020 and into the first quarter of 2021 at a record-high $0.16 per share. Book value per share was $22.81 ($18.84 tangible) on March 31, 2021.

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.sturgisbank.com.

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)

		Mar. 31,				Dec. 31,
		2021				2020
ASSETS
Cash and due from banks		$	10,632			$	12,060
Other short-term investments			65,709				55,782
Total cash and cash equivalents			76,341				67,842
Interest-earning deposits in banks			1,241				1,241
Securities - available for sale			96,230				73,072
Federal Home Loan Bank stock, at cost			5,476				4,917
Loans held for sale, at fair value			13,419				6,832
Loans, net of allowance of $6,615 and $6,231			475,054				445,091
Premises and equipment, net			11,977				11,844
Goodwill			5,834				5,834
Core deposit intangibles			69				77
Originated mortgage servicing rights			2,547				2,245
Real estate owned			210				341
Bank-owned life insurance			11,162				11,091
Accrued interest receivable			2,464				2,458
Other assets			6,939				10,721
Total assets		$	708,963			$	643,606
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing		$	138,250			$	124,434
Interest-bearing			423,672				383,464
Total deposits			561,922				507,898
Federal Home Loan Bank advances and other borrowings			61,500				61,500
Subordinated debentures - $15,000 face amount (less unamortized
debt issuance costs of $389 at March 31, 2021 and $400 at
December 31, 2020)			14,611				14,600
Accrued interest payable			430				477
Other liabilities			22,009				12,019
Total liabilities			660,472				596,494
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 2,125,541 shares at March 31, 2021
and 2,123,291 at December 31, 2020			2,126				2,123
Additional paid-in capital			8,090				8,050
Retained earnings			39,862				38,840
Accumulated other comprehensive loss			(1,587)				(1,901)
Total stockholders' equity			48,491				47,112
Total liabilities and stockholders' equity		$	708,963			$	643,606

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

		Three Months Ended March 31,
		2021				2020
Interest income
Loans		$	4,770			$	4,509
Investment securities:
Taxable			210				257
Tax-exempt			139				229
Dividends			232				51
Total interest income			5,351				5,046
Interest expense
Deposits			655				514
Borrowed funds			385				388
Total interest expense			1,040				902
Net interest income			4,311				4,144
Provision (benefit) for loan losses			636				151
Net interest income after provision (benefit) for loan losses			3,675				3,993
Noninterest income:
Service charges and other fees			298				324
Interchange income			250				211
Investment brokerage commission income			448				362
Mortgage banking activities			1,117				776
Trust fee income			84				98
Earnings on cash value of bank-owned life insurance			72				73
Gain (loss) on sale of real estate owned			39				(2)
Gain on termination of interest rate swap			407				-
Other income			26				22
Total noninterest income			2,741				1,864
Noninterest expenses:
Salaries and employee benefits			2,896				2,524
Occupancy and equipment			609				510
Interchange expenses			113				102
Data processing			215				202
Professional services			114				133
Real estate owned expense			3				2
Advertising			106				69
FDIC premiums			63				44
Other expenses			656				469
Total noninterest expenses			4,775				4,055
Income before income tax expense			1,641				1,802
Income tax expense			278				295
Net income		$	1,363			$	1,507
Earnings per share		$	0.64			$	0.71
Dividends per share			0.16				0.16

OTHER FINANCIAL INFORMATION

(Amounts in thousands)

		Three Months Ended March 31,
		2021				2020
Sturgis Bank & Trust Company:
Average noninterest-bearing deposits		$	135,974			$	86,772
Average interest-bearing deposits			419,886				273,152
Average total assets			687,254				500,719
Sturgis Bancorp:
Average equity			47,774				43,343
Average total assets			687,368				500,719
Financial ratios for Sturgis Bancorp:
Return on average assets			0.79	%			1.21	%
Return on average equity			11.32	%			13.99	%
Net interest margin			2.74	%			3.65	%
Tax equivalent net interest margin			2.78	%			3.72	%

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/642834/Sturgis-Bancorp-Reports-Earnings-for-First-Quarter-2021

FAQ

What were Sturgis Bancorp's Q1 2021 earnings results?

Sturgis Bancorp reported a net income of $1.4 million for Q1 2021, down 9.6% from $1.5 million in Q1 2020.

How did Sturgis Bancorp perform in terms of assets in Q1 2021?

Total assets for Sturgis Bancorp increased by 10.2% to $709 million as of March 31, 2021.

What is the current dividend per share for STBI?

Sturgis Bancorp maintained a regular quarterly dividend of $0.16 per share.

Did Sturgis Bancorp's net loans increase in Q1 2021?

Yes, net loans increased by 6.7% to $475.1 million in Q1 2021.

What impact did COVID have on Sturgis Bancorp's financials?

The provision for loan losses rose significantly due to uncertainty related to COVID, reaching $636,000 in Q1 2021 compared to $151,000 in the same quarter of 2020.