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Sturgis Bancorp Reports Earnings for 2022

Company Release - 1/23/2023 12:30 PM ET

STURGIS, MI / ACCESSWIRE / January 23, 2023 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $6.6 million for 2022 and $1.9 million for the fourth 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, Marshall, 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:

  • Earnings per share increased to $3.10 in 2022 from $2.98 in 2021. Earnings per share increased to $0.87 in the three months ended December 31, 2022 from $0.83 per share in the three months ended December 31, 2021. Net income increased 4.4% in 2022 to $6,620,000 from 2021 net income of $6,344,000, primarily due to higher net interest income in 2022.
  • Credit quality remains strong, with 99.7% of loans performing according to loan agreements. Allowance for loan losses was 1.01% of loans on December 31, 2022, compared to 1.28% on December 31, 2021. Net charge-offs were ($110,000) in 2022, compared to $275,000 in 2021.
  • The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.09%.
  • Sales of $42.6 million residential mortgages generated $1.4 million of noninterest income in 2022, compared to $3.6 million on $128.3 million of sales in 2021. The slowdown in loan sales was due to higher market interest rates in 2022.
  • Total assets increased 17.6% to $864.8 million.
  • Net loans increased 29.0% to $699.4 million in 2022, including increases of $91.3 million in residential mortgages and $40.5 million in commercial real estate loans.
  • Total non-brokered deposits increased 14.9% to $659.9 million on December 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 2022. 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 has continued strong, despite national and regional stress from higher interest rates and inflation. The overall franchise value of the Bank is expanding."

Year ended December 31, 2022 vs. year ended December 31, 2021 - Net income for 2022 was $6.6 million, or $3.10 per share, compared to $6.3 million, or $2.98 per share, for 2021. The tax equivalent net interest margin increased to 3.30% in 2022 from 2.96% in 2021.

Net interest income increased to $24.4 million in 2022 from $19.6 million in 2021. The growth was primarily in loan interest income, which increased $4.8 million to $26.5 million. Total interest income increased $5.2 million to $28.9 million, while interest expense increased only $369,000 to $4.5 million.

The Company made no provision to the allowance for loan losses in 2022, compared to $1.1 million in the 2021. Net charge-offs were ($110,000) in 2022 and $275,000 in 2021. Credit quality remains strong, with 99.7% of loans performing in accordance with loan terms.

Noninterest income was $7.0 million in 2022, compared to $9.7 million in 2021. Most of the decrease in noninterest income was due to mortgage banking activities, which decreased $2.2 million to $1.4 million. Mortgage banking activities included residential loan sales of $42.6 million in 2022, compared to $128.3 million in 2021.

Noninterest expense was $23.5 million in 2022, compared to $20.5 million in 2021. Compensation and benefits, the largest component of noninterest expenses, increased $2.1 million, or 16.8%. The higher compensation expense includes additional staffing for the Bank's expansion into Berrien, Calhoun, and Kalamazoo Counties in southwest Michigan.

Three months ended December 31, 2022 vs. three months ended December 31, 2021 - Net income for the three months ended December 31, 2022 was $1,865,000, or $0.87 per share, compared to net income of $1,775,000, or $0.83 per share, for the same period in 2021. The tax equivalent net interest margin increased to 3.60% in the last three months of 2022 from 2.87% in the last three months of 2021.

Net interest income increased to $7.1 million in the last quarter of 2022 from $4.9 million in the last quarter of 2021. The growth was primarily in loan interest income, which increased $2.8 million to $8.2 million. Total interest income increased $2.9 million to $8.8 million, while interest expense increased only $695,000 to $1.7 million.

The Company made no provision to the allowance for loan losses in the final quarters of 2022 and 2021. Net charge-offs were ($10,000) in the last three months of 2022, compared to $66,000 in the last three months of 2021.

Noninterest income was $1.6 million in the final quarter of 2022, compared to $3.0 million in the same period 2021. Most of the decrease was due to mortgage banking activities, which decreased $1.2 million to $236,000. Mortgage banking activities included residential loan sales of $6.9 million in the fourth quarter of 2022, compared to $39.2 million in the fourth quarter 2021.

Noninterest expense was $6.4 million in the fourth quarter of 2022, compared to $5.7 million in the fourth quarter of 2021. Compensation and benefits, the largest component of noninterest expenses, increased $224,000, or 6.1%. 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 $864.8 million on December 31, 2022, from $751.7 million on December 31, 2021, primarily the result of the growth in loans. Loans increased $157.2 million to $699.4 million on December 31, 2022, including increases of $91.3 million in residential mortgages and $40.5 million in commercial real estate loans.

Interest-bearing deposits increased to $556.5 million on December 31, 2022 from $438.7 million on December 31, 2021. Noninterest-bearing deposit accounts also increased $17.5 million to $163.0 million. The increase in deposit accounts is substantially due increased market penetration in southwest Michigan. Brokered deposits, a component of interest-bearing deposits, increased $49.6 million in 2022, while borrowed funds decreased $18.0 million.

Total equity was $52.5 million on December 31, 2022, compared to $52.4 million on December 31, 2021. Lower market values on available-for-sale securities, recorded in other comprehensive income, substantially offset equity growth from retained earnings. Total dividends paid in the 2022 were $1.5 million, or $0.68 per share. Book value per share was $24.53 ($20.42 tangible) as of December 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)

    Dec.31,     Dec. 31,  
    2022     2021  

ASSETS

           

Cash and due from banks

  $ 14,008     $ 15,793  

Other short-term investments

    977       23,731  

Total cash and cash equivalents

    14,985       39,524  

Interest-earning deposits in banks

    -       494  

Securities - available for sale

    63,159       83,134  

Securities - held to maturity

    22,070       24,347  

Federal Home Loan Bank stock, at cost

    8,381       7,951  

Loans held for sale, at fair value

    664       7,287  

Loans, net of allowance of $7,141 and $7,031

    699,443       542,196  

Premises and equipment, net

    17,431       13,231  

Goodwill

    5,834       5,834  

Core deposit intangibles

    -       49  

Originated mortgage servicing rights

    2,967       2,963  

Real estate owned

    380       -  

Bank-owned life insurance

    15,988       15,598  

Accrued interest receivable

    2,691       1,894  

Other assets

    10,782       7,233  

Total assets

  $ 864,775     $ 751,735  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Liabilities

               

Deposits

               

Noninterest-bearing

  $ 162,978     $ 145,503  

Interest-bearing

    556,538       438,690  

Total deposits

    719,516       584,193  

Federal Home Loan Bank advances and other borrowings

    71,000       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)

    14,755       14,673  

Accrued interest payable

    760       425  

Other liabilities

    6,226       11,008  

Total liabilities

    812,257       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

    2,141       2,132  

Additional paid-in capital

    8,387       8,210  

Retained earnings

    48,991       43,823  

Accumulated other comprehensive loss

    (7,001 )     (1,729 )

Total stockholders' equity

    52,518       52,436  
                 

Total liabilities and stockholders' equity

  $ 864,775     $ 751,735  

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

    Three Months  
    Ended December 31,  
    2022     2021  

Interest income

           

Loans

  $ 8,180     $ 5,358  

Investment securities:

               

Taxable

    398       359  

Tax-exempt

    124       125  

Dividends

    76       50  

Total interest income

    8,778       5,892  

Interest expense

               

Deposits

    1,073       581  

Borrowed funds

    623       420  

Total interest expense

    1,696       1,001  

Net interest income

    7,082       4,891  

Provision (benefit) for loan losses

    -       -  

Net interest income after provision (benefit) for loan losses

    7,082       4,891  

Noninterest income:

               

Service charges and other fees

    317       324  

Interchange income

    326       311  

Investment brokerage commission income

    435       461  

Mortgage banking activities

    236       1,465  

Trust fee income

    87       225  

Earnings on cash value of bank-owned life insurance

    100       91  

Proportionate net income from unconsolidated subsidiaries

    109       113  

Other income

    21       18  

Total noninterest income

    1,631       3,008  

Noninterest expenses:

               

Compensation and benefits

    3,884       3,660  

Occupancy and equipment

    893       680  

Interchange expenses

    152       131  

Data processing

    239       232  

Professional services

    99       86  

Real estate owned expense

    2       -  

Advertising

    123       145  

FDIC premiums

    107       78  

Other expenses

    937       708  

Total noninterest expenses

    6,436       5,720  

Income before income tax expense

    2,277       2,179  

Income tax expense

    412       404  

Net income

  $ 1,865     $ 1,775  

Earnings per share

  $ 0.87     $ 0.83  

Dividends per share

  $ 0.17     $ 0.16  

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

    Year Ended  
    December 31,  
    2022     2021  

Interest income

           

Loans

  $ 26,548     $ 21,743  

Investment securities:

               

Taxable

    1,582       1,242  

Tax-exempt

    500       528  

Dividends

    281       171  

Total interest income

    28,911       23,684  

Interest expense

               

Deposits

    2,652       2,527  

Borrowed funds

    1,835       1,591  

Total interest expense

    4,487       4,118  

Net interest income

    24,424       19,566  

Provision (benefit) for loan losses

    -       1,074  

Net interest income after provision (benefit) for loan losses

    24,424       18,492  

Noninterest income:

               

Service charges on deposits and other fees

    1,253       1,216  

Interchange income

    1,286       1,183  

Investment brokerage commission income

    1,881       1,890  

Mortgage banking activities

    1,389       3,554  

Trust fee income

    411       505  

Earnings on cash value of bank-owned life insurance

    390       307  

Gain on termination of interest rate swap

    -       407  

Proportionate net income from unconsolidated subsidiaries

    352       494  

Other income

    87       141  

Total noninterest income

    7,049       9,697  

Noninterest expenses:

               

Compensation and benefits

    14,804       12,673  

Occupancy and equipment

    3,139       2,553  

Interchange expenses

    578       496  

Data processing

    490       901  

Professional services

    348       322  

Advertising

    525       593  

FDIC premiums

    364       272  

Other expenses

    3,231       2,704  

Total noninterest expenses

    23,479       20,514  

Income before income tax expense

    7,994       7,675  

Income tax expense

    1,374       1,331  

Net income

  $ 6,620     $ 6,344  

Earnings per share

  $ 3.10     $ 2.98  

Dividends per share

  $ 0.68     $ 0.64  

OTHER FINANCIAL INFORMATION
(Amounts in thousands)

    Three Months  
    Ended December 31,  
    2022     2021  

Sturgis Bank & Trust Company:

           

Average noninterest-bearing deposits

  $ 166,882     $ 151,881  

Average interest-bearing deposits

    563,325       443,501  

Average total assets

    847,592       735,966  

Sturgis Bancorp:

               

Average equity

    51,676       51,571  

Average total assets

    847,780       736,145  
                 

Financial ratios for Sturgis Bancorp:

               

Return on average assets

    0.86 %     0.96 %

Return on average equity

    14.32 %     13.66 %

Net interest margin

    3.58 %     2.84 %

Tax equivalent net interest margin

    3.60 %     2.87 %
                 
  Year Ended
    December 31,  
    2022     2021  

Sturgis Bank & Trust Company:

               

Average noninterest-bearing deposits

  $ 161,782     $ 148,277  

Average interest-bearing deposits

    524,747       433,175  

Average total assets

    807,549       719,416  

Sturgis Bancorp:

               

Average equity

    51,615       49,725  

Average total assets

    807,758       719,583  
                 

Financial ratios for Sturgis Bancorp:

               

Return on average assets

    0.82 %     0.88 %

Return on average equity

    12.83 %     12.76 %

Net interest margin

    3.27 %     2.93 %

Tax equivalent net interest margin

    3.30 %     2.96 %

SOURCE: Sturgis Bancorp, Inc.



View source version on accesswire.com:
https://www.accesswire.com/736297/Sturgis-Bancorp-Reports-Earnings-for-2022

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