STURGIS, Mich., Feb. 10 /PRNewswire-FirstCall/ -- Sturgis Bancorp,
Inc. (OTC:STBI) (BULLETIN BOARD: STBI) announced earnings of
$915,000 for 2009, and a loss of $199,000 for the fourth quarter of
2009. The decreases from 2008 were primarily due to higher
provisions for loan losses and a significant increase in FDIC
premiums, Eric L. Eishen, President and CEO, announced today. Key
Highlights for 2009: -- Bank reports profits and continues to
exceed "well-capitalized' requirements. -- Net income decreased
60.3% to $915,000, or $0.45 per share. -- Mortgage banking
activities increased 22.1% to $1.1 million. -- Total deposits
increased 9.1% to $259.2 million. -- Realized gain on sale of
securities was $1.2 million. -- Secured liabilities of the Bank,
comprised of Federal Home Loan Bank advances and repurchase
agreements, were reduced $33.8 million, or 28.9%. -- Sturgis Bank
& Trust Company's regulatory capital ratios were enhanced with
additional capital infusion from Sturgis Bancorp. -- Allowance for
loan losses increased to 1.41% of total loans from 1.00% at the end
of 2008. -- TARP CPP funds of $7.2 million were preliminarily
approved by the U.S. Treasury - In April 2009, the Company rejected
Treasury's offer. -- Nonaccrual loans increased $3.7 million, while
delinquent loans decreased to 1.56% of total loans from 1.59% at
December 31, 2008. President and CEO Eishen further stated:
"Although this decrease in earnings is disappointing, given the
extensive losses in our industry and the significant economic
troubles in Michigan, I am pleased to end the year in a positive
income position. In the fourth quarter the Bank made some
significant provisions to the allowance for loan and lease losses
(ALLL). These provisions, coupled with the increase in FDIC
premiums, negatively impacted fourth quarter performance. There
have been some positive signs in the Bank's primary market.
Employment has stabilized and real estate activity is showing some
signs of life. We believe 2010 will continue to present challenges,
but the additional provisioning and charge downs taken in 2009
should position us well for the next year." 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 12 banking centers in Sturgis,
Bronson, Centreville, Climax, Coldwater, 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.
Year 2009 vs. 2008 - Net income for the year ended December 31,
2009 decreased to $915,000, or $0.45 per share, from $2.3 million,
or $1.13 per share for 2008. Net interest income decreased 4.9% to
$9.7 million, from $10.2 million for 2008. The decrease is
primarily due to the reduction in the tax equivalent net interest
margin to 2.82% in 2009 from 3.07% in 2008. Average
interest-earning assets increased to $349.6 million in 2009 from
$336.6 million in 2008. Noninterest income was $5.6 million for
2009, compared to $4.8 million for 2008. The Company realized $1.2
million of gains on sales of available-for-sale securities in 2009.
Income from mortgage banking activities increased $197,000, as
lower rates stimulated mortgage refinance activity. Commission
income from Oakleaf Financial Services, Inc. decreased $496,000 to
$1.1 million, primarily as a result of lower market values of
assets that fees are assessed against. Noninterest expense
decreased $8,000 for 2009, compared to 2008. Salaries and employee
benefits decreased $674,000, or 9.6%. Real estate owned expense
increased $207,000, as the Company wrote down the carrying value of
foreclosed assets with declines in market values. FDIC deposit
insurance expense increased $473,000 to $644,000. The Company
provided $2.5 million to the ALLL in 2009, compared to $489,000 in
2008. Net charge-offs were $1.4 million in 2009, compared to
$350,000 in 2008. The activity in the ALLL increased the allowance
to 1.41% of gross loans at December 31, 2009, compared to 1.00% of
gross loans at December 31, 2008. The additional provisioning and
charge-offs are a reflection of the economic conditions present in
the National Economy and not the result of weak underwriting
criteria. Total assets decreased to $369.9 million at December 31,
2009 from $383.4 million at December 31, 2008, primarily in
available for sale securities. Loans decreased $2.6 million from
2008, primarily in residential mortgages. Noninterest-bearing
deposits decreased to $24.9 million at December 31, 2009 from $25.7
million at December 31, 2008. Interest-bearing deposits increased
to $234.3 million at December 31, 2009 from $211.8 million at
December 31, 2008. The increase in interest-bearing deposits
includes $10.6 million growth in savings accounts and $9.1 million
growth in checking accounts. In addition, the number of checking
accounts increased through 2009, as the Bank continues to expand
its customer base. During 2009, the Company used growth in savings
and checking accounts to reduce reliance on brokered certificates
of deposit, borrowed funds, and repurchase agreements. Brokered
certificates of deposit were $31.6 million at December 31, 2009,
compared to $37.3 million at December 31, 2008. Borrowed funds
(primarily advances from Federal Home Loan Bank of Indianapolis)
decreased to $57.9 million at December 31, 2009, compared to $86.3
million at December 31, 2008. Repurchase agreements were also
reduced by $5.5 million to $25.0 million at December 31, 2009. In
2009, the Company borrowed $2.3 million to invest in the common
stock of its subsidiary Bank. The additional investment expanded
the Bank's excess capital, relative to regulatory requirements. In
2009, the Company paid cash dividends of $0.39 per common share,
totaling $787,000. Total equity was $25.4 million at December 31,
2009, compared to $25.8 million at December 31, 2008. Book value
per share decreased to $12.60 at December 31, 2009 from $12.76 at
December 31, 2008. Mr. Eishen added, "Our earnings releases usually
include limited commentary from me to describe the cause of
differences in earnings from year to year. In this release I wish
to add a few additional comments that may answer some of your
questions on banking and how the current environment is impacting
Sturgis Bank & Trust Company and in turn Sturgis Bancorp, Inc.
"One concern for many bank stockholders is asset quality. In
today's environment, this is a legitimate concern. The Bank's
investment portfolio consists primarily of government guaranteed
mortgage-backed securities and fully insured deposits. It is of the
highest asset quality. As a result of credit quality concerns, I
have provided more detailed loan quality information in our
quarterly earnings releases this year." "Loan quality is of greater
interest because it has posed the biggest challenges for small
community banks. The table below compares the Bank's nonperforming
loans and Real Estate Owned (REO) for year-end 2009 versus year-end
2008. It is broken down into five categories and reflects
percentages of loans and assets. Loans past due one month decreased
in 2009. Loans past due two months increased, along with loans past
due three or more months. While these categories of loans
increased, the increase is relatively small given the extent of the
economic downturn. Management works to keep borrowers from falling
into the next category of delinquency. Nonaccrual loans are loans
that may not be paying as initially agreed. This indicates the
collection of interest may be doubtful. When a loan enters the
Nonaccrual category, the Bank analyzes the underlying collateral
and adjusts the carrying amount of the loan amount to reflect the
expected cashflow. Part of the increase in the ALLL is reflective
of loans in this category. The final category is REO, which
increased only slightly. Management makes every effort to liquidate
REO properties in a timely basis, and writes these assets down to a
marketable level. Management does not believe it is prudent to sell
REO properties below market value, simply to reduce this metric.
The bottom line is that troubled assets are elevated from 2008,
although constant management of the collection process has
minimized their growth. Percentage of Percentage of Gross Loans at
Total Assets December 31, at December 31, Past due and still
accruing: 2009 2008 2009 2008 ---- ---- ---- ---- Past due one
month 0.59% 1.07% 0.45% 0.79% Past due two months 0.51% 0.38% 0.39%
0.28% Past due three or more months 0.46% 0.14% 0.35% 0.10%
Nonaccrual loans 2.43% 1.12% 1.86% 0.83% Real Estate Owned 0.74%
0.67% 0.56% 0.50% Fourth Quarter of 2009 vs. 2008 - Net income for
the quarter ended December 31, 2009 decreased to a loss of
$199,000, or ($0.10) per share from income of $565,000, or $0.28
per share for the year-earlier quarter. Net interest income
decreased 5.0% to $2.4 million in the fourth quarter of 2009, from
$2.5 million in 2008. The decrease chiefly reflects the decrease in
average interest earning assets for the quarters to $337.9 million
in 2009 from $356.4 million in 2008. The tax equivalent net
interest margin increased to 2.88% in 2009 from 2.86% in 2008.
Noninterest income was $1.1 million for the fourth quarters of both
2009 and 2008. Mortgage banking income decreased $85,000 for the
quarters. In the fourth quarter of 2009, the Company realized
$72,000 gain on sale of available-for-sale securities. Noninterest
expense increased $336,000 to $3.1 million. The primary component
of the increase in noninterest expense was FDIC deposit insurance
premium. Net charge-offs for the fourth quarter of 2009 were
$687,000, compared to $243,000 a year ago. The Company provided
$473,000 for loan losses in the fourth quarter of 2009, compared to
$221,000 in 2008. Mr. Eishen said, "Unfortunately, our earnings are
down for 2009. This is primarily due to increasing the Company's
provision for loan losses. Credit losses have continued to erode
net income, although Management is hopeful that the worst is behind
us. We look forward to 2010 with hopes we will return to a more
normal economic environment." 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, 2009 Dec.
31, 2008 ------------- ------------- (In Thousands) Assets Cash and
due from banks $8,448 $6,930 Other short-term investments 528 9 ---
--- Total cash and cash equivalents 8,976 6,939 Interest-earning
deposits in banks 7,565 9,334 Securities -Available for sale 31,908
41,896 Securities - Held-to-maturity 7,607 8,777 Federal Home Loan
Bank stock, at cost 4,784 4,784 Loans held for sale 595 1,578
Loans, net 278,227 280,867 Premises and equipment, net 8,010 8,710
Premises and equipment held for sale 317 - Goodwill, net of
accumulated amortization 5,109 5,109 Originated mortgage servicing
rights 1,277 1,409 Real estate owned 2,086 1,913 Bank owned life
insurance 8,401 8,072 Accrued interest receivable 1,795 2,286
Investment in limited partnerships 511 618 Other assets 2,753 1,102
Total assets $369,921 $383,394 ======== ======== Liabilities and
Stockholders' Equity Liabilities Deposits Noninterest-bearing
$24,855 $25,710 Interest bearing 234,296 211,807 Total Deposits
259,151 237,517 Federal Home Loan Bank advances and other
borrowings 57,942 86,287 Repurchase agreements 25,000 30,500
Accrued interest payable 687 868 Other liabilities 1,714 2,472
Total liabilities 344,494 357,644 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
outstanding shares at December 31, 2009 and 2008 2,017 2,017
Additional paid-in capital 6,872 6,872 Accumulated other
comprehensive income (loss) (60) 391 Retained earnings 16,598
16,470 Total stockholders' equity 25,427 25,750 Total liabilities
and stockholders' equity $369,921 $383,394 ======== ========
Consolidated Statements of Income Year Ended December 31, 2009 2008
Interest income Loans $15,384 $17,817 Investment securities:
Taxable 1,702 2,403 Tax-exempt 55 49 Dividends 155 214 --- ---
Total interest income 17,296 20,483 Interest expense Deposits 4,184
5,779 Borrowed funds 3,374 4,460 ----- ----- Total interest expense
7,558 10,239 Net interest income 9,738 10,244 Provision for loan
losses 2,534 489 ----- --- Net interest income -After provision for
loan losses 7,204 9,755 Noninterest income: Service charges and
other fees 1,550 1,555 Investment brokerage commission income 1,091
1,587 Mortgage banking activities 1,089 892 Trust fee income 319
380 Increase in value of bank owned life insurance 329 324 Gain on
sale of securities 1,244 - Other income 2 37 --- --- Total
noninterest income 5,624 4,775 Noninterest expenses: Salaries and
employee benefits 6,365 7,038 Occupancy and equipment 1,488 1,414
Data processing 735 818 Professional services 301 332 Real estate
owned expense 440 233 Advertising 132 197 FDIC deposit insurance
premium 644 171 Other 1,515 1,425 ----- ----- Total noninterest
expenses 11,620 11,628 Income -Before income tax expense 1,208
2,902 Provision for federal income tax 293 596 Net income $915
$2,306 ==== ====== Earnings per share $0.45 $1.13 Dividends
declared per share $0.39 $0.48 Key Ratios: ----------- Return on
average equity 3.55% 9.14% Return on average assets 0.24% 0.62% Net
interest margin (tax equivalent) 2.82% 3.07% Efficiency ratio
75.64% 77.42% Consolidated Statements of Income Three Months Ended
December 31, 2009 2008 Interest income (In Thousands) Loans $3,762
$4,221 Investment securities: Taxable 237 819 Tax-exempt 14 9
Dividends 29 - -- - Total interest income 4,042 5,049 Interest
expense Deposits 983 1,307 Borrowed funds 639 1,194 --- ----- Total
interest expense 1,622 2,501 Net interest income 2,420 2,548
Provision for loan losses 694 221 --- --- Net interest income
-After provision for loan losses 1,726 2,327 Noninterest income:
Service charges and other fees 372 379 Investment brokerage
commission income 305 342 Mortgage banking activities 158 243 Trust
fee income 84 73 Increase in value of bank owned life insurance 80
82 Gain on sale of securities 72 - Other income 60 22 --- --- Total
noninterest income 1,131 1,141 Noninterest expenses: Salaries and
employee benefits 1,643 1,606 Occupancy and equipment 343 366 Data
processing 161 204 Professional services 57 69 Real estate owned
expense 144 77 Advertising 41 56 FDIC deposit insurance premium 171
46 Other 536 336 --- --- Total noninterest expenses 3,096 2,760
----- ----- Income -Before income tax expense (239) 708 Provision
for federal income tax (40) 143 --- --- Net income $(199) $565
===== ==== Earnings per share $(0.10) $0.28 Dividends declared per
share $0.03 $0.12 Key Ratios: ----------- Return on average equity
(3.07%) 8.92% Return on average assets (0.21%) 0.57% Net interest
margin (tax equivalent) 2.88% 2.86% Efficiency ratio 86.94% 74.80%
DATASOURCE: 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/
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