Sturgis Bancorp, Inc. Reports Financial Results for Third Quarter 2024

STURGIS, MI / ACCESSWIRE / October 18, 2024 / Sturgis Bancorp, Inc. (OTCQX:STBI) today reported for the third quarter of 2024:

Key Quarterly Highlights

• Net income was $1.5 million.

• Earnings per share of $0.72.

• Paid dividend of $0.17 per share.

• Total assets increased to $948 million.

• Deposits increased to $809 million.

• Credit quality remains strong, with 98.34% of loans performing according to loan agreements.

• The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 7.71%.

From Jason J. Hyska, Sturgis Bancorp, Inc. Chief Executive Officer

"This has been a challenging year for the Bank. The current economic environment and political climate seem to make for much uncertainty in all lines of business. The focus of management has been on closely monitoring credit quality and improving the margin. The focus of staff has been on acquiring new relationships while deepening relationships we already have. The Community bank model continues to be a resilient model that customers desire."

Quarterly Income Statement Highlights

• Net income for the quarter (3Q24) was $1.5 million, increasing from last quarter's (2Q24) $1.3 million net income, while down from the net income of $3.1 million reported for the same quarter of the prior year (3Q23). The decrease from 3Q23 was substantially due to a gain on termination of interest rate swaps and higher earnings on bank-owned life insurance recorded in 3Q23.

• Earnings per share were $0.72 for 3Q24, $0.60 for 2Q24, and $1.46 for 3Q23.

• Net interest income was $7.0 million during 3Q24, a 2.85% increase from 2Q24's $6.8 million. This also is a 3.37% decrease from 3Q23's $7.3 million net interest income. The change from the same quarter a year ago was primarily due to:

  • Interest expense of $4.9 million in 3Q24, compared to $3.4 million in 3Q23.

• Tax equivalent net interest margin increased slightly to 3.22% for 3Q24 from 3.21% for 2Q24, while decreasing from the 3.49% margin in 3Q23.

• During 3Q24, there was a reversal of the allowance for credit losses of $28,000, due to quarterly net recoveries. During 2Q24 and 3Q23, $165,000 and $44,000, respectively, were provided to the allowance for credit losses.

• Noninterest income totaled $2.4 million during 3Q24, a 7.61% increase from 2Q24's $2.2 million, while it was a 30.94% decrease from 3Q23's $3.4 million. These fluctuations were primarily due to:

  • Mortgage banking activities for 3Q24 were $588,000, compared to $487,000 for 2Q24, and $470,000 for 3Q23.

  • Earnings on cash value of bank-owned life insurance for 3Q24 were $111,000, compared to $108,000 for 2Q24, and $590,000 for 3Q23.

  • A gain on termination of interest rate swaps resulted in recognizing $793,000 during 3Q23, while there were no such gains (or losses) on termination of interest rate swaps in 3Q24 or 2Q24.

• Noninterest expenses totaled $7.6 million during 3Q24, a 3.74% increase from 2Q24's $7.3 million and a 9.40% increase from 3Q23's $6.9 million. These fluctuations were primarily due to:

  • Compensation and benefits in 3Q24 were $4.6 million, compared to $4.3 million for 2Q24, and $4.1 million for 3Q23.

Year-to-Date Income Statement Highlights

• Net income for the first nine months of 2024 (YTD 2024) was $870,000, compared to $6.4 million for the first nine months of 2023 (YTD 2023), as further discussed below.

• Earnings per share were $0.40 for YTD 2024 and $2.97 for YTD 2023.

• Net interest income was $20.7 million for YTD 2024, a 4.48% decrease from YTD 2023's $21.6 million. This decrease was primarily due to:

  • Interest expense of $14.0 million for YTD 2024, compared to $8.4 million for YTD 2023.

• During YTD 2024, $4.8 million was provided to the allowance for credit losses, compared to $277,000 for YTD 2023. This increase was primarily due to:

  • A one-time charge-off of one customer's loans of $5.5 million occurred in 1Q24.

• Noninterest income totaled $7.7 million for YTD 2024, compared to $6.9 million for YTD 2023. This is a 10.51% increase. This net increase was primarily due to:

  • Investment brokerage commission income of $1.9 million in YTD 2024, compared to $1.6 million in YTD 2023.

  • Mortgage banking activities of $1.6 million in YTD 2024, compared to $1.1 million in YTD 2023.

  • Earnings on cash value of bank-owned life insurance of $325,000 in YTD 2024, compared to $787,000 in YTD 2023. This decrease was due to an excess death benefit received in YTD 2023.

  • Gain on termination of interest rate swaps of $1.1 million in YTD 2024, compared to $793,000 in YTD 2023.

• Noninterest expense totaled $22.7 million for YTD 2024, compared to $20.6 million for YTD 2023. This is a 10.03% increase. This increase was primarily due to:

  • Compensation and benefits in YTD 2024 were $13.5 million, compared to $12.0 million in YTD 2023.

Balance Sheet Highlights

• Total assets increased to $948 million as of the end of 3Q24, a 0.61% increase from the end of 2Q24's $942 million, and a 5.61% increase from the end of 3Q23's $898 million. These increases were primarily due to:

  • Cash and cash equivalents ended 3Q24 at $23.8 million, compared to $21.1 million as of the end of 2Q24, and $24.6 million as of the end of 3Q23.

  • Securities - available-for-sale increased to $80.9 million as of the end of 3Q24, from $79.1 million as of the end of 2Q24, and $50.1 million as of the end of 3Q23.

  • Net loans ended 3Q24 near the same level as they ended 2Q24 at $753 million, which was an increase from $735 million as of the end of 3Q23.

• Total deposits as of the end of 3Q24 were $809 million, compared with $800 million as of the end of 2Q24, and $810 million as of the end of 3Q23. These fluctuations were comprised of:

  • Noninterest-bearing deposits decreased to $162 million as of the end of 3Q24, from $169 million as of the end of 2Q24. This was an increase from $157 million as of the end of 3Q23.

  • Interest-bearing deposits increased to $647 million as of the end of 3Q24, from $631 million as of the end of 2Q24. This was a decrease from $653 million as of the end of 3Q23.

• Borrowed funds decreased to $57.0 million as of the end of 3Q24, from $65.0 million as of the end of 2Q24. This was an increase from $10.0 million as of the end of 3Q23.

• Total equity as of the end of 3Q24 was $55.5 million, compared to $53.5 million as of the end of 2Q24, and $55.5 million as of the end of 3Q23.

• Book value per share was $25.74 ($21.55 tangible) as of the end of 3Q24, compared to $24.81 ($20.66 tangible) as of the end of 2Q24, and $25.84 ($21.75 tangible) as of the end of 3Q23.

About Sturgis Bancorp, Inc.

Sturgis Bancorp, Inc. is the holding company for Sturgis Bank & Trust Company (the 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, Michigan. Oakleaf Financial Services offers a complete range of investment and financial-advisory services. Oakleaf 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 services.

Forward-Looking Statements

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 Sturgis Bancorp, Inc. (Bancorp), primarily with respect to future events and the future financial performance of 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 statements. 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 or future litigation and contingencies; trends in consumer behavior and ability to repay loans; and changes in 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.

Sturgis Bancorp, Inc. Contacts

• Jason J. Hyska, CEO & President, or Brian P. Hoggatt, CFO - [phone]

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

		Three Months Ended
		Sep 30, 2024 3Q24				Jun 30, 2024 2Q24				Sep 30, 2023 3Q23
Interest and dividend income
Loans (including fees)		$	10,819			$	10,524			$	9,898
Investment securities:
Taxable			906				804				545
Tax-exempt			39				39				70
Dividends			190				172				122
Total interest and dividend income			11,954				11,539				10,635
Interest expense
Deposits			3,686				3,777				3,062
Borrowed funds			1,233				922				293
Total interest expense			4,919				4,699				3,355
Net interest income			7,035				6,840				7,280
Credit loss expense (benefit)			(28	)			165				44
Net interest income, after credit loss expense			7,063				6,675				7,236
Noninterest income
Service charges on deposits and other fees			356				345				356
Interchange income			375				350				367
Investment brokerage commission income			646				641				635
Mortgage banking activitives			588				487				470
Trust fee income			97				166				42
Earnings on cash value of bank-owned life insurance			111				108				590
Gain on sale of real estate owned, net			47				26				36
Gain on termination of interest rate swap			-				-				793
Proportionate net income from unconsolidated subsidiaries			100				61				100
Other income			47				15				38
Total noninterest income			2,367				2,199				3,427
Noninterest expenses
Compensation and benefits			4,559				4,340				4,068
Occupancy and equipment			1,063				1,029				977
Interchange expenses			174				166				169
Data processing			318				287				273
Professional services			125				120				122
Advertising			223				213				183
FDIC premiums			176				197				185
Other expenses			933				945				943
Total noninterest expenses			7,571				7,297				6,920
Income (loss) before income tax expense (benefit)			1,859				1,577				3,743
Income tax expense (benefit)			316				280				618
Net income (loss)		$	1,543			$	1,297			$	3,125
Earnings (loss) per share		$	0.72			$	0.60			$	1.46
Dividends per share		$	0.17			$	0.17			$	0.17

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

		Nine Months Ended
		Sep 30, 2024 3Q24				Sep 30, 2023 3Q23
Interest and dividend income
Loans (including fees)		$	31,554			$	27,908
Investment securities:
Taxable			2,471				1,459
Tax-exempt			138				292
Dividends			509				339
Total interest and dividend income			34,672				29,998
Interest expense
Deposits			11,213				7,229
Borrowed funds			2,791				1,131
Total interest expense			14,004				8,360
Net interest income			20,668				21,638
Credit loss expense			4,800				277
Net interest income, after credit loss expense			15,868				21,361
Noninterest income
Service charges on deposits and other fees			1,036				1,011
Interchange income			1,033				1,021
Investment brokerage commission income			1,881				1,596
Mortgage banking activitives			1,561				1,063
Trust fee income			350				289
Earnings on cash value of bank-owned life insurance			325				787
Gain on sale of real estate owned, net			75				54
Gain on termination of interest rate swap			1,070				793
Proportionate net income from unconsolidated subsidiaries			274				157
Other income			74				178
Total noninterest income			7,679				6,949
Noninterest expenses
Compensation and benefits			13,468				12,047
Occupancy and equipment			3,157				2,746
Interchange expenses			505				470
Data processing			895				801
Professional services			415				348
Advertising			636				538
FDIC premiums			554				523
Other expenses			3,054				3,143
Total noninterest expenses			22,684				20,616
Income before income tax expense			863				7,694
Income tax expense (benefit)			(7	)			1,326
Net income		$	870			$	6,368
Earnings per share		$	0.40			$	2.97
Dividends per share		$	0.51			$	0.51

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

		Sep 30, 2024 3Q24				Jun 30, 2024 2Q24				Sep 30, 2023 3Q23
ASSETS
Cash and due from banks		$	12,642			$	9,518			$	11,768
Other short-term investments			11,199				11,612				12,823
Total cash and cash equivalents			23,841				21,130				24,591
Securities - available-for-sale			80,867				79,101				50,078
Securities - held-to-maturity			19,722				20,310				21,104
Federal Home Loan Bank stock			9,786				8,563				6,675
Loans held for sale			3,664				2,445				2,548
Loans, net of allowance for credit losses of $9,484; $9,502;
and $9,194 at 3Q24; 2Q24; and 3Q23, respectively			752,660				752,756				734,981
Premises and equipment, net			18,546				18,700				17,747
Goodwill			5,834				5,834				5,834
Mortgage servicing rights			3,198				3,110				2,946
Real estate owned			151				248				126
Bank-owned life insurance			16,158				16,047				15,732
Accrued interest receivable			3,504				3,439				3,046
Other assets			10,201				10,736				12,370
Total assets		$	948,132			$	942,419			$	897,778
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing		$	162,254			$	169,000			$	156,984
Interest-bearing			646,734				631,394				652,558
Total deposits			808,988				800,394				809,542
Federal Home Loan Bank advances and other borrowings			57,000				65,000				10,000
Subordinated debentures - $15,000 face amount (less
unamortized debt issuance costs of $102; $123; and $184
at 3Q24; 2Q24; and 3Q23, respectively)			14,898				14,877				14,816
Accrued interest payable			2,190				1,870				1,427
Other liabilities			9,540				6,821				6,491
Total liabilities			892,616				888,962				842,276
Stockholders' equity
Common stock - $1 par value: authorized - 9,000,000 shares;
issued and outstanding - 2,156,941 shares at 3Q24;
2,154,691 shares at 2Q24; and 2,147,941 shares at 3Q23			2,157				2,155				2,148
Additional paid-in capital			8,660				8,624				8,517
Retained earnings			51,801				50,624				52,744
Accumulated other comprehensive (loss)			(7,102	)			(7,946	)			(7,907	)
Total stockholders' equity			55,516				53,457				55,502
Total liabilities and stockholders' equity		$	948,132			$	942,419			$	897,778

SOURCE: Sturgis Bancorp, Inc.

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