Sturgis Bancorp, Inc. (
Sturgis Bancorp is the holding company for Sturgis Bank & Trust Company (Bank), 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 11 banking centers in Sturgis, Bronson, Centreville, Climax, 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.
Key Highlights for 2012:
- Net income for 2012 increased to $1.9 million, or $0.92 per share, compared to net income of $501,000, or $0.25 per share, in 2011.
- The Bank further increased capital ratios, exceeding "well-capitalized" requirements and ending 2012 with Tier 1 capital at 8.82% and 12.48% of average assets and risk-weighted assets, respectively. Total capital at December 31, 2012 was 13.75% of risk-weighted assets.
- Net interest income decreased $137,000.
- Provision for loan losses decreased by $1.1 million to $545,000.
- Realized gain on sale of securities was $0, compared to $536,000 in 2011.
- Total deposits increased 0.1% to $235.0 million, including $7.3 million decrease in interest-bearing deposits.
- Brokered certificates of deposit and other jumbo certificates decreased by $1.6 million and $3.4 million, respectively.
- Loans charged off, net of recoveries, decreased to $1.3 million in 2012 from $2.4 million in 2011. The allowance for loan losses decreased to 2.02% of loans from 2.28% at the end of 2011.
Nonaccrual loans decreased to $7.2 million, or 2.83% of gross loans on December 31, 2012. Nonaccrual loans peaked in June 2011 at $14.5 million, and were reduced to $10.5 million at December 31, 2011.
President and CEO Eishen stated: "I am pleased to announce earnings for 2012. They are up significantly from the last few years and are returning to more normal levels. Credit quality is improving and the interest margin is stable. Mortgage banking activity has been a strong part of the Bank's historical earnings streams. Sturgis Bank & Trust Company and its wholly-owned subsidiary Oak Mortgage continue to dominate our home market in St. Joseph County Michigan. Since the Bank retains 100% of the mortgage servicing, we are building additional relationships while maintaining existing relationships in our market. This provides the opportunity to provide other financial services to our customers. Another wholly-owned subsidiary had a very successful year as well. Oakleaf Financial Services returned to more normal earnings levels, partially due to the positive performance of the stock market. Many of the accounts managed are fee based relationships and this provides a much more stable income stream to the Bank. The Bank has also continued to decrease its reliance on non-core funding sources, with consistent growth of core deposits. All of these factors have made your Bank more valuable at the end of 2012."
Year 2012 vs. 2011 - Net income for the year ended December 31, 2012 increased to $1.9 million, or $0.92 per share from net income of $501,000, or $0.25 per share, for 2011. Net interest income decreased 1.4% to $9.6 million, from $9.8 million for 2011. The decrease in net interest income is primarily due to the decrease in average earning assets to $276.4 million in 2012 from $307.0 million in 2011. The tax equivalent net interest margin increased to 3.52% in 2012 from 3.22% in 2011. The decrease in assets was used to fund planned reductions in deposit liabilities and borrowings, especially in the second half of 2011.
Noninterest income was $4.7 million for 2012, compared to $4.5 million for 2011. The Company realized no gains on sales of available-for-sale securities in 2012, compared to $536,000 in 2011. Mortgage banking activities increased $460,000 to $1.2 million, as proceeds from loan sales increased to $47.6 million from $24.4 million in 2011. Commission income from Oakleaf Financial Services, a Bank-owned subsidiary, increased $359,000 to $1.5 million in 2012.
Noninterest expense decreased $947,000 for 2012, compared to 2011. The largest component of noninterest expense is salaries and employee benefits, which decreased $406,000, or 6.1%, to $6.3 million in 2012. Real estate owned expense also decreased $259,000 to $745,000. The early extinguishment of repurchase agreements incurred a one-time prepayment penalty of $195,000 in 2011.
The Company provided $545,000 to the allowance for loan losses in 2012, compared to $1.6 million in 2011. Net charge-offs were $1.3 million in 2012, compared to $2.4 million in 2011. The net activity in the ALLL decreased the total allowance to 2.02% of gross loans at December 31, 2012, compared to 2.28% of gross loans at December 31, 2011.
Total assets increased to $317.0 million at December 31, 2012 from $314.3 million at December 31, 2011, primarily in interest-earning deposits in banks. Loans decreased $3.5 million from 2011. Closed-end residential mortgage loans increased, while net decreases were realized in home equity lines of credit, commercial and construction loans.
Noninterest-bearing deposits increased to $41.3 million at December 31, 2012 from $33.6 million at December 31, 2011. Interest-bearing deposits decreased to $193.7 million at December 31, 2012 from $201.0 million at December 31, 2011. The decrease in interest-bearing deposits includes $1.6 million in brokered deposits and $3.4 million in non-brokered certificates of deposit with balances of $100,000 and greater. Despite the decrease in balances, the number of checking accounts increased throughout 2012, as the Bank continues to expand its customer base.
The Company paid no cash dividends in 2012, compared to $0.03 per common share, totaling $60,000, in 2011. Total equity was $26.9 million at December 31, 2012, compared to $24.9 million at December 31, 2011. Book value per share increased to $13.21 at December 31, 2012 from $12.34 at December 31, 2011.