STURGIS, MI / ACCESSWIRE / February 27, 2024 / Sturgis Bancorp, Inc. (OTCQX:STBI) today announced financial results for the fourth quarter and year ended 2023.
Sturgis Bancorp (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 services.
Key Highlights:
Net loss for the fourth quarter 2023 was $(350,000).
Net income for 2023 was $6.0 million, compared to $6.6 million for 2022.
Credit quality remains strong with 98.60% of loans performing according to loan agreements. Allowance for credit losses was 1.36% of loans on December 31, 2023, compared to 1.01% on December 31, 2022. Net charge-offs (recoveries) were $(167,000) in 2023, compared to $(110,000) in 2022.
The Bank maintained strong capital ratios, exceeding "well-capitalized" requirements, with Tier 1 leverage capital at 8.05%.
Sales of residential mortgages generated $420,000 of noninterest income in the fourth quarter of 2023, compared to noninterest income of $236,000 in the fourth quarter of 2022. Sales of residential mortgages generated $1.5 million of noninterest income in 2023, compared to noninterest income of $1.4 million in 2022.
Total assets increased 6.3% to $919.5 million during 2023.
Net loans increased 5.7% to $739.5 million during 2023, including a $44.9 million increase in residential mortgages.
Total deposits increased 11.0% to $798.9 million during 2023.
Bancorp CEO, Jason J. Hyska stated, "The fourth quarter of 2023 showed a loss for Bancorp. Bancorp had one large commercial relationship that elevated nonaccrual loans and required a large allowance for credit loss. However, overall credit quality remains good, and Bancorp expects a full restoration of the relationship in 2024. Bancorp also realized some one-time compensation expenses in the fourth quarter of 2023 associated with the retirement of the former President and CEO. Overall, the franchise value of the Bank continues to expand, primarily in our Western Michigan markets of Berrien and Van Buren Counties, driven by a team of well-seasoned bankers and strong community advisory boards. The Bank also welcomed Jon Werme, a new Market President for our Kalamazoo market. The Bank continues to maintain strong capital ratios exceeding "well-capitalized" requirements. The Bank expects modest net interest margin compression as deposit rates increase. Mortgage banking activities and other components of noninterest income contribute positively to net income diversification. Fee income 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."
Three months ended December 31, 2023, vs. three months ended December 31, 2022- Net loss for the three months ended December 31, 2023, was $(350,000), or $(0.16) per share, compared to net income of $1,865,000, or $0.87 per share, for the same period of the prior year. The tax equivalent net interest margin decreased to 3.28% in the fourth quarter of 2023 from 3.60% in the fourth quarter of 2022.
Net interest income decreased to $6.9 million in the fourth quarter of 2023 from $7.1 million in the fourth quarter of 2022. The decline was primarily due to interest expense, which increased $2.2 million to $3.9 million. Total interest and dividend income increased $2.0 million to $10.8 million.
The Bank provided $993,000 to the allowance for credit losses in the fourth quarter of 2023, compared to no provision in the fourth quarter of 2022. Net charge-offs (recoveries) were $63,000 in the fourth quarter of 2023, compared to $(10,000) in the fourth quarter of 2022. Credit quality remains strong with 98.60% of loans performing in accordance with loan terms.
Noninterest income was $2.0 million in the fourth quarter of 2023, compared to $1.6 million in the same period of the prior year. Brokerage commissions, the largest component of noninterest income, increased $171,000. Noninterest income from mortgage banking activities increased $184,000 to $420,000.
Noninterest expense was $8.4 million in the fourth quarter of 2023, compared to $6.4 million in the fourth quarter of 2022. Compensation and benefits, the largest component of noninterest expenses, increased $1.6 million, with most of this increase due to one-time expenses associated with the retirement of the former President and CEO.
Year ended December 31, 2023, vs. year ended December 31, 2022- Net income for 2023 was $6.0 million, or $2.81 per share, compared to net income of $6.6 million, or $3.10 per share, for 2022. The tax equivalent net interest margin increased to 3.48% in 2023, from 3.30% in 2022.
Net interest income increased to $28.5 million in 2023 from $24.4 million in 2022. The growth was primarily in loan interest income, which increased $11.4 million to $38.0 million. Total interest and dividend income increased $11.9 million to $40.8 million, while interest expense increased $7.8 million to $12.3 million.
The Bank provided $1.3 million to the allowance for credit losses in 2023, compared to no provision for 2022. Net charge-offs (recoveries) were $(167,000) in 2023, compared to $(110,000) in 2022.
Noninterest income was $8.9 million in 2023, compared to $7.0 million in 2022. Most of the increase in noninterest income was due to one-time events: $793,000 gain on termination of interest rate swap; and $488,000 death benefit on bank-owned life insurance. Brokerage commissions, the largest component of noninterest income, increased $322,000 to $2.2 million.
Noninterest expense was $29.0 million in 2023, compared to $23.5 million in 2022. Compensation and benefits, the largest component of noninterest expenses, increased $3.0 million, with a large portion of this increase due to one-time expenses associated with the retirement of the former President and CEO in the fourth quarter.
Balance Sheet - Total assets increased to $919.5 million on December 31, 2023, from $864.8 million on December 31, 2022, primarily in loans. In the year ended December 31, 2023, loans increased $40.0 million, to $739.5 million, including an increase of $44.9 million in residential mortgages.
Interest-bearing deposits increased to $639.0 million on December 31, 2023, from $556.5 million on December 31, 2022. Noninterest-bearing deposit accounts decreased $3.1 million to $159.9 million. Brokered deposits, a component of interest-bearing deposits, increased $24.6 million in 2023, while borrowed funds decreased $31.0 million.
Total equity was $55.8 million on December 31, 2023, compared to $52.5 million on December 31, 2022. The day-one CECL ACL reduction adjustment to equity was $1,552,000 ($1,964,000 pre-tax) and partially offset retained earnings growth from net income. Dividends paid in 2023 were $0.68 ($0.17 each quarter) per share. Book value per share was $25.94 ($21.84 tangible) as of December 31, 2023.
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.
Sturgis Bancorp, Inc. Contacts: Jason J. Hyska, CEO, or Brian P. Hoggatt, CFO - (269) 651-9345
CONSOLIDATED BALANCE SHEETS (Unaudited - Amounts in thousands, except share and per share data)
December 31,
December 31,
2023
2022
ASSETS
Cash and due from banks
$
10,243
$
14,008
Other short-term investments
29,766
977
Total cash and cash equivalents
40,009
14,985
Securities - available for sale
52,658
63,159
Securities - held to maturity
20,866
22,070
Federal Home Loan Bank stock
7,295
8,381
Loans held for sale
2,259
664
Loans, net of allowance for credit losses of $10,198 and $7,141
at December 31, 2023 and 2022, respectively
739,461
699,443
Premises and equipment, net
19,136
17,431
Goodwill
5,834
5,834
Mortgage servicing rights
2,979
2,967
Real estate owned
130
380
Bank-owned life insurance
15,832
15,988
Accrued interest receivable
3,099
2,691
Other assets
9,914
10,812
Total assets
$
919,472
$
864,805
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Deposits
Noninterest-bearing
$
159,899
$
162,978
Interest-bearing
639,039
556,538
Total deposits
798,938
719,516
Federal Home Loan Bank advances and other borrowings
40,000
71,000
Subordinated debentures - $15,000 face amount (less unamortized
debt issuance costs of $164 and $245 at December 31, 2023
and 2022)
14,836
14,755
Accrued interest payable
1,654
760
Other liabilities
8,276
6,226
Total liabilities
863,704
812,257
Stockholders' equity
Common stock - $1 par value: authorized - 9,000,000 shares;
issued and outstanding - 2,150,191 shares at December 31, 2023
and 2,141,191 shares at December 31, 2022
2,150
2,141
Additional paid-in capital
8,556
8,387
Retained earnings
52,029
48,990
Accumulated other comprehensive (loss)
(6,967
)
(6,970
)
Total stockholders' equity
55,768
52,548
Total liabilities and stockholders' equity
$
919,472
$
864,805
CONSOLIDATED STATEMENTS OF INCOME (Unaudited - Amounts in thousands, except share and per share data)
Three Months Ended
December 31,
2023
2022
Interest and dividend income
Loans (including fees)
$
10,056
$
8,180
Investment securities:
Taxable
506
398
Tax-exempt
69
124
Dividends
139
76
Total interest and dividend income
10,770
8,778
Interest expense
Deposits
3,496
1,073
Borrowed funds
410
623
Total interest expense
3,906
1,696
Net interest income
6,864
7,082
Credit loss expense
993
-
Net interest income, after credit loss expense
5,871
7,082
Noninterest income
Service charges on deposits and other fees
345
317
Interchange income
328
326
Investment brokerage commission income
606
435
Mortgage banking activities
420
236
Trust fee income
76
87
Earnings on cash value of bank-owned life insurance
100
100
Gain on sale of real estate owned, net
2
1
Proportionate net income from unconsolidated subsidiaries
67
109
Other income
14
20
Total noninterest income
1,958
1,631
Noninterest expenses
Compensation and benefits
5,412
3,796
Occupancy and equipment
992
893
Interchange expenses
179
152
Data processing
187
239
Professional services
177
100
Advertising
185
123
FDIC premiums
152
108
Other expenses
1,082
1,025
Total noninterest expenses
8,366
6,436
(Loss) income before income tax (benefit) expense
(537
)
2,277
Income tax (benefit) expense
(187
)
412
Net (loss) income
$
(350
)
$
1,865
(Loss) earnings per share
$
(0.16
)
$
0.87
Dividends per share
$
0.17
$
0.17
CONSOLIDATED STATEMENTS OF INCOME (Unaudited - Amounts in thousands, except share and per share data)
Year Ended
December 31,
2023
2022
Interest and dividend income
Loans (including fees)
$
37,964
$
26,548
Investment securities:
Taxable
1,965
1,582
Tax-exempt
361
500
Dividends
479
281
Total interest and dividend income
40,769
28,911
Interest expense
Deposits
10,725
2,652
Borrowed funds
1,542
1,835
Total interest expense
12,267
4,487
Net interest income
28,502
24,424
Credit loss expense
1,269
-
Net interest income, after credit loss expense
27,233
24,424
Noninterest income
Service charges on deposits and other fees
1,356
1,253
Interchange income
1,349
1,286
Investment brokerage commission income
2,203
1,881
Mortgage banking activities
1,484
1,389
Trust fee income
365
411
Earnings on cash value of bank-owned life insurance
887
390
Gain on sale of real estate owned, net
56
6
Gain on termination of interest rate swap
793
-
Proportionate net income from unconsolidated subsidiaries
224
352
Other income
190
81
Total noninterest income
8,907
7,049
Noninterest expenses
Compensation and benefits
17,459
14,450
Occupancy and equipment
3,739
3,139
Interchange expenses
650
578
Data processing
988
490
Professional services
525
348
Advertising
723
525
FDIC premiums
675
364
Other expenses
4,224
3,585
Total noninterest expenses
28,983
23,479
Income before income tax expense
7,157
7,994
Income tax expense
1,139
1,374
Net income
$
6,018
$
6,620
Earnings per share
$
2.81
$
3.10
Dividends per share
$
0.68
$
0.68
OTHER FINANCIAL INFORMATION (Unaudited - Amounts in thousands)
