STURGIS, Mich., Oct. 24 /PRNewswire-FirstCall/ -- Sturgis Bancorp,
Inc. (OTC:STBI) (BULLETIN BOARD: STBI) announced earnings of
$610,000 for the third quarter of 2008. The decrease from 2007 was
primarily due to lower interest margin, Eric L. Eishen, President
and CEO, announced today. 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. Third Quarter of
2008 vs. 2007 -- Net income for the quarter ended September 30,
2008 decreased to $610,000, or $0.30 per share, basic and diluted,
from $733,000, or $0.32 per share, basic and diluted, for the
year-earlier quarter. Net interest income decreased 11.5% to $2.6
million, from $2.9 million for the third quarter of 2008. The
decrease chiefly reflects the decrease in net interest margin for
the quarters to 3.01% in 2008 from 3.94% in 2007. Noninterest
income was $1.3 million for the third quarter of 2008 and 2007.
Commission income, trust fee income, and mortgage banking income
increased for the quarters. Noninterest expense increased $216,000,
including an increase in FDIC premiums, which is impacting the
entire industry, and a $42,000 loss on sale of securities. Net
charge-offs for the third quarter of 2008 were $6,000, compared to
net recoveries of $24,000 a year ago. The Company provided $37,000
for loan losses in the third quarter of 2008, compared to $276,000
in 2007. Mr. Eishen said, "A year ago, who could have imagined what
would happen in the stock market and the actions of our government?
Sturgis Bank & Trust Company is weathering the financial storm
well. Our loan delinquencies are down, compared to this time last
year. Our repossessed assets are down from year end 2007. As a
result, our loan loss provision is down for the first nine months
of 2008. Asset quality continues to be strong. We did not have
exposure to Freddie Mac or Fannie Mae stock holdings and we did not
participate in "sub-prime" lending. "Unfortunately, our earnings
are down for 2008. This primarily is due to compression of our
interest rate margin. The Federal Reserve rate cuts in 2008 have
negatively impacted our interest rate margin. As we finish the
year, it appears the Federal Reserve may cut rates further. This
will place additional pressure on the interest rate margin. We have
also witnessed irrational pricing in our market on deposits. There
are many reasons a bank may offer higher than market rates on
deposits. I will not attempt to explain them in this release, but
this irrational pricing has driven up costs and is impacting the
net interest margin of many banks. We continue to consider the
lowest cost sources to fund our assets and will continue to use
this strategy, when "in market" deposits exceed National rates.
"While I will not describe the loan activity as normal, we continue
to originate quality loans. As with many banks, we are carefully
examining new and existing relationships to detect weaknesses
early. We have also used the interest rate volatility to our
advantage, by purchasing Government guaranteed securities and
funding them with Repurchase Agreements. While this is not part of
our long-term business strategy, it has added to net income and
therefore earnings per share. This has also impacted our interest
margin, due to the low risk nature of this activity. As the economy
recovers and we find additional quality lending relationships, we
will be able to unwind this strategy and re-deploy our capital for
higher margin loans." First Nine Months of 2008 vs. 2007 -- Net
income for the nine months ended September 30, 2008 decreased to
$1.7 million, or $0.86 per share, basic and diluted, from $2.7
million, or $1.12 per share, basic and diluted, for 2007. Net
interest income decreased 10.9% to $7.7 million, from $8.6 million
for the first nine months of 2007. The decrease is primarily due to
the reduction in the tax equivalent net interest margin to 3.13% in
2008 from 3.98% in 2007. Average interest-earning assets increased
to $330.0 million in 2008 from $292.0 million in 2007. Noninterest
income was $3.6 million for the first nine months of 2008, compared
to $3.7 million for the first nine months of 2007. Service charges
and other fee income decreased $112,000, or 8.7%, to $1.2 million.
Income from mortgage banking activities increased $151,000, as
lower rates spurred mortgage refinance activity. Noninterest
expense increased $729,000, primarily in compensation and employee
benefits. Net charge-offs for the first nine months of 2008 were
$107,000, compared to $183,000 a year ago. The Company provided
$268,000 for loan losses in the first nine months of 2008, compared
to $389,000 in 2007. Total assets increased to $385.4 million at
September 30, 2008 from $347.2 million at December 31, 2007,
primarily in available for sale securities. Loans also increased
$9.1 million for the nine months ended September 30, 2008,
primarily in commercial real estate loans, which increased $4.3
million to $75.0 million at September 30, 2008. Noninterest-bearing
deposits increased to $26.0 million at September 30, 2008 from
$18.6 million at December 31, 2007. Interest-bearing deposits
increased to $219.7 million at September 30, 2008 from $201.5
million at December 31, 2007. The number of checking accounts has
increased every month in 2008, as the Bank continues to expand its
customer base. However the increase in interest-bearing deposits is
primarily in certificates of deposit. Brokered certificates of
deposit were $48.4 million at September 30, 2008, compared to $29.7
million at December 31, 2007. During the nine months ended
September 30, 2008, other certificates of deposit greater than
$100,000 decreased by $4.9 million to $21.7 million. In the nine
months ended September 30, 2008, the Company redeemed 253,243
shares of common stock for $3.8 million and paid cash dividends of
$0.36 per common share, totaling $730,000. Total equity was $24.9
million at September 30, 2008, compared to $27.7 million at
December 31, 2007. Book value per share increased to $12.36 at
September 30, 2008 from $12.20 at December 31, 2007. The Company
concluded its Stock Repurchase Plan on March 27, 2008 to preserve
capital. Under the Stock Repurchase Plan announced in October 2005,
the Company had repurchased 508,709 shares, about 20% of the common
stock outstanding at announcement. 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 Sept. 30, Dec. 31,
2008 2007 (In Thousands) Assets Cash and due from banks $8,645
$11,781 Other short-term investments 663 2,349 Total cash and cash
equivalents 9,308 14,130 Interest-earning deposits in banks 11,853
11,160 Securities - Available for sale 41,782 14,380 Securities -
Held-to-maturity 9,549 4,401 Federal Home Loan Bank stock, at cost
4,611 4,611 Loans held for sale 639 645 Loans, net 279,262 270,200
Premises and equipment, net 8,777 7,404 Goodwill, net of
accumulated amortization 5,109 5,109 Originated mortgage servicing
rights 1,384 1,367 Real estate owned 1,276 1,702 Bank owned life
insurance 7,989 7,748 Accrued interest receivable 2,310 2,313
Investment in limited partnerships 645 759 Other assets 900 1,273
Total assets $385,394 $347,202 Liabilities and Stockholders' Equity
Liabilities Deposits Noninterest-bearing $26,047 $18,598 Interest
bearing 219,704 201,524 Total Deposits 245,751 220,122 Federal Home
Loan Bank advances 81,160 83,000 Repurchase agreements 30,500
13,000 Accrued interest payable 900 1,150 Other liabilities 2,148
2,249 Total liabilities 360,459 319,521 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 and 2,268,607 shares at September 30, 2008 and December 31,
2007, respectively 2,017 2,269 Additional paid-in capital 6,872
10,377 Accumulated other comprehensive income (loss) (101) (100)
Retained earnings 16,147 15,135 Total stockholders' equity 24,935
27,681 Total liabilities and stockholders' equity $385,394 $347,202
Consolidated Statements of Income Three Months Ended September 30,
2008 2007 Interest income (In Thousands) Loans $4,354 $4,966
Investment securities: Taxable 684 497 Tax-exempt 8 26 Dividends 69
47 Total interest income 5,115 5,536 Interest expense Deposits
1,437 1,634 Borrowed funds 1,101 990 Total interest expense 2,538
2,624 Net interest income 2,577 2,912 Provision for loan losses 37
276 Net interest income - After provision for loan losses 2,540
2,636 Noninterest income: Service charges and other fees 395 435
Investment brokerage commission income 508 426 Mortgage banking
activities 223 165 Trust fee income 92 87 Increase in value of bank
owned life insurance 80 80 Other income (18) 57 Total noninterest
income 1,280 1,250 Noninterest expenses: Salaries and employee
benefits 1,812 1,725 Occupancy and equipment 368 354 Data
processing 215 165 Professional services 100 63 Real estate owned
expense 56 148 Advertising 62 54 Other 440 328 Total noninterest
expenses 3,053 2,837 Income - Before income tax expense 767 1,049
Provision for federal income tax 157 316 Net income $610 $733 Basic
earnings per share $0.30 $0.32 Diluted earnings per share $0.30
$0.32 Dividends declared per share $0.12 $0.12 Key Ratios: Return
on average equity 9.87 % 10.46 % Return on average assets 0.64 %
0.87 % Net interest margin (tax equivalent) 3.01 % 3.94 %
Efficiency ratio 79.15 % 68.16 % Nine Months Ended September 30,
2008 2007 Interest income Loans 13,591 14,483 Investment
securities: Taxable 1,584 1,494 Tax-exempt 40 82 Dividends 219 142
Total interest income 15,434 16,201 Interest expense Deposits 4,472
4,788 Borrowed funds 3,266 2,780 Total interest expense 7,738 7,568
Net interest income 7,696 8,633 Provision for loan losses 268 389
Net interest income - After provision for loan losses 7,428 8,244
Noninterest income: Service charges and other fees 1,176 1,288
Investment brokerage commission income 1,245 1,211 Mortgage banking
activities 650 499 Trust fee income 308 340 Increase in value of
bank owned life insurance 241 237 Other income 14 155 Total
noninterest income 3,634 3,730 Noninterest expenses: Salaries and
employee benefits 5,433 5,136 Occupancy and equipment 1,048 995
Data processing 615 505 Professional services 263 199 Real estate
owned expense 157 192 Advertising 141 136 Other 1,211 976 Total
noninterest expenses 8,868 8,139 Income - Before income tax expense
2,194 3,835 Provision for federal income tax 452 1,183 Net income
$1,742 $2,652 Basic earnings per share $0.86 $1.12 Diluted earnings
per share $0.86 $1.12 Dividends declared per share $0.36 $0.36 Key
Ratios: Return on average equity 9.21 % 12.77 % Return on average
assets 0.63 % 1.07 % Net interest margin (tax equivalent) 3.13 %
3.98 % Efficiency ratio 78.27 % 65.84 % 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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