STURGIS, Mich., April 23, 2018 (GLOBE NEWSWIRE) -- Sturgis Bancorp, Inc. (OTCQX:STBI) today announced net income of $756,000 for the first quarter of 2018.

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 banking centers in Sturgis, Bangor, 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 the first quarter of 2018:

• Net income increased 14% for the first quarter of 2018 to $756,000, compared to $662,000 for the first quarter of 2017, primarily due to higher net interest income.
  
• The Bank maintained strong capital ratios, exceeding “well-capitalized” requirements, with Tier 1 leverage capital at 8.05%.  Total capital at March 31, 2018 was 13.00% of risk-weighted assets.  The Bank's risk-weighted assets were $286.8 million at March 31, 2018.
  
• Total deposits increased 9.0% to $367.6 million, mostly in temporary municipal deposits.
  
• Allowance for loan losses was 1.07% of loans.

Three months ended March 31, 2018 vs. three months ended March 31, 2017 - Net income for the three months ended March 31, 2018 was $756,000, or $0.36 per share, compared to net income of $662,000, or $0.32 per share, for the three months ended March 31, 2017.  The tax equivalent net interest margin decreased slightly to 3.78% in the first three months of 2018 from 3.79% in the first three months of 2017. 

Net interest income increased to $3.4 million in 2018 from $3.2 million in 2017.  The growth was primarily due to loan interest income, which increased by $196,000 to $3.4 million.  Total interest income increased $259,000 to $3.9 million in 2018, and interest expense only increased $110,000 to $577,000 in 2018.

The Company provided $122,000 to the allowance for loan losses in the first three months of 2018, compared to ($135,000) in the same quarter of 2017.  The increase for 2018 was primarily due to growth in total loans.  Net charge-offs were ($2,000) in 2018, compared to ($72,000) in 2017. 

Noninterest income was $1.3 million in the first quarter of 2018, compared to $1.1 million in the first quarter of 2017.  Service charges and other fees increased to $345,000 in 2018 from $260,000 in 2017, due to higher deposit account fee income.  Investment brokerage commission income increased to $391,000 in 2018 from $330,000 in 2017, due to successful transition to Raymond James from LPL and higher market values.  Mortgage banking income increased to $188,000 in 2018 from $124,000 in 2017, primarily due to reduced mortgage servicing rights impairment in 2018.

Noninterest expense was $3.7 million in 2018 and $3.6 million in 2017.  Salaries and employee benefits, the largest component of noninterest expense, increased only $27,000, or 1.2%. 

Total assets increased to $444.6 million at March 31, 2018 from $414.4 million at December 31, 2017, primarily in loans.  Loans increased $18.0 million from December 31, 2017, primarily in commercial real estate loans.

Noninterest-bearing deposits increased to $82.9 million at March 31, 2018 from $81.6 million at December 31, 2017.  Interest-bearing deposits increased to $284.7 million at March 31, 2018 from $255.5 million at December 31, 2017.  The increase in deposit accounts is typical for the first quarter of each year, as municipalities deposit property tax revenues.  Municipalities historically have either used or reinvested those funds elsewhere during the second quarter of the year, and Management expects that pattern to continue for 2018.  Brokered deposits increased $11.4 million in the first quarter of 2018, to $54.9 million at March 31, 2018.  The growth in deposits, including brokered deposits, funded the loan growth realized in the first quarter.

Total equity was $38.2 million at March 31, 2018, compared to $37.3 million at December 31, 2017.  In the first quarter of 2018, the regular quarterly dividend was increased from $0.12 to a record-high $0.14 per share.  Book value per share increased to $18.19 ($14.75 tangible) at March 31, 2018 from $17.78 ($14.35 tangible) at December 31, 2017. 

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.sturgisbank.com.

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

				Mar. 31,			Dec. 31,
				2018			2017
ASSETS
	Cash and due from banks			$	8,083		$	14,219
	Other short-term investments				26,438			10,293
		Total cash and cash equivalents			34,521			24,512
	Interest-earning deposits in banks				10,811			11,058
	Securities - available for sale				26,685			25,313
	Securities - held to maturity				35,388			35,578
	Federal Home Loan Bank stock, at cost				3,393			3,393
	Loans held for sale, at fair value				473			1,117
	Loans, net of allowance of $3,195 and $3,072				298,616			280,586
	Premises and equipment, net				9,128			8,985
	Goodwill				5,834			5,834
	Core deposit intangibles				190			203
	Originated mortgage servicing rights				1,199			1,160
	Real estate owned				350			453
	Bank-owned life insurance				10,323			10,261
	Accrued interest receivable				1,665			1,536
	Other assets				6,030			4,443
		Total assets		$	444,606		$	414,432
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
	Deposits
		Noninterest-bearing		$	82,875		$	81,641
		Interest-bearing			284,748			255,473
		Total deposits			367,623			337,114
	Federal Home Loan Bank advances and other borrowings				34,339			34,447
	Accrued interest payable				270			239
	Other liabilities				4,224			5,378
		Total liabilities			406,456			377,178
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 2,097,241 shares at March 31, 2018 and 2,094,741 at December 31, 2017				2,097			2,095
	Additional paid-in capital				7,554			7,514
	Retained earnings				27,814			27,351
	Accumulated other comprehensive loss				685			294
		Total stockholders' equity			38,150			37,254
		Total liabilities and stockholders' equity		$	444,606		$	414,432

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

			Three Months Ended March 31,
			2018				2017
Interest income
	Loans		$	3,360			$	3,164
	Investment securities:
		Taxable		238				214
		Tax-exempt		277				267
	Dividends			57				28
		Total interest income		3,932				3,673
Interest expense
	Deposits			376				162
	Borrowed funds			201				305
		Total interest expense		577				467
Net interest income				3,355				3,206
Provision (benefit) for loan losses				122				(135	)
Net interest income after provision (benefit) for loan losses				3,233				3,341
Noninterest income:
	Service charges and other fees			345				260
	Interchange income			180				182
	Investment brokerage commission income			391				330
	Mortgage banking activities			188				124
	Trust fee income			113				109
	Earnings on cash value of bank-owned life insurance			62				66
	(Loss) on sale of real estate owned			(2	)			(9	)
	Net gain on cash flow hedges			-				16
	Other income			28				22
		Total noninterest income		1,305				1,100
Noninterest expenses:
	Salaries and employee benefits			2,213				2,186
	Occupancy and equipment			432				445
	Interchange expenses			87				97
	Data processing			181				158
	Professional services			122				114
	Real estate owned expense			33				16
	Advertising			49				47
	FDIC premiums			60				47
	Other expenses			523				529
		Total noninterest expenses		3,700				3,639
Income before income tax expense				838				802
Income tax expense				82				140
Net income			$	756			$	662
Earnings per share			$	0.36			$	0.32
Dividends per share				0.14				0.12

OTHER FINANCIAL INFORMATION
(Amounts in thousands)

		Three Months Ended March 31,
		2018				2017
Sturgis Bank & Trust Company:
	Average noninterest-bearing deposits	$	80,717			$	68,191
	Average interest-bearing deposits		218,399				237,229
	Average total assets		427,943				401,276
	Total risk-weighted assets		286,803				249,541
Sturgis Bancorp:
	Average equity		37,807				35,005
	Average total assets		428,139				401,451
	Total risk-weighted assets		287,041				249,787
Financial ratios for Sturgis Bancorp:
	Return on average assets		0.72	%			0.67	%
	Return on average equity		8.11	%			8.10	%
	Net interest margin		3.61	%			3.62	%
	Tax equivalent net interest margin		3.78	%			3.79	%

Contacts:
Sturgis Bancorp -- Eric Eishen, President & CEO, or Brian P. Hoggatt, CFO -- P: 269 651-9345

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