STBI Sturgis Bancorp Inc (QX)

STURGIS, Mich., April 26 2011 /PRNewswire/ -- Sturgis Bancorp, Inc. (OTCBB: STBI) posted a $117,000 net loss for the first quarter of 2011, compared to net income of $253,000 for 2010, Eric L. Eishen, President and CEO, announced today.  The decrease was primarily due to the higher provisions for loan losses.

Key Highlights for the first three months of 2011:

• Bank reports that it continues to exceed "well-capitalized' requirements.
• Net income decreased to a loss of $117,000, or $0.06 per share.
• Provision for loan losses increased to $882,000 in 2011 from $590,000 in 2010.
• Mortgage banking activities increased 27.0% to $249,000.
• Total deposits increased 3.8% to $275.7 million.
• Noninterest bearing deposits increased 13.0% to $33.5 million
• No gain on sale of securities was realized in 2011, compared to $126,000 in the first three months of 2010.
• Allowance for loan losses increased to 2.57% of total loans from 2.50% at the end of 2010.
• Nonaccrual loans increased $4.1 million and delinquent loans decreased to 2.38% of total loans from 2.52% at December 31, 2010.

First Quarter of 2011 vs. 2010 – The net loss for the quarter ended March 31, 2011 was ($117,000), or ($0.06) per share, compared to net income of $253,000, or $0.13 per share, for the year-earlier quarter. Net interest income decreased $22,000. The tax-equivalent net interest margin for the quarters increased to 3.02% in 2011 from 2.96% in 2010.  Average interest-earning assets decreased to $330.3 million for the quarter ended March 31, 2011 from $339.9 million for the same quarter in 2010.

Net charge-offs for the first quarter of 2011 were $734,000, compared to $424,000 a year ago.  The Company provided $882,000 for loan losses in the first quarter of 2011, compared to $590,000 in 2010.  The provision for loan losses recognized changes in the market economic conditions, increasing the Bank's allowance for loan losses to 2.57% of total loans at March 31, 2011 from 2.50% at December 31, 2010.

Noninterest income was $1.1 million for the first quarter of 2011, compared to $1.3 million for 2010.   The primary component of this decrease was realized gains on sales of assets.  During the three months ended March 31, 2010, the Company recorded gains on sale of available-for-sale mortgage-backed securities of $126,000 and gains on sales of fixed assets of $109,000.  Mortgage banking activities increased 27.0% to $249,000.

Noninterest expense increased $29,000, primarily in professional fees and other expenses.  The Company permanently froze its defined benefit plan for employees in the first quarter of 2011.

Mr. Eishen said, "Provisions to the Allowance for Loan and Lease Losses resulted in our loss in 2010 and for the first quarter of 2011.  Management has spent the last 15 months analyzing the loan portfolio and addressing any difficulties we have encountered.  We believe this quarter represents the end to any significant allocations to the ALLL.  We now stand at 2.57% of loans.  This is a historic high and we believe that with the improving National economy and positive signs in our local market area, the worst of the last recession is now behind us.  As economic conditions improve, we also believe many of the credits we have analyzed and provided for in our ALLL will improve.  We are hopeful that a portion of the non-accrual loans will become healthy enough to return to an accrual basis.  Short-term this may not result in a reversal of these specific reserves, but long-term we do not expect troubled loans to remain at the current level.  Our general allowance has increased due to a few significant charged off loans that we expect were the exception in the loan portfolio.

"Management continues to control expenses and has made adjustments to maintain a healthy core interest and non-interest income stream.  With the positive interest rate gap, the Bank is positioned for increasing rates.  If the Federal Reserve makes significant interest rate increases, the Bank will realize an increase in the net interest margin.

"The Bank continues to be in the "Well Capitalized" category as defined by Regulators and did not participate in TARP or any other government capital assistance programs.  The Company has not issued any Trust Preferred indentures and has not recently been to the capital markets to raise capital.  We maintain a modest loan at the Holding Company.

"As we progress though 2011, we hope to see earnings return to more normal levels."

Total assets increased to $379.6 million at March 31, 2011 from $370.0 million at December 31, 2010, primarily in short-term investments.  Loans decreased $2.2 million for the quarter.

Delinquent loans changed from December 31, 2010, as follows:

Noninterest-bearing deposits increased to $33.5 million at March 31, 2011 from $29.6 million at December 31, 2010.  Interest-bearing deposits also increased to $242.3 million at March 31, 2011 from $236.3 million at December 31, 2010.  Brokered certificates of deposit decreased $3.7 million to $22.0 million at March 31, 2011.  Brokered certificates of deposit are used as an alternative to Federal Home Loan Bank ("FHLB") advances, when the total interest cost is lower.  

In the quarter ended March 31, 2011, the Company paid cash dividends of $0.01 per common share, totaling $20,000. Total equity was $23.1 million at March 31, 2011, compared to $23.3 million at December 31, 2010.  Book value per share decreased to $11.47 at March 31, 2011 from $11.56 at December 31, 2010.  

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 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.

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.

SOURCE Sturgis Bancorp, Inc.