STURGIS, Mich., Nov 06, 2009 /PRNewswire-FirstCall via COMTEX/ ----Sturgis Bancorp, Inc. (OTC Bulletin Board: STBI) posted a 36.1% earnings decrease for the first nine months of 2009, compared to 2008, Eric L. Eishen, President and CEO, announced today.

Key Highlights for the first nine months of 2009:

   --  Bank reports profits and continues to exceed "well-capitalized"
   requirements.
   --  Net income decreased 36.1% to $1,114,000, or $0.55 per share.
   --  Net income decreased 36.1% to $1,114,000, or $0.55 per share.
   --  Mortgage banking activities increased 43.2% to $931,000.
   --  Total deposits increased 9.9% to $260.9 million.
   --  Realized gain on sale of securities was $1.2 million.
   --  Secured liabilities of the Bank, comprised of Federal Home Loan Bank
   advances and repurchase agreements, were reduced $31.3 million, or
   26.8%.
   --  Sturgis Bank & Trust Company's regulatory capital ratios were enhanced
   with additional capital infusion from Sturgis Bancorp.
   --  Allowance for loan losses increased to 1.39% of total loans from 1.01%
   at the end of 2008.
   --  TARP CPP funds of $7.2 million were preliminarily approved by the U.S.
   Treasury - In April 2009, the Company rejected Treasury's offer.
   
   --  Nonaccrual loans increased $2.9 million and delinquent loans also
   increased to 1.74% of total loans from 1.59% at December 31, 2008.
   
   

First Nine Months of 2009 vs. 2008 - Net income for the nine months ended September 30, 2009 decreased 36.1% to $1,114,000, or $0.55 per share from $1,742,000, or $0.86 per share for 2008. Net interest income decreased $378,000, primarily due to the lower tax-equivalent net interest margin of 2.80% in 2009 from 3.13% in 2008. Average interest-earning assets increased to $353.5 million for the nine months ended September 30, 2009 from $330.0 million for the same period in 2008.

Net charge-offs for the first nine months of 2009 were $702,000, compared to $107,000 a year ago. The Company provided $1.8 million for loan losses in the first nine months of 2009, compared to $268,000 in 2008. The increase in provision for loan losses recognizes the deterioration of economic market conditions, increasing the Bank's allowance for loan losses to 1.39% of total loans at September 30, 2009 from 1.00% at December 31, 2008.

Noninterest income was $4.6 million for the first nine months of 2009, compared to $3.6 million for same period in 2008. The primary component of this increase was $1.2 million of realized gain on sale of available-for-sale mortgage-backed securities. Mortgage banking activities also increased 43% to $931,000, primarily due to a decrease in mortgage rates during the nine months ended September 30, 2009. Commission income decreased 37% to $786,000, as the market value of brokerage accounts decreased.

Noninterest expense decreased $273,000, despite the FDIC special assessment of $182,000 paid in 2009. Total FDIC premiums, including the special assessment, increased $348,000 from the first nine months of 2008. Salaries and employee benefits decreased $711,000. Lower brokerage commission expense and increase in deferral of loan origination expenses contributed to the decline.

President and CEO Eishen stated, "The Michigan economy continues to struggle. We are fortunate that our market area continues to be slightly better than other regions within the State. We are hearing positive reports from our commercial clients and hopefully we will see improvements in employment. However, we are seeing more stress on consumers. We have made significant increases to our Allowance for Loan and Lease Losses thus far in 2009. We have also written down troubled loans when it is evident the borrower may not be able to service their obligations. It is troubling that the banking industry continues to receive mixed messages on capital and liquidity levels. Washington D.C. is telling bankers to lend and the Regulatory Agencies are indicating it is a time to further build capital."

Third Quarter of 2009 vs. 2008 - Net income for the quarter ended September 30, 2009 decreased 65.7% to $209,000, or $0.10 per share from $610,000, or $0.30 per share for the year-earlier quarter. Net interest income decreased $96,000, primarily due to the lower tax-equivalent net interest margin for the quarters to 2.90% in 2009 from 3.01% in 2008. Average interest-earning assets increased to $343.7 million for the quarter ended September 30, 2009 from $342.4 million for the same quarter in 2008.

Net charge-offs for the third quarter of 2009 were $442,000, compared to $6,000 a year ago. The Company provided $359,000 for loan losses in the third quarter of 2009, compared to $37,000 in 2008. The increase in provision for loan losses recognizes the deterioration of economic market conditions.

Noninterest income was $1.2 million for the third quarter of 2009, compared to $1.3 million in 2008. An additional $51,000 gain on sale of securities was realized in the third quarter of 2009. Mortgage banking activities increased $50,000. Commission income decreased 41.1% to $299,000.

Noninterest expense decreased $98,000, despite $58,000 paid to prepay a FHLB advance and increases in FDIC insurance premiums of $52,000 during the quarter. Salaries and employee benefits decreased by $209,000. Lower brokerage commission expense and increase in deferral of loan origination expenses contributed to the decline.

Total assets decreased to $375.0 million at September 30, 2009 from $383.4 million at December 31, 2008, primarily in securities available-for-sale. Loans increased $1.1 million during the first nine months of 2009.

Mr. Eishen also stated, "As with most banks in Michigan, we continue to focus on Asset Quality. The chart that follows gives a comparison in loan trends since the beginning of the year. Non accruals and real estate owned (REO) have increased, but past due accounts continue to be at historical levels, despite the deterioration of the economy. Unfortunately, we are not immune to the Michigan economy. Employment continues to be relatively stable in our main market area. Management is implementing plans to reduce REO properties and non-accrual loans."

Nonperforming assets increased from December 31, 2008, as follows:

   
   Percentage of
   Gross Loans
   Past due and still accruing:                    09/30/2009    12/31/2008
   Past due one month                            1.00%         1.07%
   Past due two months                           0.39%         0.38%
   Past due three or more months                 0.35%         0.14%
   Nonaccrual loans                                   2.14%         1.12%
   Real Estate Owned                                  0.81%         0.67%
   
   

Noninterest-bearing deposits increased to $25.9 million at September 30, 2009 from $25.7 million at December 31, 2008. Interest-bearing deposits also increased to $235.1 million at September 30, 2009 from $211.8 million at December 31, 2008. A majority of the increase, $17.3 million, was in transaction accounts. Brokered certificates of deposit decreased $3.1 million from December 31, 2008. Brokered certificates of deposit are used as an alternative to Federal Home Loan Bank ("FHLB") advances, when the total interest cost is lower. The increase in deposits allowed the Bank to also reduce FHLB advances and repurchase agreements by $25.8 million and $5.5 million, respectively.

In the nine months ended September 30, 2009, the Company paid cash dividends of $0.36 per common share, totaling $0.7 million. Total equity was $25.8 million at September 30, 2009 and at December 31, 2008. Book value per share increased to $12.79 at September 30, 2009 from $12.76 at December 31, 2008.

Also in the first nine months of 2009, Sturgis Bancorp borrowed $2.3 million to invest in the common stock of Sturgis Bank & Trust Company. This capital infusion, along with retained earnings, enhanced the regulatory capital ratios of the Bank, as follows:

   
   Sept. 30, 2009   December 31, 2008
   Total capital to risk-weighted assets      11.99%              11.02%
   Tier 1 capital to risk-weighted assets     10.74%               9.84%
   Tier 1 capital to adjusted total assets     7.02%               6.11%
   
   

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.

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.

(Financial statements follow)

   
   Consolidated Balance Sheets
   
   Sept. 30, 2009    Dec. 31, 2008
   --------------    -------------
   (In Thousands)
   Assets
   Cash and due from banks                           $11,037         $6,930
   Other short-term investments                        3,752              9
   -----            ---
   Total cash and cash equivalents                 14,789          6,939
   Interest-earning deposits in banks                  6,578          9,334
   Securities - Available for sale                    29,606         41,896
   Securities - Held-to-maturity                       8,267          8,777
   Federal Home Loan Bank stock, at cost               4,784          4,784
   Loans held for sale                                   161          1,578
   Loans, net                                        281,943        280,867
   Premises and equipment, net                         8,443          8,710
   Goodwill, net of accumulated amortization           5,109          5,109
   Originated mortgage servicing rights                1,321          1,409
   Real estate owned                                   2,316          1,913
   Bank owned life insurance                           8,321          8,072
   Accrued interest receivable                         1,891          2,286
   Investment in limited partnerships                    538            618
   Other assets                                          927          1,102
   ---          -----
   Total assets                            $374,994       $383,394
   ========       ========
   
   Liabilities and Stockholders' Equity
   Liabilities
   Deposits
   Noninterest-bearing                            $25,898        $25,710
   Interest bearing                               235,085        211,807
   -------        -------
   Total Deposits                            260,983        237,517
   Federal Home Loan Bank advances                  60,500         86,287
   Repurchase agreements                            25,000         30,500
   Accrued interest payable                            685            868
   Other liabilities                                 2,022          2,472
   -----          -----
   Total liabilities                        349,190        357,644
   
   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
   at September 30, 2009 and
   December 31, 2008                               2,017          2,017
   Additional paid-in capital                        6,872          6,872
   Accumulated other comprehensive
   income (loss)                                       58            391
   Retained earnings                                16,857         16,470
   ------         ------
   Total stockholders' equity                25,804         25,750
   ------         ------
   Total liabilities and
   stockholders' equity                   $374,994       $383,394
   ========       ========
   
   

   
   Consolidated Statements of Income
   
   Nine Months Ended September 30,
   2009            2008
   Interest income                                    (In Thousands)
   Loans                                        $11,623         $13,591
   Investment securities:
   Taxable                                   1,465           1,584
   Tax-exempt                                   41              40
   Dividends                                        126             219
   ---             ---
   Total interest income                    13,255          15,434
   Interest expense
   Deposits                                       3,202           4,472
   Borrowed funds                                 2,735           3,266
   -----           -----
   Total interest expense                    5,937           7,738
   -----           -----
   Net interest income                            7,318           7,696
   Provision for loan losses                           1,840             268
   -----             ---
   Net interest income - After
   provision for loan losses                     5,478           7,428
   Noninterest income:
   Service charges and other fees                 1,178           1,176
   Investment brokerage commission income           786           1,245
   Mortgage banking activities                      931             650
   Trust fee income                                 235             308
   Increase in value of bank owned life
   insurance                                       249             241
   Gain on sale of securities                     1,172               -
   Other income                                      14              14
   --              --
   Total noninterest income                  4,565           3,634
   Noninterest expenses:
   Salaries and employee benefits                 4,722           5,433
   Occupancy and equipment                        1,146           1,048
   Data processing                                  574             615
   Professional services                            243             263
   Real estate owned expense                        296             157
   Advertising                                       91             141
   FDIC insurance premium                           473             125
   Other                                          1,050           1,086
   -----           -----
   Total noninterest expenses                8,595           8,868
   -----           -----
   
   Income - Before income tax expense        1,448           2,194
   Provision for federal income tax                  334             452
   ---             ---
   Net income                               $1,114          $1,742
   ======          ======
   
   Earnings per share                                  $0.55           $0.86
   Dividends declared per share                        $0.36           $0.36
   Return on average equity                             5.77%           9.21%
   Return on average assets                             0.38%           0.63%
   Net interest margin (tax equivalent)                 2.80%           3.13%
   
   

   
   Consolidated Statements of Income
   
   Three Months Ended
   September 30,
   2009      2008
   Interest income                                   (In Thousands)
   Loans                                          $3,853    $4,354
   Investment securities:
   Taxable                                      428       684
   Tax-exempt                                    17         8
   Dividends                                          46        69
   ---       ---
   Total interest income                      4,344     5,115
   Interest expense
   Deposits                                        1,021     1,437
   Borrowed funds                                    842     1,101
   ---     -----
   Total interest expense                     1,863     2,538
   -----     -----
   Net interest income                             2,481     2,577
   Provision for loan losses                              359        37
   ---        --
   Net interest income - After provision
   for loan losses                                2,122     2,540
   Noninterest income:
   Service charges and other fees                    376       395
   Investment brokerage commission
   income                                           299       508
   Mortgage banking activities                       273       223
   Trust fee income                                   76        92
   Increase in value of bank owned life
   insurance                                         84        80
   Gain on sale of securities                         51         -
   Other income                                       55       (18)
   ---       ---
   Total noninterest income                   1,214     1,280
   Noninterest expenses:
   Salaries and employee benefits                  1,603     1,812
   Occupancy and equipment                           381       368
   Data processing                                   197       215
   Professional services                              80       100
   Real estate owned expense                         121        56
   Advertising                                        30        62
   FDIC insurance premium                             96        44
   Other                                             447       396
   ---       ---
   Total noninterest expenses                 2,955     3,053
   -----     -----
   
   Income - Before income tax expense           381       767
   Provision for federal income tax                   172       157
   ---       ---
   Net income                                  $209      $610
   ====      ====
   
   Earnings per share                                   $0.10     $0.30
   Dividends declared per share                         $0.12     $0.12
   Return on average equity                              3.22%     9.87%
   Return on average assets                              0.22%     0.64%
   Net interest margin (tax equivalent)                  2.90%     3.01%
   
   

SOURCE Sturgis Bancorp, Inc.

http://www.sturgisbank.com
   

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