Sturgis Bancorp, Inc. (OTC Bulletin Board: STBI) posted a 27.8% earnings decrease for the first quarter of 2008, compared to 2007, 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.
First Quarter of 2008 vs. 2007 - Net income for the quarter ended March 31, 2008 decreased 27.8% to $651,000, or $0.30 per share, basic and diluted, from $902,000, or $0.38 per share, basic and diluted, for the year-earlier quarter. Net interest income decreased 7.8% to $2.6 million, from $2.8 million for the first quarter of 2007. The decrease chiefly reflects the decrease in net interest margin for the quarters to 3.25% in 2008 from 3.99% in 2007. Average interest-earning assets increased to $321.3 million for the quarter ended March 31, 2008 from $288.8 million for the same quarter in 2007.
Noninterest income was $1.3 million for the first quarter of 2008, compared to $1.2 million for 2007. The primary components of this increase were mortgage banking activities and other noninterest income. Mortgage banking activities increased $35,000 to $207,000, primarily due to a short term decrease in mortgage rates during the three months ended March 31, 2008. Other noninterest income included a $31,000 gain on sale of real estate owned in 2008, compared to $16,000 loss in 2007. Noninterest expense increased $270,000, primarily in salaries and employee benefits, which increased due to annual cost of living, benefit and other compensation changes. Net charge-offs for the first quarter of 2008 were $19,000, compared to $33,000 a year ago. The Company provided $82,000 for loan losses in the first quarter of 2008, compared to $53,000 in 2007.
Mr. Eishen said, "We had a profitable first quarter, even though it was down from the first quarter of 2007. Despite softness in the real estate market, strong competition and significant compression of the net interest margin, we have contained loan losses, especially in light of the current business cycle and Michigan economy. Even with the lower net income, the Company still is performing better than many of its Michigan peers. The Company is continuing to diligently investigate the loan portfolio for early indications of weakness in any segment."
Mr. Eishen added, "Loan activity remains strong, although the Company has resisted weakening our underwriting standards or stretching for yield as rates have fallen. Our lending team is working hard to add quality customers and market share. We are continuing our strategic focus on restructuring our balance sheet to reflect a more commercial bank structure and building fee income from our brokerage operations."
Total assets increased to $362.8 million at March 31, 2008 from $347.2 million at December 31, 2007, primarily in securities and short-term interest-earning deposits. Loans also increased $3.1 million for the quarter.
Noninterest-bearing deposits increased to $19.5 million at March 31, 2008 from $18.6 million at December 31, 2007. Interest-bearing deposits increased to $217.7 million at March 31, 2008 from $201.5 million at December 31, 2007. The increase is certificates of deposit. Brokered certificates of deposit are used as an alternative to Federal Home Loan Bank advances, when the total interest cost is lower.
In the quarter ended March 31, 2008, the Company redeemed 247,422 shares of common stock for $3.7 million and paid cash dividends of $0.12 per common share, totaling $0.3 million. Total equity was $24.3 million at March 31, 2008, compared to $27.7 million at December 31, 2007. Book value per share decreased to $12.08 at March 31, 2008 from $12.20 at December 31, 2007.
South Haven Expansion - Based on the Company's success in South Haven, Michigan, along with perceived growth opportunities for the South Haven community, the Bank opened its second full-service office in South Haven on April 16, 2008. The grand opening for the new South Haven branch office will be scheduled soon. -- Sturgis Bancorp, Inc.
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