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Sturgis Bancorp, Inc. Response to SEC (WNJ) 11-24-04

WARNER NORCROSS & JUDD LLP

ATTORNEYS AT LAW

900 Fifth Third Center

111 Lyon Street, N.W.

Grand Rapids, Michigan 49503-2487

Telephone 616.752.2000

Fax 616.752.2500

Gordon R. Lewis

616.752.2752

Direct Fax: 616.222.2752

glewis@wnj.com

November 24, 2004

Ms. Michele M. Anderson

Office of Mergers and Acquisitions

Division of Corporation Finance

Securities and Exchange Commission

Washington, D.C. 20549-0303

Re:

Sturgis Bancorp, Inc.

Schedule 13E-3 Filed September 29, 2004

File No. 5-78116

Preliminary Schedule 14A Filed September 29, 2004

File No. 0-49613

Ms. Anderson:

                    We represent Sturgis Bancorp, Inc. ("Sturgis" or the "Company") as counsel to assist the Company in the preparation of its Schedule 13E-3 and Preliminary Schedule 14A filed on September 29, 2004, and in responding to your letter dated October 29, 2004 (the "Letter"), in which you provided comments on Sturgis' Schedule 13E-3 and Preliminary Schedule 14A.

                    This letter provides the Company's response to your comments. For convenience of reference, each of the Commission's comments is set forth in full and Sturgis' response immediately follows. Page references indicated below refer to pages of the proxy statement and Schedule 13E-3, as noted. We have enclosed with this letter a copy of the revised proxy statement and Amendment No. 1 to the Schedule 13E-3. We have also enclosed marked copies of these documents to identify the changes we have made since the initial filing on September 29, 2004.

Ms. Michele M. Anderson

November 24, 2004

Page 2

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Reasons for the Merger.

Comment 1:

                    It appears that the expenses listed in this section do not correspond to those costs identified in the table at page 25. Please revise to eliminate any inconsistent disclosure. In addition, disclose the bases underlying the company's estimates for the significant increases in audit fees and for the certification of controls program for 2004, and clarify whether those estimates comprise the $143,000 one-time expenses mentioned in the second paragraph.

Response:

                    The expenses previously listed on page 5 corresponded with the costs identified on page 25. Page 5 referenced anticipated reporting company expenses in 2004 of approximately $290,000. This number could be found on page 25 by adding the estimated 2004 hard costs of nearly $260,000 with the reference immediately below the table of $30,000 in internal costs. However, we have modified the proxy statement to update the expense figures to reflect the shifting of anticipated Sarbanes-Oxley 404 costs from 2004 to 2005 because the Company now believes such costs will not be incurred in 2004, but would be incurred in 2005 if the Company does not succeed in going private.

                    The bases for the Company's estimates for the significant increases in audit fees and for the certification of controls program are oral cost estimates provided by the Company's accountants and internal management assessments. We have modified the proxy statement to include these additional disclosures. See page 29.

Comment 2:

                    Revise to elaborate on the "risks" posed by the passage of the Sarbanes-Oxley Act that the company is seeking to avoid by engaging in a going private transaction.

Response:

                    The use of the term "risks" in connection with the Sarbanes-Oxley Act was inappropriate. We have modified the proxy statement to remove the reference to risks posed by Sarbanes-Oxley. See pages 5 and 29.

Ms. Michele M. Anderson

November 24, 2004

Page 3

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Comment 3:

                    You reference the "disproportionately high burden" on management as a reason for taking the company private. To the extent practicable, quantify the amount of time management devotes to compliance with the federal securities laws.

Response:

                    The Company believes that compliance with securities laws involves a certain base level of management time, regardless of company size. Small companies therefore frequently bear a burden that is disproportionate to that borne by large companies in terms of management time because of the relatively small number of managers working in small companies. Sturgis' management has estimated the amount of time management devotes to compliance with federal securities laws. We have revised the proxy statement to reflect these estimates. See page 29.

Background of the Merger Proposal.

Comment 4:

                    We note that the board has considered taking the company private since late 2002. Revise to indicate why you seek to undertake the going private transaction at this time as opposed to other times in the past two years. See Item 1013(c) of Regulation M-A.

Response:

                    The Company has not been considering a going private transaction since 2002. The Company believes that active consideration of a going private transaction began at the Board of Directors meeting on July 19, 2004. As is accurately described in the "SPECIAL FACTORS - Background of the Merger Proposal" section, there was an increasing awareness by management of going private as a strategic alternative prior to the July 19, 2004 meeting. Prior to the July 19, 2004 meeting, management and directors began to collect information concerning going private transactions. The Company began to actively consider the going private transaction in July when management and the Executive Committee believed that they then had a sufficient knowledge base to begin to make a deliberate and informed decision and the board of directors authorized development of a proposal for later consideration and related expenditures. The proxy statement reflects this information. See pages 10 - 11.

Ms. Michele M. Anderson

November 24, 2004

Page 4

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Comment 5:

                    Given your disclosure that many applicable banking regulations already impose operational procedures required by the Sarbanes-Oxley Act, revise to specify the provisions of the Act that will significantly increase the company's costs.

Response:

                    Banks and bank holding companies are highly regulated and regularly examined by federal and state auditors. Some of these requirements are intended to achieve objectives similar to those of Sarbanes-Oxley. However, the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act impose additional requirements upon the Company that neither the Company nor the Bank are subjected to under banking regulations. The additional Sarbanes requirements include, among others, management certification and external auditor attestation of internal controls functions under Rule 404 of Sarbanes and the preparation and filing of reports with the SEC. We have modified the proxy statement to reflect these requirements. See page 5. The costs noted on page 29 of the proxy statement include only incremental costs related solely to expenses the Company incurs as a result of being a reporting company.

Comment 6:

                    Expand your discussion of the background of the merger to describe all meetings, negotiations, contacts, etc., among board members and management and provide the reader with more of a sense of the content of those discussions. Please revise to disclose the following, which is not intended to be an exhaustive list:

•

the nature of the "extensive discussions" that took place following Plante & Moran's presentation at the meeting on March 15, 2004;

•

the specific "positives and negatives" of remaining a public corporation offered by Mr. Eishen at the April 19, 2004 meeting; and

•

the substance of the discussions and the conclusions made at the meeting on June 21, 2004, pertaining to "the process, benefits and potential concerns" for proceeding with the transaction and the "positive and negative aspects."

Response:

                    We have expanded the proxy statement to include this information. See pages 8 - 9.

Ms. Michele M. Anderson

November 24, 2004

Page 5

______________________

Comment 7:

                    Each presentation, discussion, or report held with or presented by an outside party that is materially related to the Rule 13e-3 transaction, whether oral or written, is a separate report that requires a reasonably detailed description meeting the requirements of Item 1015 of Regulation M-A. Revise to summarize any and all presentations made by any outside parties during your evaluation of the transaction and file any written materials as exhibits to the Schedule 13E-3 pursuant to Item 9 of Schedule 13E-3 and Item 1016(c) of Regulation M-A, including the following:

•

Plante & Moran's report presented at the March 15, 2004 meeting;

•

the information received from the "various investment banking firms" mentioned on pages 8 and 9;

•

Crowe Chizek's presentation on compliance with Section 404 of the Sarbanes-Oxley Act; and

•

Donnelly Penman's valuation report of the fair market value of the company's common stock as of June 30, 2004. To the extent that the information contained in the preliminary valuation report is substantially similar to the disclosure already provided in the summary of Donnelly Penman's updated valuation, then provide a statement to this effect and summarize any differences in the information presented.

                    Alternatively, explain to us why you believe the items are not materially related to the Rule 13e-3 transaction.

Response:

                    Plante & Moran, PLLC provided two letters to the Audit Committee in advance of the March 15, 2004, meetings. These letters were not materially related to the going private transaction. They detailed services provided to the Company and the Bank during 2003 and proposed to be provided in 2004. A Plante & Moran representative did have discussions with the Audit Committee and the Board of Directors on March 15, 2004, that related to Rule 404 and costs associated with being a publicly traded company. These discussions are now summarized in the background section of the proxy statement. See pages 8 - 9. These discussions were informal and in question and answer format. No report, opinion or appraisal that is materially related to this going private transaction was prepared by Plante for the Company.

                    The literature received from investment banking firms and Crowe Chizek consisted of generic, general information that is believed to have been provided by these firms to numerous clients and prospective clients. Item 1015 of Regulation M-A uses the words "report,

Ms. Michele M. Anderson

November 24, 2004

Page 6

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opinion or appraisal". Implicit within these words is an analysis undertaken by the outside party that relates in a specific way to the issuer, its value, or its assets. This literature is generic and does not relate in a specific way to the Company. Therefore, the Company believes that this literature does not constitute a "report, opinion or appraisal" and does not fall within the scope of Item 1015.

                    The information contained in the preliminary valuation report, which valued the Company's common stock as of June 30, 2004, is substantially the same as the updated valuation report, which valued the Company's common stock as of September 20, 2004, except for updates resulting from the use of a later valuation date. We have modified the proxy statement to reflect valuation comparison information. See page 17.

Fairness; Recommendation of Board of Directors.

Comment 8:

                    Generally, your discussion of the factors listed in Item 1014 of Regulation M-A should only address substantive and procedural fairness to unaffiliated shareholders, and not all shareholders generally. See Item 1014(a) of Regulation M-A and Question and Answer No. 19 in Exchange Act Release No. 34-17719 and revise accordingly. In addition, revise to state whether the board believes the Rule 13e-3 transaction is substantively and procedurally fair to unaffiliated shareholders who will retain their interest in the company and to those who will be cashed out in the merger.

Response:

                    We have revised the proxy statement to address more directly the substantive and procedural fairness to unaffiliated Shareholders. See pages 3, 12 and 13. The proxy statement also now states that the board believes the Merger is substantively and procedurally fair to unaffiliated shareholders who will retain their interest in the Company and to those who will be cashed out in the Merger. See page 12.

Comment 9:

                    Include a statement as to whether SB Merger Company believes the Rule 13e-3 transaction to be fair to the company's unaffiliated security holders, including both the unaffiliated shareholders who will retain their shares and those who will receive cash, and an analysis of the material factors upon which it relied in reaching such a conclusion. See Item 1014 of Regulation M-A. Note that if SB Merger Company did not individually analyze the

Ms. Michele M. Anderson

November 24, 2004

Page 7

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factors in support of its fairness determination, it may expressly adopt the board's analysis as its own. Refer to Question and Answer No. 20 in Exchange Act Release No. 34-17719.

Response:

                    As a newly-formed company and wholly-owned subsidiary of the Company organized solely for the purpose of this transaction, SB Merger Company has not undertaken independent analyses relating to the Merger. Its directors and officers are directors and officers of the Company. SB Merger Company expressly adopts the board's analyses as its own. The amended proxy statement so states. See page 37.

Comment 10:

                    Revise the penultimate paragraph on page 18 to clarify why the board believes that liquidation value is not relevant to its fairness determination. Please note that your assertion that a liquidation is an unlikely alternative does not provide an adequate explanation for why liquidation value is not relevant. In this regard, please refer to Question and Answer No. 20 of Exchange Act Release No. 34-17719 (" . . . the absence of an intention to liquidate is not determinative of whether the discussion should address liquidation values.").

Response:

                    Liquidation value was not a factor in the Board's determination of purchase price or fairness. The proxy statement so states on page 14. The Board of Directors was advised by management and the Company's advisors that they were not aware of a single instance in which a solvent, profitable bank in the United States has ever been liquidated and the proxy statement so states. The board did not consider a liquidation analysis as a relevant factor because the liquidation of a solvent, profitable bank or discontinuance of a bank's operations is an extremely unlikely event. The Company believes that because substantially all of the assets on the Company's balance sheet are financial assets, book value (which the Company did consider) approximates liquidation value. The proxy statement so states on page 14. This assumption is validated by Note 15 ("Fair Value of Financial Instruments") to the Company's consolidated financial statements appearing in its Form 10-K annual report, which is expressly incorporated by reference in both documents.

Comment 11:

                    Revise your discussion of procedural fairness to clarify how the board reached a conclusion that the transaction is procedurally fair in the absence of the procedural safeguard set forth in Item 1014(c) of Regulation M-A. Currently, your discussion only references

Ms. Michele M. Anderson

November 24, 2004

Page 8

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approval by a majority of th