Fentura Financial, Inc. Announces Third Quarter 2015 Results

  • Net Income exceeded prior year levels
  • Net interest income increased from balance sheet growth and loan trends compared to prior quarter and prior year
  • Book value increased 13.1% to $12.26 per share over prior year
  • Continued growth shown in assets and core deposits

FENTON, Mich., Oct. 30, 2015 (GLOBE NEWSWIRE) — Fentura Financial, Inc. (OTCQX:FETM) reported net income for the three months ended September 30, 2015 of $970,000 compared to earnings of $1.2 million reported for the second quarter of 2015 and $807,000 reported for the three months ended September 30, 2014.  On a pre-tax, pre-provision basis net income was $1.5 million in the current quarter compared to $1.8 million in the prior quarter and $1.2 million reported for the quarter ended September 30, 2014.  For the nine months ended September 30, 2015 the Company reported net income of $2.9 million compared to earnings of $2.3 million for the same period in 2014.

Ronald L. Justice, President and CEO said, “I continue to be pleased with Company operating results.  Deposit growth has allowed us to fund solid loan growth, creating strong earnings performance fueled by improving net interest and noninterest income year over year.  While economic forecasts vary, I feel we are positioned to continue efforts to enhance our core financial performance and expand our client base.”

Balance Sheet

Total assets increased $18.5 million or 4.5% at September 30, 2015 compared to June 30, 2015, ending the quarter at $434.4 million.  When compared to December 31, 2014, assets at September 30, 2015 increased $39.1 million or 9.9%.  Cash and due from banks totals increased 20.4%, to $32.5 million at September 30, 2015 compared to the $27.0 million reported at June 30, 2015.  Cash totals increases during the quarter were funded by the growth of deposits.    Loan balances increased $14.3 million or 4.2% during the same period.  Loans increased from continued efforts to grow the Bank’s client base. During the quarter, the Bank experienced growth principally in its consumer and mortgage. Loans totaled $358.1 million at September 30, 2015.  Year over year, loans increased $54.7 million or 18.0%.  The increase in loans resulted from the Company’s efforts to grow its loan portfolio with new and existing clients.  Additionally, the Company has continued to have success in offering customers variable rate loans which help to manage interest rate risk in changing interest rate environments.           

Deposit totals of $368.3 million, showed an increase of $17.2 million or 4.9% compared to the $351.1 million reported at June 30, 2015.  The increase was in interest bearing non-maturity deposits as the Company continued efforts to grow its client base.  We have seen an increase in municipal cash holdings based on our efforts to grow these relationships as well.  A portion of municipal deposits can have seasonal volatility, though no indications have been made that the balances will see material decreases in the near term. Additionally, commercial deposit account growth has been strong.  Year over year deposits increased $48.0 million or 15.0%.

Capital

Fentura Financial, Inc. and The State Bank continue to maintain capital in excess of levels considered well capitalized by regulatory agencies. The Bank’s regulatory capital ratios are detailed in the table that follows, and indicate the Bank’s strong Tier 1 Leverage Capital Ratio at September 30, 2015, December 31, 2014, and September 30, 2014.   As the table reflects, the Bank’s Tier 1 Leverage Capital ratio remains strong at September 30, 2015 due primarily to the improved level of capital from earnings. The decline in Tier 1 and Total Risk-Based Capital ratios year over year is primarily due to changes in the regulatory calculation of risk weighted assets along with the strong overall asset growth rate.

 

September 30, 
2015 

December 31, 
2014 

September 30, 
2014 

 

Regulatory
Well Capitalized

Tier 1 Leverage Capital Ratio    9.42 %   9.83 %   9.44 %   5.00 %
Tier 1 Risk-Based Capital Ratio    10.72     11.80     11.36     8.00  
Total Risk-Based Capital Ratio    11.92     13.05     12.62     10.00  


Credit Quality

The Company continued to benefit from credit quality improvement during the 3rd quarter of 2015.   At September 30, 2015 loan delinquencies to total loans were 0.11% compared to 0.12% and 0.14% at June 30, 2015 and September 30, 2014, respectively.  Substandard assets totaled $1.0 million at the end of the third quarter down from the $1.2 million and $4.1 million reported at June 30, 2015 and September 30, 2014, respectively.    These numbers tend to be leading indicators of potential losses in the loan portfolio and are monitored monthly. The allowance for loan losses is calculated on a quarterly basis and at the end of the current quarter the Company believes that the allowance for loan loss is adequate to absorb losses inherent in the portfolio.  Continued improvement in credit quality metrics could result in further releases of previously provided reserves for loan losses, as seen in the fourth quarter of 2014.

Net Interest Income

Net interest income of $3.7 million for the quarter ended September 30, 2015 reflects a 6.2% increase compared to the quarter ended June 30, 2015 and a 12.8% increase relative to the $3.3 million reported for the quarter ended September 30, 2014.    The increase in the current quarter compared to both prior periods is attributable to improved levels of interest income from loan growth.  While the portfolios showed increases over prior periods, the net interest margin declined during the period, largely due the Company’s strategy to offer competitively priced variable rate loans in order to more effectively manage the Company’s interest rate risk. Additionally, when compared to the prior year, increases in rates on time deposits and the use of FHLB borrowings are also related to the overall management of interest rate risk, primarily by lengthening the terms of our funding portfolios.

Noninterest Income

Noninterest income was $1.5 million for the quarter ended September 30, 2015 compared to $2.1 million for the second quarter of 2015 and $1.3 million for the third quarter of 2014.  The increase in the volume of mortgage loans sold in the secondary market and accordingly, the gain on sale from those loans (including the retention of mortgage servicing rights) contributed to the increase in the current period compared to the same period in 2014.  The noninterest income decline in the current quarter compared to the prior quarter is attributable to decline in gains on the sales of mortgage loans in the current quarter based on the volume of sold loans as well as a gain on an investment held by the holding company that was sold and the gain recognized in the second quarter of this year.  For the nine months ended September 30, 2015, noninterest income of $5.1 million represents an increase of $898,000 or 21.2% over the same period in 2014.  The substantial increase is attributable to the previously mentioned gain on the sales of mortgage loans along with increased revenue from wealth management activities. 

Noninterest Expense

The Company recorded $3.7 million of noninterest expense in the quarter ended September 30, 2015, an $89,000 decline of the level reported in second quarter of 2015 and an increase over the $3.4 million reported in the third quarter of 2014.  The current quarter decrease over the 2nd quarter of year is primarily attributable to a modest decline in other operating expense.  The current quarter increase of the same quarter in 2014 is primarily attributable to an increase in salary and benefits.  These expenses increased due to commissions paid associated with mortgage loan volumes and the strong gains on the sales of these loans in the secondary market.  For the nine months ended September 30, 2015, noninterest expense totaled $11.2 million an increase over the $10.3 million reported for the same period of 2014.  The increase is primarily attributable to salary and benefits expense.  Salary and benefits expense increased in 2015 based on general annual salary increases, the rising cost of providing medical benefits, and an accrual increase to the formal annual bonus program. 

Fentura Financial, Inc. is a bank holding company headquartered in Fenton, Michigan.  Its subsidiary bank, The State Bank, is also headquartered in Fenton with offices serving Fenton, Linden, Holly, Grand Blanc and Brighton. The Bank offers comprehensive financial services including commercial, consumer, mortgage, trust and financial planning services, and deposit products.  The Bank proudly provides services from its community offices in Genesee, Oakland and Livingston Counties and through on-line and mobile banking services.  More information about The State Bank is available at www.thestatebank.com.

CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve risks and uncertainties.  Forward-looking statements include, but are not limited to, statements concerning future growth in earning assets and net income.  Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. 



Fentura Financial Inc.            
 
  Sep-15 Jun-15 Mar-15 Dec-14 Sep-14  
  Unaudited Unaudited Unaudited   Unaudited  
Balance Sheet Highlights  
Cash and due from banks     32,517       27,003       32,947       19,522       14,887    
Investment securities     27,518       29,204       31,452       33,008       34,702    
Commercial loans     222,560       222,330       211,388       206,914       192,819    
Consumer loans     30,204       27,637       26,620       27,110       27,308    
Mortgage loans     105,353       93,825       89,302       85,945       83,305    
Gross loans     358,117       343,792       327,310       319,969       303,432    
ALLL     (4,439 )     (4,333 )     (4,453 )     (4,406 )     (4,782 )  
Other assets     20,655       20,155       26,394       27,175       27,113    
Total assets     434,368       415,821       413,650       395,268       375,352    
             
Non-interest deposits     104,131       110,930       99,390       91,738       85,573    
Interest bearing non-maturity deposits     182,865       157,860       162,719       154,499       162,972    
Time deposits     81,277       82,268       83,322       81,686       71,711    
Total deposits     368,273       351,058       345,431       327,923       320,256    
Borrowings     34,775       34,775       35,251       34,817       24,817    
Other liabilities     499       19       4,134       4,386       3,209    
Equity     30,821       29,969       28,834       28,142       27,070    
      434,368       415,821       413,650       395,268       375,352    
BALANCE SHEET RATIOS (unaudited)  
Gross Loans to Deposits   97.24 %   97.93 %   94.75 %   97.57 %   94.75 %  
Earning Assets to Total Assets   88.78 %   89.70 %   86.73 %   89.30 %   90.08 %  
Securities and Cash to Assets   13.82 %   13.52 %   15.57 %   13.29 %   13.21 %  
Deposits to Assets   84.78 %   84.43 %   83.51 %   82.96 %   85.32 %  
Loan Loss Reserve to Gross Loans   1.24 %   1.26 %   1.36 %   1.38 %   1.58 %  
Net Charge-Offs to Gross Loans   -0.01 %   0.03 %   -0.01 %   -0.02 %   0.02 %  
Leverage Ratio – The State Bank   9.42 %   9.55 %   9.07 %   9.83 %   9.44 %  
Book Value per Share $   12.26   $   11.94   $   11.49   $   11.24   $   10.84    
 
Income Statement Highlights – QTD Sep-15 Jun-15 Mar-15 Dec-14 Sep-14  
  Unaudited Unaudited Unaudited Unaudited Unaudited  
Interest income     4,232       4,005       3,933       3,951       3,709    
Interest expense     541       529       523       514       436    
Net interest income     3,691       3,476       3,410       3,437       3,273    
Provision for loan loss     –        –        –        (450 )     –     
Service charges on deposit accounts     202       207       194       232       232    
Gain on sale of mortgage loans     454       655       609       530       285    
Wealth management income     343       304       345       289       359    
Other non-interest income     469       886       460       443       429    
Salaries and benefits     2,186       2,194       2,237       2,116       1,921    
Occupancy and equipment     557       554       583       552       539    
Loan and collection     124       154       190       267       135    
Other operating expenses     821       875       767       825       762    
Net Income before tax     1,471       1,751       1,241       1,621       1,221    
Income Taxes     501       595       422       559       414    
Net Income     970       1,156       819       1,062       807    
             
INCOME STATEMENT RATIOS/DATA (unaudited)  
Basic earnings per share $   0.39   $   0.46   $   0.33   $   0.43   $   0.32    
Pre-tax pre-provision earnings     1,471       1,751       1,241       1,171       1,221    
Net Charge offs     (33 )     120       (47 )     (74 )     48    
Return on Equity (ROE)   8.81 %   10.78 %   11.40 %   15.26 %   12.00 %  
Return on Assets (ROA)   0.89 %   1.10 %   0.81 %   1.10 %   0.88 %  
Efficiency Ratio   71.49 %   68.32 %   75.27 %   76.25 %   73.33 %  
Average Bank Prime   3.25 %   3.25 %   3.25 %   3.25 %   3.25 %  
Average Earning Asset Yield   4.46 %   4.42 %   4.49 %   4.60 %   4.52 %  
Average Cost of Funds   0.75 %   0.77 %   0.77 %   0.78 %   0.69 %  
Spread   3.71 %   3.65 %   3.72 %   3.83 %   3.83 %  
Net impact of free funds   0.19 %   0.19 %   0.18 %   0.18 %   0.17 %  
Net Interest Margin   3.90 %   3.84 %   3.90 %   4.01 %   3.99 %  
 
Income Statement Highlights – YTD Sep-15 Sep-14   Dec-14 Dec-13  
  Unaudited Unaudited        
Interest income     12,171       10,704         14,655       12,481    
Interest expense     1,592       1,200         1,713       1,454    
Net interest income     10,579       9,504         12,942       11,027    
Provision for loan loss     –        –          (450 )     7    
Service charges on deposit accounts     603       650         882       897    
Gain on sale of mortgage loans     1,718       808         1,339       1,613    
Wealth management income     992       939         1,228       996    
Other non-interest income     1,816       1,834         2,276       2,077    
Salaries and benefits     6,617       5,790         7,906       6,925    
Occupancy and equipment     1,694       1,628         2,181       2,152    
Loan and collection     468       385         652       688    
Other operating expenses     2,464       2,464         3,289       3,471    
Net Income before tax     4,465       3,468         5,089       3,367    
Income Taxes     1,518       1,169         1,728       (5,118 )  
Net Income from continuing operations     2,947       2,299         3,361       8,485    
             
INCOME STATEMENT RATIOS/DATA (unaudited)          
Basic earnings per share $   1.17   $   0.92     $   1.35   $   3.44    
Pre-tax pre-provision earnings     4,465       3,468         4,639       3,374    
Net Charge offs     41       117         43       68    
Return on Equity (ROE)   10.21 %   12.24 %     13.03 %   46.78 %  
Return on Assets (ROA)   0.94 %   0.88 %     0.94 %   2.71 %  
Efficiency Ratio   71.57 %   74.75 %     75.15 %   79.69 %  
Average Bank Prime   3.25 %   3.25 %     3.25 %   3.25 %  
Average Earning Asset Yield   4.46 %   4.56 %     4.57 %   4.71 %  
Average Cost of Funds   0.77 %   0.67 %     0.70 %   0.69 %  
Spread   3.69 %   3.89 %     3.87 %   4.02 %  
Net impact of free funds   0.18 %   0.16 %     0.17 %   0.15 %  
Net Interest Margin   3.88 %   4.05 %     4.04 %   4.16 %  

 

 

CONTACT: Ronald L. Justice
President & CEO
Fentura Financial, Inc.
(810) 714-3902