Fentura Financial, Inc Announces Second Quarter 2014 Earnings

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| Source: Fentura Financial, Inc.
  • Operating results represent the 9th straight quarter of profitability for the Company
  • Book value increased 49.3% to $10.51 per share over prior year
  • Loan growth continues to exceed expectations
  • Operating results continue to strengthen capital, and capital level is considered well capitalized by industry standards
  • Credit quality continues to improve, as loan delinquencies remain low and substandard assets improved significantly over the prior year.

FENTON, Mich., Aug. 6, 2014 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCBB:FETM) reported after tax net income for the three months ended June 30, 2014 of $935,000 compared to $557,000 reported for the first quarter of 2014 and $722,000 reported for the three months ended June 30, 2013. On a pretax basis, the Company earned $1.4 million during the quarter ended June 30, 2014 compared to the $722,000 reported for the quarter ended June 30, 2013.

"I am pleased with the Company's continued strong performance. Initiatives to grow our balance sheet and strengthen earnings have produced solid operating results," stated President and CEO, Ronald L. Justice.

Balance Sheet

Total assets increased $5.2 million or 1.5% at June 30, 2014 compared to March 31, 2014, ending the quarter at $351.9 million. This increase was funded primarily by deposit growth and the improvement of capital from operating results. Loan balances increased $10.8 million or 3.9% during the same period. Loans increased from continued efforts to grow the Bank's client base. During the quarter, the Bank experienced growth in its consumer, mortgage and commercial loan portfolios. Loans totaled $284.6 million at June 30, 2014. For the six months ended June 30, 2014 loans increased $20.7 million or 7.8% compared to the $264.0 million reported at December 31, 2013.

Deposit totals of $298.1 million at June 30, 2014, represent an increase of $4.0 million or 1.4% from the $294.1 million reported at March 31, 2014. The increase during the quarter occurred in both core accounts and certificates of deposits, primarily as the Company continued efforts to grow it's client base. For the six months ended June 30, 2014 deposits increased $14.8 million or 5.2% compared to the $283.3 million reported at December 31, 2013.

Capital

As previously reported, Fentura Financial, Inc. and The State Bank, have achieved their goal 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 continued strengthening of the Bank's Tier 1 Leverage Capital Ratio at June 30, 2014 associated with operating results compared to both December 31, 2013 and June 30, 2013.

  June 30, December 31, June 30, Regulatory
  2014 2013 2013 Well Capitalized
         
Tier 1 Leverage Capital Ratio 9.70% 9.49% 9.02% 5.00%
Tier 1 Risk-Based Capital Ratio 11.67 11.15 11.74 6.00
Total Risk-Based Capital Ratio 12.92 12.41 13.00 10.00

Credit Quality

Throughout the second quarter of 2014, the Company continued to benefit from improvement in credit quality. At June 30, 2014 loan delinquencies to total loans were 0.42% compared to 0.58% reported at June 30, 2013. Substandard assets totaled $5.1 million at June 30, 2014, down from $8.0 million reported at June 30, 2013. The low level of loan delinquencies and the improved level of substandard assets both support the lack of need for additional provisions for the allowance for loan losses during the quarter and for the six months ended June 30, 2014. 

Net Interest Income

Net interest income of $3.2 million for the quarter ended June 30, 2014 improved compared to the $3.1 million and the $2.7 million reported for both the first quarter of 2014 and the second quarter of 2013, respectively. The improvement in net interest income was primarily due to loan growth during the quarter. Interest expense increased modestly comparing the current period to the quarter ended March 31, 2014, primarily due to the increase in the amount of time deposits.  

Noninterest Income

Noninterest income was $1.8 million for the quarter ended June 30, 2014 compared to $1.1 million and $1.3 million reported for the first quarter of 2014 and for the second quarter of 2013, respectively. Growth of revenue from Wealth Management services, gains from the sale of mortgage loans in the secondary market, and a one time gain on an investment held by the holding company were the primary contributors to the increases in non interest income in the current period.          

Noninterest Expense

The Company recorded $3.6 million of noninterest expense in the quarter ended June 30, 2014, a 9.1% increase from the $3.3 million reported in the first quarter of the year and a 11.2% increase from the $3.2 million reported for the second quarter of 2013. Current period noninterest expense increases are primarily due to an increase in salary and benefit expense based on an accrual for a formal bonus program, a modest amount of losses from debit card fraud, and an accrual for interest refunds in connection with certain adjustable rate mortgages.   

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.          
           
  Jun-14 Mar-14 Dec-13 Sep-13 Jun-13
  Unaudited Unaudited   Unaudited Unaudited
Balance Sheet Highlights          
Cash and due from banks  11,276  16,061  12,856  23,647  21,109
Fed funds sold  --  --  --  --  --
Investment securities  33,768  35,478  36,574  38,147  41,379
Commercial loans  186,884  180,675  176,796  167,204  160,720
Consumer loans  26,399  25,470  25,336  24,907  24,462
Mortgage loans  71,348  67,696  61,846  49,554  43,182
Gross loans  284,631  273,841  263,978  241,665  228,364
ALLL  (4,830)  (4,916)  (4,900)  (4,790)  (4,699)
Other assets  27,061  26,224  26,717  19,816  20,817
Total assets  351,906  346,688  335,225  318,485  306,970
           
Non-interest deposits  84,604  83,378  82,585  81,195  84,366
Interest bearing non-maturity deposits  149,092  154,814  154,838  154,675  139,584
Time deposits  64,396  55,870  45,918  47,383  46,822
Total deposits  298,092  294,062  283,341  283,253  270,772
Fed funds purchased  --  --  --  --  --
Borrowings  24,817  24,855  24,855  14,855  14,855
Other liabilities  2,786  2,265  2,267  1,958  3,994
Equity  26,211  25,506  24,762  18,419  17,349
   351,906  346,688  335,225  318,485  306,970
BALANCE SHEET RATIOS (unaudited)          
Gross Loans to Deposits 95.48% 93.12% 93.17% 85.32% 84.34%
Earning Assets to Total Assets 90.48% 89.22% 89.66% 87.86% 87.87%
Securities and Cash to Assets 12.80% 14.87% 14.75% 19.40% 20.36%
Deposits to Assets 84.71% 84.82% 84.52% 88.94% 88.21%
Loan Loss Reserve to Gross Loans 1.70% 1.80% 1.86% 1.99% 2.07%
Net Charge-Offs to Gross Loans 0.03% -0.01% -0.04% -0.04% -0.01%
Leverage Ratio - The State Bank 9.70% 9.76% 9.49% 9.21% 9.02%
Book Value per Share  $ 10.51  $ 10.25  $ 9.97  $ 7.45  $ 7.04
           
Income Statement Highlights - QTD Jun-14 Mar-14 Dec-13 Sep-13 Jun-13
  Unaudited Unaudited Unaudited Unaudited Unaudited
Interest income  3,556  3,439  3,298  3,214  3,017
Interest expense  397  367  348  373  361
Net interest income  3,159  3,072  2,950  2,841  2,656
Provision for loan loss  --  --  --  --  --
Service charges on deposit accounts  212  205  230  231  215
Gain on sale of mortgage loans  410  114  186  419  433
Wealth management income  316  263  274  275  217
Other non-interest income  911  495  566  638  445
Salaries and benefits  2,007  1,863  1,745  1,788  1,736
Occupancy and equipment  542  547  527  561  531
Loan and collection  110  139  112  217  186
Other operating expenses  947  755  1,004  864  791
Net Income before tax  1,402  845  818  974  722
Income Taxes  467  288  (5,118)  --  --
Net Income  935  557  5,936  974  722
           
INCOME STATEMENT RATIOS/DATA (unaudited)        
Basic earnings per share  $ 0.38  $ 0.22  $ 2.40  $ 0.40  $ 0.29
Pre-tax pre-provision earnings  1,402  845  818  974  722
Net Charge offs  86  (16)  (108)  (92)  (17)
Return on Equity (ROE) 14.27% 10.04% 123.38% 21.92% 16.43%
Return on Assets (ROA) 1.08% 0.67% 7.43% 1.24% 0.94%
Efficiency Ratio 72.00% 79.63% 80.55% 77.88% 81.80%
Average Bank Prime 3.25% 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.56% 4.61% 4.60% 4.69% 4.70%
Average Cost of Funds 0.68% 0.64% 0.64% 0.71% 0.71%
Spread 3.88% 3.96% 3.96% 3.99% 3.99%
Net impact of free funds 0.17% 0.16% 0.16% 0.17% 0.15%
Net Interest Margin 4.05% 4.12% 4.12% 4.15% 4.14%
           
Income Statement Highlights - YTD Jun-14 Jun-13   Dec-13 Dec-12
  Unaudited Unaudited      
Interest income  6,995  5,970    12,481  12,193
Interest expense  764  732    1,454  1,945
Net interest income  6,231  5,238    11,027  10,248
Provision for loan loss  --   7    7  (508)
Service charges on deposit accounts  418  436    897  1,030
Gain on sale of mortgage loans  523  1,009    1,613  961
Wealth management income  580  448    996  1,071
Other non-interest income  1,405  871    2,077  1,775
Salaries and benefits  3,869  3,392    6,925  6,775
Occupancy and equipment  1,089  1,064    2,152  2,155
Loan and collection  250  359    688  944
Other operating expenses  1,702  1,603    3,470  4,382
Net Income before tax  2,247  1,577    3,368  1,337
Income Taxes  755  --     (5,118)  73
Net Income from continuing operations  1,492  1,577    8,486  1,264
           
INCOME STATEMENT RATIOS/DATA (unaudited)        
Basic earnings per share  $ 0.60  $ 0.64    $ 3.44  $ 0.52
Pre-tax pre-provision earnings  2,247  1,584    3,375  829
Net Charge offs  69  268    69  2,694
Return on Equity (ROE) 12.43% 17.89%   46.78% 7.26%
Return on Assets (ROA) 0.88% 1.03%   2.71% 0.42%
Efficiency Ratio 76.58% 81.32%   80.83% 94.64%
Average Bank Prime 3.25% 3.25%   3.25% 3.25%
Average Earning Asset Yield 4.58% 4.78%   4.71% 4.75%
Average Cost of Funds 0.66% 0.71%   0.69% 0.92%
Spread 3.92% 4.06%   4.02% 3.83%
Net impact of free funds 0.16% 0.13%   0.15% 0.17%
Net Interest Margin 4.09% 4.19%   4.16% 4.00%
Ronald L. Justice
President & CEO
Fentura Financial, Inc.
(810) 714-3902