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-15Jun-15Mar-15Dec-14Sep-14 
 UnauditedUnauditedUnaudited 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 - QTDSep-15Jun-15Mar-15Dec-14Sep-14 
 UnauditedUnauditedUnauditedUnauditedUnaudited 
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 - YTDSep-15Sep-14 Dec-14Dec-13 
 UnauditedUnaudited    
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% 

 

 


            

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