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Fentura Financial, Inc Announces Second Quarter 2014 Earnings

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  • 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%

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

Source:Fentura Financial, Inc.