Fentura Financial, Inc Announces Third Quarter 2014 Earnings

  • Strong operating results allowed for payment of the 2nd consecutive quarterly dividend
  • Book value increased 45.5% to $10.84 per share over prior year
  • Loans grew 6.6% during the quarter and continue to exceed budgeted growth
  • Operating results continue to strengthen capital, which is considered well capitalized by industry standards
  • Credit quality continues to improve, as loan delinquencies remain low and substandard assets decline significantly over the prior year

FENTON, Mich., Oct. 30, 2014 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCBB:FETM) reported after tax net income for the three months ended September 30, 2014 of $807,000 compared to $935,000 reported for the second quarter of 2014 and $974,000 reported for the three months ended September 30, 2013. On a pretax basis, the Company earned $1.2 million during the quarter ended September 30, 2014 compared to the $974,000 reported for the quarter ended September 30, 2013. Net income for the nine months ended September 30, 2014 on a pretax basis was $3.5 million compared to the $2.6 million reported for the same time period in 2013. Improved net income in 2014 is primarily attributable to an increase in net interest income resulting from loan growth. On an after tax basis the Company is reporting net income of $2.3 million for the nine months ended September 30, 2014.

"I am pleased with the Company's third quarter and year to date operating results. Net income is again, ahead of our budget forecast largely based on increasing net interest income from initiatives to grow our balance sheet", stated President and CEO, Ronald L. Justice.

Balance Sheet

Total assets increased $23.4 million, or 6.7% at September 30, 2014 compared to June 30, 2014, ending the quarter at $375.4 million. This increase was funded primarily by deposit growth and the improvement of capital from operating results. Loan balances increased $18.8 million, or 6.6% 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 $303.4 million at September 30, 2014. For the nine months ended September 30, 2014 loans increased $39.4 million, or 14.9% compared to the $264.0 million reported at December 31, 2013.

Deposit totals of $320.3 million at September 30, 2014, represent an increase of $22.2 million, or 7.4% from the $298.1 million reported at June 30, 2014. The increase during the quarter occurred in both core accounts and certificates of deposits, as the Company continued efforts to grow deposits from both existing and new clients. For the nine months ended September 30, 2014 deposits increased $36.9 million, or 13.0% 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 September 30, 2014 associated with operating results compared to September 30, 2013. Capital ratios declined modestly at September 30, 2014 compared to December 31, 2013 as we have continued to leverage the Bank's capital to enhance future earnings.

Sept. 30,
2014
December 31,
2013
Sept. 30,
2013
Regulatory
Well Capitalized
Tier 1 Leverage Capital Ratio 9.45% 10.00% 9.21% 5.00%
Tier 1 Risk-Based Capital Ratio 11.24 11.83 11.56 6.00
Total Risk-Based Capital Ratio 12.50 13.09 12.82 10.00

Credit Quality

Throughout the third quarter of 2014, the Company continued to benefit from improvement in credit quality. At September 30, 2014 loan delinquencies to total loans were 0.14% compared to 0.46% reported at September 30, 2013. Substandard assets totaled $4.1 million at September 30, 2014, down from $6.2 million reported at September 30, 2013. The low level of loan delinquencies and the improved level of substandard assets eliminated the need for additional provision for loan losses during the quarter and for the nine months ended September 30, 2014.

Net Interest Income

Net interest income of $3.3 million for the quarter ended September 30, 2014 improved compared to the $3.2 million and the $2.8 million reported for both the second quarter of 2014 and the third quarter of 2013, respectively. The improvement in net interest income was primarily due to loan growth during the quarter. Interest expense increased modestly for the same periods, primarily due to the increase in the amount of time deposits as a percentage of total funding.

Noninterest Income

Noninterest income was $1.3 million for the quarter ended September 30, 2014 compared to $1.8 million and $1.6 million reported for the second quarter of 2014 and for the third quarter of 2013, respectively. Noninterest income for the quarter ended September 30, 2014 was down due to a decline in the gains from the sale of mortgage loans in the secondary market based on the volume of closed loans and the one time gain on an investment held by the holding company recognized during the second quarter of 2014.

Noninterest Expense

The Company recorded $3.4 million of noninterest expense in the quarter ended September 30, 2014, a 6.9% decrease from the $3.6 million reported in the second quarter of the year and about the same as the $3.4 million reported for the third quarter of 2013. Current quarter noninterest expense improvements are primarily due to the nonrecurring expense items reported last quarter.

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-14 Jun-14 Mar-14 Dec-13 Sep-13
Unaudited Unaudited Unaudited Unaudited
Balance Sheet Highlights
Cash and due from banks 14,887 11,276 16,061 12,856 23,647
Investment securities 34,702 33,768 35,478 36,574 38,147
Commercial loans 192,819 186,884 180,675 176,796 167,204
Consumer loans 27,308 26,399 25,470 25,336 24,907
Mortgage loans 83,305 71,348 67,696 61,846 49,554
Gross loans 303,432 284,631 273,841 263,978 241,665
ALLL (4,782) (4,830) (4,916) (4,900) (4,790)
Other assets 27,113 27,062 26,224 26,717 19,816
Total assets 375,352 351,907 346,688 335,225 318,485
Non-interest deposits 85,573 84,604 83,378 82,585 81,195
Interest bearing non-maturity deposits 162,972 149,092 154,814 154,838 154,675
Time deposits 71,711 64,396 55,870 45,918 47,383
Total deposits 320,256 298,092 294,062 283,341 283,253
Borrowings 24,817 24,817 24,855 24,855 14,855
Other liabilities 3,209 2,786 2,265 2,267 1,958
Equity 27,070 26,212 25,506 24,762 18,419
375,352 351,907 346,688 335,225 318,485
BALANCE SHEET RATIOS (unaudited)
Gross Loans to Deposits 94.75% 95.48% 93.12% 93.17% 85.32%
Earning Assets to Total Assets 90.08% 90.48% 89.22% 89.66% 87.86%
Securities and Cash to Assets 13.21% 12.80% 14.87% 14.75% 19.40%
Deposits to Assets 85.32% 84.71% 84.82% 84.52% 88.94%
Loan Loss Reserve to Gross Loans 1.58% 1.70% 1.80% 1.86% 1.99%
Net Charge-Offs to Gross Loans 0.02% 0.03% -0.01% -0.04% -0.04%
Leverage Ratio - The State Bank 9.45% 9.71% 9.76% 10.00% 9.21%
Book Value per Share $ 10.84 $ 10.51 $ 10.25 $ 9.97 $ 7.45
Income Statement Highlights - QTD Sep-14 Jun-14 Mar-14 Dec-13 Sep-13
Unaudited Unaudited Unaudited Unaudited Unaudited
Interest income 3,709 3,556 3,439 3,298 3,214
Interest expense 436 397 367 348 373
Net interest income 3,273 3,159 3,072 2,950 2,841
Provision for loan loss -- -- -- -- --
Service charges on deposit accounts 232 212 205 230 231
Gain on sale of mortgage loans 285 410 114 186 419
Wealth management income 359 316 263 274 275
Other non-interest income 429 911 495 566 638
Salaries and benefits 1,921 2,007 1,863 1,745 1,788
Occupancy and equipment 539 542 547 527 561
Loan and collection 135 110 139 112 217
Other operating expenses 762 947 755 1,004 864
Net Income before tax 1,221 1,402 845 818 974
Income Taxes 414 467 288 (5,118) --
Net Income 807 935 557 5,936 974
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $ 0.32 $ 0.38 $ 0.22 $ 2.40 $ 0.40
Pre-tax pre-provision earnings 1,221 1,402 845 818 974
Net Charge offs 48 86 (16) (108) (92)
Return on Equity (ROE) 12.00% 14.27% 10.04% 123.38% 21.92%
Return on Assets (ROA) 0.88% 1.08% 0.67% 7.43% 1.24%
Efficiency Ratio 73.33% 72.00% 79.63% 80.55% 77.88%
Average Bank Prime 3.25% 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.52% 4.56% 4.61% 4.60% 4.69%
Average Cost of Funds 0.69% 0.68% 0.64% 0.64% 0.71%
Spread 3.83% 3.88% 3.96% 3.96% 3.99%
Net impact of free funds 0.17% 0.17% 0.16% 0.16% 0.17%
Net Interest Margin 3.99% 4.05% 4.12% 4.12% 4.15%
Income Statement Highlights - YTD Sep-14 Sep-13 Dec-13 Dec-12
Unaudited Unaudited
Interest income 10,704 9,184 12,481 12,193
Interest expense 1,200 1,106 1,454 1,945
Net interest income 9,504 8,078 11,027 10,248
Provision for loan loss -- 7 7 (508)
Service charges on deposit accounts 650 666 897 1,030
Gain on sale of mortgage loans 808 1,428 1,613 961
Wealth management income 939 723 996 1,071
Other non-interest income 1,834 1,510 2,077 1,775
Salaries and benefits 5,790 5,180 6,925 6,775
Occupancy and equipment 1,628 1,624 2,152 2,155
Loan and collection 385 576 688 944
Other operating expenses 2,464 2,467 3,471 4,381
Net Income before tax 3,468 2,551 3,367 1,338
Income Taxes 1,169 -- (5,118) 73
Net Income from continuing operations 2,299 2,551 8,485 1,265
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $ 0.92 $ 1.03 $ 3.44 $ 0.52
Pre-tax pre-provision earnings 3,468 2,558 3,374 830
Net Charge offs 117 176 68 2,694
Return on Equity (ROE) 12.25% 19.19% 46.78% 7.26%
Return on Assets (ROA) 0.88% 1.10% 2.71% 0.42%
Efficiency Ratio 74.75% 79.38% 79.69% 94.50%
Average Bank Prime 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.56% 4.75% 4.71% 4.75%
Average Cost of Funds 0.67% 0.71% 0.69% 0.92%
Spread 3.89% 4.04% 4.02% 3.83%
Net impact of free funds 0.16% 0.14% 0.15% 0.17%
Net Interest Margin 4.05% 4.18% 4.16% 4.00%

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

Source:Fentura Financial, Inc.