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Fentura Financial, Inc Announces 2014 Profits

  • Pre-tax income for the year exceeded levels reported for 2013
  • Book value increased 12.7% to $11.24 per share over prior year
  • Total assets grew by more than $19.9 million
  • Loan growth exceeded expectations for the year, growing by more $56 million

FENTON, Mich., Feb. 18, 2015 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX:FETM) reported net income for the three months ended December 31, 2014 of $1,062,000 compared to earnings of $807,000 reported for the third quarter of 2014. For the year, Fentura reported net income of $3.4 million compared to the $8.5 million reported for 2013. Pre-tax net income was $5.1 million in 2014 or an increase of 51.1% compared to $3.4 million in 2013. Net Income for 2013 reflects the reversal of the deferred tax asset valuation allowance of $4.9 million disallowed in previous years.

Ronald L. Justice, President and CEO said, "2014 was another solid year for Fentura. We are pleased with the strong improvement in earnings from core operations throughout the year. Key to our success was the significant growth of both loans and deposits and the increase in net interest income from this growth. Our mortgage team closed just under $100 million in residential mortgage loans, most of which were sold in the secondary market. The gains as well as the revenue from retaining servicing from these mortgages contributed to our operating results. Additionally, growth of our Wealth Management practice and client base contributed to a solid improvement of revenue as well. We remain excited about our future and continuing to serve our markets with relationship banking as the local community bank."

Balance Sheet

Total assets increased $19.9 million or 5.3% at December 31, 2014 compared to September 30, 2014, ending the year at $395.3 million. Cash and due from banks totals increased 31.1%, to $19.5 million at December 31, 2014 compared to the $14.9 million reported at September 31, 2014. This increase was primarily attributable to an increase in funding from deposit growth. Loan balances increased $16.5 million or 5.5% during the same period. Loans increased from continued efforts to grow the Bank's client base. During the quarter, the Bank experienced growth in both its mortgage and commercial loan portfolios. Loans totaled $320.0 million at December 31, 2014. For the year ended December 31, 2014, loans increased $56.0 million or 21.2% when compared to December 31, 2013. The increase in loans occurred from the Company's efforts to grow its loan portfolio with new and existing clients.

Deposit totals of $327.9 million at December 31, 2014, showed an increase of $7.7 million or 2.4% compared to the $320.3 million reported at the end of the prior quarter. Deposits increased $44.6 million or 15.7% for the year ended December 31, 2014 when compared to December 31, 2013. The increase throughout the year occurred in both non-interest bearing and time deposits as the Company continued efforts to grow its client base. Further, efforts to grow time deposits were to lengthen the duration of this funding source to minimize interest rate risk.

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 December 31, 2014 and December 31, 2013. The modest decline in the capital ratios year over year is primarily due to the significant overall asset growth rate.

December 31,
2014
December 31,
2013
Regulatory
Well Capitalized
Tier 1 Leverage Capital Ratio 9.53% 10.00% 5.00%
Tier 1 Risk-Based Capital Ratio 11.43 11.83 8.00
Total Risk-Based Capital Ratio 12.68 13.09 10.00

Credit Quality

Throughout 2014, the Company continued to benefit from improvement in credit quality. At December 31, 2014 loan delinquencies to total loans were 0.07% compared to 0.60% at December 31, 2013. Substandard assets totaled $3.2 million at December 31, 2014, down from $6.2 million reported at December 31, 2013. The low level of loan delinquencies and the improved level of substandard assets eliminated the need for additional provisions to the allowance for loan losses throughout all of 2014 and in fact, contributed to a reversal of $450 thousand from the allowance based on improved credit trends for the year ended December 31, 2014.

Net Interest Income

Net interest income of $3.4 million for the quarter ended December 31, 2014 improved compared to the $3.3 million and the $3.0 million reported in the third quarter of 2014 and the fourth quarter of 2013, respectively. Interest income improved during the three months ended December 31, 2014, from interest on new loans added during the quarter and throughout the entire year. Interest expense increased for the quarter ended December 31, 2014 compared to the quarters ended September 30, 2014 and December 31, 2013 based on interest expense on time deposits added during the quarter.

On a year to date basis, net interest income at $12.9 million in 2014 compared favorably to the $11.0 million reported in 2013. The year over year improvement is due to the increase in interest income from loan growth throughout the year.

Noninterest Income

Noninterest income was $1.5 million for the quarter ended December 31, 2014 compared to $1.3 million for the third quarter of 2014 and $1.3 million for the fourth quarter of 2013. The increase in the volume of mortgage loans sold in the secondary market and accordingly, the gain on sale from those loans as well as the retention of mortgage servicing rights throughout the year contributed to the increase in the current period compared to both prior periods.

For the twelve months ended December 31, 2014, noninterest income totaled $5.7 million compared to $5.6 million reported for the prior year. The increase in 2014 is primarily attributable to improved revenue from Wealth Management services based on the growth from new clients and strong market conditions.

Noninterest Expense

The Company recorded $3.8 million of noninterest expense in the quarter ended December 30, 2014, an increase from the $3.4 million reported in the third quarter of 2014 and the $3.4 million reported in the fourth quarter of 2013. The quarterly increase is attributable to general increases in each of the major expense categories. For the year, noninterest expense was $14.0 million in 2014 compared to $13.2 million during 2013. The increase in noninterest expense in 2014 is primarily based on an increase in salary and benefits expense. Salary and benefits expense increased in 2014 based on general annual salary increases, the rising costs of providing medical benefits, the return to historical levels of the Company's 401K match, and the reinstatement of a formal bonus program for staff.

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.
Dec-14 Sep-14 Jun-14 Mar-14 Dec-13
Unaudited Unaudited Unaudited Unaudited
Balance Sheet Highlights
Cash and due from banks 19,522 14,887 11,276 16,061 12,856
Investment securities 33,008 34,702 33,768 35,478 36,574
Commercial loans 206,914 192,819 186,884 180,675 176,796
Consumer loans 27,110 27,308 26,399 25,470 25,336
Mortgage loans 85,945 83,305 71,348 67,696 61,846
Gross loans 319,969 303,432 284,631 273,841 263,978
ALLL (4,406) (4,782) (4,830) (4,916) (4,900)
Other assets 27,175 27,113 27,062 26,225 26,717
Total assets 395,268 375,352 351,907 346,689 335,225
Non-interest deposits 91,738 85,573 84,604 83,378 82,585
Interest bearing non-maturity deposits 154,499 162,972 149,092 154,814 154,838
Time deposits 81,686 71,711 64,396 55,870 45,918
Total deposits 327,923 320,256 298,092 294,062 283,341
Borrowings 34,817 24,817 24,817 24,855 24,855
Other liabilities 4,386 3,209 2,787 2,266 2,267
Equity 28,142 27,070 26,211 25,506 24,762
395,268 375,352 351,907 346,689 335,225
BALANCE SHEET RATIOS (unaudited)
Gross Loans to Deposits 97.57% 94.75% 95.48% 93.12% 93.17%
Earning Assets to Total Assets 89.30% 90.08% 90.48% 89.22% 89.66%
Securities and Cash to Assets 13.29% 13.21% 12.80% 14.87% 14.75%
Deposits to Assets 82.96% 85.32% 84.71% 84.82% 84.52%
Loan Loss Reserve to Gross Loans 1.38% 1.58% 1.70% 1.80% 1.86%
Net Charge-Offs to Gross Loans -0.02% 0.02% 0.03% -0.01% -0.04%
Leverage Ratio - The State Bank 9.53% 9.44% 9.71% 9.76% 10.00%
Book Value per Share $ 11.24 $ 10.84 $ 10.51 $ 10.25 $ 9.97
Income Statement Highlights - QTD Dec-14 Sep-14 Jun-14 Mar-14 Dec-13
Unaudited Unaudited Unaudited Unaudited
Interest income 3,951 3,709 3,556 3,439 3,298
Interest expense 514 436 397 367 348
Net interest income 3,437 3,273 3,159 3,072 2,950
Provision for loan loss (450) -- -- -- --
Service charges on deposit accounts 232 232 212 205 230
Gain on sale of mortgage loans 530 285 410 114 186
Wealth management income 289 359 316 263 274
Other non-interest income 443 429 911 495 566
Salaries and benefits 2,116 1,921 2,007 1,863 1,745
Occupancy and equipment 552 539 542 547 527
Loan and collection 267 135 110 139 112
Other operating expenses 825 762 947 755 1,004
Net Income before tax 1,621 1,221 1,402 845 818
Income Taxes 559 414 467 288 (5,118)
Net Income 1,062 807 935 557 5,936
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $ 0.43 $ 0.32 $ 0.38 $ 0.22 $ 2.40
Pre-tax pre-provision earnings 1,171 1,221 1,402 845 818
Net Charge offs (74) 48 86 (16) (108)
Return on Equity (ROE) 15.26% 12.00% 14.27% 10.04% 123.38%
Return on Assets (ROA) 1.10% 0.88% 1.08% 0.67% 7.43%
Efficiency Ratio 76.25% 73.33% 72.00% 79.63% 80.55%
Average Bank Prime 3.25% 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.60% 4.52% 4.56% 4.61% 4.60%
Average Cost of Funds 0.78% 0.69% 0.68% 0.64% 0.64%
Spread 3.83% 3.83% 3.88% 3.96% 3.96%
Net impact of free funds 0.18% 0.17% 0.17% 0.16% 0.16%
Net Interest Margin 4.01% 3.99% 4.05% 4.12% 4.12%
Income Statement Highlights - YTD Dec-14 Dec-13 Dec-13 Dec-12
Unaudited
Interest income 14,655 12,481 12,481 12,193
Interest expense 1,713 1,454 1,454 1,945
Net interest income 12,942 11,027 11,027 10,248
Provision for loan loss (450) 7 7 (508)
Service charges on deposit accounts 882 897 897 1,030
Gain on sale of mortgage loans 1,339 1,613 1,613 961
Wealth management income 1,228 996 996 1,071
Other non-interest income 2,276 2,077 2,077 1,775
Salaries and benefits 7,906 6,925 6,925 6,775
Occupancy and equipment 2,181 2,152 2,152 2,155
Loan and collection 652 688 688 944
Other operating expenses 3,289 3,471 3,471 4,381
Net Income before tax 5,089 3,367 3,367 1,338
Income Taxes 1,728 (5,118) (5,118) 73
Net Income from continuing operations 3,361 8,485 8,485 1,265
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $ 1.35 $ 3.44 $ 3.44 $ 0.52
Pre-tax pre-provision earnings 4,639 3,374 3,374 830
Net Charge offs 43 68 68 2,694
Return on Equity (ROE) 13.03% 46.78% 46.78% 7.26%
Return on Assets (ROA) 0.94% 2.71% 2.71% 0.42%
Efficiency Ratio 75.15% 79.69% 79.69% 94.50%
Average Bank Prime 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.57% 4.71% 4.71% 4.75%
Average Cost of Funds 0.70% 0.69% 0.69% 0.92%
Spread 3.87% 4.02% 4.02% 3.83%
Net impact of free funds 0.17% 0.15% 0.15% 0.17%
Net Interest Margin 4.04% 4.16% 4.16% 4.00%

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

Source:Fentura Financial, Inc.