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Fentura Financial, Inc Announces First Quarter 2015 Results

  • Net Income before tax and provision for loan loss exceeded prior quarter and prior year levels
  • Book value increased 12.1% to $11.49 per share over prior year
  • Solid growth shown in assets and core deposits in the current year
  • Continued strength shown in non-interest income

FENTON, Mich., April 22, 2015 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX:FETM) reported net income for the three months ended March 31, 2015 of $819,000 compared to earnings of $1,062,000 reported for the fourth quarter of 2014. On a pre-tax, pre-provision basis net income was $1.24 million in the current quarter compared to $1.17 million in the prior quarter.

Ronald L. Justice, President and CEO said, "I am very pleased with our strong performance and ability to continue growing our loan and deposit portfolios even in the current rate environment. While we have seen slight degradation in the net interest margin, that is largely due to protecting future revenue and has been more than offset by strength in our mortgage banking and wealth management areas. We continue to be excited about the future and look forward to building new relationships and enhancing those that we currently have using our community focused business model."

Balance Sheet

Total assets increased $18.4 million or 4.7% at March 31, 2015 compared to December 31, 2014, ending the quarter at $413.7 million. Cash and due from banks totals increased 68.8%, to $32.9 million at March 31, 2015 compared to the $19.5 million reported at December 31, 2014. This increase was primarily attributable to an increase in funding from deposit growth. Loan balances increased $7.3 million or 2.3% 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 $327.3 million at March 31, 2015. Year over year, loans increased $53.5 million or 19.5% when compared to March 31, 2014. The increase in loans resulted from the Company's efforts to grow its loan portfolio with new and existing clients. The Company has also been successful with offering customers variable rate loans which help to manage interest rate risk in changing interest rate environments.

Deposit totals of $345.4 million, showed an increase of $17.5 million or 5.3% compared to the $327.9 million reported at December 31, 2014. The increase has primarily been in non-interest bearing and other non-maturity deposits as the Company continued efforts to grow its client base. We have seen an increase in municipal cash holdings, a portion of which tend to be relatively volatile, 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.

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 March 31, 2015 and December 31, 2014. The decline in the capital ratios quarter over quarter is primarily due to changes in the treatment of certain items in the calculation of regulatory capital in the current quarter along with the strong overall asset growth rate. Absent the change in calculation the ratios would have shown a very modest decline quarter over quarter.

March 31,
2015
December 31,
2014
Regulatory
Well Capitalized
Tier 1 Leverage Capital Ratio 8.96% 9.24% 5.00%
Tier 1 Risk-Based Capital Ratio 10.56 11.01 8.00
Total Risk-Based Capital Ratio 11.82 12.26 10.00

Credit Quality

As seen in recent periods, the Company continued to benefit from improvement in credit quality during the 1st quarter of 2015. At March 31, 2015 loan delinquencies to total loans were 0.16% compared to 0.60% at March 31, 2014. Substandard assets totaled $2.8 million at March 31, 2015, down from $3.2 million reported at December 31, 2014. These numbers tend to be leading indicators of 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 $3.4 million for the quarter ended March 31, 2015 was unchanged when compared to the fourth quarter of 2014 and improved relative to the $3.1 million reported in the first quarter of 2014. Both interest income and interest expense were flat relative to the prior quarter, while both numbers were higher than the same period last year, largely due to increases in the loan and deposit portfolios. While the portfolios showed increases over the prior quarter, the net interest margin declined 11 basis points, largely due the aforementioned 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 $1.6 million for the quarter ended March 31, 2015 compared to $1.5 million for the fourth quarter of 2014 and $1.1 million for the first 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) along with increased revenue from wealth management activities contributed to the increase in the current period relative to both comparative prior periods. These increases were offset in both periods by modest declines in service charges on deposit accounts.

Noninterest Expense

The Company recorded $3.8 million of noninterest expense in the quarter ended March 31, 2015, flat with the level reported in the fourth quarter of 2014 and increased over the $3.3 million reported in the first quarter of 2014. On a quarterly basis, increases in salaries and benefits were largely offset by decreases in loan and collection expenses and other operating expenses. Year over year, the increase in noninterest expense 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 reestablishment 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.
Mar-15 Dec-14 Sep-14 Jun-14 Mar-14
Unaudited Unaudited Unaudited Unaudited
Balance Sheet Highlights
Cash and due from banks 32,947 19,522 14,887 11,276 16,061
Investment securities 31,452 33,008 34,702 33,768 35,478
Commercial loans 211,388 206,914 192,819 186,884 180,675
Consumer loans 26,620 27,110 27,308 26,399 25,470
Mortgage loans 89,302 85,945 83,305 71,348 67,696
Gross loans 327,310 319,969 303,432 284,631 273,841
ALLL (4,453) (4,406) (4,782) (4,830) (4,916)
Other assets 26,394 27,175 27,113 27,062 26,225
Total assets 413,650 395,268 375,352 351,907 346,689
Non-interest deposits 99,390 91,738 85,573 84,604 83,378
Interest bearing non-maturity deposits 162,719 154,499 162,972 149,092 154,814
Time deposits 83,322 81,686 71,711 64,396 55,870
Total deposits 345,431 327,923 320,256 298,092 294,062
Borrowings 35,251 34,817 24,817 24,817 24,855
Other liabilities 4,134 4,386 3,209 2,787 2,266
Equity 28,834 28,142 27,070 26,211 25,506
413,650 395,268 375,352 351,907 346,689
BALANCE SHEET RATIOS (unaudited)
Gross Loans to Deposits 94.75% 97.57% 94.75% 95.48% 93.12%
Earning Assets to Total Assets 86.73% 89.30% 90.08% 90.48% 89.22%
Securities and Cash to Assets 15.57% 13.29% 13.21% 12.80% 14.87%
Deposits to Assets 83.51% 82.96% 85.32% 84.71% 84.82%
Loan Loss Reserve to Gross Loans 1.36% 1.38% 1.58% 1.70% 1.80%
Net Charge-Offs to Gross Loans -0.01% -0.02% 0.02% 0.03% -0.01%
Leverage Ratio - The State Bank 8.96% 9.53% 9.44% 9.71% 9.76%
Book Value per Share $ 11.49 $ 11.24 $ 10.84 $ 10.51 $ 10.25
Income Statement Highlights - QTD Mar-15 Dec-14 Sep-14 Jun-14 Mar-14
Unaudited Unaudited Unaudited Unaudited
Interest income 3,933 3,951 3,709 3,556 3,439
Interest expense 523 514 436 397 367
Net interest income 3,410 3,437 3,273 3,159 3,072
Provision for loan loss -- (450) -- -- --
Service charges on deposit accounts 194 232 232 212 205
Gain on sale of mortgage loans 609 530 285 410 114
Wealth management income 345 289 359 316 263
Other non-interest income 460 443 429 911 495
Salaries and benefits 2,237 2,116 1,921 2,007 1,863
Occupancy and equipment 583 552 539 542 547
Loan and collection 190 267 135 110 139
Other operating expenses 767 825 762 947 755
Net Income before tax 1,241 1,621 1,221 1,402 845
Income Taxes 422 559 414 467 288
Net Income 819 1,062 807 935 557
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $ 0.33 $ 0.43 $ 0.32 $ 0.38 $ 0.22
Pre-tax pre-provision earnings 1,241 1,171 1,221 1,402 845
Net Charge offs (47) (74) 48 86 (16)
Return on Equity (ROE) 11.40% 15.26% 12.00% 14.27% 10.04%
Return on Assets (ROA) 0.81% 1.10% 0.88% 1.08% 0.67%
Efficiency Ratio 75.27% 76.25% 73.33% 72.00% 79.63%
Average Bank Prime 3.25% 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.49% 4.60% 4.52% 4.56% 4.61%
Average Cost of Funds 0.77% 0.78% 0.69% 0.68% 0.64%
Spread 3.72% 3.83% 3.83% 3.88% 3.96%
Net impact of free funds 0.18% 0.18% 0.17% 0.17% 0.16%
Net Interest Margin 3.90% 4.01% 3.99% 4.05% 4.12%
Income Statement Highlights - YTD Mar-15 Mar-14 Dec-14 Dec-13
Unaudited Unaudited
Interest income 3,933 3,439 14,655 12,481
Interest expense 523 367 1,713 1,454
Net interest income 3,410 3,072 12,942 11,027
Provision for loan loss -- -- (450) 7
Service charges on deposit accounts 194 205 882 897
Gain on sale of mortgage loans 609 114 1,339 1,613
Wealth management income 345 263 1,228 996
Other non-interest income 460 495 2,276 2,077
Salaries and benefits 2,237 1,863 7,906 6,925
Occupancy and equipment 583 547 2,181 2,152
Loan and collection 190 139 652 688
Other operating expenses 767 755 3,289 3,471
Net Income before tax 1,241 845 5,089 3,367
Income Taxes 422 288 1,728 (5,118)
Net Income from continuing operations 819 557 3,361 8,485
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $ 0.33 $ 0.22 $ 1.35 $ 3.44
Pre-tax pre-provision earnings 1,241 845 4,639 3,374
Net Charge offs (47) (16) 43 68
Return on Equity (ROE) 11.55% 10.18% 13.03% 46.78%
Return on Assets (ROA) 0.82% 0.67% 0.94% 2.71%
Efficiency Ratio 75.27% 79.63% 75.15% 79.69%
Average Bank Prime 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.49% 4.61% 4.57% 4.71%
Average Cost of Funds 0.77% 0.64% 0.70% 0.69%
Spread 3.72% 3.96% 3.87% 4.02%
Net impact of free funds 0.17% 0.16% 0.17% 0.15%
Net Interest Margin 3.90% 4.12% 4.04% 4.16%

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

Source:Fentura Financial, Inc.