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Fentura Financial, Inc Announces Second Quarter 2015 Results

  • Net Income exceeded prior quarter and prior year levels
  • Net interest income and noninterest income increased from balance sheet growth and loan trends compared to prior quarter and prior year
  • Book value increased 13.6% to $11.94 per share over prior year
  • Continued growth shown in assets and core deposits


FENTON, Mich., July 29, 2015 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX:FETM) reported net income for the three months ended June 30, 2015 of $1.2 million compared to earnings of $819,000 reported for the first quarter of 2015 and $935,000 reported for the three months ended June 30, 2014. On a pre-tax, pre-provision basis net income was $1.8 million in the current quarter compared to $1.2 million in the prior quarter and $1.4 million reported for the quarter ended June 30, 2014. For the six months ended June 30, 2015 the Company reported net income of $2.0 million compared to earnings of $1.5 million for the same period in 2014.

Ronald L. Justice, President and CEO said, “I am very pleased with our strong operating results and the continued growth of our loan and deposit portfolios. Our balance sheet growth has continued to strengthen net interest income and the current rate environment has supported solid results from mortgage banking and our wealth management group. I remain optimistic and excited about the future and the ability to enhance our business and financial performance through our relationship and community focused business model.”

Balance Sheet

Total assets increased $2.2 million or 0.5% at June 30, 2015 compared to March 31, 2015, ending the quarter at $415.8 million. When compared to December 31, 2014, assets at June 30, 2015 increased $20.6 million or 5.2%. Cash and due from banks totals decreased 18.0%, to $27.0 million at June 30, 2015 compared to the $32.9 million reported at March 31, 2015. Cash totals declined during the quarter due to the funding of new loans. Loan balances increased $16.5 million or 5.0% 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 $343.8 million at June 30, 2015. Year over year, loans increased $59.2 million or 20.8%. 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 $351.1 million, showed an increase of $5.6 million or 1.6% compared to the $345.4 million reported at March 31, 2015. 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 based on our efforts to grow these relationships. 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. For the six months ended June 30, 2015, deposits increased $23.1 million or 7.1%.

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 June 30, 2015, December 31, 2014, and June 30, 2014. As the table reflects, the Bank’s Tier 1 Leverage Capital ratio has strengthened during 2015 due primarily to the improved level of capital from earnings. The decline in Tier 1 and Total Risk-Based Capital ratios compared to prior periods is primarily due to changes in the regulatory calculation of risk weighted assets along with the strong overall asset growth rate.

June 30, December 31, June 30, Regulatory
2015 2014 2014 Well Capitalized
Tier 1 Leverage Capital Ratio 9.53% 9.83% 9.70% 5.00%
Tier 1 Risk-Based Capital Ratio 10.78 11.80 11.67 8.00
Total Risk-Based Capital Ratio 11.99 13.05 12.92 10.00


Credit Quality

The Company continued to benefit from credit quality improvement during the 2nd quarter of 2015. At June 30, 2015, loan delinquencies to total loans were 0.12% compared to 0.16% and 0.42% at March 31, 2015 and June 30, 2014, respectively. Substandard assets totaled $1.2 million at the end of the second quarter down from the $2.8 million and $5.1 million reported at March 31, 2015 and June 30, 2014, respectively. 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 $3.5 million for the quarter ended June 30, 2015 reflects a 1.9% increase compared to the quarter ended March 31, 2015 and a 10.0% increase relative to the $3.2 million reported for the quarter ended June 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 $2.1 million for the quarter ended June 30, 2015 compared to $1.6 million for the first quarter of 2015 and $1.8 million for the second 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 relative to both comparative prior periods. Additionally, other non-interest income increased during the current quarter relative to both comparative prior periods, due to gains on the sale of Other Real Estate Owned and a gain on an investment held by the holding company. For the six months ended June 30, 2015, noninterest income of $3.7 million represents an increase of $735,000 or 25.1% 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 $3.8 million of noninterest expense in the quarter ended June 30, 2015, flat with the level reported in the first quarter of 2015 and an increase over the $3.6 million reported in the second quarter of 2014. The current quarter increase over the 2nd quarter of 2014 is primarily attributable to 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 six months ended June 30, 2015, noninterest expense totaled $7.6 million an increase over the $6.9 million reported for the same period of 2014. The increase is 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.
Jun-15Mar-15Dec-14Sep-14Jun-14
UnauditedUnaudited UnauditedUnaudited
Balance Sheet Highlights
Cash and due from banks 27,003 32,947 19,522 14,887 11,276
Investment securities 29,204 31,452 33,008 34,702 33,768
Commercial loans 222,330 211,388 206,914 192,819 186,884
Consumer loans 27,637 26,620 27,110 27,308 26,399
Mortgage loans 93,825 89,302 85,945 83,305 71,348
Gross loans 343,792 327,310 319,969 303,432 284,631
ALLL (4,333) (4,453) (4,406) (4,782) (4,830)
Other assets 20,155 26,394 27,175 27,113 27,062
Total assets 415,821 413,650 395,268 375,352 351,907
Non-interest deposits 110,930 99,390 91,738 85,573 84,604
Interest bearing non-maturity deposits 157,860 162,719 154,499 162,972 149,092
Time deposits 82,268 83,322 81,686 71,711 64,396
Total deposits 351,058 345,431 327,923 320,256 298,092
Borrowings 34,775 35,251 34,817 24,817 24,817
Other liabilities 19 4,134 4,386 3,209 2,787
Equity 29,969 28,834 28,142 27,070 26,211
415,821 413,650 395,268 375,352 351,907
BALANCE SHEET RATIOS (unaudited)
Gross Loans to Deposits 97.93% 94.75% 97.57% 94.75% 95.48%
Earning Assets to Total Assets 89.70% 86.73% 89.30% 90.08% 90.48%
Securities and Cash to Assets 13.52% 15.57% 13.29% 13.21% 12.80%
Deposits to Assets 84.43% 83.51% 82.96% 85.32% 84.71%
Loan Loss Reserve to Gross Loans 1.26% 1.36% 1.38% 1.58% 1.70%
Net Charge-Offs to Gross Loans 0.03% -0.01% -0.02% 0.02% 0.03%
Leverage Ratio - The State Bank 9.53% 9.38% 9.83% 9.43% 9.70%
Book Value per Share$ 11.94 $ 11.49 $ 11.24 $ 10.84 $ 10.51
Income Statement Highlights - QTDJun-15Mar-15Dec-14Sep-14Jun-14
UnauditedUnauditedUnauditedUnauditedUnaudited
Interest income 4,005 3,933 3,951 3,709 3,556
Interest expense 529 523 514 436 397
Net interest income 3,476 3,410 3,437 3,273 3,159
Provision for loan loss - - (450) - -
Service charges on deposit accounts 207 194 232 232 212
Gain on sale of mortgage loans 655 609 530 285 410
Wealth management income 304 345 289 359 316
Other non-interest income 886 460 443 429 911
Salaries and benefits 2,194 2,237 2,116 1,921 2,007
Occupancy and equipment 554 583 552 539 542
Loan and collection 154 190 267 135 110
Other operating expenses 875 767 825 762 947
Net Income before tax 1,751 1,241 1,621 1,221 1,402
Income Taxes 595 422 559 414 467
Net Income 1,156 819 1,062 807 935
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share$ 0.46 $ 0.33 $ 0.43 $ 0.32 $ 0.38
Pre-tax pre-provision earnings 1,751 1,241 1,171 1,221 1,402
Net Charge offs 120 (47) (74) 48 86
Return on Equity (ROE) 10.78% 11.40% 15.40% 12.00% 14.27%
Return on Assets (ROA) 1.10% 0.81% 1.10% 0.88% 1.08%
Efficiency Ratio 68.32% 75.27% 76.25% 73.33% 72.00%
Average Bank Prime 3.25% 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.42% 4.49% 4.60% 4.52% 4.56%
Average Cost of Funds 0.77% 0.77% 0.78% 0.69% 0.68%
Spread 3.65% 3.72% 3.83% 3.83% 3.88%
Net impact of free funds 0.19% 0.18% 0.18% 0.17% 0.17%
Net Interest Margin 3.84% 3.90% 4.01% 3.99% 4.05%
Income Statement Highlights - YTDJun-15Jun-14 Dec-14Dec-13
UnauditedUnaudited
Interest income 7,938 6,995 14,655 12,481
Interest expense 1,052 764 1,713 1,454
Net interest income 6,886 6,231 12,942 11,027
Provision for loan loss - - (450) 7
Service charges on deposit accounts 401 418 882 897
Gain on sale of mortgage loans 1,265 523 1,339 1,613
Wealth management income 649 580 1,228 996
Other non-interest income 1,346 1,405 2,276 2,077
Salaries and benefits 4,431 3,869 7,906 6,925
Occupancy and equipment 1,137 1,089 2,181 2,152
Loan and collection 344 250 652 688
Other operating expenses 1,643 1,702 3,288 3,472
Net Income before tax 2,992 2,247 5,090 3,366
Income Taxes 1,017 755 1,728 (5,118)
Net Income from continuing operations 1,975 1,492 3,362 8,484
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share$ 0.79 $ 0.60 $ 1.35 $ 3.44
Pre-tax pre-provision earnings 2,992 2,247 4,640 3,373
Net Charge offs 73 69 44 68
Return on Equity (ROE) 11.12% 12.43% 13.06% 46.78%
Return on Assets (ROA) 0.97% 0.88% 0.94% 2.71%
Efficiency Ratio 71.63% 75.46% 75.15% 79.68%
Average Bank Prime 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.46% 4.58% 4.57% 4.71%
Average Cost of Funds 0.77% 0.66% 0.70% 0.69%
Spread 3.69% 3.92% 3.87% 4.02%
Net impact of free funds 0.18% 0.16% 0.17% 0.15%
Net Interest Margin 3.87% 4.09% 4.04% 4.16%



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

Source:Fentura Financial, Inc.