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Fentura Financial, Inc Announces First Quarter 2016 Results

  • Net Income before tax and provision for loan loss showed a 12.5% increase over prior year
  • Book value increased 13.3% to $13.02 per share over prior year
  • Commercial loan growth continues to show steady growth
  • Continued strength shown in non-interest income

FENTON, Mich., April 29, 2016 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX:FETM) reported net income for the three months ended March 31, 2016 of $921,000 compared to earnings of $1,744,000 reported for the fourth quarter of 2016. On a pre-tax, pre-provision basis net income was $1.4 million in the current quarter compared to $1.6 million in the prior quarter.

Ronald L. Justice, President and CEO said, “I am pleased to report another quarter of solid results. Our strong loan pipeline and continued deposit growth, coupled with the recent acquisition announcement, creates considerable excitement and optimism for the future of our organization.”

Balance Sheet

Total assets increased $10.6 million or 2.4% at March 31, 2016 compared to December 31, 2015, ending the quarter at $445.6 million. Cash and due from banks totals increased 42.8%, to $27.7 million at March 31, 2016 compared to the $19.4 million reported at December 31, 2015. This increase was primarily attributable to a single long-term borrowing taken out during the quarter at a fixed rate below treasury. Net loan balances increased $5.1 million or 1.3%, to $383.1 million at March 31, 2016 compared to December 31, 2015. Loans increased from continued efforts to grow the Bank’s client base. The commercial loan portfolio was the only one showing growth during the quarter, with the other portfolios showing very slight declines. Year over year, loans increased $60.3 million or 18.7% when compared to March 31, 2015. 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. The growth in mortgage loans has been somewhat fueled by the expansion of single-note close construction loans to borrowers.

Deposit totals of $376.4 million were essentially flat with the $376.0 million reported at December 31, 2015. There was movement amongst the portfolios, with core, non-interest bearing checking accounts growing $8.0 million, or 7.4% over the balance at the end of the prior quarter offset by declines in money market and time deposits. 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, 2016 and December 31, 2015. The decline in the leverage ratio quarter over quarter is primarily due the strong overall asset growth rate, while the increase in the risk-based capital ratio is mostly due to an increase in liquid assets. Absent the change in calculation all three ratios would have shown a modest decline quarter over quarter.

March 31,
2016
December 31,
2015
Regulatory
Well Capitalized
Tier 1 Leverage Capital Ratio 9.76% 9.90% 5.00%
Tier 1 Risk-Based Capital Ratio 11.10 11.00 8.00
Total Risk-Based Capital Ratio 12.01 11.91 10.00

Credit Quality

As seen in recent periods, the Company continued to benefit from improvement in credit quality during the 1st quarter of 2016. At March 31, 2016 loan delinquencies to total loans were 0.14% compared to 0.16% at March 31, 2015. Substandard assets totaled $700,000 at March 31, 2016, flat with the $700,000 reported at December 31, 2015. 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 2015.

Net Interest Income

Net interest income of $4.0 million for the quarter ended March 31, 2016 was relatively unchanged when compared to the $3.9 million reported in the fourth quarter of 2015 and improved by $600,000, or 17.6% relative to the $3.4 million reported in the first quarter of 2015. 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 9 basis points, largely due to the mix of assets and funding sources carried on the balance sheet.

Noninterest Income

Noninterest income was $1.5 million for the quarter ended March 31, 2016 compared to $1.4 million for the fourth quarter of 2015 and $1.6 million for the first quarter of 2015. The 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 and modest declines in mortgage banking revenue.

Noninterest Expense

The Company recorded $4.0 million of noninterest expense in the quarter ended March 31, 2016, an increase of $300,000, or 8.0% over the level reported in the fourth quarter of 2015 and increased over the $3.8 million reported in the first quarter of 2015. On a year over year basis, increases in salaries and benefits and other operating expenses were partially offset by decreases in loan and collection expenses. Quarter over quarter, the increase in noninterest expense is primarily based on an increase in salary and benefits expense and other expenses. Salary and benefits expense increased in 2015 based on general annual salary increases, the rising costs of providing medical benefits, the return to historical levels of the Company’s 401K match. The increase in other operating expenses is primarily due to expenses related to the aforementioned anticipated acquisition of Community Bancorp, Inc.

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-16Dec-15Sep-15Jun-15Mar-15
Unaudited UnauditedUnauditedUnaudited
Balance Sheet Highlights
Cash and due from banks 27,734 19,425 32,517 27,003 32,947
Investment securities 23,440 26,689 27,518 29,204 31,452
Commercial loans 239,409 233,853 222,560 222,330 211,388
Consumer loans 28,790 29,014 30,204 27,637 26,620
Mortgage loans 118,486 118,693 105,353 93,825 89,302
Gross loans 386,685 381,560 358,117 343,792 327,310
ALLL (3,562) (3,505) (4,439) (4,333) (4,453)
Other assets 21,306 20,872 20,655 20,155 26,394
Total assets 455,603 445,041 434,368 415,821 413,650
Non-interest deposits 116,141 108,102 104,131 110,930 99,390
Interest bearing non-maturity deposits 175,805 181,703 182,865 157,860 162,719
Time deposits 84,451 86,166 81,277 82,268 83,322
Total deposits 376,397 375,971 368,273 351,058 345,431
Borrowings 44,775 34,775 34,775 34,775 35,251
Other liabilities 1,435 1,822 499 19 4,134
Equity 32,996 32,473 30,821 29,969 28,834
455,603 445,041 434,368 415,821 413,650
BALANCE SHEET RATIOS (unaudited)
Gross Loans to Deposits 102.73% 101.49% 97.24% 97.93% 94.75%
Earning Assets to Total Assets 90.02% 91.73% 88.78% 89.70% 86.73%
Securities and Cash to Assets 11.23% 10.36% 13.82% 13.52% 15.57%
Deposits to Assets 82.62% 84.48% 84.78% 84.43% 83.51%
Loan Loss Reserve to Gross Loans 0.92% 0.92% 1.24% 1.26% 1.36%
Net Charge-Offs to Gross Loans -0.01% -0.02% -0.01% 0.03% -0.01%
Leverage Ratio - The State Bank 9.75% 9.90% 9.42% 9.55% 9.07%
Book Value per Share $13.02 $12.90 $12.26 $11.94 $11.49
Income Statement Highlights - QTD Mar-16Dec-15Sep-15Jun-15Mar-15
Unaudited UnauditedUnauditedUnaudited
Interest income 4,526 4,481 4,232 4,005 3,933
Interest expense 573 560 541 529 523
Net interest income 3,953 3,921 3,691 3,476 3,410
Provision for loan loss - (1,000) - - -
Service charges on deposit accounts 179 203 202 207 194
Gain on sale of mortgage loans 387 448 428 655 468
Wealth management income 350 262 343 304 345
Other non-interest income 573 533 495 886 601
Total non-interest income 1,489 1,446 1,468 2,052 1,608
Salaries and benefits 2,405 2,209 2,186 2,194 2,237
Occupancy and equipment 563 568 557 554 583
Loan and collection 107 97 124 154 190
Other operating expenses 971 860 821 875 767
Total non-interest expense 4,046 3,734 3,688 3,777 3,777
Net Income before tax 1,396 2,633 1,471 1,751 1,241
Income Taxes 475 889 501 595 422
Net Income 921 1,744 970 1,156 819
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $0.36 $0.69 $0.39 $0.46 $0.33
Pre-tax pre-provision earnings 1,396 1,633 1,471 1,751 1,241
Net Charge offs (52) (66) (33) 120 (47)
Return on Equity (ROE) 11.15% 22.00% 8.81% 10.78% 11.40%
Return on Assets (ROA) 0.82% 1.62% 0.89% 1.10% 0.81%
Efficiency Ratio 74.35% 69.57% 71.49% 68.32% 75.27%
Average Bank Prime 3.50% 3.35% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.43% 4.53% 4.46% 4.42% 4.49%
Average Cost of Funds 0.77% 0.77% 0.75% 0.77% 0.77%
Spread 3.66% 3.76% 3.71% 3.65% 3.72%
Net impact of free funds 0.21% 0.21% 0.19% 0.19% 0.18%
Net Interest Margin 3.88% 3.97% 3.90% 3.84% 3.90%
Income Statement Highlights - YTD Mar-16Mar-15 Dec-15Dec-14
UnauditedUnaudited
Interest income 4,526 3,933 16,652 14,655
Interest expense 573 523 2,152 1,713
Net interest income 3,953 3,410 14,500 12,942
Provision for loan loss - - (1,000) (450)
Service charges on deposit accounts 179 194 806 882
Gain on sale of mortgage loans 387 468 2,000 1,339
Wealth management income 350 345 1,255 1,228
Other non-interest income 573 601 2,514 2,276
Total non-interest income 1,489 1,446 2,052 1,608
Salaries and benefits 2,405 2,237 8,826 7,906
Occupancy and equipment 563 583 2,262 2,181
Loan and collection 107 190 565 652
Other operating expenses 971 767 3,324 3,289
Total non-interest expenses 4,046 3,734 3,777 3,777
Net Income before tax 1,396 1,241 7,098 5,089
Income Taxes 475 422 2,407 1,728
Net Income from continuing operations 921 819 4,691 3,361
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $0.36 $0.33 $1.87 $1.35
Pre-tax pre-provision earnings 1,396 1,241 6,098 4,639
Net Charge offs (52) (47) (26) 43
Return on Equity (ROE) 11.18% 11.55% 12.73% 13.03%
Return on Assets (ROA) 0.82% 0.82% 1.11% 0.94%
Efficiency Ratio 74.35% 75.27% 71.07% 75.15%
Average Bank Prime 3.50% 3.50% 3.50% 3.50%
Average Earning Asset Yield 4.43% 4.49% 4.48% 4.57%
Average Cost of Funds 0.77% 0.77% 0.77% 0.70%
Spread 3.66% 3.72% 3.71% 3.87%
Net impact of free funds 0.21% 0.17% 0.19% 0.17%
Net Interest Margin 3.87% 3.90% 3.90% 4.04%

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

Source:Fentura Financial, Inc.