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Fentura Financial, Inc Announces Second Quarter 2016 Results

  • Solid Net Income showed positive quarter over quarter growth
  • Quarterly earnings per share growth of 11.1% over prior quarter
  • Book value increased 12.0% to $13.37 per share year over year
  • Continued growth shown in assets and core deposits

FENTON, Mich., Aug. 02, 2016 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. reported net income for the three months ended June 30, 2016 of $1.0 million compared to earnings of $921,000 reported for the first quarter of 2016 and $1.2 million reported for the three months ended June 30, 2015. On a pre-tax, pre-provison basis net income was $1.5 million in the current quarter compared to $1.4 million in the prior quarter and $1.8 million reported for the quarter ended June 30, 2015. For the six months ended June 30, 2016 the Company reported net income of $1.9 million compared to earnings of $2.0 million for the same period in 2015.

“We continue to work toward regulatory approval of our announced acquisition of Community State Bank, while producing Quarter over Quarter improvement in Earnings and strong Balance Sheet growth,” Ronald L. Justice, President and CEO said. “We look forward to integrating those customers and employees into our family and are optimistic that the acquired markets provide potential new customers as well. Additionally, while competitive, our legacy markets continue to provide solid pipelines for business, municipal and consumer account growth.”

Balance Sheet

Total assets increased $18.1 million or 4.0% at June 30, 2016 compared to March 31, 2016, ending the quarter at $473.7 million. When compared to December 31, 2015, assets at June 30, 2016, increased $28.7 million or 6.4%. Cash and due from banks totals increased 26.4%, to $35.0 million at June 30, 2016 compared to the $27.7 million reported at March 31, 2016. Cash totals increased during the quarter primarily due to core funding growth outpacing loan growth. Gross loan balances increased $9.9 million or 2.6% quarter over quarter. Both consumer and mortgage loan portfolios grew during the quarter, while commercial loans saw a slight decline. All three portfolios showed growth over year end 2015 levels. Loans totaled $396.6 million at June 30, 2016. Year over year, loans increased $52.8 million or 15.4%. 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 products whose terms help manage interest rate risk in changing interest rate environments.

Deposit totals of $393.6 million, showed an increase of $17.2 million or 4.6% compared to the $376.4 million reported at March 31, 2016. The increase has primarily been in non-interest bearing and other non-maturity deposits as the Company continues to have success in acquiring new clients and increasing wallet share of current clients. 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, 2016, deposits increased $17.6 million or 4.7%.

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, 2016, December 31, 2015, and June 30, 2015. As the table reflects, while the Bank saw a marginal weakening in the Tier 1 Leverage Capital ratio during 2016 due primarily to asset growth outpacing earnings, both Risk-Based Capital ratios increased year to date and compared to June 30, 2015, primarily due to changes in the balance sheet mix and strong earnings.

June 30,
2016
December 31,
2015
June 30,
2015
Regulatory
Well Capitalized
Tier 1 Leverage Capital Ratio 9.79% 9.90% 9.53% 5.00%
Tier 1 Risk-Based Capital Ratio 11.37 11.00 10.83 6.00
Total Risk-Based Capital Ratio 12.28 11.91 12.05 10.00

Credit Quality

The Company continued to benefit from credit quality improvement during the 2nd quarter of 2016. At June 30, 2016 loan delinquencies to total loans were 0.02% compared to 0.14% and 0.12% at March 31, 2016 and June 30, 2015, respectively. Substandard assets totaled $472,000 at the end of the second quarter down slightly from the $724,000 reported at March 31, 2016 and down significantly from the $1.2 million reported at June 30, 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 $3.9 million for the quarter ended June 30, 2016 reflects no change compared to the quarter ended March 31, 2016 and an 11.4% increase relative to the $3.5 million reported for the quarter ended June 30, 2015. The increase relative to the prior year is attributable to improved levels of interest income from loan growth. While the portfolios showed increases over prior periods, the net interest margin declined modestly during the period, largely due to the competitive marketplace and the Company’s strategy to offer competitively priced variable rate loans in order to more effectively manage the Company’s interest rate risk. Additionally, funding growth has outpaced loan growth, with the proceeds not yet being reinvested in the loan portfolio. This also caused a slight depression in the net interest margin, though at the same time enhancing the Company’s liquidity position.

Noninterest Income

Noninterest income was $1.5 million for the quarter ended June 30, 2016 compared to $1.5 million for the first quarter of 2016 and $2.1 million for the second quarter of 2015. The decline from the prior year is due primarily to a one-time gain on the sale of a security at the holding company taken in 2015 as well as the loss of income from data processing services previously rendered to an unrelated financial institution, partially offset by an increase in mortgage banking income. For the six months ended June 30, 2016, noninterest income of $3.0 million represents a decrease of $700,000 or 18.9% over the same period in 2015. The decrease is primarily attributable to the above mentioned items.

Noninterest Expense

The Company recorded $3.9 million of noninterest expense in the quarter ended June 30, 2016, down from the $4.0 million reported in the first quarter of 2016 and up slightly from the $3.8 million reported in the second quarter of 2015. The current quarter increase over the prior quarter is primarily attributable to salary and benefits. These expenses decreased largely due to commissions paid associated with mortgage loan volumes and the decline in gains on the sales of these loans in the secondary market. For the six months ended June 30, 2016, noninterest expense totaled $8.0 million an increase over the $7.6 million reported for the same period of 2015. The increase is attributable to increases in salary and benefits and other operating expenses, partially offset by a decline in loan and collection expenses. Salary and benefits expense increased in 2016 due to general annual salary increases, the rising cost of providing medical benefits, commission expenses and increase to the formal annual bonus program. The increase in other expenses is primarily due diligence costs related to the acquisition of Community State Bank along with other risk mitigation activities that the Company has undertaken.

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-16Mar-16Dec-15Sep-15Jun-15
UnauditedUnaudited UnauditedUnaudited
Balance Sheet Highlights
Cash and due from banks 35,037 27,734 19,425 32,517 27,003
Investment securities 24,378 23,440 26,689 27,518 29,204
Commercial loans 235,990 239,409 233,853 222,560 222,330
Consumer loans 31,388 28,790 29,014 30,204 27,637
Mortgage loans 129,186 118,486 118,693 105,353 93,825
Gross loans 396,564 386,685 381,560 358,117 343,792
ALLL (3,579) (3,562) (3,505) (4,439) (4,333)
Other assets 21,314 21,306 20,872 20,655 20,155
Total assets 473,714 455,603 445,041 434,368 415,821
Non-interest deposits 128,274 116,141 108,102 104,131 110,930
Interest bearing non-maturity deposits 186,702 175,805 181,703 182,865 157,860
Time deposits 78,602 84,451 86,166 81,277 82,268
Total deposits 393,578 376,397 375,971 368,273 351,058
Borrowings 44,000 44,775 34,775 34,775 34,775
Other liabilities 2,217 1,435 1,822 499 19
Equity 33,919 32,996 32,473 30,821 29,969
473,714 455,603 445,041 434,368 415,821
BALANCE SHEET RATIOS (unaudited)
Gross Loans to Deposits 100.76% 102.73% 101.49% 97.24% 97.93%
Earning Assets to Total Assets 88.86% 90.02% 91.73% 88.78% 89.70%
Securities and Cash to Assets 12.54% 11.23% 10.36% 13.82% 13.52%
Deposits to Assets 83.08% 82.62% 84.48% 84.78% 84.43%
Loan Loss Reserve to Gross Loans 0.90% 0.92% 0.92% 1.24% 1.26%
Net Charge-Offs to Gross Loans -0.02% -0.01% -0.02% -0.01% 0.03%
Leverage Ratio - The State Bank 9.79% 9.75% 9.90% 9.42% 9.55%
Book Value per Share $13.37 $13.02 $12.90 $12.26 $11.94
Income Statement Highlights - QTD Jun-16Mar-16Dec-15Sep-15Jun-15
UnauditedUnaudited UnauditedUnaudited
Interest income 4,510 4,526 4,481 4,232 4,005
Interest expense 585 573 560 541 529
Net interest income 3,925 3,953 3,921 3,691 3,476
Provision for loan loss - - (1,000) - -
Service charges on deposit accounts 181 179 203 202 207
Gain on sale of mortgage loans 706 671 392 425 598
Wealth management income 333 350 262 343 304
Other non-interest income 317 289 589 498 943
Total non-interest income 1,537 1,489 1,446 1,468 2,052
Salaries and benefits 2,230 2,405 2,209 2,186 2,194
Occupancy and equipment 580 563 568 557 554
Loan and collection 130 107 97 124 154
Other operating expenses 993 971 860 821 875
Total non-interest expense 3,933 4,046 3,734 3,688 3,777
Net Income before tax 1,529 1,396 2,633 1,471 1,751
Income Taxes 523 475 889 501 595
Net Income 1,006 921 1,744 970 1,156
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $0.40 $0.36 $0.69 $0.39 $0.46
Pre-tax pre-provision earnings 1,529 1,396 1,633 1,471 1,751
Net Charge offs (65) (52) (66) (33) 120
Return on Equity (ROE) 11.92% 11.15% 22.00% 8.81% 10.78%
Return on Assets (ROA) 0.88% 0.82% 1.62% 0.89% 1.10%
Efficiency Ratio 72.01% 74.35% 69.57% 71.49% 68.32%
Average Bank Prime 3.50% 3.50% 3.35% 3.25% 3.25%
Average Earning Asset Yield 4.38% 4.43% 4.53% 4.46% 4.42%
Average Cost of Funds 0.78% 0.77% 0.77% 0.75% 0.77%
Spread 3.59% 3.66% 3.76% 3.71% 3.65%
Net impact of free funds 0.22% 0.21% 0.21% 0.19% 0.19%
Net Interest Margin 3.82% 3.88% 3.97% 3.90% 3.84%
Income Statement Highlights - YTD Jun-16Jun-15 Dec-15Dec-14
UnauditedUnaudited
Interest income 9,036 7,938 16,652 14,655
Interest expense 1,158 1,052 2,152 1,713
Net interest income 7,878 6,886 14,500 12,942
Provision for loan loss - - (1,000) (450)
Service charges on deposit accounts 359 401 806 882
Gain on sale of mortgage loans 1,377 1,190 2,008 1,314
Wealth management income 683 649 1,255 1,228
Other non-interest income 607 1,421 2,506 2,301
Total non-interest income 3,026 3,661 6,575 5,725
Salaries and benefits 4,635 4,431 8,826 7,906
Occupancy and equipment 1,143 1,137 2,262 2,181
Loan and collection 237 344 565 652
Other operating expenses 1,964 1,643 3,324 3,289
Total non-interest expenses 7,979 7,555 14,977 14,028
Net Income before tax 2,925 2,992 7,098 5,089
Income Taxes 997 1,017 2,407 1,728
Net Income from continuing operations 1,928 1,975 4,691 3,361
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $0.76 $0.79 $1.87 $1.35
Pre-tax pre-provision earnings 2,925 2,992 6,098 4,639
Net Charge offs (118) 73 (26) 43
Return on Equity (ROE) 11.57% 11.12% 12.73% 13.03%
Return on Assets (ROA) 0.85% 0.97% 1.11% 0.94%
Efficiency Ratio 73.17% 71.63% 71.07% 75.15%
Average Bank Prime 3.50% 3.50% 3.50% 3.50%
Average Earning Asset Yield 4.41% 4.46% 4.48% 4.57%
Average Cost of Funds 0.78% 0.77% 0.77% 0.70%
Spread 3.63% 3.69% 3.71% 3.87%
Net impact of free funds 0.21% 0.18% 0.19% 0.17%
Net Interest Margin 3.84% 3.87% 3.90% 4.04%

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

Source:Fentura Financial, Inc.