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Fentura Financial, Inc. Announces Third Quarter 2016 Results

  • Net Income exceeded prior year and prior quarter levels
  • Net interest income increased from balance sheet growth and loan trends compared to prior quarter and prior year
  • Book value increased 12.4% to $13.78 per share over prior year
  • Total assets continued to grow, crossing the $500 million threshold
  • Non-performing assets and loans fall to record low levels

FENTON, Mich., Nov. 01, 2016 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. reported net income for the three months ended September 30, 2016 of $1.3 million compared to earnings of $1.0 million reported for the second quarter of 2016 and $970,000 reported for the three months ended September 30, 2015. On a pre-tax, pre-provision basis net income was $1.9 million in the current quarter compared to $1.5 million in the prior quarter and $0.0 million for the quarter ended September 30, 2015. For the nine months ended September 30, 2016 the Company reported net income of $3.2 million compared to earnings of $2.9 million for the same period in 2015.

Ronald L. Justice, President and CEO said, “Our asset quality results are simply outstanding. We have literally no non-performing loans and in fact have no delinquencies. Additionally, we continue to move through the approval process with our regulatory agencies regarding our acquisition of Community Bancorp, Inc. and their subsidiary, Community State Bank and we intend to close on the transaction in the 4th quarter. In conjunction with the acquisition and in an effort to bolster our Tangible Common Equity Ratio at the Holding Company level, we have commitments to raise $15 million in common equity primarily to a small number of institutional investors at just above book value. All in all, we are very excited about our continued balance sheet growth and the prospects for the remainder of this year and beyond.”

Balance Sheet

Total assets increased $26.9 million or 5.7% at September 30, 2016 compared to June 30, 2016, ending the quarter at $500.6 million. When compared to December 31, 2015, assets at September 30, 2016 increased $55.5 million or 12.5%. Cash and due from banks increased 34.8%, to $47.2 million at September 30, 2016 compared to the $35.0 million reported at June 30, 2016. Increases in liquid assets during the quarter were funded almost exclusively by growth in deposit portfolios. Loan balances increased $17.1 million or 4.3% during the same period. Loans increased from continued efforts to grow the Bank’s client base. During the quarter, the Bank experienced growth principally in its commercial and mortgage portfolios. Loans totaled $413.6 million at September 30, 2016. Year over year, loans increased $55.5 million or 15.5%. The increase in loans resulted from the Company’s efforts to grow it’s loan portfolio with new and existing clients. Additionally, the Company has continued to have success in offering customers new and innovative products that fill their financial needs, such as variable rate loans and single-note close construction loans.

For the current period, deposit totals of $418.9 million, showed an increase of $25.3 million or 6.4% compared to the $393.6 million reported at June 30, 2016. The increase was mostly in interest bearing non-maturity deposits as the Company continued efforts to grow it’s client base. We have particularly 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. Year over year total deposits increased $50.6 million or 13.7%.

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 September 30, 2016, December 31, 2015, and September 30, 2015. As the table reflects, the Bank’s Tier 1 Leverage Capital ratio remains strong at September 30, 2016 due primarily to the improved level of capital from earnings. The decline in Tier 1 and Total Risk-Based Capital ratios year over year is primarily due to changes in the regulatory calculation of risk weighted assets along with the strong overall asset growth rate.

September 30,
2016
December 31,
2015
Septemer 30,
2015
Regulatory
Well Capitalized
Tier 1 Leverage Capital Ratio 9.52% 9.90% 9.42% 5.00%
Tier 1 Risk-Based Capital Ratio 11.37 11.00 10.66 8.00
Total Risk-Based Capital Ratio 12.27 11.91 11.85 10.00

Credit Quality

The Company continued to benefit from credit quality improvement during the 3rd quarter of 2016. At September 30, 2016 the bank held no delinquent loans in the portfolio, compared to loan delinquency to total loan ratios of 0.02% and 0.11% at June 30, 2016 and September 30, 2015, respectively. Substandard assets totaled $269,000 at the end of the third quarter down from the $472,000 and $934,000 reported at June 30, 2016 and September 30, 2015, respectively. These numbers tend to be leading indicators of potential 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 $4.1 million for the quarter ended September 30, 2016 reflects a 5.1% increase compared to the quarter ended June 30, 2016 and a 10.8% increase relative to the $3.7 million reported for the quarter ended September 30, 2015. The increase in the current quarter compared to both prior periods is attributable to improved levels of interest income from loan growth. As stated in the prior quarters, 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 $1.9 million for the quarter ended September 30, 2016 compared to $1.5 million for the second quarter of 2016 and $1.5 million for the third quarter of 2015. 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 compared to the comparative quarters. Additionally, wealth management income has shown a positive trend over the comparative periods. For the nine months ended September 30, 2016, noninterest income of $4.9 million represents a decrease of $223,000 or 4.3% over the same period in 2015. Other non-interest income decreased during the current quarter relative to the prior year periods, due primarily to the loss of income from data processing services previously rendered to an unrelated financial institution. This decrease was partially offset by the previously mentioned gain on the sales of mortgage loans along with increased revenue from wealth management activities.

Noninterest Expense

The Company recorded $4.0 million of noninterest expense in the quarter ended September 30, 2016, a 1.4% or $56,000 increase over the level reported in the second quarter of 2016 and an increase of $300,000, or 8.1% over the $3.7 million reported in the third quarter of 2015. No individual line items showed any material variances from the 2nd quarter. The current quarter increase over the same quarter in 2015 is primarily attributable to an increase in other operating expenses, largely due to elevated professional services costs due mostly to enhancements to the control and reporting environments along with contract for outside technology consulting. For the nine months ended September 30, 2016, noninterest expense totaled $12.0 million an increase over the $11.2 million reported for the same period of 2015. The increase is primarily attributable to salary and benefits and other operating expense. Salary and benefits expense increased in 2016 based on general annual salary increases and the rising cost of providing medical benefits, while other operating expenses increased largely due to the aforementioned elevated professional services costs.

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.
Sep-16Jun-16Mar-16Dec-15Sep-15
UnauditedUnauditedUnaudited Unaudited
Balance Sheet Highlights
Cash and due from banks 47,229 35,037 27,734 19,425 32,517
Investment securities 23,283 24,378 23,440 26,689 27,518
Commercial loans 244,211 235,990 239,409 233,853 222,560
Consumer loans 32,009 31,388 28,790 29,014 30,204
Mortgage loans 137,403 129,186 118,486 118,693 105,353
Gross loans 413,623 396,564 386,685 381,560 358,117
ALLL (3,645) (3,579) (3,562) (3,505) (4,439)
Other assets 20,070 21,314 21,306 20,872 20,655
Total assets 500,560 473,714 455,603 445,041 434,368
Non-interest deposits 125,393 128,274 116,141 108,102 104,131
Interest bearing non-maturity deposits 211,883 186,702 175,805 181,703 182,865
Time deposits 81,574 78,602 84,451 86,166 81,277
Total deposits 418,850 393,578 376,397 375,971 368,273
Borrowings 44,000 44,000 44,775 34,775 34,775
Other liabilities 2,656 2,217 1,435 1,822 499
Equity 35,054 33,919 32,996 32,473 30,821
500,560 473,714 455,603 445,041 434,368
BALANCE SHEET RATIOS (unaudited)
Gross Loans to Deposits 98.75% 100.76% 102.73% 101.49% 97.24%
Earning Assets to Total Assets 87.28% 88.86% 90.02% 91.73% 88.78%
Securities and Cash to Assets 14.09% 12.54% 11.23% 10.36% 13.82%
Deposits to Assets 83.68% 83.08% 82.62% 84.48% 84.78%
Loan Loss Reserve to Gross Loans 0.88% 0.90% 0.92% 0.92% 1.24%
Net Charge-Offs to Gross Loans -0.01% -0.02% -0.01% -0.02% -0.01%
Leverage Ratio - The State Bank 9.54% 9.79% 9.75% 9.90% 9.42%
Book Value per Share $13.78 $13.37 $13.02 $12.90 $12.26
Income Statement Highlights - QTD Sep-16Jun-16Mar-16Dec-15Sep-15
UnauditedUnauditedUnauditedUnaudited Unaudited
Interest income 4,657 4,510 4,526 4,481 4,232
Interest expense 601 585 573 560 541
Net interest income 4,056 3,925 3,953 3,921 3,691
Provision for loan loss - - - (1,000) -
Service charges on deposit accounts 192 181 179 203 202
Gain on sale of mortgage loans 872 706 671 392 425
Wealth management income 396 333 350 262 343
Other non-interest income 420 317 289 589 498
Total non-interest income 1,880 1,537 1,489 1,446 1,468
Salaries and benefits 2,209 2,230 2,405 2,209 2,186
Occupancy and equipment 610 580 563 568 557
Loan and collection 135 130 107 97 124
Other operating expenses 1,035 993 971 860 821
Total non-interest expense 3,989 3,933 4,046 3,734 3,688
Net Income before tax 1,947 1,529 1,396 2,633 1,471
Income Taxes 659 523 475 889 501
Net Income 1,288 1,006 921 1,744 970
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $0.51 $0.40 $0.36 $0.69 $0.39
Pre-tax pre-provision earnings 1,947 1,529 1,396 1,633 1,471
Net Charge offs (59) (65) (52) (66) (33)
Return on Equity (ROE) 14.73% 11.92% 11.15% 22.00% 8.81%
Return on Assets (ROA) 1.06% 0.88% 0.82% 1.62% 0.89%
Efficiency Ratio 67.20% 72.01% 74.35% 69.57% 71.49%
Average Bank Prime 3.50% 3.50% 3.50% 3.35% 3.25%
Average Earning Asset Yield 4.32% 4.38% 4.43% 4.53% 4.46%
Average Cost of Funds 0.76% 0.78% 0.77% 0.77% 0.75%
Spread 3.57% 3.59% 3.66% 3.76% 3.71%
Net impact of free funds 0.21% 0.22% 0.21% 0.21% 0.19%
Net Interest Margin 3.78% 3.82% 3.88% 3.97% 3.90%
Income Statement Highlights - YTD Sep-16Sep-15 Dec-15Dec-14
UnauditedUnaudited
Interest income 13,693 12,171 16,652 14,655
Interest expense 1,758 1,592 2,152 1,713
Net interest income 11,935 10,579 14,500 12,942
Provision for loan loss - - (1,000) (450)
Service charges on deposit accounts 551 603 806 882
Gain on sale of mortgage loans 2,249 1,615 2,008 1,314
Wealth management income 1,079 992 1,255 1,228
Other non-interest income 1,027 1,919 2,506 2,301
Total non-interest income 4,906 5,129 6,575 5,725
Salaries and benefits 6,844 6,617 8,826 7,906
Occupancy and equipment 1,753 1,694 2,262 2,181
Loan and collection 371 468 565 652
Other operating expenses 2,999 2,464 3,324 3,289
Total non-interest expenses 11,967 11,243 14,977 14,028
Net Income before tax 4,874 4,465 7,098 5,089
Income Taxes 1,657 1,518 2,407 1,728
Net Income from continuing operations 3,217 2,947 4,691 3,361
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share $1.27 $1.17 $1.87 $1.35
Pre-tax pre-provision earnings 4,874 4,465 6,098 4,639
Net Charge offs (177) 41 (26) 43
Return on Equity (ROE) 12.62% 10.21% 12.73% 13.03%
Return on Assets (ROA) 0.92% 0.94% 1.11% 0.94%
Efficiency Ratio 71.06% 71.57% 71.07% 75.15%
Average Bank Prime 3.50% 3.50% 3.50% 3.50%
Average Earning Asset Yield 4.38% 4.46% 4.48% 4.57%
Average Cost of Funds 0.77% 0.77% 0.77% 0.70%
Spread 3.61% 3.69% 3.71% 3.87%
Net impact of free funds 0.21% 0.18% 0.19% 0.17%
Net Interest Margin 3.81% 3.88% 3.90% 4.04%

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

Source:Fentura Financial, Inc.