Fentura Financial, Inc. Announces Fourth Quarter 2017 Results

FENTON, Mich., March 02, 2018 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. announces another strong quarter with net income of $2,162 and $8,676 for the three and 12 month periods ended December 31, 2017, respectively. The results for the year represent the highest level of earnings reported by Fentura Financial, Inc. with the quarterly results being the second-best quarter on record.

  • 18.00% increase in stock trading price over December 31, 2016
  • 95.36% increase in net income over 2016
  • 40.59% increase in earnings per share over 2016
  • 30.39% increase in gross loans since December 31, 2016
  • 11.62% increase in total deposits since December 31, 2016
  • Efficiency ratio improved to 66.20% as compared to 74.56% in 2016
  • Net interest income increased by 65.86% over 2016
  • 35.00% increase in noninterest income
  • Net interest margin to earning assets improved to 4.01% for the 12 months ended December 31, 2017

The Corporation’s ability to generate consistent, high quality, loan growth continues to be one of its most significant strengths. This loan growth has been the result of actively pursuing opportunities in existing market areas without sacrificing underwriting standards as credit quality indicators remain at historically low levels. The ability to grow loans at this pace was a direct result of the acquisition of The Community State Bank of St. Charles on December 31, 2016 and its strong deposit base.

While capital ratios have declined during the year, the Corporation’s capital ratios remain in excess of levels considered adequately capitalized by regulatory agencies. The decline in the capital ratios during the year have been a direct result of the robust loan growth.

Ronald L. Justice, President and CEO said, “Our consistent strong operating results reflect our team’s commitment to organically expand our franchise by attracting new and expanding existing client relationships in all business lines. By expanding client relationships we have enhanced net interest income while improving our efficiency, thus strengthening our bottom line.”

All historical information prior to December 31, 2016 excludes any impact of the Community State Bank acquisition.

Balance Sheet Breakdown and Analysis


12/31/17 9/30/17 6/30/17 3/31/17 12/31/16
ASSETS
Cash and cash equivalents $ 15,928 $ 16,450 $ 29,487 $ 68,202 $ 78,313
Total securities 55,323 67,155 70,699 72,472 72,458
Loans held for sale 2,067 4,835 4,664 514 3,869
Gross loans 672,530 628,552 591,753 554,415 515,775
Less allowance for loan losses 3,603 3,262 3,092 2,877 2,851
Net loans 668,927 625,290 588,661 551,538 512,924
All other assets 39,198 43,237 37,000 37,910 35,786
Total assets $ 781,443 $ 756,967 $ 730,511 $ 730,636 $ 703,350
LIABILITIES AND
SHAREHOLDERS' EQUITY
Total deposits $ 673,505 $ 625,588 $ 614,167 $ 630,055 $ 603,367
Total borrowed funds 46,000 68,000 59,000 45,000 45,000
Accrued interest and other liabilties 2,491 6,218 3,089 3,765 4,323
Total liabilities 721,996 699,806 676,256 678,820 652,690
Total shareholders' equity 59,447 57,161 54,255 51,816 50,660
Total liabilities and
shareholders' equity
$ 781,443 $ 756,967 $ 730,511 $ 730,636 $ 703,350
Selected Ratios
Net loans to total deposits 99.32% 99.95% 95.85% 87.54% 85.01%
ALLL to gross loans 0.54% 0.52% 0.52% 0.52% 0.55%
Book value per share $ 16.37 $ 15.75 $ 14.96 $ 14.31 $ 14.00
Tangible book value per share $ 14.96 $ 14.25 $ 13.42 $ 12.72 $ 13.11
Total capital to risk weighted assets* 10.46% 10.21% 10.36% 10.89% 11.24%
Tier 1 capital to risk weighted assets* 9.91% 9.70% 9.84% 10.36% 10.72%
CET1 captial ro risk weighted assets* 9.91% 9.70% 9.84% 10.36% 10.72%
Tier 1 capital to average assets* 8.57% 8.62% 8.30% 7.96% 11.69%
*The State Bank
12/31/2017 vs 9/30/2017 12/31/2017 vs 12/31/2016
$ Variance % Variance $ Variance % Variance
ASSETS
Cash and cash equivalents $ (522) -3.17% $ (62,385) -79.66%
Total securities (11,832) -17.62% (17,135) -23.65%
Loans held for sale (2,768) -57.25% (1,802) -46.58%
Gross loans 43,978 7.00% 156,755 30.39%
Less allowance for loan losses 341 10.45% 752 26.38%
Net loans 43,637 6.98% 156,003 30.41%
All other assets (4,039) -9.34% 3,412 9.53%
Total assets $ 24,476 3.23% $ 78,093 11.10%
LIABILITIES AND
SHAREHOLDERS' EQUITY
Total deposits $ 47,917 7.66% $ 70,138 11.62%
Total borrowed funds (22,000) -32.35% 1,000 2.22%
Accrued interest and other liabilties (3,727) -59.94% (1,832) -42.38%
Total liabilities 22,190 3.17% 69,306 10.62%
Total shareholders' equity 2,286 4.00% 8,787 17.35%
Total liabilities and
shareholders' equity
$ 24,476 3.23% $ 78,093 11.10%
Selected Ratios
Net loans to total deposits -0.63% 14.31%
ALLL to gross loans 0.02% -0.02%
Book value per share $ 0.62 3.94% $ 2.37 4.43%
Tangible book value per share $ 0.71 4.98% $ 1.85 5.42%
Total capital to risk weighted assets* 0.25% -0.78%
Tier 1 capital to risk weighted assets* 0.21% -0.81%
CET1 captial ro risk weighted assets* 0.21% -0.81%
Tier 1 capital to average assets* -0.05% -3.12%


The following tables outline the composition and changes in the loan portfolio as of:

12/31/17 9/30/17 6/30/17 3/31/17 12/31/16
Commercial real estate $ 298,920 $ 272,292 $ 240,627 $ 226,530 $ 232,543
Residential real estate 234,032 230,994 220,000 204,461 178,706
Commercial 82,667 73,553 79,063 75,916 66,912
Home equity 44,602 39,951 38,434 31,135 30,629
Installment 12,309 11,754 13,628 16,213 6,985
Total loans $ 672,530 $ 628,544 $ 591,752 $ 554,255 $ 515,775
12/31/2017 vs 9/30/2017 12/31/2017 vs 12/31/2016
$ Variance % Variance $ Variance % Variance
Commercial real estate $ 26,628 9.78% $ 66,377 28.54%
Residential real estate 3,038 1.32% 55,326 30.96%
Commercial 9,114 12.39% 15,755 23.55%
Home equity 4,651 11.64% 13,973 45.62%
Installment 555 4.72% 5,324 76.22%
Total loans $ 43,986 7.00% $ 156,755 30.39%

We have been successful in growing our loan portfolio in all segments over the past 12 months. This growth has been the direct result of efforts to grow organically in our existing markets with the liquidity provided from the acquisition of The Community State Bank.

The following tables outline the composition and changes in the deposit portfolio as of:

12/31/17 9/30/17 6/30/17 3/31/17 12/31/16
Demand $ 216,607 $ 208,494 $ 217,504 $ 213,538 $ 160,903
Savings 224,558 229,471 223,274 230,235 213,499
Money market demand 67,387 68,567 55,736 62,229 105,007
NOW 2,253 3,565 2,810 2,554 2,153
Time deposits 162,700 115,491 114,843 121,499 121,805
Total deposits $ 673,505 $ 625,588 $ 614,167 $ 630,055 $ 603,367
12/31/2017 vs 9/30/2017 12/31/2017 vs 12/31/2016
$ Variance % Variance $ Variance % Variance
Demand $ 8,113 3.89% $ 55,704 34.62%
Savings (4,913) -2.14% 11,059 5.18%
Money market demand (1,180) -1.72% (37,620) -35.83%
NOW (1,312) -36.80% 100 4.64%
Time deposits 47,209 40.88% 40,895 33.57%
Total deposits $ 47,917 7.66% $ 70,138 11.62%


Like loans, total deposits have grown both quarter over quarter and year over year. Most of the growth has come in the form of demand deposits and time deposits. The increase in demand deposits has been the direct result of our treasury management team working with municipalities and small business customers to ensure that we have the appropriate mix of products and services at a competitive price. The increase in time deposits has been the result of targeted CD specials and an increase in brokered and internet deposits to fund the remaining growth in the loan portfolio.

Income Statement Breakdown and Analysis


Quarter to Date
12/31/17 9/30/17 6/30/17 3/31/17 12/31/16
Interest and dividend income
Loans, including fees $ 8,524 $ 7,226 $ 6,931 $ 6,084 $ 4,836
Investments 341 339 323 343 116
Total interest and dividend income 8,865 7,565 7,254 6,427 4,952
Total interest expense 939 792 702 687 614
Net interest income 7,926 6,773 6,552 5,740 4,338
Provision for loan losses 348 136 125 - (900)
Net interest income, after provision for loan losses 7,578 6,637 6,427 5,740 5,238
Total noninterest income 2,220 3,396 2,138 1,234 1,792
Total noninterest expenses 7,400 5,581 5,742 5,095 5,191
Income before federal income taxes 2,398 4,452 2,823 1,879 1,839
Federal income taxes 236 1,164 884 592 636
Net income $ 2,162 $ 3,288 $ 1,939 $ 1,287 $ 1,203
Quarter to Date
12/31/17 9/30/17 6/30/17 3/31/17 12/31/16
Based on GAAP net income
Return on Average Assets 1.11% 1.76% 1.09% 0.75% 0.92%
Efficiency Ratio 72.94% 54.88% 66.08% 73.06% 84.68%
Earnings Per Share $ 0.60 $ 0.91 $ 0.53 $ 0.35 $ 0.41
Yield on Earning Assets 5.13% 4.40% 4.45% 4.19% 4.41%
Rate on Int. Bearing Liabilities 0.82% 0.67% 0.57% 0.55% 0.73%
Net Interest Margin to Earning Assets 4.59% 3.94% 4.02% 3.74% 3.86%
Based on adjusted net income from operations
Return on Average Assets 0.84% 1.03% 1.07% 0.70% 0.79%
Efficiency Ratio 74.22% 63.73% 66.73% 73.29% 72.81%
Earnings Per Share $ 0.49 $ 0.53 $ 0.52 $ 0.33 $ 0.35
Based on adjusted net interest income
Yield on Earning Assets 4.54% 4.24% 4.29% 4.01% 4.41%
Rate on Int. Bearing Liabilities 0.83% 0.68% 0.58% 0.56% 0.73%
Net Interest Margin to Earning Assets 4.01% 3.79% 3.87% 3.58% 3.86%
GAAP net income $ 2,162 $ 3,288 $ 1,939 $ 1,287 $ 1,203
Provision for loan losses (net of tax) 229 90 83 - (594)
Acquisition related items (net of tax)
Accretion on purchased loans (676) (179) (175) (173) -
Amortization of core deposit intangible 105 104 104 104 -
Acquisition related expenses 296 - - - 480
Accretion on acquired OREO - - (53) - -
Amortization on acquired time deposits 10 10 9 9 -
Amortization on purchased MSRs 8 8 7 7 -
Total acquisition related items (net of tax) (257) (57) (108) (53) 480
One-time items (net of tax)
Net gain from BOLI death benefit - (1,155) - - -
Re-valuation of net deferred tax liabilities (489) - - - -
Net gain from note receivable - (172) - - -
Total one-time items (net of tax) (489) (1,327) - - -
Adjusted net income from operations $ 1,645 $ 1,994 $ 1,914 $ 1,234 $ 1,089
GAAP net interest income $ 7,926 $ 6,773 $ 6,552 $ 5,740 $ 4,338
Accretion on purchased loans (1,021) (272) (266) (263) -
Amortization on acquired time deposits 15 15 14 14 -
Adjusted net interest income $ 6,920 $ 6,516 $ 6,300 $ 5,491 $ 4,338

Year Ended December 31 Variance
2017 2016 $ %
Interest and dividend income
Loans, including fees $ 28,765 $ 18,119 $ 10,646 58.76%
Investments 1,346 526 820 155.89%
Total interest and dividend income 30,111 18,645 11,466 61.50%
Total interest expense 3,120 2,372 748 31.53%
Net interest income 26,991 16,273 10,718 65.86%
Provision for loan losses 609 (900) 1,509 -167.67%
Net interest income, after provision for loan losses 26,382 17,173 9,209 53.62%
Total noninterest income 8,988 6,658 2,330 35.00%
Total noninterest expenses 23,818 17,097 6,721 39.31%
Income before federal income taxes 11,552 6,734 4,818 71.55%
Federal income taxes 2,876 2,293 583 25.43%
Net income $ 8,676 $ 4,441 $ 4,235 95.36%
Year Ended December 31 Variance
2017 2016 $ %
Based on GAAP net income
Return on Average Assets 1.19% 0.93% 0.25%
Efficiency Ratio 66.20% 74.56% -8.36%
Earnings Per Share $ 2.39 $ 1.70 $ 0.69 40.59%
Yield on Earning Assets 4.55% 4.38% 0.17%
Rate on Int. Bearing Liabilities 0.65% 0.76% -0.11%
Net Interest Margin to Earning Assets 4.08% 3.83% 0.25%
Based on adjusted net income from operations
Return on Average Assets 0.93% 0.91% 0.02%
Efficiency Ratio 69.39% 74.56% -5.16%
Earnings Per Share $ 1.87 $ 1.66 $ 0.21 12.65%
Based on adjusted net interest income
Yield on Earning Assets 4.28% 4.38% -0.11%
Rate on Int. Bearing Liabilities 0.66% 0.76% -0.09%
Net Interest Margin to Earning Assets 3.82% 3.83% -0.01%
GAAP net income $ 8,676 $ 4,441 $ 4,235 95.36%
Provision for loan losses (net of tax) 402 (594) 996 -167.68%
Acquisition related items (net of tax)
Accretion on purchased loans (1,203) - (1,203) N/M
Amortization of core deposit intangible 417 - 417 N/M
Acquisition related expenses 296 480 (184) -38.33%
Accretion on acquired OREO (53) - (53) N/M
Amortization on acquired time deposits 38 - 38 N/M
Amortization on purchased MSRs 30 - 30 N/M
Total acquisition related items (net of tax) (475) 480 (955) -198.96%
One-time items (net of tax)
Net gain from BOLI death benefit (1,155) - (1,155) N/M
Re-valuation of net deferred tax liabilities (489) - (489) N/M
Net gain from note receivable (172) - (172) N/M
Total one-time items (net of tax) (1,816) - (1,816) N/M
Adjusted net income from operations $ 6,787 $ 4,327 $ 2,460 56.85%
GAAP net interest income $ 26,991 $ 16,273 $ 10,718 65.86%
Accretion on purchased loans (1,822) - (1,822) N/M
Amortization on acquired time deposits 58 - 58 N/M
Adjusted net interest income $ 25,227 $ 16,273 $ 8,954 55.02%


To effectively compare core operating results from period to period, the impact of the provision for loan losses, acquisition related items, and one-time items have been isolated.

As outlined in the preceding tables, except for the fourth quarter of 2017, the Corporation has been able to consistently increase adjusted net income from operations. The decline in the fourth quarter of 2017 was primarily the result of increases in compensation expenses. Compensation expenses are expected to normalize in future periods. Included in the one-time items for the fourth quarter of 2017 was the impact of re-valuing the Corporation’s net deferred tax liabilities as a result of the Tax Cuts and Jobs Act of 2017. While the re-valuing of the net deferred tax liability is a one-time item, the Corporation anticipates an increase in net income in 2018 because of lower corporate tax rates resulting from the implementation of the Tax Cuts and Jobs Act of 2017.

The Corporation has also been successful at consistently increasing adjusted net interest income. This increase continues to be driven primarily through increases in loans. Despite the strong growth in the loan portfolio during 2017, the Corporation maintain relatively strong interest margins. As the Corporation expects to grow its loan portfolio in 2018 at modest levels, net interest income is expected to continue to increase.

About Fentura Financial, Inc. and The State Bank

Fentura Financial, Inc., which had total assets of $781,443 as of 12/31/2017, is the holding company for The State Bank. It was formed in 1987 and is traded on the OTCQX exchange under the symbol FETM, and was recognized as one of the Top 50 performing stocks in 2016 on that exchange.

The State Bank is a full-service, 4-Star Bauer Financial rated commercial, retail and trust bank headquartered in Fenton, Michigan. It currently operates 15 full-service branches in Genesee, Livingston, Oakland, Saginaw, and Shiawassee Counties and loan production offices in Washtenaw and Saginaw Counties. The State Bank’s commercial department provides a complete array of products including lines of credit, term loans, commercial mortgages, SBA loans and a full-suite of cash management products. The retail department offers personal checking, savings, time and IRA deposit accounts and a wide array of loan products including home equity, auto and personal loans. The residential loan department offers construction, purchase and refinance residential mortgage loans. The wealth management department offers a full-service suite of trust and portfolio management services. The aim of The State Bank is to become and remain “Your Financial Partner for Life.” More information can be found 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.

Contact: Ronald L. Justice
President & CEO
Fentura Financial, Inc.
810.714.3902

Source:Fentura Financial, Inc.