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 4 th 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 2 nd 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-16 Jun-16 Mar-16 Dec-15 Sep-15
    Unaudited Unaudited Unaudited   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-16 Jun-16 Mar-16 Dec-15 Sep-15
    Unaudited Unaudited Unaudited Unaudited  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-16 Sep-15   Dec-15 Dec-14
    Unaudited Unaudited      
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. JusticePresident & CEOFentura Financial, Inc.(810) 714-3902

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