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Fentura Financial, Inc Announces Second Quarter 2015 Results

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  • Net Income exceeded prior quarter and prior year levels
  • Net interest income and noninterest income increased from balance sheet growth and loan trends compared to prior quarter and prior year
  • Book value increased 13.6% to $11.94 per share over prior year
  • Continued growth shown in assets and core deposits


FENTON, Mich., July 29, 2015 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX:FETM) reported net income for the three months ended June 30, 2015 of $1.2 million compared to earnings of $819,000 reported for the first quarter of 2015 and $935,000 reported for the three months ended June 30, 2014.     On a pre-tax, pre-provision basis net income was $1.8 million in the current quarter compared to $1.2 million in the prior quarter and $1.4 million reported for the quarter ended June 30, 2014.  For the six months ended June 30, 2015 the Company reported net income of $2.0 million compared to earnings of $1.5 million for the same period in 2014.

Ronald L. Justice, President and CEO said, "I am very pleased with our strong operating results and the continued growth of our loan and deposit portfolios.  Our balance sheet growth has continued to strengthen net interest income and the current rate environment has supported solid results from mortgage banking and our wealth management group. I remain optimistic and excited about the future and the ability to enhance our business and financial performance through our relationship and community focused business model."

Balance Sheet

Total assets increased $2.2 million or 0.5% at June 30, 2015 compared to March 31, 2015, ending the quarter at $415.8 million.  When compared to December 31, 2014, assets at June 30, 2015 increased $20.6 million or 5.2%.  Cash and due from banks totals decreased 18.0%, to $27.0 million at June 30, 2015 compared to the $32.9 million reported at March 31, 2015.  Cash totals declined during the quarter due to the funding of new loans.  Loan balances increased $16.5 million or 5.0% during the same period.  Loans increased from continued efforts to grow the Bank's client base. During the quarter, the Bank experienced growth in its consumer, mortgage and commercial loan portfolios. Loans totaled $343.8 million at June 30, 2015.  Year over year, loans increased $59.2 million or 20.8%.  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 variable rate loans which help to manage interest rate risk in changing interest rate environments.           

Deposit totals of $351.1 million, showed an increase of $5.6 million or 1.6% compared to the $345.4 million reported at March 31, 2015.  The increase has primarily been in non-interest bearing and other non-maturity deposits as the Company continued efforts to grow its client base.  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, 2015, deposits increased $23.1 million or 7.1%.

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, 2015, December 31, 2014, and June 30, 2014.   As the table reflects, the Bank's Tier 1 Leverage Capital ratio has strengthened during 2015 due primarily to the improved level of capital from earnings. The decline in Tier 1 and Total Risk-Based Capital ratios compared to prior periods is primarily due to changes in the regulatory calculation of risk weighted assets along with the strong overall asset growth rate.

     
 June 30,   December 31, June 30, Regulatory
  2015   2014 2014   Well Capitalized
                
Tier 1 Leverage Capital Ratio  9.53%  9.83%  9.70%  5.00%
Tier 1 Risk-Based Capital Ratio  10.78   11.80   11.67   8.00 
Total Risk-Based Capital Ratio  11.99   13.05   12.92   10.00 


Credit Quality

The Company continued to benefit from credit quality improvement during the 2nd quarter of 2015.   At June 30, 2015, loan delinquencies to total loans were 0.12% compared to 0.16% and 0.42% at March 31, 2015 and June 30, 2014, respectively.  Substandard assets totaled $1.2 million at the end of the second quarter down from the $2.8 million and $5.1 million reported at March 31, 2015 and June 30, 2014, respectively.    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 2014.

Net Interest Income

Net interest income of $3.5 million for the quarter ended June 30, 2015 reflects a 1.9% increase compared to the quarter ended March 31, 2015 and a 10.0% increase relative to the $3.2 million reported for the quarter ended June 30, 2014.    The increase in the current quarter compared to both prior periods is attributable to improved levels of interest income from loan growth.  While the portfolios showed increases over prior periods, the net interest margin declined during the period, largely due the Company's strategy to offer competitively priced variable rate loans in order to more effectively manage the Company's interest rate risk. Additionally, when compared to the prior year, increases in rates on time deposits and the use of FHLB borrowings are also related to the overall management of interest rate risk, primarily by lengthening the terms of our funding portfolios.

Noninterest Income

Noninterest income was $2.1 million for the quarter ended June 30, 2015 compared to $1.6 million for the first quarter of 2015 and $1.8 million for the second quarter of 2014.  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 relative to both comparative prior periods.   Additionally, other non-interest income increased during the current quarter relative to both comparative prior periods, due to gains on the sale of Other Real Estate Owned and a gain on an investment held by the holding company.  For the six months ended June 30, 2015, noninterest income of $3.7 million represents an increase of $735,000 or 25.1% over the same period in 2014.  The substantial increase is attributable to the previously mentioned gain on the sales of mortgage loans along with increased revenue from wealth management activities. 

Noninterest Expense

The Company recorded $3.8 million of noninterest expense in the quarter ended June 30, 2015, flat with the level reported in the first quarter of 2015 and an increase over the $3.6 million reported in the second quarter of 2014.  The current quarter increase over the 2nd quarter of 2014 is primarily attributable to salary and benefits.  These expenses increased due to commissions paid associated with mortgage loan volumes and the strong gains on the sales of these loans in the secondary market.  For the six months ended June 30, 2015, noninterest expense totaled $7.6 million an increase over the $6.9 million reported for the same period of 2014.  The increase is attributable to salary and benefits expense.  Salary and benefits expense increased in 2015 based on general annual salary increases, the rising cost of providing medical benefits, and an accrual increase to the formal annual bonus program. 

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-15Mar-15Dec-14Sep-14Jun-14 
 UnauditedUnaudited UnauditedUnaudited 
Balance Sheet Highlights 
Cash and due from banks   27,003    32,947    19,522    14,887    11,276  
Investment securities   29,204    31,452    33,008    34,702    33,768  
Commercial loans   222,330    211,388    206,914    192,819    186,884  
Consumer loans   27,637    26,620    27,110    27,308    26,399  
Mortgage loans   93,825    89,302    85,945    83,305    71,348  
Gross loans   343,792    327,310    319,969    303,432    284,631  
ALLL   (4,333)   (4,453)   (4,406)   (4,782)   (4,830) 
Other assets   20,155    26,394    27,175    27,113    27,062  
Total assets   415,821    413,650    395,268    375,352    351,907  
       
Non-interest deposits   110,930    99,390    91,738    85,573    84,604  
Interest bearing non-maturity deposits   157,860    162,719    154,499    162,972    149,092  
Time deposits   82,268    83,322    81,686    71,711    64,396  
Total deposits   351,058    345,431    327,923    320,256    298,092  
Borrowings   34,775    35,251    34,817    24,817    24,817  
Other liabilities   19    4,134    4,386    3,209    2,787  
Equity   29,969    28,834    28,142    27,070    26,211  
    415,821    413,650    395,268    375,352    351,907  
BALANCE SHEET RATIOS (unaudited) 
Gross Loans to Deposits 97.93% 94.75% 97.57% 94.75% 95.48% 
Earning Assets to Total Assets 89.70% 86.73% 89.30% 90.08% 90.48% 
Securities and Cash to Assets 13.52% 15.57% 13.29% 13.21% 12.80% 
Deposits to Assets 84.43% 83.51% 82.96% 85.32% 84.71% 
Loan Loss Reserve to Gross Loans 1.26% 1.36% 1.38% 1.58% 1.70% 
Net Charge-Offs to Gross Loans 0.03% -0.01% -0.02% 0.02% 0.03% 
Leverage Ratio - The State Bank 9.53% 9.38% 9.83% 9.43% 9.70% 
Book Value per Share$  11.94 $  11.49 $  11.24 $  10.84 $  10.51  
 
Income Statement Highlights - QTDJun-15Mar-15Dec-14Sep-14Jun-14 
 UnauditedUnauditedUnauditedUnauditedUnaudited 
Interest income   4,005    3,933    3,951    3,709    3,556  
Interest expense   529    523    514    436    397  
Net interest income   3,476    3,410    3,437    3,273    3,159  
Provision for loan loss   -     -     (450)   -     -   
Service charges on deposit accounts   207    194    232    232    212  
Gain on sale of mortgage loans   655    609    530    285    410  
Wealth management income   304    345    289    359    316  
Other non-interest income   886    460    443    429    911  
Salaries and benefits   2,194    2,237    2,116    1,921    2,007  
Occupancy and equipment   554    583    552    539    542  
Loan and collection   154    190    267    135    110  
Other operating expenses   875    767    825    762    947  
Net Income before tax   1,751    1,241    1,621    1,221    1,402  
Income Taxes   595    422    559    414    467  
Net Income   1,156    819    1,062    807    935  
       
INCOME STATEMENT RATIOS/DATA (unaudited) 
Basic earnings per share$  0.46 $  0.33 $  0.43 $  0.32 $  0.38  
Pre-tax pre-provision earnings   1,751    1,241    1,171    1,221    1,402  
Net Charge offs   120    (47)   (74)   48    86  
Return on Equity (ROE) 10.78% 11.40% 15.40% 12.00% 14.27% 
Return on Assets (ROA) 1.10% 0.81% 1.10% 0.88% 1.08% 
Efficiency Ratio 68.32% 75.27% 76.25% 73.33% 72.00% 
Average Bank Prime 3.25% 3.25% 3.25% 3.25% 3.25% 
Average Earning Asset Yield 4.42% 4.49% 4.60% 4.52% 4.56% 
Average Cost of Funds 0.77% 0.77% 0.78% 0.69% 0.68% 
Spread 3.65% 3.72% 3.83% 3.83% 3.88% 
Net impact of free funds 0.19% 0.18% 0.18% 0.17% 0.17% 
Net Interest Margin 3.84% 3.90% 4.01% 3.99% 4.05% 
 
Income Statement Highlights - YTDJun-15Jun-14 Dec-14Dec-13 
 UnauditedUnaudited    
Interest income   7,938    6,995     14,655    12,481  
Interest expense   1,052    764     1,713    1,454  
Net interest income   6,886    6,231     12,942    11,027  
Provision for loan loss   -     -      (450)   7  
Service charges on deposit accounts   401    418     882    897  
Gain on sale of mortgage loans   1,265    523     1,339    1,613  
Wealth management income   649    580     1,228    996  
Other non-interest income   1,346    1,405     2,276    2,077  
Salaries and benefits   4,431    3,869     7,906    6,925  
Occupancy and equipment   1,137    1,089     2,181    2,152  
Loan and collection   344    250     652    688  
Other operating expenses   1,643    1,702     3,288    3,472  
Net Income before tax   2,992    2,247     5,090    3,366  
Income Taxes   1,017    755     1,728    (5,118) 
Net Income from continuing operations   1,975    1,492     3,362    8,484  
       
INCOME STATEMENT RATIOS/DATA (unaudited)     
Basic earnings per share$  0.79 $  0.60  $  1.35 $  3.44  
Pre-tax pre-provision earnings   2,992    2,247     4,640    3,373  
Net Charge offs   73    69     44    68  
Return on Equity (ROE) 11.12% 12.43%  13.06% 46.78% 
Return on Assets (ROA) 0.97% 0.88%  0.94% 2.71% 
Efficiency Ratio 71.63% 75.46%  75.15% 79.68% 
Average Bank Prime 3.25% 3.25%  3.25% 3.25% 
Average Earning Asset Yield 4.46% 4.58%  4.57% 4.71% 
Average Cost of Funds 0.77% 0.66%  0.70% 0.69% 
Spread 3.69% 3.92%  3.87% 4.02% 
Net impact of free funds 0.18% 0.16%  0.17% 0.15% 
Net Interest Margin 3.87% 4.09%  4.04% 4.16% 


 

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

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