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Fentura Financial, Inc Announces First Quarter 2016 Results

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  • Net Income before tax and provision for loan loss showed a 12.5% increase over prior year
  • Book value increased 13.3% to $13.02 per share over prior year
  • Commercial loan growth continues to show steady growth
  • Continued strength shown in non-interest income

FENTON, Mich., April 29, 2016 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX:FETM) reported net income for the three months ended March 31, 2016 of $921,000 compared to earnings of $1,744,000 reported for the fourth quarter of 2016.  On a pre-tax, pre-provision basis net income was $1.4 million in the current quarter compared to $1.6 million in the prior quarter.

Ronald L. Justice, President and CEO said, "I am pleased to report another quarter of solid results. Our strong loan pipeline and continued deposit growth, coupled with the recent acquisition announcement, creates considerable excitement and optimism for the future of our organization."

Balance Sheet

Total assets increased $10.6 million or 2.4% at March 31, 2016 compared to December 31, 2015, ending the quarter at $445.6 million.  Cash and due from banks totals increased 42.8%, to $27.7 million at March 31, 2016 compared to the $19.4 million reported at December 31, 2015.  This increase was primarily attributable to a single long-term borrowing taken out during the quarter at a fixed rate below treasury. Net loan balances increased $5.1 million or 1.3%, to $383.1 million at March 31, 2016 compared to December 31, 2015.  Loans increased from continued efforts to grow the Bank's client base. The commercial loan portfolio was the only one showing growth during the quarter, with the other  portfolios showing very slight declines. Year over year, loans increased $60.3 million or 18.7% when compared to March 31, 2015.  The increase in loans resulted from the Company's efforts to grow its loan portfolio with new and existing clients.  The Company has also been successful with offering customers variable rate loans which help to manage interest rate risk in changing interest rate environments.  The growth in mortgage loans has been somewhat fueled by the expansion of single-note close construction loans to borrowers.          

Deposit totals of $376.4 million were essentially flat with the $376.0 million reported at December 31, 2015.  There was movement amongst the portfolios, with core, non-interest bearing checking accounts growing $8.0 million, or 7.4% over the balance at the end of the prior quarter offset by declines in money market and time deposits.  We have seen an increase in municipal cash holdings, a portion of which tend to be relatively volatile, 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.

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 March 31, 2016 and December 31, 2015.   The decline in the leverage ratio quarter over quarter is primarily due the strong overall asset growth rate, while the increase in the risk-based capital ratio is mostly due to an increase in liquid assets.  Absent the change in calculation all three ratios would have shown a modest decline quarter over quarter.

  March 31,
2016
   December 31,
2015
  Regulatory
Well Capitalized
 
Tier 1 Leverage Capital Ratio  9.76%  9.90% 5.00%
Tier 1 Risk-Based Capital Ratio  11.10   11.00  8.00 
Total Risk-Based Capital Ratio  12.01   11.91  10.00 
           

Credit Quality

As seen in recent periods, the Company continued to benefit from improvement in credit quality during the 1st quarter of 2016.   At March 31, 2016 loan delinquencies to total loans were 0.14% compared to 0.16% at March 31, 2015.  Substandard assets totaled $700,000 at March 31, 2016, flat with the $700,000 reported at December 31, 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 $4.0 million for the quarter ended March 31, 2016 was relatively unchanged when compared to the $3.9 million reported in the fourth quarter of 2015 and improved by $600,000, or 17.6% relative to the $3.4 million reported in the first quarter of 2015.  Both interest income and interest expense were flat relative to the prior quarter, while both numbers were higher than the same period last year, largely due to increases in the loan and deposit portfolios. While the portfolios showed increases over the prior quarter, the net interest margin declined 9 basis points, largely due to the mix of assets and funding sources carried on the balance sheet.

Noninterest Income

Noninterest income was $1.5 million for the quarter ended March 31, 2016 compared to $1.4 million for the fourth quarter of 2015 and $1.6 million for the first quarter of 2015.  The increased revenue from wealth management activities contributed to the increase in the current period relative to both comparative prior periods.   These increases were offset in both periods by modest declines in service charges on deposit accounts and modest declines in mortgage banking revenue.           

Noninterest Expense

The Company recorded $4.0 million of noninterest expense in the quarter ended March 31, 2016, an increase of $300,000, or 8.0% over the level reported in the fourth quarter of 2015 and increased over the $3.8 million reported in the first quarter of 2015.  On a year over year basis, increases in salaries and benefits and other operating expenses were partially offset by decreases in loan and collection expenses. Quarter over quarter, the increase in noninterest expense is primarily based on an increase in salary and benefits expense and other expenses.  Salary and benefits expense increased in 2015 based on general annual salary increases, the rising costs of providing medical benefits, the return to historical levels of the Company's 401K match. The increase in other operating expenses is primarily due to expenses related to the aforementioned anticipated acquisition of Community Bancorp, Inc.

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.      
 
  Mar-16Dec-15Sep-15Jun-15Mar-15
  Unaudited UnauditedUnauditedUnaudited
Balance Sheet Highlights  
Cash and due from banks  27,734  19,425  32,517  27,003  32,947 
Investment securities  23,440  26,689  27,518  29,204  31,452 
Commercial loans  239,409  233,853  222,560  222,330  211,388 
Consumer loans  28,790  29,014  30,204  27,637  26,620 
Mortgage loans  118,486  118,693  105,353  93,825  89,302 
Gross loans  386,685  381,560  358,117  343,792  327,310 
ALLL  (3,562) (3,505) (4,439) (4,333) (4,453)
Other assets  21,306  20,872  20,655  20,155  26,394 
Total assets  455,603  445,041  434,368  415,821  413,650 
       
Non-interest deposits  116,141  108,102  104,131  110,930  99,390 
Interest bearing non-maturity deposits  175,805  181,703  182,865  157,860  162,719 
Time deposits  84,451  86,166  81,277  82,268  83,322 
Total deposits  376,397  375,971  368,273  351,058  345,431 
Borrowings  44,775  34,775  34,775  34,775  35,251 
Other liabilities  1,435  1,822  499  19  4,134 
Equity  32,996  32,473  30,821  29,969  28,834 
   455,603  445,041  434,368  415,821  413,650 
BALANCE SHEET RATIOS (unaudited)  
Gross Loans to Deposits  102.73% 101.49% 97.24% 97.93% 94.75%
Earning Assets to Total Assets  90.02% 91.73% 88.78% 89.70% 86.73%
Securities and Cash to Assets  11.23% 10.36% 13.82% 13.52% 15.57%
Deposits to Assets  82.62% 84.48% 84.78% 84.43% 83.51%
Loan Loss Reserve to Gross Loans  0.92% 0.92% 1.24% 1.26% 1.36%
Net Charge-Offs to Gross Loans  -0.01% -0.02% -0.01% 0.03% -0.01%
Leverage Ratio - The State Bank  9.75% 9.90% 9.42% 9.55% 9.07%
Book Value per Share $13.02 $12.90 $12.26 $11.94 $11.49 
 
Income Statement Highlights - QTD Mar-16Dec-15Sep-15Jun-15Mar-15
  Unaudited UnauditedUnauditedUnaudited
Interest income  4,526  4,481  4,232  4,005  3,933 
Interest expense  573  560  541  529  523 
Net interest income  3,953  3,921  3,691  3,476  3,410 
Provision for loan loss  -  (1,000) -  -  - 
Service charges on deposit accounts  179  203  202  207  194 
Gain on sale of mortgage loans  387  448  428  655  468 
Wealth management income  350  262  343  304  345 
Other non-interest income  573  533  495  886  601 
Total non-interest income  1,489  1,446  1,468  2,052  1,608 
Salaries and benefits  2,405  2,209  2,186  2,194  2,237 
Occupancy and equipment  563  568  557  554  583 
Loan and collection  107  97  124  154  190 
Other operating expenses  971  860  821  875  767 
Total non-interest expense  4,046  3,734  3,688  3,777  3,777 
Net Income before tax  1,396  2,633  1,471  1,751  1,241 
Income Taxes  475  889  501  595  422 
Net Income  921  1,744  970  1,156  819 
       
INCOME STATEMENT RATIOS/DATA (unaudited)     
Basic earnings per share $0.36 $0.69 $0.39 $0.46 $0.33 
Pre-tax pre-provision earnings  1,396  1,633  1,471  1,751  1,241 
Net Charge offs  (52) (66) (33) 120  (47)
Return on Equity (ROE)  11.15% 22.00% 8.81% 10.78% 11.40%
Return on Assets (ROA)  0.82% 1.62% 0.89% 1.10% 0.81%
Efficiency Ratio  74.35% 69.57% 71.49% 68.32% 75.27%
Average Bank Prime  3.50% 3.35% 3.25% 3.25% 3.25%
Average Earning Asset Yield  4.43% 4.53% 4.46% 4.42% 4.49%
Average Cost of Funds  0.77% 0.77% 0.75% 0.77% 0.77%
Spread  3.66% 3.76% 3.71% 3.65% 3.72%
Net impact of free funds  0.21% 0.21% 0.19% 0.19% 0.18%
Net Interest Margin  3.88% 3.97% 3.90% 3.84% 3.90%
 
Income Statement Highlights - YTD Mar-16Mar-15 Dec-15Dec-14
  UnauditedUnaudited   
Interest income  4,526  3,933   16,652  14,655 
Interest expense  573  523   2,152  1,713 
Net interest income  3,953  3,410   14,500  12,942 
Provision for loan loss  -  -   (1,000) (450)
Service charges on deposit accounts  179  194   806  882 
Gain on sale of mortgage loans  387  468   2,000  1,339 
Wealth management income  350  345   1,255  1,228 
Other non-interest income  573  601   2,514  2,276 
Total non-interest income  1,489  1,446   2,052  1,608 
Salaries and benefits  2,405  2,237   8,826  7,906 
Occupancy and equipment  563  583   2,262  2,181 
Loan and collection  107  190   565  652 
Other operating expenses  971  767   3,324  3,289 
Total non-interest expenses  4,046  3,734   3,777  3,777 
Net Income before tax  1,396  1,241   7,098  5,089 
Income Taxes  475  422   2,407  1,728 
Net Income from continuing operations  921  819   4,691  3,361 
       
INCOME STATEMENT RATIOS/DATA (unaudited)        
Basic earnings per share $0.36 $0.33  $1.87 $1.35 
Pre-tax pre-provision earnings  1,396  1,241   6,098  4,639 
Net Charge offs  (52) (47)  (26) 43 
Return on Equity (ROE)  11.18% 11.55%  12.73% 13.03%
Return on Assets (ROA)  0.82% 0.82%  1.11% 0.94%
Efficiency Ratio  74.35% 75.27%  71.07% 75.15%
Average Bank Prime  3.50% 3.50%  3.50% 3.50%
Average Earning Asset Yield  4.43% 4.49%  4.48% 4.57%
Average Cost of Funds  0.77% 0.77%  0.77% 0.70%
Spread  3.66% 3.72%  3.71% 3.87%
Net impact of free funds  0.21% 0.17%  0.19% 0.17%
Net Interest Margin  3.87% 3.90%  3.90% 4.04%
               
Contact: Ronald L. Justice President & CEO Fentura Financial, Inc. (810) 714-3902

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