Press Release

CORRECTING and REPLACING -- Fentura Financial, Incorporated Announces Fourth Quarter and Full Year 2016 Results

Company Release - 3/7/2017 3:19 PM ET

FENTON, Mich., March 07, 2017 (GLOBE NEWSWIRE) -- In a release issued under the same headline on March 3, 2017 by Fentura Financial, Inc (OTCQX:FETM), please note that three financial tables were excluded from the release in error. The corrected release follows:

Fentura Financial, Incorporated Announces Fourth Quarter and Full Year 2016 Results

Fentura Financial, Inc (the “Company” or “Fentura”) (OTCQX:FETM), the holding company for The State Bank (the “Bank”), today announced its earnings for the fourth quarter and full year of 2016.  Highlights include the following:

  • Net Income before tax, provision for loan losses, and merger transaction expense for the year exceeded levels reported for 2015
  • Book value increased 8.9% over prior year to $14.05
  • Year over year share price appreciated 15.4%
  • Assets, excluding Community acquisition, grew $87.0 million during the year
  • Loan growth exceeded expectations for the year, growing by $54.0 million, excluding Community acquisition
  • Deposits, excluding Community acquisition, grew $56.0 million during the year 

As previously reported, Fentura completed its acquisition of St. Charles based Community Bancorp, Inc. (“Community”) the holding company for Community State Bank, effective on December 31, 2016. Under the terms of the merger agreement, Community was merged with and into Fentura and The State Bank.

In December 2016, Fentura issued 1,071,428 shares of common stock from a private placement offering for an aggregate purchase price of $15 million.  The proceeds of the offering were used largely to fund the acquisition of Community. 

Fentura reported pre-tax, pre-provision for loan losses, and pre-merger transaction expense net income for the three months ended December 31, 2016 of $1.7 million compared to pre-tax and pre-provision earnings of $1.9 million and $1.6 million reported for the third quarter of 2016 and the fourth quarter of 2015, respectively.  On an after-tax basis, quarterly earnings of $900 thousand for the fourth quarter of 2016 compared to $1.3 million and $1.7 million for the third quarter of 2016 and the fourth quarter of 2015, respectively.  For the year, Fentura reported pre-tax, pre-provision, and pre-merger transaction expense net income of $6.5 million compared to the $6.1 million reported for 2015.  On an after-tax basis, net income was $4.1 million in 2016 compared to $4.7 million in 2015.     

Ronald L. Justice, President and CEO stated, “2016 was a very active, productive, and successful year.  Throughout the year we experienced solid improvement in earnings from core operations, largely from our continued organic growth of both our deposits and loans.  In addition to our strong core operating results and growth, our franchise grew from the acquisition of Community Bancorp, Inc.  We remain committed to our markets, including those new to us as a result of the Community acquisition, and are confident in our ability to grow market share as we move forward.” 

Balance Sheet

Total assets, increased $203.0 million or 40.6% at December 31, 2016 compared to September 30, 2016, ending the year at $703.5 million.  Of the increase in total assets, $31.5 million or 6.3% was from organic growth and $171.5 million related to the Community acquisition.  Cash and due from banks increased 303.2%, to $78.3 million at December 31, 2016 compared to the $19.4 million reported at December 31, 2015.  This increase was primarily attributable to the Community acquisition, deposit growth and the increase in capital from a downstream dividend from Fentura following the issuance of new shares detailed above.  Gross loan balances, increased $107.4 million or 26.0% compared to the prior quarter.  Of this increase in loans, $22.0 million or 20.5% was from organic growth with the remainder from the Community acquisition.  The organic loan growth was from continued efforts to grow the Bank’s client base. During the quarter, the Bank continued to experience growth in both its mortgage and commercial loan portfolios. Gross loans totaled $521.0 million at December 31, 2016, an increase of $139.4 million or 36.5% when compared to December 31, 2015.  Of this year to year loan increase, $54.0 million was from organic growth with the remainder from the Community acquisition.  As noted previously, the organic increase in loans resulted from the Company’s efforts to grow its loan portfolio with new and existing clients.           

Deposits, totaled $603.4 million at December 31, 2016, an increase of $184.5 million or 44.1% compared to the $418.9 million reported at the end of the prior quarter.  Of this deposit growth, $13.1 million or 3.1% was from organic growth during the quarter with the remainder from the Community acquisition.  Deposits increased $227.4 million or 60.5% for the year ended December 31, 2016 when compared to December 31, 2015.  Of this strong year to year deposit increase, $56.0 million or 14.9% was from core growth with the remainder from the Community acquisition.  The core growth throughout the year occurred in non-interest bearing and non-maturing interest bearing deposits as the Company continued to grow its consumer, commercial and municipal client base.

Capital

Fentura Financial, Inc. and The State Bank continued 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 a strong Tier 1 Leverage Capital Ratio at December 31, 2016 and December 31, 2015.  The increase in the Tier 1 Leverage Ratio was primarily due to the increase in capital from operating results and the timing of the acquisition of Community, while the modest decline in the total risk-based capital ratio year over year is primarily due to modest changes in risk categories based on strong overall asset growth.

  December 31, December 31, Regulatory 
  2016 2015 Well Capitalized 
Tier 1 Leverage Capital Ratio 11.85% 9.90% 5.00% 
Tier 1 Risk-Based Capital Ratio 10.89  11.00  8.00  
Total Risk-Based Capital Ratio 11.41  11.91  10.00  
           

Credit Quality

Throughout 2016, the Company continued to benefit from improvement in credit quality.  At December 31, 2016, loan delinquencies to total loans, excluding loans acquired from Community, were 0.00% compared to 0.06% at December 31, 2015.  Substandard assets, again excluding assets acquired from Community, totaled $152,000 at December 31, 2016, down from $745,000 reported at December 31, 2015.  The low level of loan delinquencies and substandard assets eliminated the need for additional provisions to the allowance for loan losses throughout all of 2016 and in fact, contributed to a reversal of $900,000 from the allowance for the year ended December 31, 2016.  Comparatively, for the year ended December 31, 2015 the Bank reversed $1.0 million from the allowance.

Net Interest Income

Net interest income of $4.3 million for the quarter ended December 31, 2016 improved compared to the $4.1 million and the $3.9 million reported in the third quarter of 2016 and the fourth quarter of 2015, respectively.  Interest income improved during the three months ended December 31, 2016, from interest on new loans added during the quarter and throughout the entire year.  Interest expense increased for the quarter ended December 31, 2015 as well, compared to the quarters ended September 30, 2016 and December 31, 2015 because of interest expense on time and other interest bearing deposits added during the quarter and throughout the year.  

On a year to date basis, net interest income at $16.3 million in 2016 compared favorably to the $14.5 million reported in 2015.  The year-over-year improvement is due to the increase in interest income from loan growth throughout the year. 

Noninterest Income

Noninterest income was $1.8 million for the quarter ended December 31, 2016 compared to $1.9 million for the third quarter of 2016 and $1.4 million for the fourth quarter of 2015.  The modest decline comparing the fourth quarter results to the prior quarter is attributable to a decline in Wealth Management income in the current quarter. Similar to what we reported last year for the same period, the decline was based on the level and timing of income from client investment transactions.  The primary positive variance comparing the current period to the same period in 2015 is greater volume of mortgage loans sold in the secondary market and accordingly, gains on sale and servicing rights from those loans.

For the twelve months ended December 31, 2016, noninterest income totaled $6.7 million compared to $6.6 million reported for the prior year.  The increase in 2016 is primarily attributable to improved gain on sale and servicing rights from increased volume of mortgage loans sold in the secondary market with servicing rights maintained.    

Noninterest Expense

The Company recorded $4.4 million of noninterest expense, excluding merger transaction expense, in the quarter ended December 31, 2016, an increase compared to the $4.0 million and $3.7 million reported in the third quarter of 2016 and in the fourth quarter of 2015, respectively.  The quarterly increase compared to both comparative quarters is primarily due to funding the bonus accrual and regular salary increases based on strong Company financial performance and an increase in commercial and mortgage based commission based on strong growth.  Other outside services fees also increased in the current period when compared to the two comparative quarters, based on fees paid to consultants relating to technology and other operational areas.  For the year, noninterest expense, excluding merger transaction expense was $16.4 million in 2016 compared to $15.0 million reported during 2015.  The increase in noninterest expense in 2016 is primarily due to an increase in salary and benefits expense, which increased largely because of mortgage-related and other general employee compensation as well as the increase in outside service fees described above.  

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 Genesee, Livingston, Oakland, Saginaw and Shiawassee Counties. The Bank offers comprehensive financial services including commercial, consumer, mortgage, trust and financial planning services, and deposit products.  The Bank also proudly provides services through on-line and mobile banking services.  More information about The State Bank is available at www.thestatebank.com.

About Fentura Financial and The State Bank

Fentura Financial 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 for 2015 on that exchange.

The State Bank is a full-service, 5-Star Bauer Financial rated commercial, retail and trust bank headquartered in Fenton, Michigan. It has assets of approximately $680 million. It currently operates fifteen full-service branches located 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 all types 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. 

               
 Dec 2016 Sep 2016 Jun 2016 Mar 2016 Dec 2015
 Unaudited Unaudited Unaudited Unaudited   
Balance Sheet Highlights              
Cash and due from banks78,313  47,229  35,037  27,734  19,425 
Fed funds sold0  0  0  0  0 
Investment securities73,902  23,283  24,378  23,440  26,689 
Commercial loans325,275  244,211  235,957  239,409  233,853 
Consumer loans37,618  32,009  31,388  28,790  29,014 
Mortgage loans158,107  137,403  129,220  118,486  118,693 
Gross loans521,000  413,623  396,565  386,685  381,560 
ALLL(2,851) (3,645) (3,579) (3,562) (3,505)
Other assets33,177  20,070  21,313  21,306  20,872 
Total assets703,541  500,560  473,714  455,603  445,041 
               
Non-interest deposits160,903  125,393  128,274  116,141  108,102 
Interest bearing non-maturity deposits  332,203  211,883  186,702  175,805  181,703 
Time deposits110,261  81,574  78,602  84,451  86,166 
Total deposits  603,367    418,850    393,578    376,397    375,971 
Fed funds purchased0  0  0  0  0 
Borrowings44,000  44,000  44,000  44,775  34,775 
Other liabilities5,323  2,656  2,217  1,435  1,822 
Equity50,851  35,054  33,919  32,996  32,473 
 703,541  500,560  473,714  455,603  445,041 
BALANCE SHEET RATIOS              
Gross Loans to Deposits86.35  98.75  100.76  102.73  101.49 
Earning Assets to Total Assets84.56  87.28  88.86  90.02  91.73 
Securities and Cash to Assets21.64  14.09  12.54  11.23  10.36 
Deposits to Assets85.76  83.68  83.08  82.62  84.48 
Loss Reserve to Gross Loans0.55  0.88  0.90  0.92  0.92 
Net Charge-Offs to Gross Loans-0.01% -0.01% -0.02% -0.01% -0.02%
Leverage Ratio - The State Bank12.52  9.54  9.79  9.75  9.89 
Book Value per Share14.05  13.78  13.37  13.02  12.90 
               



 
Income Statement Highlights - QTDDec 2016 Sep 2016 Jun 2016 Mar 2016   Dec 2015  
   Unaudited    Unaudited     Unaudited     Unaudited     
Interest income      4,952         4,657         4,510         4,526        4,481 
Interest expense614  601  585  573  560 
Net interest income4,338  4,056  3,925  3,953  3,921 
Provision for loan loss-900  0  0  0  -1,000 
Service charges on deposit  accounts  231  192  181  179  203 
Gain on sale of mortgage loans885  872  706  671  448 
Wealth management income288  396  333  350  262 
Other non-interest income374  420  317  289  533 
Total non-interest income1,778  1,880  1,537  1,489  1,446 
Salaries and benefits2,700  2,209  2,230  2,405  2,209 
Occupancy and equipment581  610  580  563  568 
Loan and collection189  135  130  107  97 
Merger transaction expenses1,173         
Other operating expenses1,072  1,035  993  971  860 
Total non-interest expense5,715  3,989  3,933  4,046  3,734 
Net Income before tax1,301  1,947  1,529  1,396  2,633 
Income Taxes445  659  523  475  889 
Net Income856  1,288  1,006  921  1,744 
               
INCOME STATEMENT RATIOS/DATA              
Basic earnings per share0.24  0.51  0.40  0.36  0.69 
Pre-tax pre-provision earnings401  1,947  1,529  1,396  1,633 
Net Charge offs(33) (59) (65) (52) (66)
Return on Equity (ROE)8.40% 14.73% 11.92% 11.15% 22.00%
Return on Assets (ROA)0.63% 1.06% 0.88% 0.82% 1.62%
Efficiency Ratio93.44% 67.20% 72.01% 74.35% 69.57%
Average Bank Prime3.63% 3.50% 3.50% 3.50% 3.35%
Average Earning Asset  Yield4.28% 4.32% 4.38% 4.43% 4.53%
Average Cost of Funds0.74% 0.76% 0.78% 0.77% 0.77%
Spread3.54% 3.57% 3.59% 3.66% 3.76%
Net impact of free funds0.21% 0.21% 0.22% 0.21% 0.21%
Net Interest Margin3.75% 3.78% 3.82% 3.88% 3.97%



Income Statement Highlights - YTDDec 2016 Dec 2015 Dec 2015 Dec 2014
 Unaudited         
Interest income18,644  16,652  16,652  14,655 
Interest expense2,372  2,152  2,152  1,713 
Net interest income16,272  14,500  14,500  12,942 
Provision for loan loss-900  -1,000  -1,000  -450 
Service charges on deposit  accounts782  806  806  882 
Gain on sale of mortgage loans2,725  1,975  1,975  1,314 
Wealth management income1,367  1,255  1,255  1,228 
Other non-interest income1,784  2,539  2,539  2,301 
Total non-interest income6,658  6,575  6,575  5,725 
Salaries and benefits9,544  8,826  8,826  7,906 
Occupancy and equipment2,334  2,262  2,262  2,181 
Merger transaction expenses1,173     —   
Loan and collection561  565  565  652 
Other operating expenses4,045  3,324  3,324  3,289 
Total non-interest expenses17,657  14,977    14,977     14,028 
Net Income before tax6,173  7,098  7,098  5,089 
Income Taxes2,102  2,407  2,407  1,728 
Net Income from continuing operations  4,071  4,691  4,691  3,361 
     
 INCOME STATEMENT RATIOS/DATA    
Basic earnings per share1.56  1.88 1.88  1.35 
Pre-tax pre-provision earnings5,273  6,098 6,098  4,639 
Net Charge offs(72) (26)(26) 43 
Return on Equity (ROE)9.99%      12.73%12.73% 13.03%
Return on Assets (ROA)0.75% 1.11%1.11% 0.94%
Efficiency Ratio      77.00% 71.07%71.07% 75.15%
Average Bank Prime3.75% 3.50%3.50% 3.50%
Average Earning Asset  Yield4.35% 4.48%4.48% 4.57%
Average Cost of Funds0.76% 0.77%0.77% 0.70%
Spread3.59% 3.71%3.71% 3.87%
Net impact of free funds0.21% 0.19%0.19% 0.17%
Net Interest Margin3.80% 3.90%3.90% 4.04%

 

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

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Source: Fentura Financial, Inc.