Press Release

Fentura Financial, Inc. Announces Fourth Quarter 2017 Results

(Dollars in thousands except per share amounts.  Certain items in the prior period financial statements have been reclassified to conform with 12/31/2017 presentation)

Company Release - 3/2/2018 2:44 PM ET

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

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Source: Fentura Financial, Inc.