Press Release

Fentura Financial, Inc. Announces Record Earnings

Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with December 31, 2018 presentation.

Company Release - 2/27/2019 12:00 PM ET

FENTON, Mich., Feb. 27, 2019 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces another year of record earnings with net income of $2,009 and $10,114 for the three and twelve month periods ended December 31, 2018, respectively.

  • YTD net income increased by 16.57%
  • YTD adjusted net income from operations increased by 22.00%
  • 10.88% increase in earnings per share over 2017
  • 12.50% total return to shareholders in 2018
  • YTD return on average assets of 1.20%
  • Total loans increased by 14.82%
  • Total deposits increased 13.31%

Ronald L. Justice, President and CEO said, “I am extremely proud of our team and their ability to consistently execute our community focused growth strategies. This was another record year for Fentura and I am excited to continue this momentum into 2019.”

Total Shareholder Return

  12/31/18 9/30/18 6/30/18 3/31/18 12/31/17
Closing Stock Price $21.00  $21.15  $21.10  $19.75  $18.88 
QTD Cash Dividends Per Share $0.06  $0.06  $0.06  $0.06  $0.05 
           
  FETM QTD Total Return to Shareholders (Annualized)
  12/31/18 9/30/18 6/30/18 3/31/18 12/31/17
Increase (Decrease) in Price (2.84)% 0.95% 27.34% 18.43% 9.32%
Cash Dividends 1.13% 1.14% 1.22% 1.27% 1.08%
Total Return (1.70)% 2.09% 28.56% 19.70% 10.41%
           
  12/31/18 12/31/17 12/31/16 12/31/15 12/31/14
Closing Stock Price $21.00  $18.88  $16.00  $13.86  $9.90 
YTD Cash Dividends Per Share $0.24  $0.20  $0.40  $0.12  $0.09 
           
  FETM Annual Total Return to Shareholders
  12/31/18 12/31/17 12/31/16 12/31/15 12/31/14
Increase (Decrease) in Price 11.23% 18.00% 15.44% 40.00% 42.04%
Cash Dividends 1.27% 1.25% 2.89% 1.21% 1.29%
Total Return 12.50% 19.25% 18.33% 41.21% 43.33%
                

Income Statement Breakdown and Analysis 

  Quarter to Date
  12/31/18 9/30/18 6/30/18 3/31/18 12/31/17
Interest and dividend income          
Loans, including fees $9,132  $8,768  $8,433  $8,038  $8,524 
Investments 799  543  296  341  341 
Total interest and dividend income 9,931  9,311  8,729  8,379  8,865 
Total interest expense 1,926  1,638  1,232  1,031  939 
Net interest income 8,005  7,673  7,497  7,348  7,926 
Provision for loan losses 290  191  301  275  348 
Net interest income, after provision for loan losses 7,715  7,482  7,196  7,073  7,578 
Total noninterest income 1,703  2,760  2,013  1,801  2,220 
Total noninterest expenses 6,907  6,075  6,049  6,279  7,400 
Income before federal income taxes 2,511  4,167  3,160  2,595  2,398 
Federal income taxes 502  654  642  521  236 
Net income $2,009  $3,513  $2,518  $2,074  $2,162 
           
  Quarter to Date
  12/31/18 9/30/18 6/30/18 3/31/18 12/31/17
Based on GAAP net income          
Average Total Assets $917,242  $866,253  $805,794  $789,391  $779,000 
Average Earning Assets $864,581  $813,867  $757,481  $737,712  $693,951 
Average Int. Bearing Liabilities $592,878  $565,908  $514,012  $505,174  $457,937 
Average Total Equity $80,781  $65,541  $62,333  $60,107  $60,034 
Average Tangible Equity $72,742  $57,419  $54,254  $51,962  $52,001 
Return on Average Assets 0.88% 1.62% 1.25% 1.05% 1.11%
Return on Average Equity 9.95% 21.44% 16.16% 13.80% 14.41%
Return on Average Tangible Equity 11.05% 24.47% 18.56% 15.97% 16.63%
Efficiency Ratio 71.15% 58.23% 63.61% 68.63% 72.94%
Earnings Per Share $0.43  $0.96  $0.69  $0.57  $0.60 
Yield on Earning Assets 4.60% 4.58% 4.62% 4.55% 5.13%
Rate on Int. Bearing Liabilities 1.30% 1.16% 0.96% 0.82% 0.82%
Net Interest Margin to Earning Assets 3.71% 3.78% 3.97% 3.99% 4.59%
                

 

  Quarter to Date
  12/31/18 9/30/18 6/30/18 3/31/18 12/31/17
GAAP net income $2,009  $3,513  $2,518  $2,074  $2,162 
Provision for loan losses (net of tax) 229  151  238  217  229 
Acquisition related items (net of tax)          
Accretion on purchased loans (168) (116) (255) (250) (676)
Amortization of core deposit intangible 107  107  107  107  105 
Acquisition related expenses         296 
Accretion on acquired OREO          
Amortization on acquired time deposits 9  9  9  9  10 
Amortization on purchased MSRs 6  6  6  6  8 
Total acquisition related items (net of tax) (46) 6  (133) (128) (257)
One-time and other items (net of tax)          
Net gain from BOLI death benefit   (933)      
Re-valuation of net deferred tax liabilities         (489)
Net gain from note receivable          
Impact of The Tax Cuts and Jobs Act (394) (405) (397) (323)  
Total one-time and other items (net of tax) (394) (1,338) (397) (323) (489)
Adjusted net income from operations $1,798  $2,332  $2,226  $1,840  $1,645 
           
GAAP net interest income $8,005  $7,673  $7,497  $7,348  $7,926 
Accretion on purchased loans (211) (147) (323) (317) (1,021)
Amortization on acquired time deposits 11  12  11  12  15 
Adjusted net interest income $7,805  $7,538  $7,185  $7,043  $6,920 
           
Based on adjusted net income from operations          
Return on Average Assets 0.78% 1.08% 1.10% 0.93% 0.84%
Return on Average Equity 8.90% 14.23% 14.28% 12.24% 10.96%
Return on Average Tangible Equity 9.89% 16.25% 16.41% 14.16% 12.65%
Efficiency Ratio 71.15% 63.37% 64.24% 69.41% 74.22%
Earnings Per Share  0.41   0.64   0.61   0.51   0.45 
                     
Based on adjusted net interest income          
Yield on Earning Assets 4.50% 4.51% 4.45% 4.38% 4.54%
Rate on Int. Bearing Liabilities 1.31% 1.17% 0.97% 0.83% 0.83%
Net Interest Margin to Earning Assets 3.62% 3.71% 3.80% 3.83% 4.01%
                

 

  Year to Date December 31 Variance
  2018 2017 $ %
Interest and dividend income        
Loans, including fees $34,371  $28,765  $5,606  19.49%
Investments 1,979  1,346  633  47.03%
Total interest and dividend income 36,350  30,111  6,239  20.72%
Total interest expense 5,827  3,120  2,707  86.76%
Net interest income 30,523  26,991  3,532  13.09%
Provision for loan losses 1,057  609  448  73.56%
Net interest income, after provision for loan losses 29,466  26,382  3,084  11.69%
Total noninterest income 8,277  8,988  (711) (7.91)%
Total noninterest expenses 25,310  23,818  1,492  6.26%
Income before federal income taxes 12,433  11,552  881  7.63%
Federal income taxes 2,319  2,876  (557) (19.37)%
Net income $10,114  $8,676  $1,438  16.57%
         
  Year to Date December 31 Variance
  2018 2017 $ %
Based on GAAP net income        
Average Total Assets $844,551  $730,974  $113,577  15.54%
Average Earning Assets $793,411  $698,753  $94,658  13.55%
Average Int. Bearing Liabilities $544,344  $485,522  $58,822  12.12%
Average Total Equity $67,192  $56,429  $10,763  19.07%
Average Tangible Equity $59,096  $48,282  $10,814  22.40%
Return on Average Assets 1.20% 1.19%   0.01%
Return on Average Equity 15.05% 15.38%   (0.32)%
Return on Tangible Equity 17.11% 17.97%   (0.85)%
Efficiency Ratio 65.23% 66.20%   (0.97)%
Earnings Per Share $2.65  $2.39  $0.26  10.88%
Yield on Earning Assets 4.59% 4.33%   0.26%
Rate on Int. Bearing Liabilities 1.07% 0.64%   0.43%
Net Interest Margin to Earning Assets 3.86% 3.88%   (0.02)%
            

 

  Year to Date December 31 Variance
  2018 2017 $ %
GAAP net income $10,114  $8,676  $1,438  16.57%
Provision for loan losses (net of tax) 835  402  433  107.71%
Acquisition related items (net of tax)        
Accretion on purchased loans (788) (1,203) 415  (34.50)%
Amortization of core deposit intangible 428  417  11  2.64%
Acquisition related expenses   296  (296) (100.00)%
Accretion on acquired OREO   (53) 53  (100.00)%
Amortization on acquired time deposits 36  38  (2) (5.26)%
Amortization on purchased MSRs 24  30  (6) (20.00)%
Total acquisition related items (net of tax) (300) (475) 175  (36.84)%
One-time and other items (net of tax)        
Net gain from BOLI death benefit (933) (1,155) 222  (19.22)%
Re-valuation of net deferred tax liabilities   (489) 489  (100.00)%
Net gain from note receivable   (172) 172  (100.00)%
Impact of The Tax Cuts and Jobs Act (1,436)   (1,436) N/M 
Total one-time and other items (net of tax) (2,369) (1,816) (553) 30.45%
Adjusted net income from operations $8,280  $6,787  $1,493  22.00%
         
GAAP net interest income $30,523  $26,991  $3,532  13.09%
Accretion on purchased loans (998) (1,822) 824  (45.23)%
Amortization on acquired time deposits 46  58  (12) (20.69)%
Adjusted net interest income $29,571  $25,227  $4,344  17.22%
         
Based on adjusted net income from operations        
Return on Average Assets 0.98% 0.93%   0.05%
Return on Average Equity 12.32% 12.03%   0.30%
Return on Tangible Equity 14.01% 14.06%   (0.05)%
Efficiency Ratio 67.04% 66.20%   0.84%
Earnings Per Share $2.17  $1.87  $0.30  16.04%
         
Based on adjusted net interest income        
Yield on Earning Assets 4.46% 4.07%   0.40%
Rate on Int. Bearing Liabilities 1.08% 0.65%   0.42%
Net Interest Margin to Earning Assets 3.74% 3.63%   0.11%
            

To effectively compare core operating results from period to period, the impact of the provision for loan losses, acquisition related items, and one-time and other items have been isolated.

As outlined in the preceding tables, the Corporation has been able to generate strong net income and adjusted net income from operations. While a portion of the increase in net income was driven by the Tax Cuts and Jobs Act of 2017, which reduced the Corporation’s Federal income tax rate from 34% to 21%, adjusted net income from operations, which excludes the impact of the reduction in tax rates, increased by 22.00% while adjusted earnings per share increased by 16.04%.

The Corporation has also been successful at consistently increasing adjusted net interest income. This increase continues to be primarily driven through increases in loans while maintaining relatively strong interest margins. As the Corporation expects to grow its loan portfolio through 2019, net interest income is expected to continue to increase. While net interest income is expected to continue to increase, net interest margin to earning assets is expected to decrease as the rates paid on interest bearing liabilities are expected to increase faster than those earned on interest earning assets.

Noninterest Income

  Quarter to Date
  12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Service charges on deposit accounts $259  $273  $253  $259  $307 
ATM and debit card income 397  386  388  354  373 
Net gain on sales of mortgage loans 162  277  187  215  333 
Net gain on sales of commercial loans     368  150   
Trust and investment services 372  444  392  383  330 
Other income and fees 513  1,380  425  440  877 
Total noninterest income $1,703  $2,760  $2,013  $1,801  $2,220 
                     


  Year to Date December 31 Variance
  2018 2017 $ %
Service charges on deposit accounts $1,044  $1,217  $(173) (14.22)%
ATM and debit card income 1,525  1,474  51  3.46%
Net gain on sales of mortgage loans 841  1,231  (390) (31.68)%
Net gain on sales of commercial loans 518    518  N/M 
Trust and investment services 1,591  1,424  167  11.73%
Other income and fees 2,758  3,642  (884) (24.27)%
Total noninterest income $8,277  $8,988  $(711) (7.91)%
                

As shown in the preceding tables, the Corporation has experienced a decline in year to date noninterest income. The declines in service charges on deposit accounts are a result of declines in NSF fees as well as a shift of customer demand toward deposit accounts with no or reduced service charges. The declines in other income and fees was primarily the result of the net gain from BOLI death benefit being less in 2018 than 2017. The remainder of the decline in other income and fees is spread across a variety of accounts. Partially offsetting these declines were increases in ATM and debit card income, net gain on sales of loans, and trust and investment services. Total noninterest income is expected to increase modestly through 2019.

Noninterest Expenses

  Quarter to Date
  12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Compensation $3,429  $3,359  $3,316  $3,317  $3,689 
Professional services 1,030  545  531  649  1,014 
Furniture and equipment 508  486  441  463  372 
Occupancy 416  379  417  427  379 
Loan and collection 134  135  139  129  202 
Advertising and promotional 198  177  219  124  166 
Telephone and communication 107  106  105  95  109 
Acquisition related         449 
Other general and administrative 1,085  888  881  1,075  1,020 
Total noninterest expenses $6,907  $6,075  $6,049  $6,279  $7,400 
                     


  Year to Date December 31 Variance
  2018 2017 $ %
Compensation $13,421  $12,437  $984  7.91%
Professional services 2,755  2,533  222  8.76%
Furniture and equipment 1,898  1,706  192  11.25%
Occupancy 1,639  1,569  70  4.46%
Loan and collection 537  548  (11) (2.01)%
Advertising and promotional 718  598  120  20.07%
Telephone and communication 413  433  (20) (4.62)%
Acquisition related   646  (646) (100.00)%
Other general and administrative 3,929  3,348  581  17.35%
Total noninterest expenses $25,310  $23,818  $1,492  6.26%
                

Total noninterest expenses have increased during 2018 primarily as a result of the increase in size and complexity of the Corporation. The Corporation anticipates total noninterest expenses to increase modestly in 2019.

Balance Sheet Breakdown and Analysis

  12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
ASSETS          
Cash and cash equivalents $23,412  $63,469  $44,280  $15,154  $15,928 
Total securities 94,721  79,531  49,110  49,608  55,323 
Loans held for sale 903  2,021  4,936  4,980  2,067 
Gross loans 772,227  728,302  707,364  686,140  672,530 
Less allowance for loan losses 4,488  4,146  4,033  3,725  3,603 
Net loans 767,739  724,156  703,331  682,415  668,927 
All other assets 39,675  40,724  39,802  37,786  39,198 
Total assets $926,450  $909,901  $841,459  $789,943  $781,443 
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Total deposits $763,124  $766,587  $702,035  $683,775  $673,505 
Total borrowed funds 69,000  74,000  74,000  44,600  46,000 
Accrued interest and other liabilities 4,810  2,974  2,346  947  2,491 
Total liabilities 836,934  843,561  778,381  729,322  721,996 
           
Total shareholders' equity 89,516  66,340  63,078  60,621  59,447 
Total liabilities and shareholders' equity $926,450  $909,901  $841,459  $789,943  $781,443 
           
Selected Ratios          
Net loans to total deposits 100.60% 94.46% 100.18% 99.80% 99.32%
ALLL to gross loans 0.58% 0.57% 0.57% 0.54% 0.54%
Book value per share $19.31  $18.20  $17.33  $16.68  $16.35 
Tangible book value per share $18.32  $16.91  $16.00  $15.31  $14.95 
Total capital to risk weighted assets* 12.76% 10.80% 10.70% 10.61% 10.46%
Tier 1 capital to risk weighted assets* 12.15% 10.22% 10.11% 10.06% 9.91%
CET1 capital to risk weighted assets* 12.15% 10.22% 10.11% 10.06% 9.91%
Tier 1 capital to average assets* 9.90% 8.48% 8.70% 8.65% 8.57%
           
*The State Bank          
           


  12/31/2018 vs 9/30/2018 12/31/2018 vs 12/31/2017
  $ Variance % Variance $ Variance % Variance
ASSETS        
Cash and cash equivalents $(40,057) (63.11)% $7,484  46.99%
Total securities 15,190  19.10% 39,398  71.21%
Loans held for sale (1,118) (55.32)% (1,164) (56.31)%
         
Gross loans 43,925  6.03% 99,697  14.82%
Less allowance for loan losses 342  8.25% 885  24.56%
Net loans 43,583  6.02% 98,812  14.77%
All other assets (1,049) (2.58)% 477  1.22%
         
Total assets $16,549  1.82% $145,007  18.56%
         
LIABILITIES AND        
SHAREHOLDERS' EQUITY        
Total deposits $(3,463) (0.45)% $89,619  13.31%
Total borrowed funds (5,000) (6.76)% 23,000  50.00%
Accrued interest and other liabilities 1,836  61.74% 2,319  93.10%
Total liabilities (6,627) (0.79)% 114,938  15.92%
         
Total shareholders' equity 23,176  34.94% 30,069  50.58%
Total liabilities and        
shareholders' equity $16,549  1.82% $145,007  18.56%
         
Selected Ratios        
Net loans to total deposits   6.14%   1.28%
ALLL to gross loans   0.01%   0.04%
Book value per share $1.11  6.10% $2.96  18.10%
Tangible book value per share $1.41  8.34% $3.37  22.54%
Total capital to risk weighted assets*   1.96%   2.30%
Tier 1 capital to risk weighted assets*   1.93%   2.24%
CET1 capital to risk weighted assets*   1.93%   2.24%
Tier 1 capital to average assets*   1.42%   1.34%
         
*The State Bank        
         

The following tables outline the composition and changes in the loan portfolio as of:

  12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Commercial $56,583  $48,594  $49,776  $47,812  $51,278 
Commercial real estate 369,043  351,739  344,658  343,265  330,309 
Residential real estate 293,271  274,035  257,776  237,677  234,047 
Home equity 43,597  41,136  41,736  42,879  44,602 
Installment 9,733  12,798  13,418  14,507  12,294 
Total Loans $772,227  $728,302  $707,364  $686,140  $672,530 
           
  12/31/2018 vs 9/30/2018   12/31/2018 vs 12/31/2017
  $ Variance % Variance   $ Variance % Variance
Commercial $7,989  16.44%   $5,305  10.35%
Commercial real estate 17,304  4.92%   38,734  11.73%
Residential real estate 19,236  7.02%   59,224  25.30%
Home equity 2,461  5.98%   (1,005) (2.25)%
Installment (3,065) (23.95)%   (2,561) (20.83)%
Total Loans $43,925  6.03%   $99,697  14.82%
                 

The following tables outline the composition and changes in the deposit portfolio as of:

  12/31/18 9/30/18 6/30/18 3/31/18 12/31/17
Demand $233,954  $235,208  $236,899  $224,486  $216,607 
Savings 223,728  221,028  218,512  227,987  224,558 
Money market demand 61,369  60,836  53,654  59,370  67,387 
NOW 10,234  8,952  6,346  2,984  2,253 
Time Deposits 233,839  240,563  186,624  168,948  162,700 
Total deposits $763,124  $766,587  $702,035  $683,775  $673,505 
           
  12/31/18 vs 9/30/18   12/31/18 vs 12/31/17
  $ Variance % Variance   $ Variance % Variance
Demand $(1,254) (0.53)%   $17,347  8.01%
Savings 2,700  1.22%   (830) (0.37)%
Money market demand 533  0.88%   (6,018) (8.93)%
NOW 1,282  14.32%   7,981  354.24%
Time Deposits (6,724) (2.80)%   71,139  43.72%
Total deposits $(3,463) (0.45)%   $89,619  13.31%
                 

Total deposits decreased slightly from September 30, 2018, but increased by $89,619 since December 31, 2017. The increase in time deposits year over year was the direct result of an initiative to enhance our municipal deposits in local markets. This strategy, as well as several other deposit growth initiatives, are expected to continue to help provide organic funding to meet loan demand in 2019.

About Fentura Financial, Inc. and The State Bank

Fentura Financial, Inc. 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 and 2018 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 a loan production office in Saginaw County. The State Bank was ranked #41 by S&P Global in terms of 2017 performance for banks under $1 billion in assets. 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 or www.fentura.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.

Contacts: Ronald L. Justice
President & CEO
Fentura Financial, Inc.
810.714.3902
ronj@thestatebank.com
 Aaron D. Wirsing
Chief Financial Officer
Fentura Financial, Inc.
810.714.3925
aaronw@thestatebank.com

Fentura Financial Inc.

Source: Fentura Financial, Inc.