Press Release

Fentura Financial, Inc. Announces First Quarter 2019 Earnings

Company Release - 4/29/2019 3:40 PM ET

Dollars in thousands except per share amounts.  Certain items in the prior period financial statements have been reclassified to conform with March 31, 2019 presentation.

FENTON, Mich., April 29, 2019 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces continued strong earnings with net income of $2,514 for the three-month period ended March 31, 2019.

  • 21.22% increase in net income over the first quarter of 2018
  • 13.60% increase in net interest income since March 31, 2018
  • 4.87% increase in gross loans since December 31, 2018
  • 18.03% increase in gross loans since March 31, 2018
  • 3.46% increase in total deposits since December 31, 2018
  • 15.47% increase in total deposits since March 31, 2018

Ronald L. Justice, President and CEO said, “The momentum that we built in 2018 has continued into 2019. We have had four consecutive quarters of net interest income growth. I continue to be extremely proud of our team, the results that they continue to produce and the work that they do in the communities we serve.”

Following are the Corporation's interim condensed consolidated balance sheets and interim condensed consolidated statements of income as well as a discussion and detailed analysis as of and for the quarter ended March 31, 2019.  At the end of this document is a list of abbreviations and acronyms.


Interim Condensed Consolidated Balance Sheets (Unaudited)

 March 31, 2019 December 31, 2018
ASSETS   
Cash and due from banks$16,509  $19,412 
Federal funds sold  4,000 
    
Cash and cash equivalents16,509  23,412 
    
Securities, AFS77,347  89,854 
Securities, HTM2,965  2,971 
Equity securities1,910  1,896 
    
Total investment securities82,222  94,721 
    
Loans held for sale1,835  903 
    
Gross Loans809,863  772,227 
Less ALLL4,745  4,488 
    
Net loans805,118  767,739 
    
Premises and equipment, net14,838  14,761 
BOLI10,070  10,007 
MSR3,414  3,406 
Accrued interest receivable3,298  3,020 
Goodwill3,219  3,219 
FHLB stock3,150  3,150 
Core deposit intangibles1,241  1,353 
OREO  32 
Other assets1,258  727 
    
Total assets$946,172  $926,450 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
    
Noninterest-bearing deposits$237,213  $233,954 
Interest-bearing deposits552,320  529,170 
    
Total deposits789,533  763,124 
    
FHLB advances40,000  55,000 
Subordinated debentures14,000  14,000 
Federal funds purchased5,000   
Accrued interest and other liabilities5,403  4,810 
    
Total liabilities853,936  836,934 
    
Shareholders' equity   
Common stock, no par value; 5,000,000 shares authorized, 4,648,965 issued and
outstanding (4,636,455 in 2018)
79,982  79,863 
Retained earnings12,178  9,988 
Accumulated other comprehensive income (loss)76  (335)
    
Total shareholders' equity92,236  89,516 
    
Total liabilities and shareholders' equity$946,172  $926,450 


Interim Condensed Consolidated Statements of Income (Unaudited)

 Three Months Ended March 31
 2019 2018
Interest and dividend income   
Loans, including fees$9,741  $8,038 
Investments   
Taxable559  193 
Tax-exempt60  64 
Cash and cash equivalents25  23 
FHLB Stock52  61 
    
Total interest and dividend income10,437  8,379 
    
Interest expense   
Deposits1,601  716 
Borrowings489  315 
    
Total interest expense2,090  1,031 
Net interest income8,347  7,348 
Provision for loan losses213  275 
Net interest income, after provision for loan losses8,134  7,073 
    
Noninterest income   
ATM and debit card income360  354 
Trust and investment services328  383 
Service charges on deposit accounts234  259 
Mortgage servicing fees211  186 
Net gain on sales of mortgage loans195  215 
Net gain on sales of commercial loans  150 
Other income and fees194  254 
    
Total noninterest income1,522  1,801 
    
Noninterest expenses   
Compensation3,630  3,317 
Professional services723  649 
Furniture and equipment491  463 
Occupancy437  427 
Advertising and promotional163  124 
Telephone and communication111  95 
Loan and collection110  129 
Other general and administrative844  1,075 
    
Total noninterest expenses6,509  6,279 
Income before federal income taxes3,147  2,595 
Federal income taxes633  521 
Net income$2,514  $2,074 
    
Earnings per share$0.54  $0.57 

Income Statement Breakdown and Analysis

  Quarter to Date
  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Interest and dividend income          
Loans, including fees $9,741  $9,132  $8,768  $8,433  $8,038 
Investments 696  799  543  296  341 
Total interest and dividend income 10,437  9,931  9,311  8,729  8,379 
Total interest expense 2,090  1,926  1,638  1,232  1,031 
Net interest income 8,347  8,005  7,673  7,497  7,348 
Provision for loan losses 213  290  191  301  275 
Net interest income, after provision for loan losses 8,134  7,715  7,482  7,196  7,073 
Total noninterest income 1,522  1,703  2,760  2,013  1,801 
Total noninterest expenses 6,509  6,907  6,075  6,049  6,279 
Income before federal income taxes 3,147  2,511  4,167  3,160  2,595 
Federal income taxes 633  502  654  642  521 
Net income $2,514  $2,009  $3,513  $2,518  $2,074 
           
  Quarter to Date
  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Average Total Assets $934,078  $917,242  $866,253  $805,794  $789,391 
Average Earning Assets $902,484  $884,694  $833,909  $773,308  $755,281 
Average Interest Bearing Liabilities $604,973  $592,878  $565,908  $514,012  $505,174 
Average Total Equity $91,964  $80,781  $65,541  $62,333  $60,107 
Average Tangible Equity $84,025  $72,742  $57,419  $54,254  $51,962 
Average earned shares outstanding 4,635,255  4,332,665  3,643,151  3,637,799  3,633,093 
Average unvested stock grants 9,788  3,022       
Average total shares outstanding 4,645,043  4,335,687  3,643,151  3,637,799  3,633,093 
           
Based on GAAP net income          
Return on Average Assets 1.08% 0.88% 1.62% 1.25% 1.05%
Return on Average Equity 10.93% 9.95% 21.44% 16.16% 13.80%
Return on Average Tangible Equity 11.97% 11.05% 24.47% 18.56% 15.97%
Efficiency Ratio 65.95% 71.15% 58.23% 63.61% 68.63%
Earnings Per Share $0.54  $0.46  $0.96  $0.69  $0.57 
Yield on Earning Assets 4.63% 4.49% 4.47% 4.52% 4.44%
Rate on Interest Bearing Liabilities 1.38% 1.30% 1.16% 0.96% 0.82%
Net Interest Margin to Earning Assets 3.71% 3.63% 3.69% 3.89% 3.90%


  Quarter to Date
  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
GAAP net income $2,514  $2,009  $3,513  $2,518  $2,074 
Provision for loan losses (net of tax) 168  229  151  238  217 
Acquisition related items (net of tax)          
Accretion on purchased loans (175) (167) (116) (255) (250)
Amortization of core deposit intangible 89  107  107  107  107 
Amortization on acquired time deposits 7  9  9  9  9 
Amortization on purchased MSRs 3  6  6  6  6 
Total acquisition related items (net of tax) (76) (45) 6  (133) (128)
One-time and other items (net of tax)          
Net gain from BOLI death benefit     (933)    
Total one-time and other items (net of tax)     (933)    
  Adjusted net income from operations $2,606  $2,193  $2,737  $2,623  $2,163 
           
GAAP net interest income $8,347  $8,005  $7,673  $7,497  $7,348 
Accretion on purchased loans (222) (211) (147) (323) (317)
Amortization on acquired time deposits 9  12  12  12  12 
Adjusted net interest income $8,134  $7,806  $7,538  $7,186  $7,043 
           
Based on adjusted net income from operations          
Return on Average Assets 1.12% 0.96% 1.26% 1.30% 1.10%
Return on Average Equity 11.33% 10.86% 16.70% 16.83% 14.39%
Return on Average Tangible Equity 12.41% 12.06% 19.07% 19.34% 16.65%
Efficiency Ratio 66.23% 71.15% 63.37% 64.24% 69.41%
Earnings Per Share $0.56  $0.51  $0.75  $0.72  $0.60 
           
Based on adjusted net interest income          
Yield on Earning Assets 4.65% 4.50% 4.51% 4.45% 4.38%
Rate on Interest Bearing Liabilities 1.39% 1.31% 1.17% 0.97% 0.83%
Net Interest Margin to Earning Assets 3.70% 3.62% 3.71% 3.80% 3.83%


  Year to Date March 31 Variance
  2019 2018 Amount %
Interest and dividend income        
Loans, including fees $9,741  $8,038  $1,703  21.19%
Investments 696  341  355  104.11%
Total interest and dividend income 10,437  8,379  2,058  24.56%
Total interest expense 2,090  1,031  1,059  102.72%
Net interest income 8,347  7,348  999  13.60%
Provision for loan losses 213  275  (62) (22.55)%
Net interest income, after provision for loan losses 8,134  7,073  1,061  15.00%
Total noninterest income 1,522  1,801  (279) (15.49)%
Total noninterest expenses 6,509  6,279  230  3.66%
Income before federal income taxes 3,147  2,595  552  21.27%
Federal income taxes 633  521  112  21.50%
Net income $2,514  $2,074  $440  21.22%
         
  Year to Date March 31 Variance
  2019 2018 Amount %
Average Total Assets $934,078  $789,391  $144,687      18.33%
Average Earning Assets $902,484  $755,281  $147,203  19.49%
Average Interest Bearing Liabilities $604,973  $505,174  $99,799  19.76%
Average Total Equity $91,964  $60,107  $31,857  53.00%
Average Tangible Equity $84,025  $51,962  $32,063  61.70%
Average earned shares outstanding 4,635,255  3,633,093  1,002,162  27.58%
Average unvested stock grants 9,788    9,788  N/M 
Average total shares outstanding 4,645,043  3,633,093  1,011,950  27.85%
         
Based on GAAP net income        
Return on Average Assets 1.08% 1.05%   0.03%
Return on Average Equity 10.93% 13.80%   (2.87)%
Return on Average Tangible Equity 11.97% 15.97%   (4)%
Efficiency Ratio 54.43% 61.68%   (7.25)%
Earnings Per Share $0.54  $0.57  $(0.03) (5.26)%
Yield on Earning Assets 4.63% 4.44%   0.19%
Rate on Interest Bearing Liabilities 1.38% 0.82%   0.56%
Net Interest Margin to Earning Assets 3.71% 3.90%   (0.19)%


  Year to Date March 31 Variance
  2019 2018 Amount %
GAAP net income $2,514  $2,074  $440     21.22%
Provision for loan losses (net of tax) 168  217  (49) (22.58)%
Acquisition related items (net of tax)        
Accretion on purchased loans (175) (250) 75  (30.00)%
Amortization of core deposit intangible 89  107  (18) (16.82)%
Amortization on acquired time deposits 7  9  (2) (22.22)%
Amortization on purchased MSRs 3  6  (3) (50.00)%
Total acquisition related items (net of tax) (76) (128) 52  (40.63)%
One-time and other items (net of tax)        
Net gain from BOLI death benefit       N/M 
Total one-time and other items (net of tax)       N/M 
  Adjusted net income from operations $2,606  $2,163  443  20.48%
         
GAAP net interest income $8,347  $7,348  $999  13.60%
Accretion on purchased loans (222) (317) 95  (29.97)%
Amortization on acquired time deposits 9  12  (3) (25.00)%
Adjusted net interest income $8,134  $7,043  $1,091  15.49%
         
Based on adjusted net income from operations        
Return on Average Assets 1.12% 1.10%   0.02%
Return on Average Equity 11.33% 14.39%   (3.06)%
Return on Average Tangible Equity 12.41% 16.65%   (4.24)%
Efficiency Ratio 66.23% 69.41%   (3.18)%
Earnings Per Share $0.56  $0.60  $(0.04) (6.67)%
         
Based on adjusted net interest income        
Yield on Earning Assets 4.65% 4.38%   0.27%
Rate on Interest Bearing Liabilities 1.39% 0.83%   0.56%
Net Interest Margin to Earning Assets 3.70% 3.83%   (0.13)%

To effectively compare core operating results from period to period, the impact of the provision for loan losses and acquisition related 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. The Corporation's net interest income and adjusted net interest income have grown in each of the last four quarters.

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 healthy interest margins. Through 2019, the Corporation expects to see a continued increase in net interest income. This increase will primarily be driven by loan growth. The Corporation expects net interest margin to earning assets to decrease as the rates paid on interest bearing liabilities are expected to increase faster than those earned on interest earning assets. The Corporation's strategy of continuing growth in non-maturity deposits will help to flatten the growth in rates paid on interest bearing liabilities.

Noninterest Income

  Quarter to Date
  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
ATM and debit card income $360  $397  $386  $388  $354 
Trust and investment services 328  372  444  392  383 
Service charges on deposit accounts 234  259  273  253  259 
Mortgage servicing fees 211  208  199  192  186 
Net gain on sales of mortgage loans 195  162  277  187  215 
Net gain on sales of commercial loans       368  150 
Other income and fees 194  305  1,181  233  254 
Total noninterest income $1,522  $1,703  $2,760  $2,013  $1,801 


  Year to Date March 31 Variance
  2019 2018 Amount %
ATM and debit card income $360  $354  $6         1.69%
Trust and investment services 328  383  (55) (14.36)%
Service charges on deposit accounts 234  259  (25) (9.65)%
Mortgage servicing fees 211  186  25  13.44%
Net gain on sales of mortgage loans 195  215  (20) (9.30)%
Net gain on sales of commercial loans   150  (150) (100.00)%
Other income and fees 194  254  (60) (23.62)%
Total noninterest income $1,522  $1,801  $(279) (15.49)%

ATM and debit card income are fees earned on ATM and debit card transactions. The Corporation expects these fees to increase modestly throughout 2019.

Trust and investment services include income the Corporation earns from its contracts with customers to manage assets for investment, and/or to transact on their accounts. The wealth management component is strongly correlated to changes in the stock market and as such, can vary from period to period.  Trust and investment services income is expected to increase throughout 2019.

Service charges on deposit accounts include fees earned from the Corporation's deposit customers for transaction-based, account maintenance and overdraft services. The decrease in service charges on deposit accounts is a result of declines in NSF fees as well as a shift of customer demand toward deposit accounts with no or reduced service charges. Service charges on deposit accounts are expected to approximate current levels throughout the remainder of the year.

Mortgage servicing fees include the fees that the Corporation earns for servicing loans that have been sold into the secondary market. The increase in mortgage servicing fees is directly related to the increases in the size of the serviced portfolio.  Mortgage servicing fees are expected to continue to increase throughout the year as mortgage demand remains strong.

Net gain on sales of mortgage loans represents the income earned on the sale of residential mortgage loans into the secondary market.  The first three months of the year are typically the lowest in terms of mortgage activity.  In the first quarter of 2018, the Corporation sold a pool of residential mortgages that was previously held in its loan portfolio which generated a gain of $47.  Excluding the impact of this sale, net gains from the sales of mortgage loans increased by $27 when the first three months of 2019 are compared to the same period in 2019 and this trend is expected to continue throughout the remainder of the year.

Net gain on sales of commercial loans includes the income earned on the sale of commercial loans into the secondary market. There were no sales for the three months ending March 31, 2019. The Corporation continues to analyze the portfolio for opportunities and will sell commercial loans into the secondary market when deemed financially beneficial.

Other income and fees include rental income, net originated MSR, and the increase in the cash surrender value of BOLI, among other miscellaneous income items. The 23.62% decrease in other income and fees is largely due to a decline in MSR income.  Other income and fees are expected to increase modestly throughout the remainder of the year.

Noninterest Expenses

  Quarter to Date
  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Compensation $3,630  $3,429  $3,359  $3,316  $3,317 
Professional services 723  1,030  545  531  649 
Furniture and equipment 491  508  486  441  463 
Occupancy 437  416  379  417  427 
Advertising and promotional 163  198  177  219  124 
Telephone and communication 111  107  106  105  95 
Loan and collection 110  134  135  139  129 
Other general and administrative 844  1,085  888  881  1,075 
Total noninterest expenses $6,509  $6,907  $6,075  $6,049  $6,279 


  Year to Date March 31 Variance
  2019 2018 Amount %
Compensation $3,630  $3,317  $313        9.44%
Professional services 723  649  74  11.40%
Furniture and equipment 491  463  28  6.05%
Occupancy 437  427  10  2.34%
Advertising and promotional 163  124  39  31.45%
Telephone and communication 111  95  16  16.84%
Loan and collection 110  129  (19) (14.73)%
Other general and administrative 844  1,075  (231) (21.49)%
Total noninterest expenses $6,509  $6,279  $230  3.66%

Compensation includes all compensation and benefits paid to the Corporation's employees. Compensation has increased, and is expected to continue to increase, due to the continued growth in size and complexity of the organization.

Professional services include expenses relating to third-party professional services. These services include, but are not limited to, data processing, regulatory, auditing, consulting, and legal. These fees, much like compensation related expenses, are attributable to the growing size and complexity of the Corporation. The increase is largely attributable to increases in audit and accounting expenses and other outside services. These expenses are expected to approximate their current levels for the remainder of the year.

Furniture and equipment and occupancy expenses primarily consist of depreciation, repairs and maintenance, property taxes, utilities, insurance, and other related items. These expenses are expected to approximate current levels throughout the remainder of the year.

Advertising and promotional includes the Corporation's media costs and any donations or sponsorships made on behalf of the Corporation. The increase in expenses is a direct result of the Corporation enhancing its marketing to attract new and expand existing customer loans and deposit accounts. These expenses are expected to approximate current levels throughout the remainder of the year.

Telephone and communication include expenses relating to the Corporation's communication systems. These expenses have also increased due to the growth in size and complexity of the organization and are expected to approximate current levels for the remainder of the year.

Loan and collection include expenses related to the origination and collection of loans, as well as expenses related to OREO. The Corporation does not expect any significant fluctuations in 2019.

Other general and administrative includes the amortization of core deposit intangibles, FDIC assessment, ATM & debit card expenses, miscellaneous office supplies, among other miscellaneous expense items. These expenses are expected to approximate current levels for the reminder of the year.

Average Balances, Interest Rate, and Net Interest Income

The following table present the daily average amount outstanding for each major category of interest earning assets, non-earning assets, interest bearing liabilities, and noninterest bearing liabilities. These tables also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a FTE basis using a federal income tax rate of 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances.

  Three Months Ended
  March 31, 2019 December 31, 2018 March 31, 2018
   Average
Balance
  Tax
Equivalent
Interest
 Average
Yield /
Rate
  Average
Balance
  Tax
Equivalent
Interest
 Average
Yield /
Rate
  Average
Balance
  Tax
Equivalent
Interest
 Average
Yield /
Rate
Interest earning assets                  
Total loans $791,069  $9,741  4.99% $746,934  $9,132  4.85% $678,591  $8,038  4.80%
Taxable investment
   securities (1)
 79,367  559  2.86% 78,496  541  2.73% 39,443  193  1.98%
Nontaxable investment
   securities
 10,582  76  2.91% 10,732  76  2.81% 12,978  81  2.53%
Federal funds sold 43    % 25,269  141  2.21% 3,775  14  1.50%
Cash 18,273  25  0.55% 20,113  19  0.37% 17,569  9  0.21%
Federal Home Loan Bank
   stock
 3,150  52  6.69% 3,150  38  4.79% 2,925  61  8.46%
Total earning assets 902,484  10,453  4.70% 884,694  9,947  4.46% 755,281  8,396  4.51%
                   
Non-earning assets                  
ALLL (4,591)     (4,215)     (3,645)    
Fixed assets 14,818      14,874      14,582     
Accrued income and
   other assets
 21,367      21,889      23,173     
Total assets $934,078      $917,242      $789,391     
                   
Interest bearing liabilities                  
Interest bearing demand
   deposits
 $73,414  $84  0.46% $64,805  $53  0.32% $64,724  $22  0.14%
Savings deposits 241,815  297  0.50% 237,486  215  0.36% 243,706  123  0.20%
Time deposits 225,866  1,220  2.19% 228,953  1,204  2.09% 149,397  571  1.55%
Borrowed funds 63,878  489  3.10% 61,634  454  2.92% 47,347  315  2.70%
Total interest bearing
   liabilities
 604,973  2,090  1.40% 592,878  1,926  1.30% 505,174  1,031  0.83%
                   
Noninterest bearing
   liabilities
                  
Noninterest bearing deposits 234,268      240,253      221,255     
Accrued interest and
   other liabilities
 2,873      3,330      2,855     
Shareholders' equity 91,964      80,781      60,107     
Total liabilities and
   shareholders' equity
 $934,078      $917,242      $789,391     
Net interest income (FTE)   $8,363      $8,021      $7,365   
Net yield on interest
   earning assets (FTE)
     3.76%     3.60%     3.95%

(1) Includes taxable AFS securities and equity securities.


Volume and Rate Variance Analysis

The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. For the purpose of this table, changes in interest due to volume and rate were determined as follows:

Volume - change in volume multiplied by the previous period's rate.
Rate - change in the FTE rate multiplied by the previous period's volume.

The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

  Three Months Ended Three Months Ended
  March 31, 2019 March 31, 2019
  Compared To Compared To
  December 31, 2018 March 31, 2018
  Increase (Decrease) Due to Increase (Decrease) Due to
   Volume  Rate Net  Volume  Rate Net
Changes in interest income            
Total Loans $534  $75  $609  $1,356  $347  $1,703 
Taxable Investment Securities 8  10  18  257  109  366 
Nontaxable Investment Securities (1) 1    (38) 33  (5)
Fed Funds Sold (70) (71) (141) (7) (7) (14)
Cash (1) 7  6    16  16 
FHLB Stock   14  14  6  (15) (9)
Total changes in interest income 470  36  506  1,574  483  2,057 
             
Changes in interest expense            
Interest Bearing Demand Deposits 8  23  31  3  59  62 
Savings Deposits 4  78  82  (1) 175  174 
Time Deposits (37) 53  16  356  293  649 
Borrowed Funds 17  18  35  122  52  174 
Total changes in interest expense (8) 172  164  480  579  1,059 
Net change in net interest income (FTE) $478  $(136) $342  $1,094  $(96) $998 


  Average Yield/Rate for the Three Month Periods Ended:
  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Total earning assets   4.70%   4.46%   4.44%   4.54%   4.51%
Total interest bearing liabilities 1.40% 1.30% 1.15% 0.96% 0.83%
Net yield on interest earning assets (FTE) 3.76% 3.60% 3.66% 3.90% 3.95%


  Quarter to Date Net Interest Income (FTE)
  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Total interest income (FTE) 10,453  9,947  9,327  8,744  8,396 
Total interest expense 2,090  1,926  1,638  1,232  1,031 
Net interest income (FTE) $8,363  $8,021  $7,689  $7,512  $7,365 

As outlined in the previous tables, the Corporation has increased net interest income primarily through increases in volume.  Despite recent increases in funding costs, the Corporation has been able to increase the net yield on interest earning assets for the three month period ended March 31, 2019 through increases in yields on loans. Net interest margins are expected to approximate current levels for the remainder of the year.
Balance Sheet Breakdown and Analysis

  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
ASSETS          
Cash and cash equivalents $16,509  $23,412  $63,469  $44,280  $15,154 
Total investment securities 82,222  94,721  79,531  49,110  49,608 
Loans held for sale 1,835  903  2,021  4,936  4,980 
Gross Loans 809,863  772,227  728,302  707,364  686,140 
Less ALLL 4,745  4,488  4,146  4,033  3,725 
Net loans 805,118  767,739  724,156  703,331  682,415 
All other assets 40,488  39,675  40,724  39,802  37,786 
Total assets $946,172  $926,450  $909,901  $841,459  $789,943 
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Total deposits $789,533  $763,124  $766,587  $702,035  $683,775 
Total borrowed funds 59,000  69,000  74,000  74,000  44,600 
Accrued interest and other liabilities 5,403  4,810  2,974  2,346  947 
Total liabilities 853,936  836,934  843,561  778,381  729,322 
           
Total shareholders' equity 92,236  89,516  66,340  63,078  60,621 
Total liabilities and shareholders' equity $946,172  $926,450  $909,901  $841,459  $789,943 
           
Ending number of shares outstanding 4,647,978  4,636,455  3,645,402  3,640,060  3,635,098 
           
Selected Ratios          
Net loans to total deposits 101.97% 100.60% 94.46% 100.18% 99.80%
ALLL to gross loans 0.59% 0.58% 0.57% 0.57% 0.54%
Book value per share $19.84  $19.31  $18.20  $17.33  $16.68 
Tangible book value per share $19.58  $19.01  $17.75  $16.86  $16.17 
Total capital to risk weighted assets* 12.85% 12.76% 10.80% 10.70% 10.61%
Tier 1 capital to risk weighted assets* 12.23% 12.15% 10.22% 10.11% 10.06%
CET1 capital to risk weighted assets* 12.23% 12.15% 10.22% 10.11% 10.06%
Tier 1 capital to average assets* 10.05% 9.90% 8.48% 8.70% 8.65%
           
*The State Bank          


  Variance
  3/31/2019 vs 12/31/2018 3/31/2019 vs 3/31/2018
  Amount % Amount %
ASSETS        
Cash and cash equivalents $(6,903) (29.48)% $1,355  8.94 %
Total investment securities (12,499) (13.20)% 32,614  65.74 %
Loans held for sale 932  103.21 % (3,145) (63.15)%
Gross Loans 37,636  4.87 % 123,723  18.03 %
Less ALLL 257  5.73 % 1,020  27.38 %
Net loans 37,379  4.87 % 122,703  17.98 %
All other assets 813  2.05 % 2,702  7.15 %
Total assets $19,722  2.13 % $156,229  19.78 %
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Total deposits $26,409  3.46 % $105,758  15.47 %
Total borrowed funds (10,000) (14.49)% 14,400  32.29 %
Accrued interest and other liabilities 593  12.33 % 4,456  470.54 %
Total liabilities 17,002  2.03 % 124,614  17.09 %
         
Total shareholders' equity 2,720  3.04 % 31,615  52.15 %
Total liabilities and shareholders' equity $19,722  2.13 % $156,229  19.78 %
         
Ending number of shares outstanding 11,523  0.25 % 1,012,880  27.86 %
         
Selected Ratios        
Net loans to total deposits   1.37 %   2.17 %
ALLL to gross loans   0.01 %   0.05 %
Book value per share $0.53  2.74 % $3.16  18.94 %
Tangible book value per share $0.57  3.00 % $3.41  21.09 %
Total capital to risk weighted assets*   0.09 %   2.24 %
Tier 1 capital to risk weighted assets*   0.08 %   2.17 %
CET1 capital to risk weighted assets*   0.08 %   2.17 %
Tier 1 capital to average assets*   0.15 %   1.40 %
         
*The State Bank        

Cash and cash equivalents

Cash and cash equivalents fluctuate from period to period based on loan demand and variances in deposit accounts. Cash and cash equivalents are expected to approximate current levels for the foreseeable future.

Total investment securities

During 2018, the Corporation increased total investment securities due to advantageous pricing opportunities. However, since late 2018, yields on bonds that meet the Corporation's investment standards have declined significantly. As such, the Corporation has not replaced maturing investments. Total investment securities are expected to approximate current levels or decline slightly over the remainder of 2019.

Loans held for sale

Loans held for sale  represent the balance of loans that have been committed to be sold to the secondary market, but have not yet been delivered. Loans held for sale  are expected to approximate current levels for the foreseeable future.

Net loans

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

  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Commercial real estate $394,462  $369,043  $351,739  $344,658  $343,265 
Residential real estate 306,466  293,271  274,035  257,776  237,677 
Commercial 56,790  56,583  48,594  49,776  47,812 
Home equity 43,130  43,597  41,136  41,736  42,879 
Installment 9,015  9,733  12,798  13,418  14,507 
Gross loans $809,863  $772,227  $728,302  $707,364  $686,140 
           
  3/31/2019 vs 12/31/2018   3/31/2019 vs 3/31/2018
  Variance   Variance
  Amount %   Amount %
Commercial real estate $25,419  6.89%   $51,197  14.91 %
Residential real estate 13,195  4.50%   68,789  28.94 %
Commercial 207  0.37%   8,978  18.78 %
Home equity (467) (1.07)%   251  0.59 %
Installment (718) (7.38)%   (5,492) (37.86)%
Gross loans $37,636  4.87%   $123,723  18.03 %

The following table summarizes the Corporation's current, past due, and nonaccrual loans as of:

  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Accruing interest          
Current $807,671  $769,799  $725,954  $705,331  $683,753 
Past due 30-89 days 1,009  1,325  1,689  1,052  1,720 
Past due 90 days or more 310  191  150  726  558 
Total accruing interest 808,990  771,315  727,793  707,109  686,031 
Nonaccrual 873  912  509  255  109 
Total loans $809,863  $772,227  $728,302  $707,364  $686,140 
Total loans past due and in nonaccrual status $2,192  $2,428  $2,348  $2,033  $2,387 
           

The following table summarizes the Corporation's nonperforming assets as of:

  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Nonaccrual loans $873  $912  $509  $255  $109 
Accruing loans past due 90 days or more 310  191  150  726  558 
Total nonperforming loans 1,183  1,103  659  981  667 
OREO   32  143  92  92 
Total nonperforming assets $1,183  $1,135  $802  $1,073  $759 
           

The following table summarizes the Corporation's primary asset quality measures as of:

  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Nonperforming loans to gross loans 0.15% 0.14% 0.09% 0.14% 0.10%
Nonperforming assets to total assets 0.13% 0.12% 0.09% 0.13% 0.10%
ALLL to gross loans 0.59% 0.58% 0.57% 0.57% 0.54%
           

As outlined in the preceding tables, the Corporation  has been successful in growing its loan portfolio over the past 12 months with most of the growth coming in the form of commercial real estate and residential real estate loans. Despite the above peer growth, the Corporation has not relaxed its underwriting standards as evidenced by the low level of nonperforming loans. This comparatively low level of non performing loans has also resulted in an ALLL to gross loans  at a level below many of the Corporation's peers. While the Corporation's  ALLL to gross loans is below its peers, it is important to keep in mind that the the ALLL  does not include the net unamortized discount on purchased loans as it is a component of gross loans.

The following table summarizes the balance of net unamortized discounts on purchased loans as of:

  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Net unamortized discount on purchased loans 2,095  2,317  2,529  2,675  2,997 
           

All other assets

All other assets  is comprised of premises and equipment, bank owned life insurance, mortgage servicing rights, goodwill, FHLB stock, accrued interest receivable, core deposit intangibles, other real estate owned, and other miscellaneous assets.  All other assets is expected to increase commensurate with the overall growth of the Corporation.

Total deposits

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

  3/31/19 12/31/18 9/30/18 6/30/18 3/31/18
Time deposits $243,570  $233,839  $240,563  $186,624  $168,948 
Demand 235,305  233,954  235,208  236,899  224,486 
Savings 230,006  223,728  221,028  218,512  227,987 
Money market demand 61,294  61,369  60,836  53,654  59,370 
NOW 19,358  10,234  8,952  6,346  2,984 
  Total deposits $789,533  $763,124  $766,587  $702,035  $683,775 
           
  3/31/2019 vs 12/31/2018   3/31/2019 vs 3/31/2018
  Variance   Variance
  Amount %   Amount %
Time deposits $9,731  4.16%   $74,622  44.17%
Demand 1,351  0.58%   10,819  4.82%
Savings 6,278  2.81%   2,019  0.89%
Money market demand (75) (0.12)%   1,924  3.24%
NOW 9,124  89.15%   16,374  548.73%
  Total deposits $26,409  3.46%   $105,758  15.47%

The Corporation continues its trend of surpassing its peers in terms of deposit growth. This growth was the direct result of an initiative to enhance municipal deposits in local markets. In addition to time deposits, the Corporation has also been able to drive meaningful increases in demand and NOW accounts through enhanced organic growth strategies. The Corporation expects that deposit growth will continue to be strong with the majority of the growth coming in the form of time deposits.

Total borrowed funds

Borrowed funds include FHLB advances, subordinated debt, and federal funds purchased. While the Corporation increased its reliance on borrowed funds in 2018 to fund its strong loan demand, borrowed funds have declined in the last two quarters as the Corporation has been able to substantially increase deposits.  Borrowed funds are expected to approximate current levels for the remainder of 2019.

Total shareholders' equity

Shareholders' equity includes common stock, retained earnings, and accumulated other comprehensive income. During the fourth quarter of 2018, the Corporation increased its capital position through a private placement of common stock to both retail and accredited individual investors. The private placement generated net proceeds of $20,500. These proceeds were used to fund the Corporation's strong organic growth, opportunistic strategic growth, and enhance its capital position. The balance of growth in retained earnings was the result of the Corporation's strong earnings.  Shareholders' equity is expected to continue to grow throughout 2019 through the Corporation's earnings and as no significant changes in dividend strategy are anticipated.

Total Shareholder Return

  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Closing Stock Price $20.89  $21.00  $21.15  $21.10  $19.75 
QTD Cash Dividends Per Share $0.07  $0.06  $0.06  $0.06  $0.06 
           
  FETM QTD Total Return to Shareholders (Annualized)
  3/31/2019 12/31/2018 9/30/2018 6/30/2018 3/31/2018
Increase (Decrease) in Price (2.10)% (2.84)% 0.95% 27.34% 18.43%
Cash Dividends 1.33 % 1.13 % 1.14% 1.22% 1.27%
Total Return (0.77)% (1.71)% 2.09% 28.56% 19.70%

The Corporation's closing stock price increased 5.77% from March 31, 2018 to March 31, 2019. The stock outperformed the ABA NASDAQ Community Bank Index (NASDAQ: XX:ABAQ) as that index price decreased 12.07% over the same time period. The ABA NASDAQ Community Bank Index includes banks and thrifts or their holding companies listed on The NASDAQ Stock Market as selected by the ABA.

Abbreviations and Acronyms

ABA: American Bankers AssociationGAAP: Generally Accepted Accounting Principles
ALLL: Allowance for loan and lease lossesHFS: Held-for-sale
AFS: Available-for-saleHTM: Held-to-maturity
AOCI: Accumulated other comprehensive incomeIRA: Individual retirement account
ASC: Accounting Standards CodificationMSR: Mortgage servicing rights
ASU: Accounting Standards UpdateNASDAQ: National Association of Securities Dealers Automated Quotations
ATM: Automated teller machineN/M: Not meaningful
BOLI: Bank owned life insuranceNOW: Negotiable order of withdrawal
CET1: Common equity tier 1NSF: Non-sufficient funds
FDIC: Federal Deposit Insurance CorporationOREO: Other real estate owned
FHLB: Federal Home Loan BankQTD: Quarter to date
FTE: Fully taxable equivalentSBA: Small Business Association


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, 5-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                              Aaron D. Wirsing
                                President & CEO                               Chief Financial Officer
                                Fentura Financial, Inc.                      Fentura Financial, Inc.
                                810.714.3902                                      810.714.3925
                                ronj@thestatebank.com                   aaronw@thestatebank.com

Fentura Financial Inc.

Source: Fentura Financial, Inc.