FETM - Fentura Financial Inc. Announces Record Earnings

February, 27 2019 12:00 PM Fentura Financial Inc

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

Company Name:	Fentura Financial Inc
Stock Symbol:	FETM
Market:	OTC
Website:	fentura.com

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