(Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with March 31, 2018 presentation)
FENTON, Mich., May 08, 2018 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX:FETM) announces another strong quarter with net income of $2,074 for the three-month period ended March 31, 2018.
- 61.15% increase in net income over the first quarter of 2017
- Return on average assets of 1.05% in the first quarter of 2018 vs 0.75% in the first quarter of 2017
- 50.00% increase in earnings per share over the first quarter of 2017
- 18.43% annualized increase in stock trading price over December 31, 2017
- 2.02% increase in gross loans since December 31, 2017
- 1.52% increase in total deposits since December 31, 2017
Ronald L. Justice, President and CEO said, “Once again, I am proud of the momentum created from our team’s continued focus on improving operating results through organic growth within our core markets. These efforts are clearly reflected in improvement in net interest income from continued balance sheet growth.”
As shown below, our strong financial results have driven strong total returns to the Corporation’s shareholders.
| FETM Quarter To Date Total Return (Annualized) | ||||||||||||||||||
| 3/31/18 | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | ||||||||||||||
| Increase in Price | 18.43 | % | 9.32 | % | 4.38 | % | 5.56 | % | 50.00 | % | ||||||||
| Cash Dividends | 1.27 | % | 1.08 | % | 1.10 | % | 1.11 | % | 1.25 | % | ||||||||
| Total Return | 19.70 | % | 10.41 | % | 5.48 | % | 6.67 | % | 51.25 | % | ||||||||
Balance Sheet Breakdown and Analysis
| 3/31/18 | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | |||||||||||||||||
| ASSETS | |||||||||||||||||||||
| Cash and cash equivalents | $ | 15,154 | $ | 15,928 | $ | 16,450 | $ | 29,487 | $ | 68,202 | |||||||||||
| Total securities | 49,608 | 55,323 | 67,155 | 70,699 | 72,472 | ||||||||||||||||
| Loans held for sale | 4,980 | 2,067 | 4,835 | 4,664 | 514 | ||||||||||||||||
| Gross loans | 686,140 | 672,530 | 628,552 | 591,753 | 554,415 | ||||||||||||||||
| Less allowance for loan losses | 3,725 | 3,603 | 3,262 | 3,092 | 2,877 | ||||||||||||||||
| Net loans | 682,415 | 668,927 | 625,290 | 588,661 | 551,538 | ||||||||||||||||
| All other assets | 37,786 | 39,198 | 43,237 | 37,000 | 37,910 | ||||||||||||||||
| Total assets | $ | 789,943 | $ | 781,443 | $ | 756,967 | $ | 730,511 | $ | 730,636 | |||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||||
| Total deposits | $ | 683,775 | $ | 673,505 | $ | 625,588 | $ | 614,167 | $ | 630,055 | |||||||||||
| Total borrowed funds | 44,600 | 46,000 | 68,000 | 59,000 | 45,000 | ||||||||||||||||
| Accrued interest and other liabilities | 947 | 2,491 | 6,218 | 3,089 | 3,765 | ||||||||||||||||
| Total liabilities | 729,322 | 721,996 | 699,806 | 676,256 | 678,820 | ||||||||||||||||
| Total shareholders' equity | 60,621 | 59,447 | 57,161 | 54,255 | 51,816 | ||||||||||||||||
| Total liabilities and shareholders' equity | $ | 789,943 | $ | 781,443 | $ | 756,967 | $ | 730,511 | $ | 730,636 | |||||||||||
| Selected Ratios | |||||||||||||||||||||
| Net loans to total deposits | 99.80 | % | 99.32 | % | 99.95 | % | 95.85 | % | 87.54 | % | |||||||||||
| ALLL to gross loans | 0.54 | % | 0.54 | % | 0.52 | % | 0.52 | % | 0.52 | % | |||||||||||
| Book value per share | $ | 16.68 | $ | 16.37 | $ | 15.75 | $ | 14.96 | $ | 14.31 | |||||||||||
| Tangible book value per share | $ | 15.31 | $ | 14.96 | $ | 14.25 | $ | 13.42 | $ | 12.72 | |||||||||||
| Total capital to risk weighted assets* | 10.61 | % | 10.46 | % | 10.21 | % | 10.36 | % | 10.89 | % | |||||||||||
| Tier 1 capital to risk weighted assets* | 10.06 | % | 9.91 | % | 9.70 | % | 9.84 | % | 10.36 | % | |||||||||||
| CET1 capital to risk weighted assets* | 10.06 | % | 9.91 | % | 9.70 | % | 9.84 | % | 10.36 | % | |||||||||||
| Tier 1 capital to average assets* | 8.65 | % | 8.57 | % | 8.62 | % | 8.30 | % | 7.96 | % | |||||||||||
| *The State Bank | |||||||||||||||||||||
| 3/31/2018 vs 12/31/2017 | 3/31/2018 vs 3/31/2017 | ||||||||||||||||||||
| $ Variance | % Variance | $ Variance | % Variance | ||||||||||||||||||
| ASSETS | |||||||||||||||||||||
| Cash and cash equivalents | $ | (774 | ) | -4.86 | % | $ | (53,048 | ) | -77.78 | % | |||||||||||
| Total securities | (5,715 | ) | -10.33 | % | (22,864 | ) | -31.55 | % | |||||||||||||
| Loans held for sale | 2,913 | 140.93 | % | 4,466 | 868.87 | % | |||||||||||||||
| Gross loans | 13,610 | 2.02 | % | 131,725 | 23.76 | % | |||||||||||||||
| Less allowance for loan losses | 122 | 3.39 | % | 848 | 29.48 | % | |||||||||||||||
| Net loans | 13,488 | 2.02 | % | 130,877 | 23.73 | % | |||||||||||||||
| All other assets | (1,412 | ) | -3.60 | % | (124 | ) | -0.33 | % | |||||||||||||
| Total assets | $ | 8,500 | 1.09 | % | $ | 59,307 | 8.12 | % | |||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||||
| Total deposits | $ | 10,270 | 1.52 | % | $ | 53,720 | 8.53 | % | |||||||||||||
| Total borrowed funds | (1,400 | ) | -3.04 | % | (400 | ) | -0.89 | % | |||||||||||||
| Accrued interest and other liabilities | (1,544 | ) | -61.98 | % | (2,818 | ) | -74.85 | % | |||||||||||||
| Total liabilities | 7,326 | 1.01 | % | 50,502 | 7.44 | % | |||||||||||||||
| Total shareholders' equity | 1,174 | 1.97 | % | 8,805 | 16.99 | % | |||||||||||||||
| Total liabilities and shareholders' equity | $ | 8,500 | 1.09 | % | $ | 59,307 | 8.12 | % | |||||||||||||
| Selected Ratios | |||||||||||||||||||||
| Net loans to total deposits | 0.48 | % | 12.26 | % | |||||||||||||||||
| ALLL to gross loans | 0.00 | % | 0.02 | % | |||||||||||||||||
| Book value per share | $ | 0.31 | 1.89 | % | $ | 2.37 | 2.17 | % | |||||||||||||
| Tangible book value per share | $ | 0.35 | 2.34 | % | $ | 2.59 | 2.75 | % | |||||||||||||
| Total capital to risk weighted assets* | 0.15 | % | -0.28 | % | |||||||||||||||||
| Tier 1 capital to risk weighted assets* | 0.15 | % | -0.30 | % | |||||||||||||||||
| CET1 capital to risk weighted assets* | 0.15 | % | -0.30 | % | |||||||||||||||||
| Tier 1 capital to average assets* | 0.08 | % | 0.69 | % | |||||||||||||||||
The following tables outline the composition and changes in the loan portfolio as of:
| 3/31/18 | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | |||||||||||||||
| Commercial real estate | $ | 339,666 | $ | 330,337 | $ | 297,292 | $ | 265,627 | $ | 251,530 | |||||||||
| Residential real estate | 237,677 | 234,032 | 230,994 | 220,000 | 204,461 | ||||||||||||||
| Commercial | 51,411 | 51,250 | 48,553 | 54,063 | 50,916 | ||||||||||||||
| Home equity | 46,026 | 44,602 | 39,951 | 38,434 | 31,135 | ||||||||||||||
| Installment | 11,360 | 12,309 | 11,754 | 13,628 | 16,213 | ||||||||||||||
| Total loans | $ | 686,140 | $ | 672,530 | $ | 628,544 | $ | 591,752 | $ | 554,255 | |||||||||
| 3/31/2018 vs 12/31/2017 | 3/31/2018 vs 3/31/2017 | ||||||||||||||||||
| $ Variance | % Variance | $ Variance | % Variance | ||||||||||||||||
| Commercial real estate | $ | 9,329 | 2.82 | % | $ | 88,136 | 35.04 | % | |||||||||||
| Residential real estate | 3,645 | 1.56 | % | 33,216 | 16.25 | % | |||||||||||||
| Commercial | 161 | 0.31 | % | 495 | 0.97 | % | |||||||||||||
| Home equity | 1,424 | 3.19 | % | 14,891 | 47.83 | % | |||||||||||||
| Installment | (949 | ) | -7.71 | % | (4,853 | ) | -29.93 | % | |||||||||||
| Total loans | $ | 13,610 | 2.02 | % | $ | 131,885 | 23.80 | % | |||||||||||
During the first quarter of 2018, the Corporation continued to drive loan growth through actively pursuing opportunities in existing market areas without sacrificing underwriting standards. Over the past 12 months the Corporation has been successful in growing the loan portfolio in all segments, except for installment loans. Installment loans have declined because of the sale of the Corporation’s credit card portfolio which was acquired from The Community State Bank of St. Charles in December 2016.
The following tables outline the composition and changes in the deposit portfolio as of:
| 3/31/18 | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | ||||||||||||||||
| Demand | $ | 224,486 | $ | 216,607 | $ | 208,494 | $ | 217,504 | $ | 213,538 | ||||||||||
| Savings | 227,987 | 224,558 | 229,471 | 223,274 | 230,235 | |||||||||||||||
| Money market demand | 59,370 | 67,387 | 68,567 | 55,736 | 62,229 | |||||||||||||||
| NOW | 2,984 | 2,253 | 3,565 | 2,810 | 2,554 | |||||||||||||||
| Time deposits | 168,948 | 162,700 | 115,491 | 114,843 | 121,499 | |||||||||||||||
| Total deposits | $ | 683,775 | $ | 673,505 | $ | 625,588 | $ | 614,167 | $ | 630,055 | ||||||||||
| 3/31/2018 vs 12/31/2017 | 3/31/2018 vs 3/31/2017 | |||||||||||||||||||
| $ Variance | % Variance | $ Variance | % Variance | |||||||||||||||||
| Demand | $ | 7,879 | 3.64 | % | $ | 10,948 | 5.13 | % | ||||||||||||
| Savings | 3,429 | 1.53 | % | (2,248 | ) | -0.98 | % | |||||||||||||
| Money market demand | (8,017 | ) | -11.90 | % | (2,859 | ) | -4.59 | % | ||||||||||||
| NOW | 731 | 32.45 | % | 430 | 16.84 | % | ||||||||||||||
| Time deposits | 6,248 | 3.84 | % | 47,449 | 39.05 | % | ||||||||||||||
| Total deposits | $ | 10,270 | 1.52 | % | $ | 53,720 | 8.53 | % | ||||||||||||
Like loans, total deposits have grown both quarter over quarter and year over year. Most of the growth continues to come in the form of demand 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. The Corporation is implementing several strategic initiatives geared at accelerating deposit growth in upcoming periods to ensure that we have sufficient organic funding to meet loan demands.
Income Statement Breakdown and Analysis
| Quarter to Date | |||||||||||||||||||||
| 3/31/18 | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | |||||||||||||||||
| Interest and dividend income | |||||||||||||||||||||
| Loans, including fees | $ | 8,038 | $ | 8,524 | $ | 7,226 | $ | 6,931 | $ | 6,084 | |||||||||||
| Investments | 341 | 341 | 339 | 323 | 343 | ||||||||||||||||
| Total interest and dividend income | 8,379 | 8,865 | 7,565 | 7,254 | 6,427 | ||||||||||||||||
| Total interest expense | 1,031 | 939 | 792 | 702 | 687 | ||||||||||||||||
| Net interest income | 7,348 | 7,926 | 6,773 | 6,552 | 5,740 | ||||||||||||||||
| Provision for loan losses | 275 | 348 | 136 | 125 | - | ||||||||||||||||
| Net interest income, after provision for loan losses | 7,073 | 7,578 | 6,637 | 6,427 | 5,740 | ||||||||||||||||
| Total noninterest income | 1,801 | 2,220 | 3,396 | 2,138 | 1,234 | ||||||||||||||||
| Total noninterest expenses | 6,279 | 7,400 | 5,581 | 5,742 | 5,095 | ||||||||||||||||
| Income before federal income taxes | 2,595 | 2,398 | 4,452 | 2,823 | 1,879 | ||||||||||||||||
| Federal income taxes | 521 | 236 | 1,164 | 884 | 592 | ||||||||||||||||
| Net income | $ | 2,074 | $ | 2,162 | $ | 3,288 | $ | 1,939 | $ | 1,287 | |||||||||||
| Quarter to Date | |||||||||||||||||||||
| 3/31/18 | 12/31/17 | 9/30/17 | 6/30/17 | 3/31/17 | |||||||||||||||||
| Based on GAAP net income | |||||||||||||||||||||
| Return on Average Assets | 1.05 | % | 1.11 | % | 1.76 | % | 1.09 | % | 0.75 | % | |||||||||||
| Efficiency Ratio | 68.63 | % | 72.94 | % | 54.88 | % | 66.08 | % | 73.06 | % | |||||||||||
| Earnings Per Share | $ | 0.57 | $ | 0.60 | $ | 0.91 | $ | 0.53 | $ | 0.35 | |||||||||||
| Yield on Earning Assets | 4.55 | % | 5.13 | % | 4.40 | % | 4.45 | % | 4.19 | % | |||||||||||
| Rate on Int. Bearing Liabilities | 0.82 | % | 0.82 | % | 0.67 | % | 0.57 | % | 0.55 | % | |||||||||||
| Net Interest Margin to Earning Assets | 3.99 | % | 4.59 | % | 3.94 | % | 4.02 | % | 3.74 | % | |||||||||||
| GAAP net income | $ | 2,074 | $ | 2,162 | $ | 3,288 | $ | 1,939 | $ | 1,287 | |||||||||||
| Provision for loan losses (net of tax) | 217 | 229 | 90 | 83 | - | ||||||||||||||||
| Acquisition related items (net of tax) | |||||||||||||||||||||
| Accretion on purchased loans | (250 | ) | (676 | ) | (179 | ) | (175 | ) | (173 | ) | |||||||||||
| Amortization of core deposit intangible | 107 | 105 | 104 | 104 | 104 | ||||||||||||||||
| Acquisition related expenses | - | 296 | - | - | - | ||||||||||||||||
| Accretion on acquired OREO | - | - | - | (53 | ) | - | |||||||||||||||
| Amortization on acquired time deposits | 9 | 10 | 10 | 9 | 9 | ||||||||||||||||
| Amortization on purchased MSRs | 6 | 8 | 8 | 7 | 7 | ||||||||||||||||
| Total acquisition related items (net of tax) | (128 | ) | (257 | ) | (57 | ) | (108 | ) | (53 | ) | |||||||||||
| One-time and other 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 | ) | - | - | |||||||||||||||
| Impact of The Tax Cuts and Jobs Act | (323 | ) | - | - | - | - | |||||||||||||||
| Total one-time and other items (net of tax) | (323 | ) | (489 | ) | (1,327 | ) | - | - | |||||||||||||
| Adjusted net income from operations | $ | 1,840 | $ | 1,645 | $ | 1,994 | $ | 1,914 | $ | 1,234 | |||||||||||
| GAAP net interest income | $ | 7,348 | $ | 7,926 | $ | 6,773 | $ | 6,552 | $ | 5,740 | |||||||||||
| Accretion on purchased loans | (317 | ) | (1,021 | ) | (272 | ) | (266 | ) | (263 | ) | |||||||||||
| Amortization on acquired time deposits | 12 | 15 | 15 | 14 | 14 | ||||||||||||||||
| Adjusted net interest income | $ | 7,043 | $ | 6,920 | $ | 6,516 | $ | 6,300 | $ | 5,491 | |||||||||||
| Based on adjusted net income from operations | |||||||||||||||||||||
| Return on Average Assets | 0.93 | % | 0.84 | % | 1.07 | % | 1.08 | % | 0.72 | % | |||||||||||
| Efficiency Ratio | 69.41 | % | 74.22 | % | 63.73 | % | 66.73 | % | 73.29 | % | |||||||||||
| Earnings Per Share | $ | 0.51 | $ | 0.45 | $ | 0.55 | $ | 0.53 | $ | 0.34 | |||||||||||
| Based on adjusted net interest income | |||||||||||||||||||||
| Yield on Earning Assets | 4.38 | % | 4.54 | % | 4.24 | % | 4.29 | % | 4.01 | % | |||||||||||
| Rate on Int. Bearing Liabilities | 0.83 | % | 0.83 | % | 0.68 | % | 0.58 | % | 0.56 | % | |||||||||||
| Net Interest Margin to Earning Assets | 3.83 | % | 4.01 | % | 3.79 | % | 3.87 | % | 3.58 | % | |||||||||||
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. 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 in the first quarter of 2018 when compared to the fourth quarter of 2017.
The Corporation has also been successful at consistently increasing adjusted net interest income. This increase continues to be primarily driven through increases in loans. Despite the strong growth in the loan portfolio, the Corporation has maintained relatively strong interest margins. As the Corporation expects to grow its loan portfolio throughout 2018, net interest income is expected to continue to increase.
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 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 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.
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