• Operating results represent the 8th straight quarter of profitability for the Company
  • Book value increased 48.1% to $10.25 per share over prior year
  • Loan growth exceeded expectations for the quarter
  • Operating results continue to strengthen capital, and our Bank's capital level is considered well capitalized by industry standards
  • Credit quality continues to improve, as loan delinquencies remain low and substandard assets improved significantly over the prior year.


Fentura Financial, Inc. (OTCBB:FETM) reported net income for the three months ended March 31, 2014 of $558,000 compared to $5.9 million for the fourth quarter of 2013. Pre-tax net income for the period was $846,000, compared to the $818,000 reported for the prior quarter.

Ronald L. Justice, President and CEO said, "I am pleased with the Company's quarterly performance. We continue to identify opportunities to grow our business and to produce solid operating results."

Balance Sheet

Total assets increased $11.5 million or 3.4% at March 31, 2014 compared to December 31, 2013, ending the quarter at $346.7 million. Cash and due from banks increased 24.8%, to $16.1 million at March 31, 2014 compared to the $12.9 million reported at December 31, 2013. This increase was funded primarily by deposit growth and the improvement of capital from operating results.   Loan balances increased $9.8 million or 3.7% during the same period. Loans increased from continued efforts to grow the Bank's client base. During the quarter, the Bank experienced growth in its consumer, mortgage and commercial loan portfolios. Loans totaled $273.8 million at March 31, 2014.      

Deposit totals of $294.1 million at March 31, 2014, represent an increase of $10.8 million or 3.8% from the $283.3 million reported at December 31, 2013. The increase during the quarter occurred in both non-interest bearing and certificates of deposit primarily as the Company continued efforts to grow its client base.  

Capital

As previously reported, Fentura Financial, Inc. and The State Bank, have achieved their goal to maintain capital in excess of levels considered well capitalized by regulatory agencies. The Bank's regulatory capital ratios are detailed in the table that follows and indicate strengthening of the Bank's Tier 1 Leverage Capital Ratio at March 31, 2014 compared to March 31, 2013 associated with strong operating results.

         
  March 31, December 31, March 31, Regulatory
  2014 2013 2013 Well Capitalized
         
Tier 1 Leverage Capital Ratio 9.34% 9.49% 8.70% 5.00%
Tier 1 Risk-Based Capital Ratio 11.32 11.15 11.89 6.00
Total Risk-Based Capital Ratio 12.59 12.41 13.15 10.00

Credit Quality

Throughout the first quarter of 2014, the Company continued to benefit from improvement in credit quality.  At March 31, 2014 loan delinquencies to total loans were 0.60% compared to 1.14% reported at March 31, 2013. Substandard assets totaled $6.0 million at March 31, 2014, down from $9.1 million reported at March 31, 2013. The low level of loan delinquencies and the improved level of substandard assets both support the lack of need for additional provisions for the allowance for loan losses during the quarter. 

Net Interest Income

Net interest income of $3.1 million for the quarter ended March 31, 2014 improved compared to the $3.0 million and the $2.6 million reported for both the fourth and first quarters of 2013, respectively. The improvement in interest income was primarily due to loan growth during the quarter and the year respectively. Interest expense increased modestly comparing the current quarter to the quarter ended December 31, 2013 due to the increase in the amount of time deposits.  

Noninterest Income

Noninterest income was $1.1 million for the quarter ended March 31, 2014 compared to $1.3 million and $1.5 million for the fourth and first quarters of 2013, respectively. The decline in the volume of mortgage loans sold in the secondary market and accordingly, the gain on sale recognized from those loan sales was the primary contributor to the decline in the current period.          

Noninterest Expense

The Company recorded $3.3 million of noninterest expense in the quarter ended March 31, 2014, a modest decline from the $3.4 million reported in the fourth quarter of 2013. Compared to the quarter ended March 31, 2013, current period noninterest expense increased $130,000 or 4.1%. The decrease in noninterest expense in the current period compared to the fourth quarter 2013 is primarily due to nonrecurring operating losses incurred in the fourth quarter of 2013. The increase in noninterest expense in the current period compared to the first quarter of 2013 is attributable to an increase in salary and benefits expense. These expenses increased in the current period primarily due to annual salary increases to staff and the increased cost of providing medical benefits. 

Fentura Financial, Inc. is a bank holding company headquartered in Fenton, Michigan.  Its subsidiary bank, The State Bank, is also headquartered in Fenton with offices serving Fenton, Linden, Holly, Grand Blanc and Brighton. The Bank offers comprehensive financial services including commercial, consumer, mortgage, trust and financial planning services, and deposit products.  The Bank proudly provides services from its community offices in Genesee, Oakland and Livingston Counties and through on-line and mobile banking services.  More information about The State Bank is available 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. 

           
Fentura Financial Inc.          
           
  Mar-14 Dec-13 Sep-13 Jun-13 Mar-13
  Unaudited   Unaudited Unaudited Unaudited
Balance Sheet Highlights          
Cash and due from banks  16,061  12,856  23,647  21,109  45,272
Fed funds sold  --   --   --   --   -- 
Investment securities  35,478  36,574  38,147  41,379  42,582
Commercial loans  180,675  176,796  167,204  160,720  154,223
Consumer loans  25,470  25,336  24,907  24,462  24,017
Mortgage loans  67,696  61,846  49,554  43,182  34,791
Gross loans  273,841  263,978  241,665  228,364  213,031
ALLL  (4,916)  (4,900)  (4,790)  (4,699)  (4,682)
Other assets  26,224  26,717  19,816  20,817  21,284
Total assets  346,688  335,225  318,485  306,970  317,487
           
Non-interest deposits  83,378  82,585  81,195  84,366  84,490
Interest bearing non-maturity deposits  154,814  154,838  154,675  139,584  146,838
Time deposits  55,870  45,918  47,383  46,822  50,380
Total deposits  294,062  283,341  283,253  270,772  281,708
Fed funds purchased  --   --   --   --   -- 
Borrowings  24,855  24,855  14,855  14,855  14,891
Other liabilities  2,265  2,267  1,958  3,994  3,901
Equity  25,506  24,762  18,419  17,349  16,987
   346,688  335,225  318,485  306,970  317,487
BALANCE SHEET RATIOS (unaudited)          
Gross Loans to Deposits 93.12% 93.17% 85.32% 84.34% 75.62%
Earning Assets to Total Assets 89.22% 89.66% 87.86% 87.87% 80.51%
Securities and Cash to Assets 14.87% 14.75% 19.40% 20.36% 27.67%
Deposits to Assets 84.82% 84.52% 88.94% 88.21% 88.73%
Loan Loss Reserve to Gross Loans 1.80% 1.86% 1.99% 2.07% 2.20%
Net Charge-Offs to Gross Loans -0.01% -0.04% -0.04% -0.01% 0.13%
Leverage Ratio - The State Bank 9.34% 9.49% 9.21% 9.02% 8.70%
Book Value per Share  $ 10.25  $ 9.97  $ 7.45  $ 7.04  $ 6.92
           
Income Statement Highlights - QTD Mar-14 Dec-13 Sep-13 Jun-13 Mar-13
  Unaudited Unaudited Unaudited Unaudited Unaudited
Interest income  3,439  3,298  3,214  3,017  2,953
Interest expense  367  348  373  361  371
Net interest income  3,072  2,950  2,841  2,656  2,582
Provision for loan loss  --   --   --   --   7
Service charges on deposit accounts  205  230  231  215  220
Gain on sale of mortgage loans  114  186  419  433  575
Wealth management income  263  274  275  217  231
Other non-interest income  495  566  638  445  428
Salaries and benefits  1,863  1,745  1,788  1,736  1,656
Occupancy and equipment  547  527  561  531  533
Loan and collection  139  112  217  186  173
Other operating expenses  755  1,004  864  791  812
Net Income before tax  845  818  974  722  855
Income Taxes  288  (5,118)  --   --   -- 
Net Income  557  5,936  974  722  855
           
INCOME STATEMENT RATIOS/DATA (unaudited)        
Basic earnings per share  $ 0.22  $ 2.40  $ 0.40  $ 0.29  $ 0.35
Pre-tax pre-provision earnings  845  818  974  722  862
Net Charge offs  (16)  (108)  (92)  (17)  286
Return on Equity (ROE) 10.04% 123.38% 21.92% 16.43% 19.03%
Return on Assets (ROA) 0.67% 7.43% 1.24% 0.94% 1.10%
Efficiency Ratio 79.63% 80.55% 77.88% 81.80% 78.64%
Average Bank Prime 3.25% 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.61% 4.60% 4.69% 4.70% 4.85%
Average Cost of Funds 0.64% 0.64% 0.71% 0.71% 0.71%
Spread 3.96% 3.96% 3.99% 3.99% 4.14%
Net impact of free funds 0.16% 0.16% 0.17% 0.15% 0.11%
Net Interest Margin 4.12% 4.12% 4.15% 4.14% 4.25%
           
Income Statement Highlights - YTD Mar-14 Mar-13   Dec-13 Dec-12
  Unaudited Unaudited      
Interest income  3,439  2,953    12,481  12,193
Interest expense  367  371    1,454  1,945
Net interest income  3,072  2,582    11,027  10,248
Provision for loan loss  --   7    7  (508)
Service charges on deposit accounts  205  220    897  1,030
Gain on sale of mortgage loans  114  575    1,613  961
Wealth management income  263  231    996  1,071
Other non-interest income  495  428    2,077  1,775
Salaries and benefits  1,863  1,656    6,925  6,775
Occupancy and equipment  547  533    2,152  2,155
Loan and collection  139  173    688  944
Other operating expenses  755  812    3,470  4,382
Net Income before tax  845  855    3,368  1,337
Income Taxes  288  --     (5,118)  73
Net Income from continuing operations  557  855    8,486  1,264
           
INCOME STATEMENT RATIOS/DATA (unaudited)        
Basic earnings per share  $ 0.22  $ 0.35    $ 3.44  $ 0.52
Pre-tax pre-provision earnings  845  862    3,375  829
Net Charge offs  (16)  286    69  2,694
Return on Equity (ROE) 10.18% 19.29%   46.78% 7.26%
Return on Assets (ROA) 0.67% 1.12%   2.71% 0.42%
Efficiency Ratio 80.82% 79.87%   80.83% 94.64%
Average Bank Prime 3.25% 3.25%   3.25% 3.25%
Average Earning Asset Yield 4.61% 4.85%   4.71% 4.75%
Average Cost of Funds 0.64% 0.71%   0.69% 0.92%
Spread 3.96% 4.14%   4.02% 3.83%
Net impact of free funds 0.16% 0.11%   0.15% 0.17%
Net Interest Margin 4.12% 4.25%   4.16% 4.00%
CONTACT: Ronald L. Justice
         President & CEO
         Fentura Financial, Inc.
         (810) 714-3902
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