• Net Income for the quarter compares favorably to the earnings reported for the fourth quarter of 2012
  • Loan growth exceeded expectations for the period
  • Capital continues to grow organically through earnings and the current position is considered strong by industry standards
  • Credit Quality continues to strengthen
  • The Bank was released from its Consent Agreement with Federal and State regulatory agencies


Fentura Financial, Inc. (OTCQB:FETM) reported net income for the three months ended March 31, 2013 of $855,000, compared to the $739,000 operating loss reported for the first quarter of 2012.

"We continue to be pleased by our performance trends. During the first quarter of 2013, the Company grew loans by $12.5 million, strengthening net interest income for the quarter. The credit quality improvement experienced throughout 2012 continued in the first quarter of 2013, reducing certain expenses and again eliminating the need for any additional provision in order to maintain an adequate allowance for loan losses at the end of the quarter. Operating income has increased as well, as the strengthening of the market has improved revenue from Wealth Management services and mortgage lending," noted Ronald Justice, President and CEO.

Balance Sheet

Total assets increased $6.8 million or 2.2% at March 31, 2013 compared to December 31, 2012, as loan balances increased by $12.5 million or 6.2% from efforts to grow the portfolio to improve net interest income.  During the quarter the Bank experienced growth in its consumer, mortgage and commercial loan portfolios.    

During the first quarter of 2013, deposits increased $5.9 million or 2.1% from the prior quarter, primarily due to the seasonal trends of both commercial and public fund clients. Fentura continues to benefit from a solid and loyal core deposit funding base.

Capital

Both Fentura Financial and its subsidiary, have achieved their goal to maintain capital consistent with levels considered well capitalized by regulatory agencies. 

The Bank's regulatory capital ratios follow, and indicate a modest decline at March 31, 2013 compared to December 31, 2012. While capital increased from quarterly operating results, assets grew at a slightly faster rate causing the modest decline.

  March 31, 2013 December 31, 2012 March 31, 2012 Regulatory Well Capitalized
Tier 1 Leverage Capital Ratio  8.70% 8.73% 7.86% 5.00%
Tier 1 Risk-Based Capital Ratio  11.89 12.06 11.30 6.00
Total Risk-Based Capital Ratio  13.15 13.34 12.59 10.00

Credit Quality

As reported previously, the Company benefited significantly from improvement in credit quality throughout 2012, and these trends continued in the first quarter of 2013. At March 31, 2013 loan delinquencies to total loans were 1.1% compared to 1.9% at the end of the fourth quarter of 2012, and 5.7% as of March 31, 2012. Substandard assets totaled $9.1 million at March 31, 2013, down from $13.2 million at December 31, 2012, and $25.5 million at March 31, 2012. These trends eliminated the need for provisions to the allowance for loan losses during the first quarter of 2013. 

Net Interest Income

Net interest income of $2.6 million for the quarter ended March 31, 2013 improved modestly compared to the $2.5 million reported for both the first and fourth quarters of 2012. Interest income improved during the three months ended March 31, 2013, from the growth of loans during the quarter when compared to interest income for the fourth quarter of 2012. Additionally, interest expense declined comparing the two quarters as well, as deposits matured and re-priced at lower rates.

Noninterest Income and Expense

Noninterest income was $1.5 million for the quarter ended March 31, 2013 compared to the $1.2 million reported for the fourth quarter of 2012.       

  • Gains on the sale of mortgage loans originated and sold in the secondary market were $575,000 for the first quarter of 2013 compared to $389,000 in the fourth quarter of 2012. Market interest rates increased refinance and home purchase activity which contributed to an increase in new loan volume and accordingly, the gains from the sale of these loans.
  • Income from trust and investment services was $231,000 in the first quarter of 2013 compared to $212,000 for the fourth quarter of 2012.   The quarter to quarter improvement is supported by growth in investment assets under management and the strengthening of the market during the first quarter of 2013.

Noninterest expense was $3.2 million for the first quarter of 2013 compared to the $3.7 million reported for the fourth quarter of 2012.       

  • Salary and benefit expense, the largest category of noninterest expense, was $1.7 million for the three months ended March 31, 2013, down from the $1.9 million reported for the fourth quarter of 2012. During the fourth quarter of 2012, the company accrued additional required balances for certain retirement agreements which contributed to the increased expense during the period. 
  • Other general and administrative expense was $0.8 million during the first quarter of 2013 compared to $1.0 million for the fourth quarter of 2012. The decline of this expense in the first quarter of 2013 is primarily attributable to the reduction of the FDIC insurance assessment based on the Bank's release from its Consent Agreement with both Federal and State regulatory agencies.  

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 Brighton area is served by Livingston Community Bank, a division of The State Bank.  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-13 Dec-12 Sep-12 Jun-12 Mar-12
           
Balance Sheet Highlights          
Cash and due from banks  45,272  45,712  42,768  16,529  30,476
Fed funds sold  --   --   --   --   -- 
Investment securities  42,582  48,249  51,812  60,199  63,332
Commercial loans  154,223  146,482  144,612  142,101  134,144
Consumer loans  24,017  23,423  23,304  24,288  25,441
Mortgage loans  34,791  30,623  29,687  40,495  39,695
Gross loans  213,031  200,528  197,603  206,884  199,280
ALLL  (4,682)  (4,962)  (6,267)  (7,083)  (7,675)
Other assets  21,284  21,195  20,585  21,342  21,053
Total assets  317,487  310,722  306,501  297,871  306,466
           
Non-interest deposits  84,490  80,550  70,293  70,831  72,348
Interest bearing non-maturity deposits  146,838  145,471  145,368  133,871  131,427
Time deposits  50,380  49,818  56,718  60,524  69,879
Total deposits  281,708  275,839  272,379  265,226  273,654
Fed funds purchased  --   --   --   --   -- 
Borrowings  14,891  14,891  14,891  14,891  14,923
Other liabilities  3,901  3,789  3,376  3,408  3,719
Equity  16,987  16,203  15,855  14,346  14,170
   317,487  310,722  306,501  297,871  306,466
BALANCE SHEET RATIOS          
Gross Loans to Deposits 75.6% 72.7% 72.6% 78.0% 72.8%
Earning Assets to Total Assets 80.5% 80.1% 81.4% 89.7% 85.7%
Securities and Cash to Assets 27.7% 30.2% 30.9% 25.8% 30.6%
Deposits to Assets 88.7% 88.8% 88.9% 89.0% 89.3%
Loss Reserve to Gross Loans 2.2% 2.5% 3.2% 3.4% 3.9%
Net Charge-Offs to Gross Loans 0.1% 0.4% 0.0% 0.3% 0.7%
Leverage Ratio - The State Bank 8.7% 8.7% 8.5% 8.1% 7.9%
           
Income Statement Highlights - QTD Mar-13 Dec-12 Sep-12 Jun-12 Mar-12
Interest income  2,953  2,924  3,096  3,059  3,114
Interest expense  371  394  390  533  628
Net interest income  2,582  2,530  2,706  2,526  2,486
Provision for loan loss  7  (600)  (850)  80  862
Service charges on deposit accounts  220  268  264  248  251
Gain on sale of mortgage loans  575  389  204  153  215
Wealth management income  231  212  346  293  219
Other non-interest income  428  331  514  447  487
Salaries and benefits  1,656  1,900  1,544  1,608  1,723
Occupancy and equipment  533  550  544  540  521
Loan and collection  173  212  412  171  150
Other operating expenses  812  1,018  980  1,123  1,265
Net Income before tax  855  650  1,404  145  (863)
Income Taxes  --   197  --   --   (124)
Net Income  855  453  1,404  145  (739)
           
INCOME STATEMENT RATIOS/DATA          
Basic earnings per share  $ 0.35  $ 0.19  $ 0.58  $ 0.06  $ (0.31)
Pre-tax pre-provision earnings  862  50  554  225  (1)
Net Charge offs  260  694  (34)  671  1,352
Return on Equity (ROE) 19.29% 7.26% 7.29% -8.07% -19.58%
Return on Assets (ROA) 1.12% 0.42% 0.36% -0.40% -0.98%
Efficiency Ratio 79.87% 94.64% 93.25% 96.96% 100.02%
Average Bank Prime 3.25% 3.25% 3.25% 3.25% 3.25%
Average Earning Asset Yield 4.85% 4.70% 4.77% 4.74% 4.80%
Average Cost of Funds 0.71% 0.76% 0.73% 1.02% 1.16%
Spread 4.14% 3.94% 4.04% 3.72% 3.65%
Net impact of free funds 0.11% 0.06% -0.06% 0.16% 0.19%
Net Interest Margin 4.25% 4.00% 3.98% 3.88% 3.84%
           
Income Statement Highlights - YTD Mar-13 Mar-12   Dec-12 Dec-11
Interest income  2,953  3,114    12,193  13,142
Interest expense  371  628    1,945  2,983
Net interest income  2,582  2,486    10,248  10,159
Provision for loan loss  7  862    (508)  3,142
Service charges on deposit accounts  220  251    1,030  1,256
Gain on sale of mortgage loans  575  215    961  348
Wealth management income  231  219    1,071  960
Other non-interest income  428  487    1,780  3,496
Salaries and benefits  1,656  1,723    6,775  6,763
Occupancy and equipment  533  521    2,155  2,158
Loan and collection  173  150    944  1,309
Other operating expenses  812  1,265    4,386  4,169
Net Income before tax  855  (863)    1,338  (1,322)
Income Taxes  --   (124)    73  295
Net Income  855  (739)    1,265  (1,617)
           
INCOME STATEMENT RATIOS/DATA          
Basic earnings per share  $ 0.35  $ (0.31)    $ 0.52  $ (0.69)
Pre-tax pre-provision earnings  862  (1)    830  1,820
Net Charge offs  260  1,352    2,683  5,005
Return on Equity (ROE) 19.29% -19.58%   7.26% -10.46%
Return on Assets (ROA) 1.12% -0.98%   0.42% -0.53%
Efficiency Ratio 79.87% 100.02%   94.64% 88.64%
Average Bank Prime 3.25% 3.25%   3.25% 3.25%
Average Earning Asset Yield 4.85% 4.80%   1.19% 1.22%
Average Cost of Funds 0.71% 1.16%   0.23% 0.33%
Spread 4.14% 3.65%   0.96% 0.89%
Net impact of free funds 0.11% 0.19%   3.04% 2.89%
Net Interest Margin 4.25% 3.84%   4.00% 3.78% 
CONTACT: Ronald L. Justice
         President & CEO
         Fentura Financial, Inc.
         (810) 714-3902
Fentura Financial (QX) (USOTC:FETM)
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