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CST: 24/11/2020 00:19:45   

Fentura Financial, Inc. Announces Third Quarter 2019 Earnings

396 Days ago

Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with September 30, 2019 presentation.

FENTON, Mich., Oct. 24, 2019 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces continued strong earnings with net income of $3,415 and $9,026 for the three and nine month periods ended September 30, 2019, respectively.

  • 13.50% increase in gross loans since September 30, 2018
  • 4.50% increase in total deposits since September 30, 2018
  • Year to date yield on interest earning assets increased to 4.81% from 4.58% at September 30, 2018
  • 18.88% increase in tangible book value per share since September 30, 2018

Ronald L. Justice, President and CEO said, “Our strong earnings are built off of our continued growth in net interest income. Even when adjusting for nonrecurring items, net interest income continues to grow quarter after quarter. Our team works diligently to put our customers in the most beneficial financial situation possible. I am extremely proud of the work they do both for Fentura, and, more importantly, the communities that we serve.”

Following is a discussion of the Corporation's financial performance as of, and for the quarter ended, September 30, 2019. At the end of this document is a list of abbreviations and acronyms.

Results of Operations
The following table outlines the Corporation's QTD results of operations and provides certain performance measures as of, and for the three month periods ended:

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
INCOME STATEMENT DATA                    
Interest income   $ 11,240     $ 10,788     $ 10,437     $ 9,931     $ 9,311  
Interest expense   2,184     2,195     2,090     1,926     1,638  
Net interest income   9,056     8,593     8,347     8,005     7,673  
Provision for loan losses   422     264     213     290     191  
Noninterest income   2,262     2,250     1,522     1,703     2,760  
Noninterest expenses   6,608     6,691     6,509     6,907     6,075  
Federal income tax expense   873     791     633     502     654  
Net income   $ 3,415     $ 3,097     $ 2,514     $ 2,009     $ 3,513  
PER SHARE                    
Earnings   $ 0.73     $ 0.67     $ 0.54     $ 0.46     $ 0.96  
Dividends   $ 0.07     $ 0.07     $ 0.07     $ 0.06     $ 0.06  
Tangible book value(1)   $ 20.59     $ 19.83     $ 19.15     $ 18.61     $ 17.32  
Quoted market value                    
High   $ 21.00     $ 20.90     $ 21.00     $ 22.02     $ 22.50  
Low   $ 20.45     $ 20.45     $ 20.05     $ 20.94     $ 20.60  
Close(1)   $ 21.00     $ 20.60     $ 20.89     $ 21.00     $ 21.15  
PERFORMANCE RATIOS                    
Return on average assets   1.40 %   1.31 %   1.09 %   0.87 %   1.61 %
Return on average shareholders' equity   13.83 %   13.14 %   11.09 %   9.87 %   21.27 %
Return on average tangible shareholders' equity   15.08 %   14.36 %   12.13 %   10.96 %   24.27 %
Efficiency ratio   58.38 %   61.71 %   65.95 %   71.15 %   58.23 %
Yield on earning assets (FTE)   4.85 %   4.81 %   4.77 %   4.54 %   4.53 %
Rate on interest bearing liabilities   1.41 %   1.46 %   1.40 %   1.29 %   1.15 %
Net interest margin to earning assets (FTE)   3.92 %   3.83 %   3.82 %   3.66 %   3.73 %
BALANCE SHEET DATA(1)                    
Total investment securities   $ 62,351     $ 73,285     $ 82,222     $ 94,721     $ 79,531  
Gross loans   $ 826,597     $ 813,547     $ 809,863     $ 772,227     $ 728,302  
Total assets   $ 978,046     $ 949,790     $ 946,172     $ 926,450     $ 909,901  
Total deposits   $ 801,101     $ 792,555     $ 789,533     $ 763,124     $ 766,587  
Borrowed funds   $ 69,000     $ 54,000     $ 59,000     $ 69,000     $ 74,000  
Total shareholders' equity   $ 99,142     $ 95,504     $ 92,236     $ 89,516     $ 66,340  
Net loans to total deposits   102.51 %   102.02 %   101.97 %   100.60 %   94.46 %
Common shares outstanding   4,658,722     4,653,343     4,647,978     4,636,455     3,645,402  
QTD BALANCE SHEET AVERAGES                    
Total assets   $ 971,074     $ 947,095     $ 934,078     $ 917,242     $ 866,253  
Earning assets   $ 920,551     $ 900,738     $ 887,974     $ 868,498     $ 817,110  
Interest bearing liabilities   $ 611,804     $ 603,965     $ 604,973     $ 592,878     $ 565,908  
Total shareholders' equity   $ 97,958     $ 94,519     $ 91,964     $ 80,781     $ 65,541  
Total tangible shareholders' equity   $ 89,860     $ 86,478     $ 84,025     $ 72,742     $ 57,419  
Earned common shares outstanding   4,646,835     4,641,161     4,635,255     4,332,665     3,643,151  
Unvested stock grants   9,967     9,967     9,788     3,022      
Total common shares outstanding   4,656,802     4,651,128     4,645,043     4,335,687     3,643,151  
ASSET QUALITY(1)                    
Nonperforming loans to gross loans   0.11 %   0.13 %   0.15 %   0.14 %   0.09 %
Nonperforming assets to total assets   0.09 %   0.11 %   0.13 %   0.12 %   0.09 %
ALLL to gross loans   0.65 %   0.62 %   0.59 %   0.58 %   0.57 %
CAPITAL RATIOS(1)                    
Total capital to risk weighted assets   14.42 %   14.18 %   13.99 %   14.00 %   11.31 %
Tier 1 capital to risk weighted assets   13.73 %   13.53 %   13.37 %   13.40 %   10.73 %
CET1 capital to risk weighted assets   11.96 %   11.73 %   11.54 %   11.52 %   8.77 %
Tier 1 leverage ratio   11.22 %   11.16 %   10.99 %   10.92 %   8.90 %
                     
(1)At end of period                    


The following table outlines the Corporation's YTD results of operations and provides certain performance measures as of, and for the nine month periods ended:

            Variance
    9/30/2019   9/30/2018   Amount
  %
INCOME STATEMENT DATA                
Interest income   $ 32,465     $ 26,419     $ 6,046     22.89 %
Interest expense   6,469     3,901     2,568     65.83 %
Net interest income   25,996     22,518     3,478     15.45 %
Provision for loan losses   899     767     132     17.21 %
Noninterest income   6,034     6,574     (540 )   (8.21 )%
Noninterest expenses   19,808     18,403     1,405     7.63 %
Federal income tax expense   2,297     1,817     480     26.42 %
Net income   $ 9,026     $ 8,105     $ 921     11.36 %
PER SHARE                
Earnings   $ 1.94     $ 2.23     $ (0.29 )   (13.00 )%
Dividends   $ 0.21     $ 0.18     $ 0.03     16.67 %
Tangible book value(1)   $ 20.59     $ 17.32     $ 3.27     18.88 %
Quoted market value                
High   $ 21.00     $ 21.15     $ (0.15 )   (0.71 )%
Low   $ 20.05     $ 18.88     $ 1.17     6.20 %
Close(1)   $ 21.00     $ 21.15     $ (0.15 )   (0.71 )%
PERFORMANCE RATIOS                
Return on average assets   1.27 %   1.32 %       (0.05 )%
Return on average shareholders' equity   12.73 %   17.29 %       (4.56 )%
Return on average tangible shareholders' equity   13.90 %   19.87 %       (5.97 )%
Efficiency ratio   61.84 %   63.26 %       (1.42 )%
Yield on earning assets (FTE)   4.81 %   4.58 %       0.23 %
Rate on interest bearing liabilities   1.43 %   0.99 %       0.44 %
Net interest margin to earning assets (FTE)   3.85 %   3.91 %       (0.06 )%
BALANCE SHEET DATA(1)                
Total investment securities   $ 62,351     $ 79,531     $ (17,180 )   (21.60 )%
Gross loans   $ 826,597     $ 728,302     $ 98,295     13.50 %
Total assets   $ 978,046     $ 909,901     $ 68,145     7.49 %
Total deposits   $ 801,101     $ 766,587     $ 34,514     4.50 %
Borrowed funds   $ 69,000     $ 74,000     $ (5,000 )   (6.76 )%
Total shareholders' equity   $ 99,142     $ 66,340     $ 32,802     49.45 %
Net loans to total deposits   102.51 %   94.46 %       8.05 %
Common shares outstanding   4,658,722     3,645,402     1,013,320     27.80 %
YTD BALANCE SHEET AVERAGES                
Total assets   $ 950,749     $ 820,481     $ 130,268     15.88 %
Earning assets   $ 904,590     $ 772,111     $ 132,479     17.16 %
Interest bearing liabilities   $ 606,912     $ 528,165     $ 78,747     14.91 %
Total shareholders' equity   $ 94,815     $ 62,662     $ 32,153     51.31 %
Total tangible shareholders' equity   $ 86,789     $ 54,547     $ 32,242     59.11 %
Earned common shares outstanding   4,641,084     3,638,123     1,002,961     27.57 %
Unvested stock grants   9,907         9,907     N/M  
Total common shares outstanding   4,650,991     3,638,123     1,012,868     27.84 %
ASSET QUALITY(1)                
Nonperforming loans to gross loans   0.11 %   0.09 %       0.02 %
Nonperforming assets to total assets   0.09 %   0.09 %       %
ALLL to gross loans   0.65 %   0.57 %       0.08 %
CAPITAL RATIOS(1)                
Total capital to risk weighted assets   14.42 %   11.31 %       3.11 %
Tier 1 capital to risk weighted assets   13.73 %   10.73 %       3.00 %
CET1 capital to risk weighted assets   11.96 %   8.77 %       3.19 %
Tier 1 leverage ratio   11.22 %   8.90 %       2.32 %
                 
(1)At end of period                


Income Statement Breakdown and Analysis

    Quarter to Date
      9/30/2019     6/30/2019   3/31/2019   12/31/2018   9/30/2018
GAAP net income   $ 3,415       $ 3,097       $ 2,514       $ 2,009       $ 3,513  
                     
GAAP net income                    
Acquisition related items (net of tax)                    
Accretion on purchased loans   (189 )     (145 )     (175 )     (167 )     (116 )
Amortization of core deposit intangible   88       90       89       107       107  
Amortization on acquired time deposits   7       7       7       9       9  
Amortization on purchased MSRs   3       3       3       6       6  
Total acquisition related items (net of tax)   (91 )     (45 )     (76 )     (45 )     6  
Other nonrecurring items (net of tax)                    
Prepayment penalties collected   (284 )     (9 )     (13 )           (96 )
Net gain from BOLI death benefit                           (932 )
Total other nonrecurring items (net of tax)   (284 )     (9 )     (13 )           (1,028 )
  Adjusted net income from operations   $ 3,040       $ 3,043       $ 2,425       $ 1,964       $ 2,491  
                     
                     
GAAP net interest income   $ 9,056       $ 8,593       $ 8,347       $ 8,005       $ 7,673  
Accretion on purchased loans   (239 )     (183 )     (222 )     (211 )     (147 )
Prepayment penalties collected   (360 )     (12 )     (16 )           (122 )
Amortization on acquired time deposits   9       9       9       12       12  
Adjusted net interest income   $ 8,466       $ 8,407       $ 8,118       $ 7,806       $ 7,416  
                     
                     
PERFORMANCE RATIOS                    
Based on adjusted net income from operations                    
Earnings per share   $ 0.65       $ 0.66       $ 0.52       $ 0.45       $ 0.68  
Return on average assets   1.24 %     1.29 %     1.05 %     0.85 %     1.14 %
Return on average shareholders' equity   12.31 %     12.91 %     10.69 %     9.65 %     15.08 %
Return on average tangible shareholders' equity   13.42 %     14.11 %     11.70 %     10.71 %     17.21 %
                     
Based on adjusted net interest income                    
Yield on earning assets (FTE)   4.59 %     4.72 %     4.66 %     4.44 %     4.40 %
Rate on interest bearing liabilities   1.42 %     1.47 %     1.41 %     1.30 %     1.16 %
Net interest margin to earning assets (FTE)   3.67 %     3.75 %     3.72 %     3.57 %     3.61 %


    Year to Date September 30   Variance
    2019   2018   Amount   %
GAAP net income   $ 9,026     $ 8,105     $ 921     11.36 %
Acquisition related items (net of tax)                
Accretion on purchased loans   (509 )   (622 )   113     (18.17 )%
Amortization of core deposit intangible   267     321     (54 )   (16.82 )%
Amortization on acquired time deposits   21     28     (7 )   (25.00 )%
Amortization on purchased MSRs   9     18     (9 )   (50.00 )%
Total acquisition related items (net of tax)   (212 )   (255 )   43     (16.86 )%
Other nonrecurring items (net of tax)                
Prepayment penalties collected   (306 )   (137 )   (169 )   123.36 %
Net gain from BOLI death benefit       (932 )   932     (100.00 )%
Total other nonrecurring items (net of tax)   (306 )   (1,069 )   763     (71.38 )%
  Adjusted net income from operations   $ 8,508     $ 6,781     $ 1,727     25.47 %
                 
GAAP net interest income   $ 25,996     $ 22,518     $ 3,478     15.45 %
Accretion on purchased loans   (644 )   (787 )   143     (18.17 )%
Prepayment penalties collected   (388 )   (173 )   (215 )   124.28 %
Amortization on acquired time deposits   27     35     (8 )   (22.86 )%
Adjusted net interest income   $ 24,991     $ 21,593     $ 3,398     15.74 %
                 
PERFORMANCE RATIOS                
Based on adjusted net income from operations                
Earnings per share   $ 1.83     $ 1.86     $ (0.03 )   (1.61 )%
Return on average assets   1.20 %   1.10 %       0.10 %
Return on average shareholders' equity   12.00 %   14.47 %       (2.47 )%
Return on average tangible shareholders' equity   13.11 %   16.62 %       (3.51 )%
                 
Based on adjusted net interest income                
Yield on earning assets (FTE)   4.66 %   4.41 %       0.25 %
Rate on interest bearing liabilities   1.44 %   1.00 %       0.44 %
Net interest margin to earning assets (FTE)   3.70 %   3.75 %       (0.05 )%

To effectively compare core operating results from period to period, the impact of acquisition related items and other nonrecurring 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 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, and into 2020, 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 approximate current levels for the remainder of 2019, and narrow slightly in 2020, due to the forecasted interest rate environment.

Average Balances, Interest Rate, and Net Interest Income

The following tables 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 an 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
    September 30, 2019   June 30, 2019   September 30, 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   $ 827,456     $ 10,639     5.10 %   $ 805,954     $ 10,141     5.05 %   $ 722,811     $ 8,768     4.81 %
Taxable investment securities   58,059     375     2.56 %   67,237     462     2.76 %   52,617     311     2.34 %
Nontaxable investment securities   9,482     72     3.01 %   9,374     70     3.00 %   11,417     77     2.68 %
Federal funds sold   16,546     89     2.13 %   10,195     61     2.40 %   23,872     120     1.99 %
Interest earning cash and cash equivalents   5,858     35     2.37 %   4,828     28     2.33 %   3,243     15     1.84 %
FHLB stock   3,150     45     5.67 %   3,150     41     5.22 %   3,150     36     4.53 %
Total earning assets   920,551     11,255     4.85 %   900,738     10,803     4.81 %   817,110     9,327     4.53 %
                                     
Non-earning assets                                    
ALLL   (5,139 )           (4,822 )           (4,080 )        
Fixed assets   14,942             14,837             14,808          
Accrued income and other assets   40,720             36,342             38,415          
Total assets   $ 971,074             $ 947,095             $ 866,253          
                                     
Interest bearing liabilities                                    
Interest bearing demand deposits   $ 97,572     $ 229     0.93 %   $ 75,496     $ 117     0.62 %   $ 67,368     $ 65     0.38 %
Savings deposits   243,796     282     0.46 %   243,794     319     0.52 %   235,723     125     0.21 %
Time deposits   209,984     1,207     2.28 %   229,863     1,319     2.30 %   188,817     907     1.91 %
Borrowed funds   60,452     451     2.96 %   54,812     440     3.22 %   74,000     541     2.90 %
Total interest bearing liabilities   611,804     2,169     1.41 %   603,965     2,195     1.46 %   565,908     1,638     1.15 %
                                     
Noninterest bearing liabilities                                    
Noninterest bearing deposits   253,292             243,010             232,153          
Accrued interest and other liabilities   8,020             5,601             2,651          
Shareholders' equity   97,958             94,519             65,541          
Total liabilities and shareholders' equity   $ 971,074             $ 947,095             $ 866,253          
Net interest income (FTE)       $ 9,086             $ 8,608             $ 7,689      
Net interest margin to earning assets (FTE)           3.92 %           3.83 %           3.73 %


    Nine Months Ended
    September 30, 2019
  September 30, 2018
    Average
Balance
  Tax
Equivalent
Interest
  Average
Yield /
Rate
  Average
Balance
  Tax
Equivalent
Interest
  Average
Yield /
Rate
Interest earning assets                        
Total loans   $ 808,159     $ 30,521     5.05 %   $ 701,791     $ 25,239     4.81 %
Taxable investment securities   68,219     1,396     2.74 %   43,273     702     2.17 %
Nontaxable investment securities   9,812     218     2.97 %   11,957     230     2.57 %
Federal funds sold   8,928     150     2.25 %   9,656     127     1.76 %
Interest earning cash and cash equivalents   6,322     88     1.86 %   2,425     47     2.59 %
FHLB stock   3,150     138     5.86 %   3,009     122     5.42 %
Total earning assets   904,590     32,511     4.81 %   772,111     26,467     4.58 %
                         
Non-earning assets                        
ALLL   (4,851 )           (3,836 )        
Fixed assets   14,866             14,642          
Accrued income and other assets   36,144             37,564          
Total assets   $ 950,749             $ 820,481          
                         
Interest bearing liabilities                        
Interest bearing demand deposits   $ 82,161     $ 445     0.72 %   $ 63,697     $ 112     0.24 %
Savings deposits   243,135     898     0.49 %   239,431     372     0.21 %
Time deposits   221,903     3,746     2.26 %   161,944     2,081     1.72 %
Borrowed funds   59,713     1,380     3.09 %   63,093     1,336     2.83 %
Total interest bearing liabilities   606,912     6,469     1.43 %   528,165     3,901     0.99 %
                         
Noninterest bearing liabilities                        
Noninterest bearing deposits   243,523             226,955          
Accrued interest and other liabilities   5,499             2,699          
Shareholders' equity   94,815             62,662          
Total liabilities and shareholders' equity   $ 950,749             $ 820,481          
Net interest income (FTE)       $ 26,042             $ 22,566      
Net interest margin to earning assets (FTE)           3.85 %           3.91 %

Net Interest Income

Net interest income is the amount by which interest income on earning assets exceeds the interest expenses on interest bearing liabilities. Net interest income, which includes loan fees, is influenced by changes in the balance and mix of assets and liabilities and market interest rates. The Corporation exerts some control over these factors; however, FRB monetary policy and competition have a significant impact. For analytical purposes, net interest income is adjusted to an FTE basis by adding the income tax savings from interest on tax exempt loans, and nontaxable investment securities, thus making year to year comparisons more meaningful.

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   Nine Months Ended  
    September 30, 2019   September 30, 2019   September 30, 2019  
    Compared To   Compared To   Compared To  
    June 30, 2019   September 30, 2018   September 30, 2018  
    Increase (Decrease) Due to   Increase (Decrease) Due to   Increase (Decrease) Due to  
     Volume    Rate   Net    Volume    Rate   Net    Volume    Rate   Net  
Changes in interest income                                      
Total loans   $ 363     $ 135     $ 498     $ 1,321     $ 550     $ 1,871     $ 1,308     $ 3,974     $ 5,282    
Taxable investment securities   (57 )   (30 )   (87 )   33     31     64     218     476     694    
Nontaxable investment securities   2         2     (47 )   42     (5 )   46     (58 )   (12 )  
Federal funds sold   71     (43 )   28     (79 )   48     (31 )   38     (15 )   23    
Interest earning cash and cash equivalents   6     1     7     15     5     20     (24 )   65     41    
FHLB stock       4     4         9     9     10     6     16    
Total changes in interest income   385     67     452     1,243     685     1,928     1,596     4,448     6,044    
                                       
Changes in interest expense                                      
Interest bearing demand deposits   41     71     112     39     125     164     42     291     333    
Savings deposits       (37 )   (37 )   4     153     157     6     520     526    
Time deposits   (102 )   (10 )   (112 )   110     190     300     901     764     1,665    
Borrowed funds   166     (155 )   11     (160 )   70     (90 )   (105 )   149     44    
Total changes in interest expense   105     (131 )   (26 )   (7 )   538     531     844     1,724     2,568    
Net change in net interest income (FTE)   $ 280     $ 198     $ 478     $ 1,250     $ 147     $ 1,397     $ 752     $ 2,724     $ 3,476    
                                                                           


    Average Yield/Rate for the Three Month Periods Ended
    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Total earning assets   4.85 %   4.81 %   4.77 %   4.54 %   4.53 %
Total interest bearing liabilities   1.41 %   1.46 %   1.40 %   1.29 %   1.15 %
Net interest margin to earning assets (FTE)   3.92 %   3.83 %   3.82 %   3.66 %   3.73 %


    Quarter to Date Net Interest Income (FTE)  
    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018  
Total interest income (FTE)   11,255     10,803     10,453     9,947     9,327    
Total interest expense   2,169     2,195     2,090     1,926     1,638    
Net interest income (FTE)   $ 9,086     $ 8,608     $ 8,363     $ 8,021     $ 7,689    

As outlined in the previous tables, the Corporation has increased net interest income primarily through increases in volume. Net interest margins are expected to approximate current levels for the remainder of the year and shrink slightly in 2020. The anticipated minor reduction in net interest margins for 2020 is due to yields on earning assets falling faster than rates on interest bearing liabilities.

Noninterest Income

    Quarter to Date  
    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018  
Net gain on sales of mortgage loans   $ 665     $ 422     $ 195     $ 162     $ 277    
ATM and debit card income   418     404     360     397     386    
Trust and investment services   395     459     328     372     444    
Mortgage servicing fees   243     230     211     208     199    
Service charges on deposit accounts   239     222     234     259     273    
Net MSR income   142     344     8     67     133    
Net gain from BOLI death benefit                   932    
Net gain on sales of commercial loans                      
Other income and fees   160     169     186     238     116    
Total noninterest income   $ 2,262     $ 2,250     $ 1,522     $ 1,703     $ 2,760    


    Year to Date September 30   Variance  
    2019   2018   Amount   %  
Net gain on sales of mortgage loans   $ 1,282     $ 679     $ 603     88.81 %  
ATM and debit card income   1,182     1,128     54     4.79 %  
Trust and investment services   1,182     1,219     (37 )   (3.04 )%  
Mortgage servicing fees   684     577     107     18.54 %  
Service charges on deposit accounts   695     785     (90 )   (11.46 )%  
Net MSR income   494     296     198     66.89 %  
Net gain from BOLI death benefit       932     (932 )   (100.00 )%  
Net gain on sales of commercial loans       518     (518 )   (100.00 )%  
Other income and fees   515     440     75     17.05 %  
Total noninterest income   $ 6,034     $ 6,574     $ (540 )   (8.21 )%  

Net gain on sales of mortgage loans represents the income earned on the sale of residential mortgage loans into the secondary market. Through the first nine months of 2019, the Corporation had two sales of residential mortgage pools that were previously held in its loan portfolio. One sale occurred in the second quarter of 2019 in which $28,000 of residential mortgages generated a gain of $25. The second sale occurred in the third quarter of 2019, in which $2,600 of residential mortgages generated a gain of $64. In 2018, the Corporation had one sale of residential mortgages that were previously held in its portfolio. The sale generated a gain of $47 and $4,724 of residential mortgages were sold. Excluding the impact of these sales, net gains from the sales of mortgage loans increased by $561 when the first nine months of 2019 are compared to the same period in 2018 and this trend is expected to continue throughout the remainder of the year. While the Corporation  continually analyzes its residential mortgage portfolio for opportunistic sales strategies, there are no sales anticipated in the foreseeable future.

ATM and debit card income represents fees earned on ATM and debit card transactions. The Corporation expects these fees to increase modestly in future periods.

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 activity is expected to approximate current levels for the foreseeable future.

Mortgage servicing fees include the fees earned 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 as mortgage demand remains strong.

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 for the foreseeable future.

Net MSR income is the net of income generated from the capitalization of new MSRs and the amortization of serviced loans as a result of paydowns and payoffs. As noted above, the Corporation sold pools of residential mortgage loans out of its loan portfolio in the second and third quarter of 2019. This second quarter sale generated $266 of net MSR income from the capitalization of the associated servicing rights while the third quarter sale generated $25 of capitalized servicing rights. The Corporation expects net MSR income to stabilize in future periods as residential mortgage sales continue at current levels for the foreseeable future.

Net gain from BOLI death benefit is recognized in the event of the death of an insured individual. The Corporation does not expect to receive any gains from BOLI death benefits in 2019.

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 nine months ending September 30, 2019. While the Corporation  continually analyzes its commercial loan portfolio for opportunistic sales strategies, there are no sales anticipated in the foreseeable future.

Other income and fees include other income items, none of which are individually significant. Other income and fees are expected to approximate current levels for the for the foreseeable future.

Noninterest Expenses

    Quarter to Date
    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Compensation   $ 3,530     $ 3,749     $ 3,630     $ 3,429     $ 3,359  
Furniture and equipment   579     525     491     508     486  
Professional services   494     439     445     518     381  
Occupancy   444     426     437     416     379  
Data processing   323     281     278     512     164  
Advertising and promotional   222     291     163     198     177  
Loan and collection   120     119     110     134     135  
Amortization of CDI   112     114     112     136     135  
Telephone and communication   110     108     111     107     106  
ATM and debit card   109     100     95     96     105  
FDIC insurance premiums   20     17     101     120     132  
Other losses   13     4     11     152     2  
Other general and administrative   532     518     525     581     514  
Total noninterest expenses   $ 6,608     $ 6,691     $ 6,509     $ 6,907     $ 6,075  


    Year to Date September 30   Variance
    2019   2018   Amount   %
Compensation   $ 10,909     $ 9,992     $ 917     9.18 %
Furniture and equipment   1,595     1,390     205     14.75 %
Professional services   1,378     1,269     109     8.59 %
Occupancy   1,307     1,223     84     6.87 %
Data processing   882     456     426     93.42 %
Advertising and promotional   676     520     156     30.00 %
Loan and collection   349     403     (54 )   (13.40 )%
Amortization of CDI   338     406     (68 )   (16.75 )%
Telephone and communication   329     306     23     7.52 %
ATM and debit card   304     291     13     4.47 %
FDIC insurance premiums   138     352     (214 )   (60.80 )%
Other losses   28     261     (233 )   (89.27 )%
Other general and administrative   1,575     1,534     41     2.67 %
Total noninterest expenses   $ 19,808     $ 18,403     $ 1,405     7.63 %

Compensation includes all compensation and benefits paid to the Corporation's employees. Compensation for the nine months ending September 30, 2019 has increased compared to the same time period for 2018, and is expected to continue to increase, due to the continued growth in size and complexity of the organization.

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.

Professional services include expenses relating to third-party professional services. These services include, but are not limited to, regulatory, auditing, consulting, and legal. These expenses are expected to approximate their current levels for the remainder of the year.

Data processing primarily includes the expenses relating to the Corporation's core data processor. The increase is largely due to the growth in size and complexity of the organization. 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 efforts 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.

Loan and collection includes 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.

Amortization of CDI relates to the core deposits acquired from Community Bancorp, Inc. on December 31, 2016 and is expected to approximate current levels for the remainder of 2019.

Telephone and communication includes expenses relating to the Corporation's communication systems. These expenses have 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.

ATM and debit card expenses fluctuate based on customer and non-customer utilization of ATMs and customer debit card volumes. The Corporation expects these fees to increase modestly throughout 2019.

FDIC insurance premiums typically fluctuate based on the size of the Corporation's balance sheet, capital position, overall risk profile, and examination ratings. FDIC insurance premiums are expected to remain at current levels for 2019.

Included in other losses was a $260 one time loan related expense in the first quarter of 2018 and one time loss totaling $132 in the fourth quarter of 2018 related to assets acquired from Community Bancorp, Inc. Excluding these isolated items, other losses have not been significant and management does not anticipate any significant other losses in 2019.

Other general and administrative includes miscellaneous other expense items, none of which are individually significant. These expenses are expected to approximate current levels for the reminder of the year.

Balance Sheet Breakdown and Analysis

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018  
ASSETS                      
Cash and cash equivalents   $ 37,572     $ 20,067     $ 16,509     $ 23,412     $ 63,469    
Total investment securities   62,351     73,285     82,222     94,721     79,531    
Loans HFS   15,111     6,771     1,835     903     2,021    
Gross loans   826,597     813,547     809,863     772,227     728,302    
Less ALLL   5,413     5,014     4,745     4,488     4,146    
Net loans   821,184     808,533     805,118     767,739     724,156    
All other assets   41,828     41,134     40,488     39,675     40,724    
Total assets   $ 978,046     $ 949,790     $ 946,172     $ 926,450     $ 909,901    
                       
LIABILITIES AND SHAREHOLDERS' EQUITY                      
Total deposits   $ 801,101     $ 792,555     $ 789,533     $ 763,124     $ 766,587    
Total borrowed funds   69,000     54,000     59,000     69,000     74,000    
Accrued interest and other liabilities   8,803     7,731     5,403     4,810     2,974    
Total liabilities   878,904     854,286     853,936     836,934     843,561    
                       
Total shareholders' equity   99,142     95,504     92,236     89,516     66,340    
Total liabilities and shareholders' equity   $ 978,046     $ 949,790     $ 946,172     $ 926,450     $ 909,901    
                                           
                                           


    9/30/2019 vs 6/30/2019   9/30/2019 vs 9/30/2018  
    Variance   Variance  
    Amount   %   Amount   %  
ASSETS                  
Cash and cash equivalents   $ 17,505     87.23 %   $ (25,897 )   (40.80 )%  
Total investment securities   (10,934 )   (14.92 )%   (17,180 )   (21.60 )%  
Loans HFS   8,340     123.17 %   13,090     647.7 %  
Gross loans   13,050     1.6 %   98,295     13.5 %  
Less ALLL   399     7.96 %   1,267     30.56 %  
Net loans   12,651     1.56 %   97,028     13.4 %  
All other assets   694     1.69 %   1,104     2.71 %  
Total assets   $ 28,256     2.97 %   $ 68,145     7.49 %  
                   
LIABILITIES AND SHAREHOLDERS' EQUITY                  
Total deposits   $ 8,546     1.08 %   $ 34,514     4.5 %  
Total borrowed funds   15,000     27.78 %   (5,000 )   (6.76 )%  
Accrued interest and other liabilities   1,072     13.87 %   5,829     196 %  
Total liabilities   24,618     1.49 %   35,343     2.2 %  
                   
Total shareholders' equity   3,638     3.81 %   32,802     49.45 %  
Total liabilities and shareholders' equity   $ 28,256     2.97 %   $ 68,145     7.49 %  

Cash and cash equivalents

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018  
Cash and due from banks   $ 28,572     $ 17,067     $ 16,509     $ 19,412     $ 21,469    
Federal funds sold   9,000     3,000         4,000     42,000    
Cash and cash equivalents   $ 37,572     $ 20,067     $ 16,509     $ 23,412     $ 63,469    
                       
    9/30/2019 vs 6/30/2019       9/30/2019 vs 9/30/2018  
    Variance       Variance  
    Amount   %       Amount   %  
Cash and due from banks   $ 11,505     67.41 %       $ 7,103     33.08 %  
Federal funds sold   6,000     200 %       (33,000 )   (78.57 )%  
Cash and cash equivalents   $ 17,505     87.23 %       $ (25,897 )   (40.80 )%  
                                           

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

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
AFS                    
U.S. Government and federal agency   $ 22,854     $ 33,842     $ 38,796     $ 57,029     $ 49,011  
Collateralized mortgage obligations - agencies   10,826     11,856     12,516     9,833     1,662  
State and municipal   10,194     8,889     10,322     10,558     12,741  
Certificates of deposit   7,155     7,154     8,394     8,393     7,171  
Mortgage backed residential   6,227     6,733     7,031     4,276     4,408  
Unrealized gain/(loss) on AFS securities   1,048     776     288     (235 )   (478 )
Total AFS   58,304     69,250     77,347     89,854     74,515  
HTM State and municipal   2,100     2,104     2,965     2,971     3,728  
Equity securities   1,947     1,931     1,910     1,896     1,288  
Total investment securities   $ 62,351     $ 73,285     $ 82,222     $ 94,721     $ 79,531  
                     
    9/30/2019 vs 6/30/2019       9/30/2019 vs 9/30/2018
    Variance       Variance
    Amount   %       Amount   %
AFS                    
U.S. Government and federal agency   $ (10,988 )   (32.47 )%       $ (26,157 )   (53.37 )%
Collateralized mortgage obligations - agencies   (1,030 )   (8.69 )%       9,164     551.38 %
State and municipal   1,305     14.68 %       (2,547 )   (19.99 )%
Certificates of deposit   1     0.01 %       (16 )   (0.22 )%
Mortgage backed residential   (506 )   (7.52 )%       1,819     41.27 %
Unrealized gain/(loss) on AFS securities   272     35.05 %       1,526     (319.25 )%
Total AFS   (10,946 )   (15.81 )%       (16,211 )   (21.76 )%
HTM State and municipal   (4 )   (0.19 )%       (1,628 )   (43.67 )%
Equity securities   16     0.83 %       659     51.16 %
Total investment securities   $ (10,934 )   (14.92 )%       $ (17,180 )   (21.60 )%

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 the majority of maturing investments. Total investment securities are expected to approximate current levels or decline slightly in future periods.

Loans HFS

Loans HFS represent the balance of loans that have been committed to be sold to the secondary market, but have not yet been delivered. The significant increase in loans HFS is due to a considerable increase in residential mortgage demand. Loans HFS are expected to decrease slightly, however, over the rest of 2019 as loan appetite tends to decrease towards the end of the year. That being said, if interest rates further decline, the Corporation could expect the balance in loans held for sale to approximate current levels going into 2020.

Net loans

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

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Commercial real estate   $ 420,127     $ 408,103     $ 394,462     $ 369,043     $ 351,739  
Residential real estate   291,401     289,944     306,466     293,271     274,035  
Commercial   63,747     63,998     56,790     56,583     48,594  
Home equity   43,061     42,890     43,130     43,597     41,136  
Installment   8,261     8,612     9,015     9,733     12,798  
Gross loans   $ 826,597     $ 813,547     $ 809,863     $ 772,227     $ 728,302  
                     
    9/30/2019 vs 6/30/2019       9/30/2019 vs 9/30/2018
    Variance       Variance
    Amount   %       Amount   %
Commercial real estate   $ 12,024     2.95 %       $ 68,388     19.44 %
Residential real estate   1,457     0.5 %       17,366     6.34 %
Commercial   (251 )   (0.39 )%       15,153     31.18 %
Home equity   171     0.4 %       1,925     4.68 %
Installment   (351 )   (4.08 )%       (4,537 )   (35.45 )%
Gross loans   $ 13,050     1.6 %       $ 98,295     13.5 %

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

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Accruing interest                    
Current   $ 824,587     $ 811,184     $ 807,671     $ 769,799     $ 725,954  
Past due 30-89 days   1,089     1,275     1,009     1,325     1,689  
Past due 90 days or more   209     301     310     191     150  
Total accruing interest   825,885     812,760     808,990     771,315     727,793  
Nonaccrual   712     787     873     912     509  
Total loans   $ 826,597     $ 813,547     $ 809,863     $ 772,227     $ 728,302  
Total loans past due and in nonaccrual status   $ 2,010     $ 2,363     $ 2,192     $ 2,428     $ 2,348  

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

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Nonaccrual loans   $ 712     $ 787     $ 873     $ 912     $ 509  
Accruing loans past due 90 days or more   209     301     310     191     150  
Total nonperforming loans   921     1,088     1,183     1,103     659  
OREO               32     143  
Total nonperforming assets   $ 921     $ 1,088     $ 1,183     $ 1,135     $ 802  
                     
                                         

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

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Nonperforming loans to gross loans   0.11 %   0.13 %   0.15 %   0.14 %   0.09 %
Nonperforming assets to total assets   0.09 %   0.11 %   0.13 %   0.12 %   0.09 %
ALLL to gross loans   0.65 %   0.62 %   0.59 %   0.58 %   0.57 %

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, 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 nonperforming 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 understand that 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:

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Net unamortized discount on purchased loans   $ 1,626     $ 1,914     $ 2,095     $ 2,318     $ 2,529  

All other assets

The following tables outline the composition and changes in other assets as of:

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Premises and equipment, net   $ 15,443     $ 14,792     $ 14,838     $ 14,761     $ 14,644  
BOLI   10,248     10,181     10,070     10,007     9,959  
MSR   3,900     3,758     3,414     3,406     3,340  
Goodwill   3,219     3,219     3,219     3,219     3,219  
FHLB stock   3,150     3,150     3,150     3,150     3,150  
AIR   2,954     3,350     3,298     3,020     3,082  
CDI assets   1,015     1,128     1,241     1,353     1,489  
OREO               32     143  
Other assets   1,899     1,556     1,258     727     1,698  
All other assets   $ 41,828     $ 41,134     $ 40,488     $ 39,675     $ 40,724  
                     
    9/30/2019 vs 6/30/2019       9/30/2019 vs 9/30/2018
    Variance       Variance
    Amount   %       Amount   %
Premises and equipment, net   $ 651     4.4 %       $ 799     5.46 %
BOLI   67     0.66 %       289     2.9 %
MSR   142     3.78 %       560     16.77 %
Goodwill       %           %
FHLB stock       %           %
AIR   (396 )   (11.82 )%       (128 )   (4.15 )%
CDI assets   (113 )   (10.02 )%       (474 )   (31.83 )%
OREO       %       (143 )   (100.00 )%
Other assets   343     22.04 %       201     11.84 %
All other assets   $ 694     1.69 %       $ 1,104     2.71 %

Premises and equipment, net is comprised of land and land improvements, building and building improvements, furniture and equipment, and construction in progress. The $651 increase in the third quarter of 2019 in mainly due to the build-out of a newly leased property and newly purchased customer facing equipment.

All other assets are 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:

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
Demand   $ 253,784     $ 245,703     $ 235,305     $ 233,954     $ 235,208  
Savings   213,494     232,094     230,006     223,728     221,028  
Money market demand   80,873     69,374     61,294     61,369     60,836  
NOW   39,286     18,017     19,358     10,234     8,952  
Time deposits   213,664     227,367     243,570     233,839     240,563  
Total deposits   $ 801,101     $ 792,555     $ 789,533     $ 763,124     $ 766,587  
                     
    9/30/2019 vs 6/30/2019       9/30/2019 vs 9/30/2018
    Variance       Variance
    Amount   %       Amount   %
Demand   $ 8,081     3.29 %       $ 18,576     7.9 %
Savings   (18,600 )   (8.01 )%       (7,534 )   (3.41 )%
Money market demand   11,499     16.58 %       20,037     32.94 %
NOW   21,269     118.05 %       30,334     338.85 %
Time deposits   (13,703 )   (6.03 )%       (26,899 )   (11.18 )%
Total deposits   $ 8,546     1.08 %       $ 34,514     4.5 %

The Corporation has continued its focus of growing non-contractual deposits while supplementing funding with time deposits. On a quarterly average basis, noninterest bearing deposits increased $10,282, or 4.23%, from June 30, 2019. The Corporation has also been able to drive this meaningful increase through enhanced organic growth strategies. The quarter over quarter decrease in Savings and increase in NOW account balances are related to the transition of specific accounts from Savings to NOW account types. This was a one-time transition. The Corporation expects that deposit growth will continue to be strong with the majority of the growth coming in the form of demand and money market accounts.

Total borrowed funds

The following tables outline the composition and changes in borrowed funds as of:

    9/30/2019   6/30/2019   3/31/2019   12/31/2018   9/30/2018
FHLB borrowings   $ 55,000     $ 40,000     $ 40,000     $ 55,000     $ 60,000  
Subordinated debentures   14,000     14,000     14,000     14,000     14,000  
Federal funds purchased           5,000          
Total borrowed funds   $ 69,000     $ 54,000     $ 59,000     $ 69,000     $ 74,000  
                     
    9/30/2019 vs 6/30/2019       9/30/2019 vs 9/30/2018
    Variance       Variance
    Amount   %       Amount   %
FHLB borrowings   $ 15,000     37.5 %       $ (5,000 )   (8.33 )%
Subordinated debentures       %           %
Federal funds purchased       %           %
Total borrowed funds   $ 15,000     27.78 %       $ (5,000 )   (6.76 )%
                                         

 

While the Corporation increased its reliance on borrowed funds in 2018 to fund its strong loan demand, borrowed funds gradually declined in the quarters prior to September 30, 2019 as the Corporation has been able to fund organic growth through increases in deposit accounts. Total borrowed funds increased in the third quarter of 2019 as the interest rates for FHLB borrowings were extremely attractive. Total borrowed funds are expected to decrease as maturing FHLB borrowings roll off. However, the Corporation continues to analyze the market for opportunities and will borrow funds when deemed financially beneficial.

Accrued interest and other liabilities

Accrued interest and other liabilities includes accrued interest payable, federal income taxes payable, deferred federal income taxes payable, and all other liabilities (none of which are individually significant).  Accrued interest and other liabilities are not expected to fluctuate significantly in future periods.

Total shareholders' equity

Total shareholders' equity includes common stock, retained earnings, and AOCI. 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. Total shareholders' equity is expected to continue to grow throughout 2019 through the Corporation's earnings as no significant changes in dividend strategy are anticipated.

Abbreviations and Acronyms

ABA: American Bankers Association GAAP: Generally Accepted Accounting Principles
ACH: Automated Clearing House HFS: Held for sale
AFS: Available-for-sale HTM: Held to maturity
AIR: Accrued interest receivable IRA: Individual retirement account
ALLL: Allowance for loan losses LIBOR: London Interbank Offered Rate
AOCI: Accumulated other comprehensive income MSR: Mortgage servicing rights
ARRC: Alternative Reference Rates Committee N/M: Not meaningful
ASC: Accounting Standards Codification NASDAQ: National Association of Securities Dealers Automated Quotations
ASU: Accounting Standards Update
ATM: Automated teller machine NOW: Negotiable order of withdrawal
BOLI: Bank owned life insurance NSF: Non-sufficient funds
CDI: Core deposit intangible OIS: Overnight Index Swap
CET1: Common equity tier 1 OREO: Other real estate owned
DRIP: Dividend Reinvestment Plan OTTI: Other-than-temporary impairment
ESOP: Employee Stock Ownership Plan QTD: Quarter to date
FASB: Financial Accounting Standards Board SBA: Small Business Association
FDIC: Federal Deposit Insurance Corporation SERP: Supplemental Executive Retirement Plan
FHLB: Federal Home Loan Bank SOFR: Secured Overnight Funding Rate
FRB: Federal Reserve Bank TDR: Troubled debt restructuring
FTE: Fully taxable equivalent YTD: Year to date


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 #20 by S&P Global in terms of 2018 performance for banks under $2 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


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