EXHIBIT 99.1
FENTURA FINANCIAL, INC.
P.O. BOX 725
FENTON, MI 48430-0725
P.O. BOX 725
FENTON, MI 48430-0725
Contact: | Ronald L. Justice The State Bank (810) 714-3902 October 17, 2006 |
For Immediate Release
FENTURA FINANCIAL, INC. REPORTS INCREASED THIRD QUARTER EARNINGS
Fenton, Michigan—October 17, 2006—Fentura Financial, Inc. (trading symbol: FETM), the holding company for The State Bank of Fenton, Michigan, Davison State Bank of Davison, Michigan, and West Michigan Community Bank of Hudsonville, Michigan, today announced earnings of $1,336,000 or $.62 per diluted share for the quarter ended September 30, 2006, a 2.8% increase over earnings of $1,299,000 or $.61 per diluted share for the same period in 2005, and a 6.2% increase over the quarter ended June 30, 2006.
For the nine months ended September 30, 2006, the Company reported net income of $3,801,000 or $1.77 per diluted share versus $3,745,000 or $1.77 per diluted share for the same period in 2005, an increase of 1.5%.
Financial highlights for the Quarter Ended September 30, 2006
1. | Revenues increased 13.6% driven by a 15.9% increase in interest income and a 3% increase in non-interest income. | ||
2. | Total loans increased $19,356,000 or 4.5% to $453,772,000 from September 30, 2005. |
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3. | Total deposits of $531,585,000 increased $14,649,000 or 2.8% compared to September 30, 2005. | ||
4. | Return on average shareholders’ equity was 10.85% for the quarter ended September 30, 2006 a decline from the 11.38% reported for the same period in 2005 and an increase over the 10.46% reported for the quarter ended June 30, 2006. | ||
5. | Non-performing loans as a percent of total loans were .44% at September 30, 2006 an improvement from the .47% reported at September 30, 2005. |
Components of Third Quarter Results
Third quarter 2006 total revenue of $12,152,000 increased $1,455,000 or 13.6% over the $10,697,000 reported in the third quarter of 2005. Interest income for the quarter increased $1,399,000 or 15.9% over the same time period in 2005. Continued loan growth and improved earning asset yields contributed to the increased interest income. Third quarter 2006 non-interest income of $1,940,000 also increased compared to the same quarter in 2005. Increases in total service charges on deposit accounts based on account growth and improved income from trust and investment services were the primary contributors to the quarter to quarter non-interest income results. Net interest income was down when comparing the two quarters due to increased interest expense in 2006. While the subsidiary banks experienced deposit account growth, and as market interest rates increased, deposits transitioned from interest free checking or lower rate savings accounts to certificates of deposit causing an increase in the cost of funds and an increase in interest expense. This deposit trend as well as the rising market interest rate environment caused a decline in the Company’s net interest margin to 4.01% for the quarter ended September 30, 2006 compared to the 4.26% reported for the period ending September 30, 2005.
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Third quarter 2006 non-interest expense at $5,503,000 increased 4.4% compared to the $5,272,000 reported in the third quarter of 2005. Compensation and occupancy expenses connected with a new branch opened during 2006 contributed to the year-to-year 2006 increase in non-interest expense.
Provision for loan losses was $240,000 for the quarter ended September 30, 2006 compared to $404,000 for the quarter ended September 30, 2005. The Company performs a quarterly analysis of the adequacy of the allowance for loan and lease losses to determine the necessary allowance balance to cover identified losses based upon information available at that time regarding assets quality, loan trends and other economic factors. The provision recorded is a result of this computation and while the quarterly provision was lower in 2006, the allowance for loan and lease losses to gross loans ratio of 1.46% was higher than the 1.45% reported at September 30, 2005.
Total assets of the Company increased 2.3% to $622,964,000 at September 30, 2006 from the $609,187,000 reported on September 30, 2005. Total assets increased principally due to increased commercial loan volumes. At September 30, 2006, loans totaled $453,772,000 compared to $434,416,000 reported at September 30, 2005. Commercial loans increased $27,115,000 between the two periods principally due to new business development efforts in existing and new markets, expanding existing relationships, and new loan opportunities generated by the Company’s alliance with other community bank partners. Total deposits of $531,585,000 increased $14,649,000 at the end of the third quarter 2006 compared to the
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$516,936,000 reported at the end of the third quarter 2005. Growth of certificates of deposit due to higher market rates was the primary contributor to the improved deposit totals.
The return on average assets for the Company was .84% for the third quarter of 2006 compared with .85% in the third quarter of 2005. The return on average shareholders’ equity for the third quarter of 2006 was 10.85% compared to 11.38% for the third quarter 2005. Cash dividends paid to shareholders in the third quarter 2006 increased 13.6% to $.25 per share compared to the $.22 per share paid in the third quarter of 2005.
Year-to-Date Results
Net interest income for the nine months ended September 30, 2006 of $17,413,000 increased $559,000 or 3.3% over the $16,854,000 reported for the same period in 2005. Higher interest rates on loans based on increased market interest rates as well as interest income on new commercial loan relationships accounted for the improved position in 2006. Non-interest income at $5,625,000 for the nine months ended September 30, 2006 increased $387,000 over the $5,238,000 reported for the same period in 2005. Service charges on deposits increased from new account growth during the period as well as improved levels of income from trust and investment services during the first nine months of 2006. Offsetting improved income levels was an increase in non-interest expense when comparing the first nine months of 2006 to the same period in 2005. In 2006, these expenses totaled $16,785,000 an increase of $1,121,000 or 7.2% over the $15,664,000 reported for the same period in 2005. Additional salary and benefit costs to staff a new community banking office at one of the banking subsidiaries as well as expansion in other markets were the primary contributors to the increased expense.
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Additionally, for the nine months ended September 30, 2006, provision for loan losses was $880,000 a decrease of $122,000 from the $1,002,000 provided in the same period in 2005.
According to President and CEO Donald L. Grill, “We are pleased with our quarterly and year to date earnings results in light of the challenging Michigan economy. Our growth and expansion strategies, coupled with the diligent efforts of our fine bankers continued to create strong financial results.”
Fentura is a bank holding company headquartered in Fenton, Michigan. Subsidiary banks include The State Bank headquartered in Fenton with offices serving Fenton, Linden, Holly, Grand Blanc and Brighton; Davison State Bank headquartered in Davison, Michigan with offices serving the Davison area; and West Michigan Community Bank headquartered in Hudsonville, Michigan with offices serving Hudsonville, Holland, Jenison, and Grandville. Fentura Financial, Inc. shares are traded over the counter under the FETM trading symbol.
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CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve 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 pricing. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Further information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included in the Company’s filing with the Securities and Exchange Commission.
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Fentura Financial Inc.
Consolidated Balance Sheets
(Dollars in thousands)
UNAUDITED
Consolidated Balance Sheets
(Dollars in thousands)
UNAUDITED
Sept 30 | June 30 | Mar 31 | Dec 31 | Sept 30 | ||||||||||||||||
2006 | 2006 | 2006 | 2005 | 2005 | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||
Cash and due from banks | $ | 17,473 | $ | 19,346 | $ | 19,156 | $ | 21,327 | $ | 22,885 | ||||||||||
Short term investments | 8,950 | 6,900 | 8,650 | 9,750 | 8,300 | |||||||||||||||
Total cash & cash equivalents | 26,423 | 26,246 | 27,806 | 31,077 | 31,185 | |||||||||||||||
Securities: | ||||||||||||||||||||
Securities available for sale | 92,557 | 92,646 | 93,217 | 99,542 | 94,705 | |||||||||||||||
Securities held to maturity | 12,202 | 16,958 | 15,395 | 14,851 | 13,663 | |||||||||||||||
Total securities | 104,759 | 109,604 | 108,612 | 114,393 | 108,368 | |||||||||||||||
Loans held for sale | 2,079 | 679 | 1,695 | 1,042 | 2,442 | |||||||||||||||
Loans: | ||||||||||||||||||||
Commercial | 268,305 | 265,097 | 260,054 | 254,498 | 241,190 | |||||||||||||||
Real estate — construction | 82,414 | 87,908 | 86,449 | 76,386 | 81,156 | |||||||||||||||
Real estate — mortgage | 37,963 | 37,076 | 36,347 | 37,627 | 39,529 | |||||||||||||||
Consumer | 65,090 | 66,896 | 69,534 | 70,845 | 72,541 | |||||||||||||||
Total loans | 453,772 | 456,977 | 452,384 | 439,356 | 434,416 | |||||||||||||||
Less: Allowance for loan losses | (6,625 | ) | (6,682 | ) | (6,518 | ) | (6,301 | ) | (6,294 | ) | ||||||||||
Net loans | 447,147 | 450,295 | 445,866 | 433,055 | 428,122 | |||||||||||||||
Bank owned life insurance | 6,736 | 6,683 | 6,642 | 6,579 | 6,417 | |||||||||||||||
Bank premises and equipment | 16,564 | 16,665 | 15,350 | 14,617 | 14,245 | |||||||||||||||
Federal Home Loan Bank stock | 2,172 | 2,432 | 2,300 | 2,300 | 2,300 | |||||||||||||||
Accrued interest receivable | 3,079 | 2,837 | 2,830 | 2,676 | 2,550 | |||||||||||||||
Goodwill | 7,955 | 7,955 | 7,955 | 7,955 | 7,955 | |||||||||||||||
Acquisition intangibles | 835 | 912 | 988 | 1,075 | 1,162 | |||||||||||||||
Other assets | 5,215 | 4,857 | 4,276 | 4,320 | 4,441 | |||||||||||||||
TOTAL ASSETS | $ | 622,964 | $ | 629,165 | $ | 624,320 | $ | 619,089 | $ | 609,187 | ||||||||||
LIABILITIES & SHAREHOLDERS’ EQUITY | ||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Non-interest bearing deposits | 75,564 | 77,463 | 77,652 | 76,792 | 81,532 | |||||||||||||||
Interest bearing deposits | 456,021 | 456,937 | 456,313 | 451,262 | 435,404 | |||||||||||||||
Total deposits | 531,585 | 534,400 | 533,965 | 528,054 | 516,936 | |||||||||||||||
Short-term borrowings | 1,251 | 6,565 | 20 | 1,537 | 1,950 | |||||||||||||||
Federal Home Loan Bank Advances | 11,091 | 12,130 | 14,189 | 14,228 | 16,267 | |||||||||||||||
Repurchase agreements | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 | |||||||||||||||
Subordinated debentures | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | |||||||||||||||
Accrued interest, taxes & other liabilities | 5,094 | 4,026 | 4,420 | 4,375 | 3,893 | |||||||||||||||
Total liabilities | 573,021 | 581,121 | 576,594 | 572,194 | 563,046 | |||||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Common stock — no par value 5,000,000 shares authorized | 41,978 | 41,810 | 34,798 | 34,491 | 34,359 | |||||||||||||||
Retained earnings | 9,149 | 8,358 | 14,431 | 13,729 | 12,882 | |||||||||||||||
Accumulated other comprehensive income (loss) | (1,184 | ) | (2,124 | ) | (1,503 | ) | (1,325 | ) | (1,100 | ) | ||||||||||
Total stockholders’ equity | 49,943 | 48,044 | 47,726 | 46,895 | 46,141 | |||||||||||||||
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | $ | 622,964 | $ | 629,165 | $ | 624,320 | $ | 619,089 | $ | 609,187 | ||||||||||
* Common stock shares issued & outstanding | 2,147,408 | 2,142,496 | 2,130,564 | 2,124,427 | 2,119,374 | |||||||||||||||
Asset Quality Ratios: | ||||||||||||||||||||
Non-Performing Loans as a % of Total Loans | 0.44 | % | 0.44 | % | 0.46 | % | 0.67 | % | 0.47 | % | ||||||||||
Allowance for Loan Losses as a % of Non-Performing Loans | 332.58 | % | 330.14 | % | 312.91 | % | 213.09 | % | 306.58 | % | ||||||||||
Accruing Loans Past Due 90 Days More to Total Loans | 0.02 | % | 0.04 | % | 0.02 | % | 0.02 | % | 0.03 | % | ||||||||||
Non-Performing Assets as a % of Total Assets | 0.48 | % | 0.44 | % | 0.35 | % | 0.56 | % | 0.46 | % | ||||||||||
Quarterly Average Balances: | ||||||||||||||||||||
Total Loans | 452,538 | 450,361 | 446,889 | 436,632 | 429,357 | |||||||||||||||
Total Earning Assets | 576,675 | 573,687 | 570,751 | 559,834 | 551,618 | |||||||||||||||
Total Shareholders’ Equity | 48,844 | 48,223 | 47,937 | 47,497 | 45,294 | |||||||||||||||
Total Assets | 630,713 | 622,474 | 619,398 | 610,275 | 603,683 | |||||||||||||||
Diluted Shares Outstanding | 2,149,598 | 2,135,056 | 2,137,265 | 2,128,215 | 2,091,588 |
* | Per share data adjusted for 10% stock dividend paid on August 4, 2006 |
Fentura Financial Inc.
Consolidated Income Statements
(Dollars in thousands, except per share data)
UNAUDITED
Consolidated Income Statements
(Dollars in thousands, except per share data)
UNAUDITED
Three Months ended | Nine months ended | |||||||||||||||||||||||
Sept 30 | June 30 | Mar 31 | Sept 30 | Sept 30 | Sept 30 | |||||||||||||||||||
2006 | 2006 | 2006 | 2005 | 2006 | 2005 | |||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Interest & fees on loans | $ | 8,929 | $ | 8,852 | $ | 8,430 | $ | 7,749 | $ | 26,211 | $ | 21,516 | ||||||||||||
Interest & dividends on securities: | ||||||||||||||||||||||||
Taxable | 860 | 852 | 883 | 801 | 2,595 | 2,464 | ||||||||||||||||||
Tax-exempt | 205 | 196 | 207 | 227 | 608 | 704 | ||||||||||||||||||
Interest on federal funds sold | 218 | 79 | 94 | 36 | 391 | 54 | ||||||||||||||||||
Total interest income | 10,212 | 9,979 | 9,614 | 8,813 | 29,805 | 24,738 | ||||||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Deposits | 3,943 | 3,594 | 3,241 | 2,538 | 10,778 | 6,449 | ||||||||||||||||||
Borrowings | 567 | 540 | 507 | 498 | 1,614 | 1,435 | ||||||||||||||||||
Total interest expense | 4,510 | 4,134 | 3,748 | 3,036 | 12,392 | 7,884 | ||||||||||||||||||
Net interest income | 5,702 | 5,845 | 5,866 | 5,777 | 17,413 | 16,854 | ||||||||||||||||||
Provision for loan losses | 240 | 240 | 400 | 404 | 880 | 1,002 | ||||||||||||||||||
Net interest income after provision for loan losses | 5,462 | 5,605 | 5,466 | 5,373 | 16,533 | 15,852 | ||||||||||||||||||
Non-interest income: | ||||||||||||||||||||||||
Service charges on deposit accounts | 989 | 950 | 811 | 907 | 2,750 | 2,571 | ||||||||||||||||||
Gain on sale of mortgage loans | 124 | 157 | 163 | 282 | 444 | 630 | ||||||||||||||||||
Trust & investment services income | 372 | 417 | 383 | 254 | 1,172 | 842 | ||||||||||||||||||
Loss on sale of securities | (2 | ) | — | — | 2 | (2 | ) | (108 | ) | |||||||||||||||
Other income and fees | 457 | 364 | 440 | 439 | 1,261 | 1,303 | ||||||||||||||||||
Total non-interest income | 1,940 | 1,888 | 1,797 | 1,884 | 5,625 | 5,238 | ||||||||||||||||||
Non-interest expense: | ||||||||||||||||||||||||
Salaries & employee benefits | 3,197 | 3,313 | 3,334 | 3,094 | 9,844 | 9,062 | ||||||||||||||||||
Occupancy | 457 | 510 | 432 | 441 | 1,399 | 1,325 | ||||||||||||||||||
Furniture and equipment | 541 | 551 | 508 | 495 | 1,600 | 1,576 | ||||||||||||||||||
Loan and collection | 72 | 84 | 71 | 87 | 227 | 255 | ||||||||||||||||||
Advertising and promotional | 140 | 201 | 153 | 153 | 494 | 509 | ||||||||||||||||||
Other operating expenses | 1,096 | 1,054 | 1,071 | 1,002 | 3,221 | 2,937 | ||||||||||||||||||
Total non-interest expense | 5,503 | 5,713 | 5,569 | 5,272 | 16,785 | 15,664 | ||||||||||||||||||
Income before federal income taxes | 1,899 | 1,780 | 1,694 | 1,985 | 5,373 | 5,426 | ||||||||||||||||||
Federal income taxes | 563 | 522 | 487 | 686 | 1,572 | 1,681 | ||||||||||||||||||
Net Income | $ | 1,336 | $ | 1,258 | $ | 1,207 | $ | 1,299 | $ | 3,801 | $ | 3,745 | ||||||||||||
*Per Share Data: | ||||||||||||||||||||||||
Basic earnings | $ | 0.62 | $ | 0.59 | $ | 0.56 | $ | 0.61 | $ | 1.77 | $ | 1.77 | ||||||||||||
Diluted earnings | $ | 0.62 | $ | 0.59 | $ | 0.56 | $ | 0.61 | $ | 1.77 | $ | 1.77 | ||||||||||||
Cash dividends declared | $ | 0.25 | $ | 0.23 | $ | 0.23 | $ | 0.22 | $ | 0.71 | $ | 0.65 | ||||||||||||
Performance Ratios: | ||||||||||||||||||||||||
Return on Average Assets | 0.84 | % | 0.81 | % | 0.79 | % | 0.85 | % | 0.81 | % | 0.85 | % | ||||||||||||
Return on Average Equity | 10.85 | % | 10.46 | % | 10.21 | % | 11.38 | % | 10.51 | % | 11.33 | % | ||||||||||||
Net Interest Margin (FTE) | 4.01 | % | 4.17 | % | 4.26 | % | 4.26 | % | 4.15 | % | 4.28 | % | ||||||||||||
Book Value Per Share | $ | 23.25 | $ | 22.42 | $ | 22.40 | $ | 21.77 | $ | 23.25 | $ | 21.77 | ||||||||||||
Net Charge-offs | 297 | 76 | 183 | 106 | 556 | 209 | ||||||||||||||||||
Ratio of Net charge-offs to Gross Loans | 0.07 | % | 0.02 | % | 0.04 | % | 0.02 | % | 0.12 | % | 5.00 | % |
* | Per share data adjusted for 10% stock dividend paid on August 4, 2006 |