Fentura Financial, Inc. Announces Continued Profits for 2013

• Net Income for the year exceeded levels reported for 2012
• Book value increased 50.0% over prior year to $9.97 per share
• Loan growth exceeded expectations for the year
• Operating results continue to strengthen capital, and our Bank's capital level is considered well capitalized by industry standards
• Credit quality continues to strengthen, as both loan delinquencies and substandard assets improved significantly over the prior year.

Fentura Financial, Inc. (OTCQB:FETM) reported pre-tax net income for the three months ended December 31, 2013 of $818,000 compared to pre-tax earnings of $650,000 reported for the fourth quarter of 2012. After tax net income for the period was $5.9 million, compared to net income of $453,000 reported for the same period in 2012. After tax net income reflects the reversal of the deferred tax asset valuation allowance of $4.9 million disallowed in previous years. For the year ended December 31, 2013, after tax earnings of $8.5 million compare favorably to the $1.3 million reported for 2012. 

Ronald L. Justice, President and CEO said, "We are proud of the continued improvement of our Company throughout the year and our 2013 operating results. Loan growth continued during the fourth quarter contributing to a $63.5 million increase in total loans for the year. The interest income from this growth, our continued control of funding costs, an increase in noninterest income, and reduction of operating expenses all contributed to our strong core operating results. The impact of the one-time reversal of the deferred tax asset valuation allowance is a reflection of the improvement in our financial condition made possible by the efforts of our entire team.

Balance Sheet

Total assets increased $16.7 million or 5.3% at December 31, 2013 compared to September 30, 2013, ending the year at $335.2 million. Cash and due from banks totals declined 45.6%, to $12.9 million at December 31, 2013 compared to the $23.6 million reported at September 30, 2013. This decrease was primarily due to the funding of new loans.   Loan balances increased $22.3 million or 9.2% 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. Portfolio loans totaled $263.0 million at December 31, 2013.      

Deposit totals of $283.3 million at December 31, 2013, were at the same level reported at the end of the prior quarter. Deposits increased $7.5 million or 2.7% for the year ended December 31, 2013. The increase throughout the year occurred in both non-interest bearing and interest bearing non-maturity deposits 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 December 31, 2013 compared to December 31, 2012.   The improvement in Tier 1 leverage capital year over year is primarily due to the increase in capital from operating results.

	December 31, 2013	December 31, 2012	Regulatory Well Capitalized
Tier 1 Leverage Capital Ratio	9.47%	8.73%	5.00%
Tier 1 Risk-Based Capital Ratio	11.04	12.06	6.00
Total Risk-Based Capital Ratio	12.30	13.34	10.00

Credit Quality

Throughout 2013, the Company continued to benefit from improvement in credit quality.  At December 31, 2013 loan delinquencies to total loans were 0.60% compared to 1.86% at December 31, 2012. Substandard assets totaled $6.2 million at December 31, 2013, down from $13.2 million reported at December 31, 2012. The low level of loan delinquencies and the improved level of substandard assets eliminated the need for significant additional provisions for the allowance for loan losses during 2013. 

Net Interest Income

Net interest income of $3.0 million for the quarter ended December 31, 2013 improved compared to the $2.8 million reported for both the third quarter of 2013 and the $2.5 million reported for the fourth quarter of 2012. Interest income improved during the three months ended December 31, 2013, from the interest on new loans added during the quarter and throughout the entire year. Interest expense declined modestly comparing the quarter ended December 31, 2013 to the quarter ended September 30, 2013, due to the decrease in the amount of time deposits during the quarter.  

On a year to date basis, net interest income was $11.0 million compared to $10.2 million reported in 2012. The year to year improvement is due to the increase in interest income from loan growth throughout the year and the decline in interest expense as certificates of deposit matured and funds were placed in lower cost savings accounts.

Noninterest Income

Noninterest income was $1.3 million for the quarter ended December 31, 2013 compared to $1.6 million for the third quarter of 2013. The decline in the volume of mortgage loans sold in the secondary market and accordingly, the gain on sale from those loans, contributed to the decline in the current period compared to the third quarter of 2013.          

For the twelve months ended December 31, 2013, noninterest income totaled $5.6 million compared to $4.8 million reported for the prior year. The increase in 2013 is primarily attributable to gains on the sale of mortgage loans due to increased volume based on a favorable interest rate environment and gains from sales of other real estate owned.

Noninterest Expense

The Company recorded $3.4 million of noninterest expense in the quarter ended December 31, 2013, flat compared with the $3.4 million reported in the third quarter of 2013. For the year, noninterest expense was $13.2 million in 2013 and $14.3 million during 2012. The decline in noninterest expense in 2013 is based on several factors. FDIC assessment expense was lower in 2013 compared to 2012 due to the Bank's release from its consent agreement with both the FDIC and the State's Department of Insurance and Financial Services.   Additionally, noninterest expense improved in 2013 due to the nonrecurring nature of several operating losses recognized in the same time period of 2012 and a decline in loan and collection expenses as asset quality and loan delinquencies improved. 

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.
	Dec-13	Sep-13	Jun-13	Mar-13	Dec-12
	Unaudited	Unaudited	Unaudited	Unaudited
Balance Sheet Highlights
Cash and due from banks	12,856	23,647	21,109	45,272	45,712
Fed funds sold	--	--	--	--	--
Investment securities	36,574	38,147	41,379	42,582	48,249
Commercial loans	176,796	167,204	160,720	154,223	146,482
Consumer loans	25,336	24,907	24,462	24,017	23,423
Mortgage loans	61,846	49,554	43,182	34,791	30,623
Gross loans	263,978	241,665	228,364	213,031	200,528
ALLL	(4,900)	(4,790)	(4,699)	(4,682)	(4,962)
Other assets	26,717	19,816	20,817	21,284	21,195
Total assets	335,225	318,485	306,970	317,487	310,722
Non-interest deposits	82,585	81,195	84,366	84,490	80,550
Interest bearing non-maturity deposits	154,838	154,675	139,584	146,838	145,471
Time deposits	45,918	47,383	46,822	50,380	49,818
Total deposits	283,341	283,253	270,772	281,708	275,839
Fed funds purchased	--	--	--	--	--
Borrowings	24,855	14,855	14,855	14,891	14,891
Other liabilities	2,267	1,958	3,994	3,901	3,789
Equity	24,762	18,419	17,349	16,987	16,203
	335,225	318,485	306,970	317,487	310,722
BALANCE SHEET RATIOS (unaudited)
Gross Loans to Deposits	93.17%	85.32%	84.34%	75.62%	72.70%
Earning Assets to Total Assets	89.66%	87.86%	87.87%	80.51%	80.06%
Securities and Cash to Assets	14.75%	19.40%	20.36%	27.67%	30.24%
Deposits to Assets	84.52%	88.94%	88.21%	88.73%	88.77%
Loan Loss Reserve to Gross Loans	1.86	1.99	2.07	2.20	2.48
Net Charge-Offs to Gross Loans	-4.10%	-3.84%	-0.76%	13.43%	34.71%
Leverage Ratio - The State Bank	9.47%	9.21%	9.02%	8.70%	8.73%
Book Value per Share	$ 9.97	$ 7.45	$ 7.04	$ 6.92	$ 6.63
Income Statement Highlights - QTD	Dec-13	Sep-13	Jun-13	Mar-13	Dec-12
	Unaudited	Unaudited	Unaudited	Unaudited
Interest income	3,298	3,214	3,017	2,953	2,924
Interest expense	348	373	361	371	394
Net interest income	2,950	2,841	2,656	2,582	2,530
Provision for loan loss	--	--	--	7	(600)
Service charges on deposit accounts	230	231	215	220	268
Gain on sale of mortgage loans	186	419	433	575	389
Wealth management income	274	275	217	231	212
Other non-interest income	566	638	445	428	331
Salaries and benefits	1,745	1,788	1,736	1,656	1,900
Occupancy and equipment	527	561	531	533	550
Loan and collection	112	217	186	173	212
Other operating expenses	1,004	864	791	812	1,018
Net Income before tax	818	974	722	855	650
Income Taxes	(5,118)	--	--	--	197
Net Income	5,936	974	722	855	453
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share	$ 2.40	$ 0.40	$ 0.29	$ 0.35	$ 0.19
Pre-tax pre-provision earnings	818	974	722	862	50
Net Charge offs	(108)	(92)	(17)	286	694
Return on Equity (ROE)	46.78%	19.19%	17.89%	19.29%	7.26%
Return on Assets (ROA)	2.71%	1.10%	1.03%	1.12%	0.42%
Efficiency Ratio	80.83%	80.56%	81.32%	79.87%	94.64%
Average Bank Prime	3.25%	3.25%	3.25%	3.25%	3.25%
Average Earning Asset Yield	4.60%	4.69%	4.70%	4.85%	4.70%
Average Cost of Funds	0.64%	0.71%	0.71%	0.71%	0.76%
Spread	3.96%	3.99%	3.99%	4.14%	3.94%
Net impact of free funds	0.20%	0.19%	0.20%	0.11%	0.06%
Net Interest Margin	4.16%	4.18%	4.19%	4.25%	4.00%
Income Statement Highlights - YTD	Dec-13	Dec-12		Dec-12	Dec-11
	Unaudited
Interest income	12,481	12,193		12,193	13,142
Interest expense	1,454	1,945		1,945	2,983
Net interest income	11,027	10,248		10,248	10,159
Provision for loan loss	7	(508)		(508)	3,142
Service charges on deposit accounts	897	1,030		1,030	1,157
Gain on sale of mortgage loans	1,613	961		961	348
Wealth management income	996	1,071		1,071	960
Other non-interest income	2,077	1,775		1,775	2,393
Salaries and benefits	6,925	6,775		6,775	6,763
Occupancy and equipment	2,152	2,155		2,155	2,158
Loan and collection	688	944		944	1,217
Other operating expenses	3,471	4,381		4,381	3,687
Net Income before tax	3,367	1,338		1,338	(1,950)
Income Taxes	(5,118)	73		73	52
Net Income from continuing operations	8,485	1,265		1,265	(2,002)
INCOME STATEMENT RATIOS/DATA (unaudited)
Basic earnings per share	$ 3.44	$ 0.52		$ 0.52	$ (0.86)
Pre-tax pre-provision earnings	3,374	830		830	1,192
Net Charge offs	68	2,694		2,694	5,005
Return on Equity (ROE)	46.78%	7.26%		7.26%	-12.95%
Return on Assets (ROA)	2.71%	0.42%		0.42%	-0.66%
Efficiency Ratio	80.83%	94.64%		94.64%	91.95%
Average Bank Prime	3.25%	3.25%		3.25%	3.25%
Average Earning Asset Yield	4.71%	4.75%		4.75%	4.89%
Average Cost of Funds	0.69%	0.92%		0.92%	1.33%
Spread	4.02%	3.83%		3.83%	3.56%
Net impact of free funds	0.15%	0.17%		0.17%	0.22%
Net Interest Margin	4.16%	4.00%		4.00%	3.78%

CONTACT: Ronald L. Justice
         President & CEO
         Fentura Financial, Inc.
         [phone]