<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-23550
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FENTURA BANCORP, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Michigan 38-2806518
- ------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Fenton Sq, P.O. Box 725, Fenton, Michigan 48430
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(Address of Principal Executive Offices)
(810) 629-2263
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(Issuer's telephone number)
None
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
X Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: November 07, 1996
Class - Common Stock ($5 par value) Shares Outstanding - 668,817
Transitional Small Business Disclosure Format (Check one): Yes ; No X
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<PAGE> 2
Fentura Bancorp, Inc.
Index to Form 10-QSB
Page
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Part I - Financial Information
Item 1 - Consolidated Financial Statements 3
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II - Other Information
Item 1 - 6 Miscellaneous Information 14
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
SEPT 30, DEC 31, SEPT 30,
(000's omitted Except Per Share Data) 1996 1995 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 9,556 11,545 9,458
Federal funds sold 1,950 6,300 0
-------- ------- -------
Total Cash & Cash Equivalents 11,506 17,845 9,458
Interest bearing deposits with banks 95 190 385
Investment securities-held to maturity,
at cost (market value of $6,800, and
$26,364 at September 30, 1996 and
1995, respectively) 6,793 9,399 26,269
Investment securities-avail for sale,
at market 43,258 36,431 23,197
-------- ------- -------
Total investment securities 50,051 45,830 49,466
Loans:
Commercial 75,375 69,961 73,714
Tax exempt development loans 949 1,130 821
Real estate loans - mortgage 14,707 15,820 14,746
Real estate loans - construction 22,600 21,666 17,479
Consumer loans 62,323 58,959 59,441
-------- ------- -------
Total loans 175,954 167,536 166,201
Less: Reserve for loan losses (2,757) (2,618) (2,507)
-------- ------- -------
Net loans 173,197 164,918 163,694
Loans held for sale 909 925 56
Bank premises and equipment 4,955 3,887 4,005
Earned interest receivable 1,791 1,677 1,651
Other assets 4,091 3,287 2,317
-------- ------- -------
Total assets $246,595 238,559 231,032
======== ======= =======
LIABILITIES
Deposits:
Non-interest bearing deposits $ 27,996 27,411 29,953
Interest bearing deposits 189,510 184,074 172,639
-------- ------- -------
Total deposits 217,506 211,485 202,592
Federal Funds Purchased 0 0 1,450
Other short term borrowings 2,695 2,631 3,500
Accrued taxes, interest and
other liabilities 3,166 2,563 2,316
-------- ------- -------
Total liabilities 223,367 216,679 209,858
-------- ------- -------
SHAREHOLDERS' EQUITY
Common stock - $5 par value
668,817 shares issued (667,079 in Dec., 3,344 3,335 2,901
1995 and 580,269 in September, 1995)
Surplus 15,968 15,910 13,132
Retained Earnings 4,375 2,690 5,496
Unrealized loss on sec avail for sale (459) (55) (355)
-------- ------- -------
Total shareholders' equity 23,228 21,880 21,174
-------- ------- -------
Total liabilities and
shareholders' equity $246,595 238,559 231,032
======== ======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
- ------------------------------------------------------------------------
(000'S omitted,
Except Per Share Data) 1996 1995 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $4,378 4,152 $12,890 11,614
Interest and dividends on
investment securities:
Taxable 627 602 1,714 1,908
Tax-exempt 91 94 345 332
Int on deposits with banks 2 8 10 25
Interest on federal funds sold 100 43 286 66
------ ----- ------- ------
Total interest income 5,198 4,899 15,245 13,945
INTEREST EXPENSE
Deposits 2,125 1,945 6,238 5,535
Short-term borrowings 45 101 137 298
------ ----- ------- ------
Total interest expense 2,170 2,046 6,375 5,833
NET INTEREST INCOME 3,028 2,853 8,870 8,112
Provision for loan losses 117 105 447 345
------ ----- ------- ------
Net interest income after
provision for loan losses 2,911 2,748 8,423 7,767
NON-INTEREST INCOME
Service chrgs on dep accts 377 339 1,045 979
Fiduciary income 98 68 251 200
Other operating income 366 350 1,283 1,175
Investment gains (losses) 0 0 (67) (35)
------ ----- ------- ------
Total non-interest income 841 757 2,512 2,319
NON-INTEREST EXPENSE
Salaries and benefits 1,198 1,047 3,415 3,197
Occupancy of bank premises 174 144 482 435
Equipment expense 330 252 962 802
Other operating expenses 932 754 2,676 2,530
------ ----- ------- ------
Total non-interest expense 2,634 2,197 7,535 6,964
NET INCOME BEFORE TAXES 1,118 1,308 3,400 3,122
Applicable income taxes 319 413 987 955
------ ----- ------- ------
NET INCOME $ 799 895 $ 2,413 2,167
====== ===== ======= ======
Per share: (668,817 shares)
Net income .................. $ 1.19 1.34 $ 3.61 3.24
Dividends ................... $ 0.36 0.33 $ 1.09 0.99
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
- --------------------------------------------------------------------------
(000's omitted,
Except Per Share Data) 1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,413 $ 2,167
Adjustments to reconcile net inc to cash
Provided by Operating Activities:
Depreciation and amortization 666 531
Provision for loan losses 447 345
Amortization (accretion) on securities 106 70
Mortgages originated for sale (16,087) (13,481)
Mortgages sold 16,103 14,129
Gain on investment securities 67 35
Decrease (increase) in interest receivable (114) (61)
Decrease (increase) in other assets (594) 1,436
Increase (decrease) in accrued taxes,
interest, and other liabilities 603 648
-------- --------
Total Adjustments 1,197 3,652
-------- --------
Net Cash Provided By (Used In) Operating Activities 3,610 5,819
-------- --------
Cash Flows From Investing Activities:
Net decrease in deposits with other banks 95 1
Proceeds from maturities of inv activities - HTM 3,835 8,179
Proceeds from maturities of inv activities - AFS 10,005 10,834
Purchases of investment securities - HTM (1,295) (4,049)
Purchases of investment securities - AFS (17,552) (9,066)
Net (increase) in customer loans (8,726) (23,785)
Capital expenditures (1,734) (1,091)
-------- --------
Net Cash Used in Investing Activities (15,372) (18,977)
Cash Flows From Financing Activities:
Net increase (decrease) in DDA/SAV deposits (990) (2,585)
Net increase (decrease) in Time deposits 7,011 10,524
Net increase (decr) in short-term borrowing's 64 3,450
Proceeds from stock issuance 67 0
Cash dividends (729) (662)
-------- --------
Net Cash Provided By (Used In) Financing Activities 5,423 10,727
NET DECREASE IN CASH AND CASH EQUIVALENTS ($6,339) ($2,431)
CASH AND CASH EQUIVALENTS - BEGINNING $ 17,845 $ 11,889
CASH AND CASH EQUIVALENTS - ENDING $ 11,506 $ 9,458
======== ========
CASH PAID FOR:
INTEREST $ 6,224 $ 5,801
INCOME TAXES $ 1,252 $ 976
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
Sept. 30, Sept. 30,
(000's omitted) 1996 1995
- --------------- -------- --------
<S> <C> <C>
COMMON STOCK
Balance, beginning of period $ 3,335 $ 2,901
Issuance of shares under
director stock purchase plan 9 0
and dividend reinvestment prog
Stock dividend 0 0
-------- --------
Balance, end of period 3,344 2,901
SURPLUS
Balance, beginning of period 15,910 13,132
Issuance of shares under
director stock purchase plan
and dividend reinvestment prog 58 0
Stock dividend 0 0
-------- --------
Balance, end of period 15,968 13,132
RETAINED EARNINGS
Balance, beginning of period 2,690 3,991
Net income 2,413 2,167
Cash dividends declared (728) (662)
-------- --------
Balance, end of period 4,375 5,496
UNREALIZED GAIN ON SECURITIES
AVAILABLE FOR SALE
Balance, beginning of period (55) (1,007)
Change in unrealized gain (loss)
on securities, net of tax $208 (404) 652
-------- --------
Balance, end of period (459) (355)
-------- --------
TOTAL SHAREHOLDERS' EQUITY $23,228 $21,174
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
Fentura Bancorp, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Note 1. Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions for Form-10QSB
and Article 9 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended September
30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.
Note 2. Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year financial statement presentation.
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis is intended to address significant
factors affecting the Corporation's consolidated financial statements during
the nine months ended September 30, 1996 and 1995. It provides a more detailed
and comprehensive review of the operating results and financial position than
could be obtained from a review of the balance sheet, income statement, and
supporting schedules alone.
NINE MONTHS, 1996 VERSUS NINE MONTHS, 1995
Net Interest Income
Net interest income, the principal source of earnings, is the amount of
interest income generated by earning assets (investment securities and loans)
less interest expense paid on interest bearing liabilities (largely deposits).
As indicated in the income statement on page 5 interest income for the nine
months ended September 30, 1996 was $15,245 thousand compared to $13,945
thousand for the same period in 1995. This represents an increase of 9.3%.
The primary factors contributing to the interest income increase are
substantial growth in the Company's loan portfolio (the largest group of
earning assets). Also indicated in the income statement, interest expense for
the nine months ended September 30, 1996 was $6,375 thousand compared to $5,833
thousand for the same period in 1995. This represents an increase of 9.3%.
Increases in the Company's certificate of deposit balances, short term
borrowings and interest rates caused the increase in interest expense.
Balances increased due to greater market penetration in existing markets,
growth in new market areas, and a change in consumer behavior toward
certificates as market interest rates increased.
ALLOWANCE AND PROVISION FOR LOAN LOSSES
The allowance for loan losses (ALL) reflects management's judgment as to the
level considered appropriate to absorb potential losses inherent in the loan
portfolio. Fentura's subsidiary, The State Bank's, methodology in determining
the adequacy of the ALL includes a review of individual loans and off-balance
sheet arrangements, historical loss experience, current economic conditions,
portfolio trends, and other pertinent factors. Although reserves have been
allocated to various portfolio segments, the ALL is general in nature and is
available for the portfolio in its entirety. At September 30, 1996, the ALL
was $2,757 thousand, or 1.57% of total loans. This compares with $2,507
thousand, or 1.51%, at September 30, 1995.
The provision for loan losses was $447 thousand for the first nine months of
1996 and $345 thousand for the same period in 1995. The primary reason for
increasing the provision was to maintain an adequate allowance in light of
substantial loan growth from September 30, 1995 to September 30, 1996.
NON-INTEREST INCOME
Non-interest income was $2,512 thousand in the first three quarters of 1996 and
$2,319 thousand in the same period of 1995. This figure represents an increase
of 8.3% in 1996. Table 1 provides a more detailed breakdown of the components
of non-interest income than can be found in the income statement on page 5.
The most significant category of non-interest income is service charges on
deposit accounts. These fees were $1,045 thousand in the first nine months of
1996 and $979 thousand in the same period of 1995. This represents an increase
of 6.7%. The increase occurred from the deposit
<PAGE> 9
growth the company experienced in its existing and new markets from
September 30, 1995 to September 30, 1996.
Gain on the sale of mortgage loans originated by the bank and sold in the
secondary market were $81 thousand in the first nine months of 1996 and $170
thousand in the same period in 1995. This 52.4% decrease occurred because
management restructured interest rates and points on new mortgage loans in
order to increase competitiveness.
In the first three quarters of 1996, the Company experienced a loss on security
transactions of $67 thousand compared to $35 thousand for the same period in
1995. The losses were associated with the sale of investment securities which
the Company sold in order to reinvest in issues with higher interest rates.
Other operating income, which includes income from the sale of checks, safe
deposit box rent, and other miscellaneous income items, was $607 thousand in
the first nine months of 1996 compared to $557 thousand in the same period of
1995. This increase of 9.0% is primarily attributable to an increase in
merchant service fees. These fees increased due to growth in the number of
accounts and account activity.
Fiduciary income was $251 thousand for the nine months ended September 30, 1996
and $200 thousand for the same period in 1995. This represents an increase of
25.5%. Fiduciary income increased in 1996 due to growth in the amount of
assets under management.
In the first quarter of 1996 the Company implemented procedures to insure
compliance with Statement of Financial Accounting Standards (SFAS) No. 122.
Accordingly, the Company began recognizing income for the value of mortgage
servicing rights (MSR). MSR income for the nine months ended September 30,
1996 was $158 thousand.
TABLE 1
<TABLE>
<CAPTION>
Nine Months Ended
Analysis of Non-Interest Income September 30,
- -------------------------------------------------------------
(000's omitted)
1996 1995
-------- --------
<S> <C> <C>
Service Charges on Deposit Accounts $1,045 $ 979
Gain on Sale of Mortgages 81 170
Gain on Security Transactions (67) (35)
Gain on Sale of Real Estate Owned 145 156
Mortgage Servicing Fees 292 292
Fiduciary Income 251 200
Mortgage Servicing Rights 158 0
Other Operating Income 607 557
-------- --------
Total Non-Interest Income $2,512 $2,319
======== ========
</TABLE>
Non-Interest Expense
Total non-interest expense was $7,535 thousand in the first three quarters of
1996 compared with $6,964 thousand in the same period of 1995. This is an
increase of 8.2%.
Salary and benefit costs, Fentura's largest non-interest expense category, were
$3,415 thousand in the first nine months of 1996, compared with $3,197 thousand
for the first nine months of 1995. 1996 salary costs represent an increase of
6.8% over 1995. Increased costs are a result of additional employees to more
effectively develop and sell product lines to the Company's customers and to
staff a new location and an increase in incentives and commissions earned by
Company employees.
<PAGE> 10
Occupancy expenses associated with the Company's facilities were $482 thousand
in the first three quarters of 1996 compared to $434 thousand in the same
period of 1995. This represents an increase of 11.1%. The primary reason for
the substantial increase is that additional dollars were spent remodeling and
equipping facilities and costs associated with opening a new branch in June of
1996.
Equipment expenses increased substantially. During the first nine months of
1996 equipment expenses were $962 thousand compared to $802 thousand for the
same period in 1995, an increase of 20.0%. Equipment (mostly computer hardware
and software) for the new branch and increased costs for maintenance contracts
are the primary reasons for the increase in equipment costs.
Loan and collection expense decreased 16.5% in the first nine months of 1996
compared to the same period in 1995. A decline in legal expenses associated
with collections and dealer reserve fees paid for indirect lending activities
account for most of the decrease.
FDIC assessment expense was $1 thousand in the first nine months of 1996
compared to $222 thousand in the same period of 1995. The dramatic decrease is
attributable to the FDIC's revision of required assessments.
Office supplies expense were $194 thousand in the first three quarters of 1996
compared to $171 thousand in the same period of 1995. This represents an
increase of 13.5%. Several large purchases of stationery items and brochures
account for the increase.
Advertising expenses for the first nine months on 1996 were $272 thousand
compared to $211 thousand in the same period of 1995. This represents an
increase of 28.9%. Increased media advertising, promotions and sponsorship to
market the Company account for the increase.
Other operating expenses were $1,926 thousand in the first three quarters of
1996 compared to $1,588 thousand in the first three quarters of 1995. The
largest increase within other operating expenses was a loss of $125 thousand.
This loss was a litigation settlement.
TABLE 2
<TABLE>
<CAPTION>
Nine Months Ended
Analysis of Non-Interest Expense September 30,
- -----------------------------------------------------
(000's omitted)
1996 1995
-------- --------
<S> <C> <C>
Salaries and Benefits $3,415 $3,197
Equipment 962 802
Net Occupancy 482 434
FDIC Assessment 1 222
Office Supplies 194 171
Loan & Collection Expense 283 339
Advertising 272 211
Other Operating Expense 1,926 1,588
--------- ---------
Total Non-Interest Expense $7,535 $6,964
========= =========
</TABLE>
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT
Asset/Liability management procedures are designed to assure liquidity and
reduce interest rate risks. The goal in managing interest rate risk is to
maintain a strong and relatively stable net interest margin. It is the
responsibility of the Asset/Liability Management Committee (ALCO) to set policy
guidelines and to establish short-term and long-term strategies with respect to
interest rate exposure and liquidity. ALCO, which is comprised of key members
of management, meets
<PAGE> 11
regularly to review Fentura's financial performance and soundness, including
interest rate risk and liquidity exposure in relation to present and
perspective markets, business conditions, and product lines. Accordingly, the
committee adopts funding and balance sheet management strategies that are
intended to assure earnings, liquidity, and growth rates consistent with policy
and prudent business standards.
Along with its solid capital base and strong earnings performance, liquidity
maintenance remains a key objective. Fentura's liquidity is derived from a
strong deposit base comprised of individual and business deposits. Deposit
accounts of customers in the mature market represent a substantial portion of
deposits of individuals. Fentura's deposit base plus other funding sources
(federal funds purchased, other liabilities and shareholders' equity) provided
primarily all funding needs in the first nine months of 1996 and 1995.
As indicated in the consolidated balance sheets on page 4, the Company had
short term borrowings of $2,695 thousand at September 30, 1996 and $4,950
thousand at September 30, 1995. The $2,255 thousand decrease was due to a
decline in amounts borrowed from the Federal Home Loan Bank and federal funds
purchased. The borrowing was performed because throughout 1994 the Company
experienced substantial loan growth. This growth was achieved by an increased
Management emphasis on lending activities and strong consumer demand within the
Company's local markets. However, deposit growth during this period did not
increase commensurately. Accordingly, the Company experienced a shift from
excess funds in 1994 to borrowing funds at the end of the third quarter of
1995 in order to fund the loan growth. During 1996 the Company experienced
deposit growth adequate to repay both the FHLB borrowing and the federal funds
purchased.
Interest rate risk is managed by controlling and limiting the level of earnings
volatility arising from rate movements. Fentura continually performs reviews
and analysis of those factors impacting interest rate risk. Factors include
maturity and re-pricing frequency of balance sheet components, impact of rate
changes on interest margin and prepayment speeds, market value impacts of rate
changes, and other issues. Both actual and projected performance are reviewed,
analyzed, and compared to policy and objectives to assure present and future
financial viability.
As indicated in the statement of cash flows, cash flows from financing
activities have increased. In the first nine months of 1996 borrowings
increased $64 thousand and Time deposits increased $7,011 thousand. In 1995,
cash flows from financing activities were principally growth in Time deposits
and increases in short term borrowings which increased $10,524 and $3,450
thousand respectively in the first nine months. Cash flows from investing
activities were ($15,372) thousand during the first nine months of 1996 and
($18,977) thousand in the same period of 1995. The primary reason for the
decrease in investing activities was a decline in the growth rate within the
Company's loan portfolio.
CAPITAL MANAGEMENT
Total shareholders' equity rose 9.7% to $23,228 thousand at September 30, 1996
compared with $21,174 thousand at September 30, 1995. The Company's equity to
asset ratio was 9.4% at September 30, 1996 and 9.2% at September 30, 1995. The
increase in the amount of capital was obtained through retained earnings. In
the first three quarters of 1996, the Company increased its cash dividends by
10.1% to $1.09 per share compared with $.99 in the first three quarters of
1995.
As indicated on the balance sheet on page 4, at September 30, 1996 the Company
had an unrealized loss (net of the tax impact) on securities available for sale
(AFS) of $459 thousand compared to an unrealized loss at September 30, 1995 of
$355 thousand. This increase in unrealized loss is attributable to market
interest rates and the interest rate structures on those securities held in the
Company's AFS portfolio.
<PAGE> 12
THIRD QUARTER, 1996 VERSUS THIRD QUARTER, 1995
Net Interest Income
Net interest income, the principal source of earnings, is the amount of
interest income generated by earning assets (investment securities and loans)
less interest expense paid on interest bearing liabilities (largely deposits).
As indicated in the income statement on page 5 interest income for the three
months ended September 30, 1996 was $5,198 thousand compared to $4,899 thousand
for the same period in 1995. This represents an increase of 6.1%. The primary
factors contributing to the interest income increase are substantial growth in
the Company's loan portfolio (the largest group of earning assets). Also
indicated in the income statement, interest expense for the three months ended
September 30, 1996 was $2,170 thousand compared to $2,046 thousand for the same
period in 1995. This represents an increase of 6.1%. Increases in the
Company's certificate of deposit balances and interest rates caused the
increase in interest expense. Balances increased due to greater market
penetration in existing markets, growth in new market areas, and a change in
consumer behavior toward certificates as market interest rates increased.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $117 thousand for the three months ended
September 30, 1996 and $105 thousand for the same period in 1995.
NON-INTEREST INCOME
Non-interest income was $841 thousand in the third quarter of 1996 and $757
thousand in the same period of 1995. This figure represents an increase of
11.1% in 1996. Table 3 provides a more detailed breakdown of the components of
non-interest income than can be found in the income statement on page 5.
The most significant category of non-interest income is service charges on
deposit accounts. These fees were $377 thousand in the third quarter of 1996
and $339 thousand in the same period of 1995. This represents an increase of
11.2%. The increase occurred from the deposit growth the company experienced
in its existing and new markets throughout the last year.
Fiduciary income was $98 thousand in the third quarter of 1996 compared to $68
thousand in the third quarter of 1995. This represents an increase of 44.1%.
This dramatic increase is due to strong growth in assets under management
throughout the year and within the third quarter of 1996.
Gain on the sale of mortgage loans originated by the bank and sold in the
secondary market were $10 thousand in the three months ended September 30, 1996
and $63 thousand in the same period in 1995. This 84.1% decrease occurred
because management restructured interest rates and points on new mortgage loans
in order to increase competitiveness.
In the first quarter of 1996 the Company implemented procedures to insure
compliance with Statement of Financial Accounting Standards (SFAS) No. 122.
Accordingly, the Company began recognizing income for the value of mortgage
servicing rights (MSR). In the third quarter of 1996 MSR income was $40
thousand.
Other operating income, which includes income from the sale of checks, safe
deposit box rent, and other miscellaneous income items, was $216 thousand in
the third quarter of 1996 compared to $172 thousand in the same period of 1995.
This increase of 25.6% is primarily attributable to an increase in merchant
service fees. These fees increased due to growth in the number of accounts and
account activity.
<PAGE> 13
TABLE 3
<TABLE>
<CAPTION>
Three Months Ended
Analysis of Non-Interest Income September 30,
- ----------------------------------------------------------
(000's omitted)
1996 1995
-------- --------
<S> <C> <C>
Service Charges on Deposit Accounts $ 377 $ 339
Gain on Sale of Mortgages 10 63
Gain on Security Transactions 0 0
Gain on Sale of Real Estate Owned 5 17
Mortgage Servicing Fees 95 98
Fiduciary Income 98 68
Mortgage Servicing Rights 40 0
Other Operating Income 216 172
--------- ---------
Total Non-Interest Income $ 841 $ 757
========= =========
</TABLE>
Non-Interest Expense
Total non-interest expense was $2,634 thousand in the third quarter of 1996
compared with $2,197 thousand in the same period of 1995. This is an increase
of 19.9%.
Salary and benefit costs, Fentura's largest non-interest expense category, were
$1,198 thousand in the quarter ended September 30, 1996, compared with $1,047
thousand for the same period in 1995. 1996 salary costs represent an increase
of 14.4% over 1995. Increased costs are a result of additional staff to more
effectively develop and sell product lines to the Company's customers and an
increase in incentives and commissions earned by Company employees.
Occupancy expenses associated with the Company's facilities were $174 thousand
in the third quarter of 1996 compared to $144 thousand in the same period of
1995. This represents an increase of 20.8%. Expenses associated with
upgrading existing facilities account for the increase.
During the third quarter of 1996 equipment expenses were $330 thousand compared
to $252 thousand for the same period in 1995, an increase of 31.0%. Equipment
(hardware and software) for the new branch and increased costs for maintenance
contracts account for the increase.
Other operating expenses were $677 thousand in the third quarter of 1996
compared to $524 thousand in the third quarter of 1995. The largest increase
within other operating expenses were fees paid to outside consultants to search
for a new President & CEO.
Advertising expenses for the three months ended September 30, 1996 were $91
thousand compared to $58 thousand in the same period on 1995. This represents
an increase of 56.9%. Increased media advertising, promotions and sponsorship
to market the Company account for the increase.
TABLE 4
<TABLE>
<CAPTION>
Three Months Ended
Analysis of Non-Interest Expense September 30,
- ---------------------------------------------------
(000's omitted)
1996 1995
-------- --------
<S> <C> <C>
Salaries and Benefits $1,198 $1,047
Equipment 330 252
Net Occupancy 174 144
FDIC Assessment 0 9
Office Supplies 67 64
Loan & Collection Expense 97 99
Advertising 91 58
Other Operating Expense 677 524
--------- ---------
Total Non-Interest Expense $2,634 $2,197
========= =========
</TABLE>
<PAGE> 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The exhibits listed on the "Exhibit Index" on page 15 of this report are
incorporated herein by reference.
b. Report on Form 8-k
No reports on Form 8-k were filed for the quarter ended September 30, 1996.
c. Exhibit 27
Financial Data Schedule
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FENTURA BANCORP, INC.
Date November 12, 1996 By /s/ Richard A. Bagnall
---------------------- -----------------------------------
Richard A. Bagnall
Executive Vice President
Date November 12, 1996 By /s/ Ronald L. Justice
---------------------- -----------------------------------
Ronald L. Justice
Vice President & Chief Financial
Officer
<PAGE> 16
FENTURA BANCORP, INC.
1996 Quarterly Report on Form 10-QSB
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Locaction
<S> <C> <C>
10.1 Equipment Sale Agreement between The State Bank and ITI, Inc.
dated December 23, 1994 ***
10.2 Master Equipment Lease Agreement between The State Bank and
MFP Technology Services Inc. dated December 23, 1994 ***
10.3 Software License Agreement between The State Bank and ITI, Inc.
dated October 29, 1994 ***
10.4 Lease of Site for Automated Teller Machines between The State
Bank and Bryce Felch dated November 6, 1986 *
10.5 Lease of Site for Automated Teller Machines between The State
Bank and VG's Food Center, Inc. dated January 1, 1992 *
10.6 Lease of Holly Branch Bank Site between The State Bank and Inter
Lakes Associates dated March 26, 1991 *
10.7 Lease of Davison Branch Bank Site between The State Bank and VG's
Food Center, Inc. dated April 27, 1993 *
10.8 Severance Compensation Agreement between the registrant and
Robert L. Cole dated January 17, 1991 *
10.9 Severance Compensation Agreement between the registrant and *
Richard A. Bagnall dated January 17, 1991
10.10 Lease of Clarkston Branch Site between The State Bank and Waldon
Properties, Inc. dated January 24, 1994 **
10.11 Lease of Site for Automated Teller Machines between The State
Bank and Russell and Joy Manser dated December 1, 1994 **
10.12 License and Service Agreement between The State Bank and
Unisys Corporation dated October 29, 1994 ***
10.13 Lease of Fenton Owen Road Branch Site between The State Bank and
VG'S Food Centers dated March 26, 1996 ****
27 Financial Data Schedule *****
</TABLE>
* Incorporated by reference to form 10-SB registration number 0-23550
** Incorporated by reference to form 10-K filed March 29, 1995
*** Incorporated by reference to form 10-QSB filed May 12, 1995
**** Incorporated by reference to form 10-QSB filed May 2, 1996
***** Filed Herewith
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,556
<INT-BEARING-DEPOSITS> 95
<FED-FUNDS-SOLD> 1,950
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 43,258
<INVESTMENTS-CARRYING> 6,793
<INVESTMENTS-MARKET> 6,800
<LOANS> 175,954
<ALLOWANCE> 2,757
<TOTAL-ASSETS> 246,595
<DEPOSITS> 217,506
<SHORT-TERM> 1,500
<LIABILITIES-OTHER> 3,166
<LONG-TERM> 1,195
0
0
<COMMON> 3,344
<OTHER-SE> 19,884
<TOTAL-LIABILITIES-AND-EQUITY> 246,595
<INTEREST-LOAN> 12,890
<INTEREST-INVEST> 2,059
<INTEREST-OTHER> 296
<INTEREST-TOTAL> 15,245
<INTEREST-DEPOSIT> 6,238
<INTEREST-EXPENSE> 6,375
<INTEREST-INCOME-NET> 8,870
<LOAN-LOSSES> 447
<SECURITIES-GAINS> (67)
<EXPENSE-OTHER> 7,535
<INCOME-PRETAX> 3,400
<INCOME-PRE-EXTRAORDINARY> 3,400
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,413
<EPS-PRIMARY> 3.61
<EPS-DILUTED> 3.61
<YIELD-ACTUAL> 5.34
<LOANS-NON> 732
<LOANS-PAST> 109
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 51
<ALLOWANCE-OPEN> 2,618
<CHARGE-OFFS> 355
<RECOVERIES> 47
<ALLOWANCE-CLOSE> 2,757
<ALLOWANCE-DOMESTIC> 2,546
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 211
</TABLE>
