<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 March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
--------------- ---------------
Commission file number 0-23550
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
----------------------------------------------------
(Address of Principal Executive Offices)
(810) 629-2263
--------------------------
(Issuer's telephone number)
None
-------------------------------------------------------------------------
(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: May 7, 1997
Class - Common Stock ($5 par value) Shares Outstanding - 683,895
Transitional Small Business Disclosure Format (Check one): Yes ; No X
--- ---
<PAGE> 2
Fentura Bancorp, Inc.
Index to Form 10-QSB
Page
----
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 13
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
MAR 31, DEC 31, MAR 31,
(000's omitted Except Per Share Data) 1997 1996 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 9,659 11,921 9,322
Federal funds sold 5,200 8,450 8,500
----------------------------------------------
Total Cash & Cash Equivalents 14,859 20,371 17,822
Interest bearing deposits with banks 95 95 190
Investment securities-held to maturity,
at cost (market value of $7,477, and
$10,418 at March 31, 1997 and
1996, respectively) 7,466 6,530 10,368
Investment securities-avail for sale,
at market 45,075 44,355 39,470
----------------------------------------------
Total investment securities 52,541 50,885 49,838
Loans:
Commercial 76,656 78,699 72,383
Tax exempt development loans 713 751 1,089
Real estate loans - mortgage 15,297 15,924 13,759
Real estate loans - construction 19,018 15,467 18,910
Consumer loans 66,108 64,388 59,354
----------------------------------------------
Total loans 177,792 175,229 165,495
Less: Reserve for loan losses (2,913) (2,836) (2,703)
----------------------------------------------
Net loans 174,879 172,393 162,792
Loans held for sale 768 1,007 1,107
Bank premises and equipment 4,566 4,794 4,157
Accrued interest receivable 1,738 1,835 1,783
Other assets 3,784 3,001 4,466
----------------------------------------------
Total assets $ 253,230 254,381 242,155
==============================================
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
LIABILITIES
Deposits:
Non-interest bearing deposits $ 25,417 28,206 25,427
Interest bearing deposits 197,930 195,843 188,281
----------------------------------------------
Total deposits 223,347 224,049 213,708
Federal Funds Purchased 0 0 0
Other borrowings 2,695 2,369 3,500
Accrued taxes, interest and
other liabilities 2,653 3,854 2,799
----------------------------------------------
Total liabilities 228,695 230,272 220,007
----------------------------------------------
STOCKHOLDERS' EQUITY
Common stock - $5 par value
679,895 shares issued (677,147 in Dec., 3,399 3,386 3,335
1996 and 667,079 in March, 1996)
Surplus 16,371 16,266 15,910
Retained Earnings 5,109 4,632 3,221
Unrealized loss on sec avail for sale (344) (175) (318)
----------------------------------------------
Total stockholder's equity 24,535 24,109 22,148
----------------------------------------------
Total liabilities and
stockholder's equity $ 253,230 254,381 242,155
==============================================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- -------------------------------------------------------------------------------
(000's omitted,
Except Per Share Data) 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $4,433 4,229
Interest and dividends on
investment securities:
Taxable 670 526
Tax-exempt 88 133
Int on deposits with banks 2 4
Interest on federal funds sold 91 105
---------------------
Total interest income 5,284 4,997
INTEREST EXPENSE
Deposits 2,208 2,064
Short-term borrowings 43 55
---------------------
Total interest expense 2,251 2,119
NET INTEREST INCOME 3,033 2,878
Provision for loan losses 156 180
---------------------
Net interest income after
provision for loan losses 2,877 2,698
NON-INTEREST INCOME
Service chrgs on dep accts 376 329
Fiduciary income 105 71
Other operating income 352 440
---------------------
Total non-interest income 833 840
NON-INTEREST EXPENSE
Salaries and benefits 1,288 1,093
Occupancy of bank premises 177 151
Equipment expense 339 302
Other operating expenses 830 808
Investment gains (losses) 0 65
---------------------
Total non-interest expense 2,634 2,419
NET INCOME BEFORE TAXES 1,076 1,119
Applicable income taxes 341 339
---------------------
NET INCOME $ 735 780
=====================
Per share: (679,895 shares)
Net income .................. $ 1.08 1.15
Dividends ................... $ 0.38 0.37
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- ---------------------------------------------------------------------------------------------------
(000's omitted,
Except Per Share Data) 1997 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $733 $780
Adjustments to reconcile net inc to cash
Provided by Operating Activities:
Depreciation and amortization 247 204
Provision for loan losses 156 180
Amortization (accretion) on securities 26 47
Mortgages originated for sale (4,903) (5,465)
Mortgages sold 5,142 5,283
Gain on investment securities 0 65
Decrease (increase) in interest receivable 97 (106)
Decrease (increase) in other assets (692) (1,043)
Increase (decrease) in accrued taxes,
interest, and other liabilities (1,201) 236
---------------------
Total Adjustments (1,128) (599)
---------------------
Net Cash Provided By (Used In) Operating Activities (395) 181
---------------------
Cash Flows From Investing Activities:
Net decrease in deposits with other banks 0 0
Proceeds from maturities of inv activities - HTM 10 20
Proceeds from maturities of inv activities - AFS 3,565 4,998
Purchases of investment securities - HTM (552) (995)
Purchases of investment securities - AFS (4,964) (8,542)
Net (increase) in customer loans (2,642) 1,946
Capital expenditures (19) (474)
---------------------
Net Cash Used in Investing Activities (4,602) (3,047)
Cash Flows From Financing Activities:
Net increase (decrease) in DDA/SAV deposits (3,663) (3,927)
Net increase (decrease) in Time deposits 2,961 6,150
Net increase (decr) in short-term borrowing's 326 869
Proceeds from stock issuance 119 0
Cash dividends (258) (249)
---------------------
Net Cash Provided By (Used In) Financing Activities (515) 2,843
NET DECREASE IN CASH AND CASH EQUIVALENTS ($5,512) ($23)
CASH AND CASH EQUIVALENTS - BEGINNING $20,371 $17,845
CASH AND CASH EQUIVALENTS - ENDING $14,859 $17,822
=====================
CASH PAID FOR:
INTEREST $2,233 $2,074
INCOME TAXES $0 $37
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
- --------------------------------------------------------------------------------------------------
March 31, March 31,
(000's omitted) 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK
Balance, beginning of period $ 3,386 $ 3,335
Issuance of shares under
director stock purchase plan
and dividend reinvestment prog 13 0
Stock dividend 0 0
----------------- -----------------
Balance, end of period 3,399 3,335
SURPLUS
Balance, beginning of period 16,266 15,910
Issuance of shares under
director stock purchase plan
and dividend reinvestment prog 105 0
Stock dividend 0 0
----------------- -----------------
Balance, end of period 16,371 15,910
RETAINED EARNINGS
Balance, beginning of period 4,632 2,690
Net income 735 780
Cash dividends declared (258) (249)
----------------- -----------------
Balance, end of period 5,109 3,221
UNREALIZED GAIN ON SECURITIES
AVAILABLE FOR SALE
Balance, beginning of period (175) (55)
Change in unrealized gain (loss)
on securities, net of tax $177 (169) (263)
----------------- -----------------
Balance, end of period (344) (318)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY $ 24,535 $ 22,148
================= =================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 8
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 three months ended March 31, 1997
are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997.
Note 2. Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year financial statement presentation.
<PAGE> 9
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following narrative discussion and analysis is intended to address
significant factors affecting the Corporation's consolidated financial
statements during the three months ended March 31, 1997 and 1996. It provides
a more detailed and comprehensive review of the operating results and financial
position than could be obtained from the financial statements alone.
THREE MONTHS, 1997 VERSUS THREE MONTHS, 1996
Net Interest Income
Net interest income, the principal source of earnings, is the amount of
interest income generated by earning assets (principally investment securities
and loans) less interest expense paid on interest bearing liabilities (largely
deposits and other borrowings). As indicated in the income statement on page 5
interest income for the three months ended March 31, 1997 was $5,284 thousand
compared to $4,997 thousand for the same period in 1996. This represents an
increase of 5.7%. The primary factors contributing to the interest income
increase are growth in the Company's loan portfolio (the largest group of
earning assets) and in investment securities. Also indicated in the income
statement, interest expense for the three months ended March 31, 1997 was
$2,251 thousand compared to $2,119 thousand for the same period in 1996. This
represents an increase of 6.2%. Increases in the Company's certificate of
deposit balances, savings account 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 and savings products 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 March 31, 1997, the ALL was
$2,913 thousand, or 1.64% of total loans. This compares with $2,703 thousand,
or 1.63%, at March 31, 1996.
The provision for loan losses was $156 thousand for the first three months of
1997 and $180 thousand for the same period in 1996. The primary reason for
decreasing the provision was the maintenance an adequate allowance.
NON-INTEREST INCOME
Non-interest income was $833 thousand in the first three months of 1997 and
$840 thousand in the same period of 1996. This figure represents an decrease
of .8% in 1997. The following discussion is intended to provide details of the
variance from year to year. 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 component of non-interest income is service charges on
deposit accounts. As indicated in Table 1, these customer charges were $376
thousand in the first three months of 1997 and $329 thousand in the same period
of 1996, an increase of $47 thousand or 14.3%. Growth in the number of
accounts and certain account activities account for the increase.
<PAGE> 10
Gain on the sale of mortgage loans originated by the bank and sold in the
secondary market were $63 thousand in the first three months of 1997 and $123
thousand in the same period in 1996. This 48.8% decrease occurred because of
strong competitive pressures and a reduction in the margins of these sold
mortgage loans.
Fiduciary income increased $34 thousand in the first three months of 1997
compared to the same time period in the prior year. This 47.9% increase in
fees is attributed to growth in the assets under management within the
Corporation's Investment Trust Department.
Other operating income, which includes income from the sale of checks, safe
deposit box rent, and other miscellaneous income transactions, was $190
thousand in the first three months of 1997 compared to $219 thousand in the
same period of 1996. This decrease of 13.2% is primarily attributable to a one
time credit insurance premium refund received in 1996 which was based on loss
experience for the preceding calendar year.
TABLE 1
<TABLE>
<CAPTION>
Three Months Ended
Analysis of Non-Interest Income March 31,
- --------------------------------------------------------------------------
(000's omitted)
1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Service Charges on Deposit Accounts $376 $329
Gain on Sale of Mortgages 63 123
Gain on Sale of Real Estate Owned 1 0
Mortgage Servicing Fees 98 98
Fiduciary Income 105 71
Other Operating Income 190 219
--------- ---------
Total Non-Interest Income $833 $840
========= =========
</TABLE>
Non-Interest Expense
Total non-interest expense was $2,634 thousand in the first three months of
1997 compared with $2,419 thousand in the same period of 1996. This is an
increase of 8.9%.
Salary and benefit costs, Fentura's largest non-interest expense category, were
$1,288 thousand in the first three months of 1997, compared with $1,093
thousand for the first three months of 1996. 1997 salary costs represent an
increase of 17.8% over 1996. Increased costs are primarily a result of adding
new positions to staff two new branches opened in the last half on 1996.
During the first three months of 1997 equipment expenses were $339 thousand
compared to $302 thousand for the same period in 1996, an increase of 12.3%.
Depreciation on equipment (mostly computer hardware and software) for the new
branches and increased costs for maintenance contracts on the Corporation's
computer systems are the primary contributors to the increase in equipment
expense.
Occupancy expenses associated with the Company's facilities were $177 thousand
in the first three months of 1997 compared to $151 thousand in the same period
of 1996. This represents an increase of 17.2%. The primary reason for the
increase in occupancy expense is the costs associated with leasing and
operating the two new branch facilities.
FDIC assessment expense was $6 thousand in the first three months of 1997
compared to $1 thousand in the same period of 1996. The increase is
attributable to the FDIC's reinstatement of required assessments.
Loan and collection expenses were $102 thousand in the first quarter of 1997
compared to $91 thousand for the same period in 1996, an increase of 12.1%.
The increase is primarily attributable
<PAGE> 11
to an increase in indirect consumer loan volume and accordingly, an increase
in dealer reserve expense.
Advertising expense was $99 thousand in the first three months of 1997 compared
to $84 thousand for the same period in 1996. This is an increase of 17.9%.
The increase in 1997 is attributable to an increase in promotional activities
to the Corporation's customers and shareholders.
In the first quarter of 1996 the Corporation had security losses of $65
thousand. These losses were associated with the sale of investment securities
which the Company sold in order to reinvest in issues with higher interest
rates. During the first quarter of 1997 the Company had no net losses
associated with security transactions.
TABLE 2
<TABLE>
<CAPTION>
Three Months Ended
Analysis of Non-Interest Expense March 31,
- --------------------------------------------------------------------------
(000's omitted)
1997 1996
- --------------------------------------------------------------------------
<S> <C> <C>
Salaries and Benefits $1,288 $1,093
Equipment 339 302
Net Occupancy 177 151
FDIC Assessment 6 1
Office Supplies 63 58
Loan & Collection Expense 102 91
Advertising 99 84
Security Losses 0 65
Other Operating Expense 560 574
--------- ---------
Total Non-Interest Expense $2,634 $2,419
========= =========
</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 regularly to review Fentura's financial performance and
soundness, including interest rate risk and liquidity exposure in relation to
present and prospective markets, business conditions, and product lines.
Accordingly, the committee adopts funding and balance sheet management
strategies that are intended to determine that earnings, liquidity, and growth
rates are consistent with policy and prudent business standards.
Liquidity maintenance together with a solid capital base and strong earnings
performance are key objectives of the Corporation. The Bank's liquidity is
derived from a strong deposit base comprised of individual and business
deposits. Deposit accounts of customers in the mature markets represent a
substantial portion of deposits of individuals. The Bank's deposit base plus
other funding sources (federal funds purchased, other liabilities and
shareholders' equity) provided primarily all funding needs in the first three
months of 1997 and 1996.
Primary liquidity is provided through short-term investments or borrowings
(including federal funds sold and purchased) and secondary liquidity is
provided by the investment portfolio. As of March 31, 1997, federal funds sold
represented 2.1% of total assets, compared to 3.5% at March 31, 1996. The
Corporation regularly monitors liquidity to ensure adequate cash flows to cover
unanticipated reductions in the availability of funding sources.
<PAGE> 12
Interest rate risk is managed by controlling and limiting the level of earnings
volatility arising from rate movements. The Corporation regularly performs
reviews and analysis of those factors impacting interest rate risk. Factors
include maturity and repricing 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 decreased slightly due to a decline in demand deposit and
saving accounts. In the first three months of 1997 these deposits decreased
$3,663 thousand partially offset by an increase in Time deposits of $2,961
thousand. In 1996, cash flows from financing activities were principally
growth in short term borrowings which increased $869 thousand in the first
three months and growth of time deposits which increased $6,150 thousand. Cash
flows from investing activities were ($4,602) thousand during the first three
months of 1997 and ($3,047) thousand in the same period of 1996. The primary
reason for the increase in investing activities was the increase in loans in
the first quarter of 1997 compared to a decrease in loans for the same time
period in 1996.
CAPITAL MANAGEMENT
Total shareholders' equity rose 10.8% to $24,535 thousand at March 31, 1997
compared with 22,148 thousand at March 31, 1996. The Company's equity to
asset ratio was 9.7% at March 31, 1997 and 9.1% at March 31, 1996. The
increase in the amount of capital was obtained through retained earnings and
the proceeds from the issuance of new shares. In the first quarter of 1997,
the Company increased its cash dividends by 2.7% to $.38 per share compared
with $.37 in the first quarter of 1996.
As indicated on the balance sheet on page 4, at March 31, 1997 the Company had
an unrealized loss on securities available for sale (AFS) of $344 thousand
compared to an unrealized loss at March 31, 1996 of $318 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> 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Fentura Bancorp, Inc.'s Annual Meeting of Shareholders was held on March 19,
1997 at which the following directors were elected:
Yes No
Votes Votes
----- -----
Donald L. Grill 540,841 530
Forrest A. Shook 540,809 562
Additionally, the shareholders approved an increase of the authorized shares of
common stock from 1,000,000 to 2,000,000 in the following vote:
Yes No
Votes Votes Abstentions
----- ----- -----------
500,576 25,145 17,092
There were no others matters submitted to a vote of security holders.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The exhibits listed on the "Exhibit Index" on page 14 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 March 31, 1997.
<PAGE> 14
FENTURA BANCORP, INC.
1997 Quarterly Report on Form 10Q-SB
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Location
- -------- --------------------------------------------------------------- ----------
<S> <C> <C>
4.1 Dividend Reinvestment Plan *****
10.1 Equipment Sale Agreement between The State Bank and ITI, Inc.
dated May 31, 1989 *
10.2 Master Equipment Lease Agreement between The State Bank and
Unisys Finance Corporation dated September 6, 1989 *
10.3 Software License Agreement between The State Bank and ITI, Inc.
dated July 3, 1989 *
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 Lease of Clarkston Branch Site between The State Bank and Waldon
Properties, Inc. dated January 24, 1994 ***
10.9 Lease of Site for Automated Teller Machines between The State Bank and
Russell and Joy Manser dated December 1, 1994 ***
10.10 Lease of Fenton Silver Parkway Branch site between The State Bank and
VG's Food Centers dated March 26, 1996 ****
10.11 Lease of Davison (second) Branch site between The State Bank and
VG'S Food Centers dated November 12, 1996 ******
10.12 Directors Stock Purchase Plan *****
10.13 Non-Employee Director Stock Option Plan *****
10.14 Form of Non-Employee Director Stock Option Agreement *****
10.15 Retainer Stock Plan for Directors *****
10.16 Employee Stock Option Plan *****
10.17 Form of Employee Stock Option Plan Agreement *****
10.18 Executive Stock Bonus Plan *****
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C>
10.19 Stock Purchase Plan between The State Bank and Donald E.
Johnson, Jr., Mary Alice J. Heaton, and Linda J. LeMieux dated
November 27, 1996 ******
10.20 Severance Compensation Agreement between the registrant and
Donald L. Grill dated March 20, 1997
27.0 Financial Data Schedule
* Incorporated by reference to form 10-SB registration number 0-23550
** Incorporated by reference to form 8-K filed July 8, 1994
*** Incorporated by reference to form 10K-SB filed March 20, 1995
**** Incorporated by reference to form 10Q-SB filed May 2, 1996
***** Incorporated by reference to form 10K-SB filed March 27, 1996
****** Incorporated by reference to form 10K-SB filed March 20, 1997
</TABLE>
<PAGE> 16
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 May 7, 1997 By /s/ Donald L. Grill
----------- --------------------
Donald L. Grill
Director
President & CEO
Date May 7, 1997 By /s/ Ronald L. Justice
----------- ----------------------
Ronald L. Justice
Vice President (Authorized Signer)
Chief Financial Officer
Cashier
<PAGE> 17
Exhibit Index
Exhibit
No. Description
- ------- -----------
10.20 Severance Compensation Agreement between the registrant and
Donald L. Grill dated March 20, 1997
27.0 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.20
SEVERANCE COMPENSATION AGREEMENT
THIS SEVERANCE COMPENSATION AGREEMENT (the "Agreement"), has been made on
March 20, 1997 by FENTURA BANCORP, INC., a Michigan corporation (the
"Company"), THE STATE BANK, (the "Bank") and DONALD L. GRILL, an individual
(the "Executive").
BACKGROUND STATEMENT:
The Executive is a principal officer of the Bank and the Company and his
continued services are important to the Bank, its depositors and customers, and
the Company's shareholders. The Bank and the Company believe it is in their
best interests that the Executive continue to render services to the Bank and
the Company if a Change of Control is threatened or occurs, free from the
distractions and vexations which might result if his personal economic security
is made uncertain as a result of an impending Change of Control.
1. DEFINITIONS. The following words and phrases have the following
meanings:
A) "CAUSE" means (i) the willful and continuing failure
by the Executive to substantially perform his duties with the
Bank or the Company (other than any such failure resulting
from the Executive's death or Disability) and which is not
remedied in a reasonable period of time after receipt by
Executive of written notice from the Bank specifying the
duties the Executive has failed to perform, or (ii) the
willful and continued engaging by Executive in gross
misconduct that is materially injurious to the Bank or the
Company and which is not ceased within a reasonable period of
time after receipt by Executive of written notice from the
Bank specifying the misconduct and the injury, or (iii) an
adjudication of the Executive's guilt of any crime involving
a serious and substantial breach of the Executive's fiduciary
duties to the Bank. No act or failure to act on the
Executive's part shall be considered "willful" unless done,
or omitted to be done, by him in bad faith
<PAGE> 2
and without reasonable belief that his action or omission was in the
best interest of the Bank or the Company.
B) "CHANGE IN CONTROL" means (i) the acquisition,
directly, indirectly and/or beneficially, by any person or
group, of more than fifty percent (50%) of the voting
securities of the Company or the Bank, (ii) the occurrence of
any event at any time during any two (2) year period which
results in a majority of the Board of Directors of the
Company or the Bank being comprised of individuals who were
not members of such Board at the commencement of that two (2)
year period (the "Incumbent Board"); provided, however, that
any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's or the Bank's shareholders, was approved by a vote
of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding for this
purpose any such individual whose initial assumption of the
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Incumbent
Board, (iii) a sale of all or substantially all of the assets
of the Company or the Bank to another entity, or (iv) a
merger or reorganization of the Company or the Bank with
another entity.
C) "COMPENSATION" means with respect to the period under
consideration, the aggregate of all amounts paid by the
Company and the Bank to and includable in the Executive's
earnings as base salary, bonuses, commissions, fees and any
other compensation, but excluding contributions made to any
welfare and pension benefit plans by the Bank and/or Company
at its or their sole expense.
D) "DISABILITY" means any physical or mental impairment
which meets the definition of disability found in the
long-term or short-term disability policy insuring the
Executive at the time disability is alleged or if no such
policy is in effect at that time, any physical or mental
impairment that, on the basis of qualified medical opinion of
three (3) medical doctors, has rendered Executive wholly and
permanently unable to engage in the regular and continuous
occupation or employment for remuneration or profit of a
nature similar to his employment with the Bank for a period
of six (6)
-2-
<PAGE> 3
consecutive months or more.
E) "GOOD REASON" means any of the following, as
determined by the Executive in his discretion: (i) the
assignment to the Executive by the Bank or the Company of any
duties inconsistent with his position, duties,
responsibilities and status with the Bank or the Company
immediately prior to a Change in Control, or a change adverse
to Executive in Executive's reporting responsibilities,
titles, terms of employment (including bonus, compensation,
fringe benefits and vacation entitlement) or offices as in
effect immediately prior to a Change in Control; or (ii) the
Bank or the Company requiring Executive to be based anywhere
other than within fifteen (15) miles of his present office
location, or to travel on business of the Bank to an extent
substantially greater than Executive's present business
travel obligations; or (iii) the failure by the Company to
obtain the assumption of this Agreement as contemplated in
Section 6 hereof. If any of the foregoing result from, or
follow, a termination of employment for Cause, then Good
Reason will not have occurred.
2. INCOME PROTECTION BENEFITS. If the Executive is an employee of the
Bank or the Company when a Change in Control occurs, and the Executive's
employment is thereafter terminated without Cause either by the Bank or the
Company, or by the Executive for Good Reason, or by any party because of the
Executive's death or Disability, then:
a) The Company and the Bank shall pay to the Executive,
in a lump sum in cash within 30 days after the date of
termination of employment the aggregate of the following
amounts:
i) that portion of the Executive's annual
base salary and director's fees through the date of
termination not theretofore paid, and
ii) the product of (x) the sum of all
commissions and bonuses of any kind paid or payable to
Executive in the calendar year immediately preceding
the year in which termination of employment occurs
multiplied by (y) a fraction, the
-3-
<PAGE> 4
numerator of which is the number of days in the current
calendar year through the date of termination, and the
denominator of which is 365, and
iii) any compensation previously deferred by
the Executive (together with any accrued interest o
earnings thereon), and
iv) any accrued vacation pay.
b) The Executive shall have the right within 90 days
following termination of employment to exercise any stock
options awarded him prior to the termination of his
employment.
c) The Bank and/or the Company shall thereafter pay to
the Executive an annual amount equal to 50% of the highest
amount of the Executive's annual Compensation in the five
calendar years immediately preceding Executive's termination
for a period of 5 years from and after the Executive's
termination of employment, payable in equal monthly
installments commencing the first day of the month coinciding
with or immediately following the Executive's termination of
employment. If the Executive dies after the Bank's and the
Company's obligation to make these payments is triggered, the
Bank and the Company shall thereafter pay to the Executive's
Beneficiary a lump sum amount equal to the present value of
the unpaid monthly installments, discounted using a ten
percent (10%) per annum interest rate. In lieu of the
foregoing installments, the Executive may elect by written
notice to the Bank within ninety (90) days of the Executive's
termination of employment to receive a lump sum amount equal
to the present value of the monthly installments, discounted
by using a ten percent (10%) per annum interest rate.
d) The Bank and/or the Company shall provide to the
Executive, at its expense, hospital and medical insurance
coverage of the same or equivalent scope as he was covered by
immediately prior to termination of his employment for a
period of 5 years after the Executive's termination of
employment.
3. MAXIMUM BENEFITS UPON CHANGE OF CONTROL. If the Bank's usual
certified public accountants determine that any payment by the Bank or the
Company to or for
-4-
<PAGE> 5
the benefit of the Executive (whether paid or payable pursuant to the terms of
this Agreement or otherwise) (the "Payment") would be nondeductible by the Bank
or the Company for Federal Income Tax purposes because of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code), then the aggregate
present value of amounts payable to or for the benefit of the Executive
pursuant to this Agreement (the "Agreement Payments") shall be reduced (but
not below zero) to the Reduced Amount. The "Reduced Amount" means an amount
expressed in present value, determined in accordance with Section 280G(d)(4) of
the Code, which maximizes the present value of all Agreement Payments without
causing any Payment to be nondeductible by the Bank or the Company because of
Section 280G of the Code.
4. TERM. Unless earlier terminated by mutual agreement of the Company
and the Executive, this Agreement shall terminate upon the earliest of (a) the
termination of the Executive's employment with the Bank and the Company for any
reason prior to a Change in Control; or (b) five (5) years from the date of a
Change in Control. Obligations under Section 2 of this Agreement created prior
to termination shall survive termination.
5. TERMINATION PRIOR TO CHANGE IN CONTROL. Notwithstanding anything in
this agreement to the contrary, if a Change of Control occurs and (i) if the
Executive's employment with the Company or the Bank is terminated prior to the
date on which Change of Control occurs, and if the termination of employment
(a) was at the request or suggestion of a 3rd party who has taken steps
reasonably calculated to effect the
-5-
<PAGE> 6
Change of Control or (b) otherwise arose in connection with or in anticipation
of the Change of Control, or (ii) Executive has terminated his employment with
Company and/or Bank for Good Cause prior to Change of Control, then
Executive shall be entitled to the Income Protection Benefits and all other
rights and privileges provided by this Agreement.
6. SUCCESSORS, BINDING AGREEMENTS.
a) Any purchaser, successor or assign (whether direct or
indirect), to or of all, substantially all, or any material part of
the business, properties and assets of the Bank and/or the Company
shall be bound by the terms of this Agreement, and the Bank and the
Company shall require any such purchaser, successor or assign, by
agreement in form and substance satisfactory to Executive,
expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent
that the Bank and the Company would be required to perform if no
such succession or assignment had taken place.
b) The Bank and the Company each hereby guarantee the timely
payment and performance, when due, of the other's obligations under
this Agreement.
c) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal and legal representatives,
executives, administrators, successors, heirs, distributees,
devisees and legatees.
-6-
<PAGE> 7
7. NOTICES. Notices under this Agreement shall be in writing and shall
be deemed given when hand delivered or three (3) days after being mailed by
United States registered or certified mail, return receipt requested, postage
prepaid, as follows:
If to the Company Fentura Bancorp, Inc.
or the Bank: One Fenton Square
PO Box 725
Fenton, MI 48430-0725
If to the Executive: Mr. Donald L. Grill
14655 S. Fowlerville Rd
Perry, MI 48872-9594
or to such other address as either party may designate.
8. AT WILL PRESERVED. This Agreement is intended only to provide an
economic benefit for Executive if his employment with the Bank or the Company
is terminated under the circumstances described herein. Even though this
economic benefit may be payable, Executive's employment with the Bank and the
Company shall continue to be "at will," and the Bank, the Company or the
Executive may terminate Executive's employment with the Bank or the Company at
any time, with or without cause. Further, the existence of this Agreement and
the economic benefits herein provided shall not contradict, override, supersede
or in any way detract from or affect the "at will" employment status of any
other employee of the Bank or the Company. The employment terms set forth in
the Bank's employee handbook or employee manual, as they may be in effect from
time to time, shall control.
-7-
<PAGE> 8
9. MISCELLANEOUS.
A) MODIFICATION; WAIVER. This Agreement may be modified, waived
or discharged only in, and limited to the extent specifically set
forth in, a written document signed by the Executive and the
Company.
B) VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
C) GOVERNING LAW. This Agreement shall be governed in all
respects according to the laws of the State of Michigan.
COMPANY:
FENTURA BANCORP, INC.,
By: /s/Russell H. Van Gilder, Jr.
------------------------------
Russell H. Van Gilder, Jr., Chairman
BANK:
THE STATE BANK
By: /s/Russell H. Van Gilder, Jr.
------------------------------
Russell H. Van Gilder, Jr., Chairman
EXECUTIVE:
/s/Donald L. Grill
------------------
Donald L. Grill
-8-
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