<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, 1997
[ ] 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
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 10, 1997
Class - Common Stock ($5 par value) Shares Outstanding - 687,157
Transitional Small Business Disclosure Format (Check one): Yes ; No X
--- ---
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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 14
2
<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) 1997 1996 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 10,644 11,921 9,556
Federal funds sold 3,800 8,450 1,950
-------- ------- -------
Total Cash & Cash Equivalents 14,444 20,371 11,506
Interest bearing deposits with banks 95 95 95
Investment securities-held to maturity,
at cost (market value of $9,357, and
$6,800 at September 30, 1997 and
1996, respectively) 9,294 6,530 6,793
Investment securities-avail for sale,
at market 50,376 44,355 43,258
-------- ------- -------
Total investment securities 59,670 50,885 50,051
Loans:
Commercial 77,276 78,699 75,375
Tax exempt development loans 562 751 949
Real estate loans - mortgage 14,346 15,924 14,707
Real estate loans - construction 19,820 15,467 22,600
Consumer loans 68,645 64,388 62,323
-------- ------- -------
Total loans 180,649 175,229 175,954
Less: Reserve for loan losses (2,979) (2,836) (2,757)
-------- ------- -------
Net loans 177,670 172,393 173,197
Loans held for sale 2,194 1,007 909
Bank premises and equipment 4,195 4,794 4,955
Accrued interest receivable 1,813 1,835 1,791
Other assets 2,074 3,001 4,091
-------- ------- -------
Total assets $262,155 254,381 246,595
======== ======= =======
</TABLE>
3
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<TABLE>
LIABILITIES
<S> <C> <C> <C>
Deposits:
Non-interest bearing deposits $ 29,241 28,206 27,996
Interest bearing deposits 201,004 195,843 189,510
-------- ------- -------
Total deposits 230,245 224,049 217,506
Federal Funds Purchased 0 0 0
Other borrowings 2,685 2,369 2,695
Accrued taxes, interest and
other liabilities 2,766 3,854 3,166
-------- ------- -------
Total liabilities 235,696 230,272 223,367
-------- ------- -------
STOCKHOLDERS' EQUITY
Common stock - $5 par value
687,157 shares issued (677,147 in Dec., 3,436 3,386 3,344
1996 and 668,817 in Sept, 1996)
Surplus 16,670 16,266 15,968
Retained Earnings 6,350 4,632 4,375
Unrealized loss on sec avail for sale 3 (175) (459)
-------- ------- -------
Total stockholder's equity 26,459 24,109 23,228
-------- ------- -------
Total liabilities and
stockholder's equity $262,155 254,381 246,595
======== ======= =======
</TABLE>
See notes to consolidated financial statements.
4
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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) 1997 1996 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $4,558 4,378 $13,455 12,890
Interest and dividends on
investment securities:
Taxable 758 627 2,143 1,714
Tax-exempt 101 91 276 345
Int on deposits with banks 2 2 7 10
Interest on federal funds sold 65 100 238 286
------ ----- ------- ------
Total interest income 5,484 5,198 16,119 15,245
INTEREST EXPENSE
Deposits 2,272 2,125 6,746 6,238
Short-term borrowings 43 45 130 137
------ ----- ------- ------
Total interest expense 2,315 2,170 6,876 6,375
NET INTEREST INCOME 3,169 3,028 9,243 8,870
Provision for loan losses 156 117 468 447
------ ----- ------- ------
Net interest income after
provision for loan losses 3,013 2,911 8,775 8,423
NON-INTEREST INCOME
Service chrgs on dep accts 409 364 1,167 1,002
Fiduciary income 140 98 360 251
Other operating income 335 333 1,030 1,239
------ ----- ------- ------
Total non-interest income 884 795 2,557 2,492
NON-INTEREST EXPENSE
Salaries and benefits 1,215 1,198 3,730 3,415
Occupancy of bank premises 165 174 502 482
Equipment expense 361 330 1,054 962
Other operating expenses 807 887 2,402 2,589
Investment gains (losses) 12 0 12 67
------ ----- ------- ------
Total non-interest expense 2,560 2,589 7,700 7,515
NET INCOME BEFORE TAXES 1,337 1,117 3,632 3,400
Applicable income taxes 417 319 1,136 987
------ ----- ------- ------
NET INCOME $ 920 798 $ 2,496 2,413
====== ===== ======= ======
Per share: (687,157 shares)
Net income .................. $ 1.34 1.16 $ 3.63 3.51
Dividends ................... $ 0.38 0.35 $ 1.13 1.06
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
FENTURA BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
- ----------------------------------------------------------------------------
(000's omitted,
Except Per Share Data) 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,496 $ 2,413
Adjustments to reconcile net inc to cash
Provided by Operating Activities:
Depreciation and amortization 742 666
Provision for loan losses 468 447
Amortization (accretion) on securities 69 106
Loans originated for sale (14,665) (16,087)
Loans sold 13,478 16,103
Gain on investment securities 12 67
Decrease (increase) in interest receivable 22 (114)
Decrease (increase) in other assets 837 (594)
Increase (decrease) in accrued taxes,
interest, and other liabilities (1,088) 603
-------- --------
Total Adjustments (125) 1,197
-------- --------
Net Cash Provided By (Used In) Operating Activities 2,371 3,610
-------- --------
Cash Flows From Investing Activities:
Net decrease in deposits with other banks 0 95
Proceeds from maturities of inv activities - HTM 665 3,835
Proceeds from maturities of inv activities - AFS 12,426 10,005
Purchases of investment securities - HTM (3,437) (1,295)
Purchases of investment securities - AFS (18,252) (17,552)
Net (increase) in customer loans (5,745) (8,726)
Capital expenditures (143) (1,734)
-------- --------
Net Cash Used in Investing Activities (14,486) (15,372)
Cash Flows From Financing Activities:
Net increase (decrease) in DDA/SAV deposits 4,334 (990)
Net increase (decrease) in Time deposits 1,862 7,011
Net increase (decr) in borrowing's 316 64
Proceeds from stock issuance 454 67
Cash dividends (778) (729)
-------- --------
Net Cash Provided By (Used In) Financing Activities 6,188 5,423
NET DECREASE IN CASH AND CASH EQUIVALENTS ($5,927) ($6,339)
CASH AND CASH EQUIVALENTS - BEGINNING $ 20,371 $ 17,845
CASH AND CASH EQUIVALENTS - ENDING $ 14,444 $ 17,122
======== ========
CASH PAID FOR:
INTEREST $ 6,695 $ 6,224
INCOME TAXES $ 1,094 $ 1,252
</TABLE>
See notes to consolidated financial statements.
6
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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) 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 50 9
Stock dividend 0 0
------- -------
Balance, end of period 3,436 3,344
SURPLUS
Balance, beginning of period 16,266 15,910
Issuance of shares under
director stock purchase plan
and dividend reinvestment prog 404 58
Stock dividend 0 0
------- -------
Balance, end of period 16,670 15,968
RETAINED EARNINGS
Balance, beginning of period 4,632 2,690
Net income 2,496 2,413
Cash dividends declared (778) (728)
------- -------
Balance, end of period 6,350 4,375
UNREALIZED GAIN ON SECURITIES
AVAILABLE FOR SALE
Balance, beginning of period (175) (55)
Change in unrealized gain (loss)
on securities, net of tax 178 (404)
------- -------
Balance, end of period 3 (459)
------- -------
TOTAL SHAREHOLDERS' EQUITY $26,459 $23,228
======= =======
</TABLE>
See notes to consolidated financial statements.
7
<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 nine months ended September
30, 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.
8
<PAGE> 9
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, 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.
NINE MONTHS, 1997 VERSUS NINE 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 nine months ended September 30, 1997 was $16,119,000
compared to $15,245,000 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 investment securities. Also indicated in the income
statement, interest expense for the nine months ended September 30, 1997 was
$6,876,000 compared to $6,375,000 for the same period in 1996. This
represents an increase of 7.9%. 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 varied.
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, 1997, the ALL
was $2,979,000, or 1.65% of total loans. This compares with $2,757,000, or
1.57%, at September 30, 1996.
The provision for loan losses was $468,000 for the first nine months of 1997
and $447,000 for the same period in 1996. The primary reason for increasing
the provision was the maintenance of an adequate allowance.
NON-INTEREST INCOME
Non-interest income was $2,557,000 for the first three quarters of 1997 and
$2,492,000 in the same period of 1996. This figure represents an increase of
2.6% in 1997. 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 $1,167,000 in the first three quarters of
1997 and $1,002,000 in the same period of 1996. This represents an increase of
16.5% The increase occurred from the deposit growth the company experienced
in its existing and new markets from September 30, 1996 to September 30, 1997.
9
<PAGE> 10
Gains on the sale of mortgage loans originated by the bank and sold in the
secondary market were $178,000 in the first nine months of 1997 and $249,000 in
the same period in 1996. This 28.5% decrease occurred because of strong
competitive pressures and a reduction in the margins of these sold mortgage
loans.
Gains on the sale of other real estate were $1,000 in the first nine months of
1997 compared to $145,000 for the same period in 1996. This decrease occurred
because the Corporation began 1996 with several pieces of other real estate
which were sold in the second quarter of 1996. In 1997 the Corporation had and
sold fewer other real estate properties.
Fiduciary income increased $109,000 in the first nine months of 1997 compared
to the same time period in the prior year. This 43.4% increase in fees is
attributed to growth in the assets under management within the Corporation's
Investment Trust Department.
Other operating income, includes income from the sale of checks, safe deposit
box rent, and other miscellaneous income items.
TABLE 1
Nine Months Ended
Analysis of Non-Interest Income September 30,
- ----------------------------------------------------------
(000's omitted)
1997 1996
- ----------------------------------------------------------
Service Charges on Deposit Accounts $1,167 $1,002
Gain on Sale of Mortgages 178 249
Gain on Sale of Real Estate Owned 1 145
Mortgage Servicing Fees 295 292
Fiduciary Income 360 251
Other Operating Income 556 553
------ ------
Total Non-Interest Income $2,557 $2,492
====== ======
Non-Interest Expense
Total non-interest expense was $7,700,000 in the first three quarters of 1997
compared with $7,515,000 in the same period of 1996. This is an increase of
2.5%.
Salary and benefit costs, Fentura's largest non-interest expense category, were
$3,730,000 in the first nine months of 1997, compared with $3,415,000 for the
first nine months of 1996. 1997 salary costs represent an increase of 9.2%
over 1996. Increased costs are primarily a result of adding new positions to
staff two new branches opened in the last half of 1996.
During the first nine months of 1997 equipment expenses were $1,054,000
compared to $962,000 for the same period in 1996. Depreciation on equipment
(mostly computer hardware and software) for the new branch and increased costs
for maintenance contracts on the Corporation's computer systems are the primary
reasons for the increase in equipment expense.
Occupancy expenses associated with the Company's facilities were $502,000 in
the first three quarters of 1997 compared to $482,000 in the same period of
1996. This represents an increase of 4.1%. The primary reason for the
increase in occupancy expense is the cost associated with leasing and operating
the two new branch facilities and increases in costs associated with grounds
maintenance.
Loan and collection expenses were $312,000 in the first nine months of 1997
compared to $283,000 for the same period in 1996, an increase of 10.2%. The
increase is primarily attributable to an increase in indirect consumer loan
volume and accordingly, an increase in dealer reserve expense.
FDIC assessment expense was $20,000 in the first nine months of 1997 compared
to $1,000 in the same period of 1996. The increase is attributable to the
FDIC's reinstatement of required reserves.
10
<PAGE> 11
In the first three quarters of 1997, the Company experienced a $12,000 loss on
security transactions compared to $67,000 for the same period in 1996. 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 expenses were $1,638,000 in the first three quarters of 1997
compared to $1,839,000 in the first three quarters of 1996. The decrease in
expense is attributable to loss of $125,000 on a litigation settlement which
occurred in the second quarter of 1996.
TABLE 2
Nine Months Ended
Analysis of Non-Interest Expense September 30,
- ----------------------------------------------------------
(000's omitted)
1997 1996
- ----------------------------------------------------------
Salaries and Benefits $3,730 $3,415
Equipment 1,054 962
Net Occupancy 502 482
FDIC Assessment 20 1
Office Supplies 194 194
Loan & Collection Expense 312 283
Advertising 238 272
Security Losses 12 67
Other Operating Expense 1,638 1,839
------ ------
Total Non-Interest Expense $7,700 $7,515
====== ======
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 perspective 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 market 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 nine
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 September 30, 1997 federal funds
sold represented 1.4% of total assets, compared to .8% at September 30, 1996.
The Corporation regularly monitors liquidity to ensure adequate cash flows to
cover unanticipated reductions in the availability of funding sources.
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 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.
11
<PAGE> 12
As indicated in the statement of cash flows, cash flows from financing
activities have increased due to growth in deposits. In the first nine months
of 1997 time deposits increased $1,862,000 and demand and savings deposits
increased $4,334,000. Comparatively, in the first nine months of 1996, cash
flows from financing activities were growth in Time deposits of $7,011,000 and
a decline of demand and savings deposits of $990,000. Cash flows from
investing activities were ($14,486,000) during the first nine months of 1997
and ($15,372,000) in the same period of 1996. The primary reason for the
investing activities was an increase in deposits creating funding for increases
in the investment and loan portfolios.
CAPITAL MANAGEMENT
Total shareholders' equity rose 13.9% to $26,459,000 at September 30, 1997
compared with $23,228,000 at September 30, 1996. The Company's equity to
asset ratio was 10.1% at September 30, 1997 and 9.4% at September 30, 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 three quarters
of 1997, the Company increased its cash dividends by 6.6% to $1.13 per share
compared with $1.06 in the first three quarters of 1996.
As indicated on the balance sheet on page 4, at September 30, 1997 the Company
had an unrealized gain on securities available for sale (AFS) of $3,000
compared to an unrealized loss at September 30, 1996 of $459,000. This
decrease in unrealized loss to a gain position is attributable to market
interest rates and the interest rate structures on those securities held in the
Company's AFS portfolio.
THIRD QUARTER, 1997 VERSUS THIRD QUARTER, 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 September 30, 1997 was $5,484,000
and compared to $5,198,000 for the same period in 1996. This represents an
increase of 5.5%. The primary factors contributing to the interest income
increase are growth in the Company's loan portfolio (the largest group of
earning assets) and investment securities. Also indicated in the income
statement, interest expense for the three months ended September 30, 1997 was
$2,315,000 compared to $2,170,000 for the same period in 1996. This
represents an increase of 6.7%. Increases in the Company's savings account and
certificate of deposit balances caused the increase in interest expense.
Balances increased due to greater market penetration in existing markets and
growth in new markets.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $156,000 for the three months ended September
30, 1997 and $117,000 for the same period in 1996.
NON-INTEREST INCOME
Non-interest income was $884,000 in the third quarter of 1997 and $795,000 in
the same period of 1996. This figure represents an increase of 11.2% in 1997.
Table 3 provides a detailed breakdown of the components of non-interest income.
The most significant category of non-interest income is service charges on
deposit accounts. These fees were $409,000 in the third quarter of 1997 and
$364,000 in the same period of 1996. This represents an increase of 12.4%.
The increase occurred from the deposit growth the company
12
<PAGE> 13
experienced in its existing and new markets throughout the last year causing an
increase in service charge income opportunity.
Gains on the sale of mortgage loans originated by the bank and sold in the
secondary market were $43,000 in the third quarter of 1997 and $55,000 in the
same period in 1996. This 21.8% decrease occurred because of strong
competitive pressures and a reduction in the margins of these sold mortgage
loans.
During the third quarter of 1997 there were no gains on the sale of other real
estate compared to $5,000 for the same period in 1996. This increase occurred
because the Corporation began 1996 with several pieces of other real estate
of which a portion were sold in the third quarter. In the third quarter of
1997 the Corporation had no other real estate properties.
Fiduciary income was $140,000 in the third quarter of 1997 compared to $98,000
in the same period of 1996, an increase of $42,000 or 42.9%. The increase in
fees is attributed to growth in the assets under management within the
Corporation's Investment Trust Department.
TABLE 3
Three Months Ended
Analysis of Non-Interest Income September 30,
- ------------------------------------------------------------
(000's omitted)
1997 1996
- ------------------------------------------------------------
Service Charges on Deposit Accounts $ 409 $ 364
Gain on Sale of Mortgages 43 55
Gain on Sale of Real Estate Owned 0 5
Mortgage Servicing Fees 99 96
Fiduciary Income 140 98
Other Operating Income 193 177
----- -----
Total Non-Interest Income $ 884 $ 795
===== =====
Non-Interest Expense
Total non-interest expense was $2,560,000 in the third quarter of 1997 compared
with $2,589,000 in the same period of 1996.
Salary and benefit costs, Fentura's largest non-interest expense category, were
$1,215,000 in the quarter ended September 30, 1997, compared with $1,198,000
for the same period in 1996. 1997 salary costs represent an increase of 1.4%
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 third quarter of 1997 equipment expenses were $361,000 compared to
$330,000 for the same period in 1996, an increase of 9.4%. 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
expense costs.
FDIC assessment expense was $7,000 in the third quarter of 1997 compared to $0
in the same period of 1996. The increase is attributable to the FDIC's
reinstatement of required reserves
Advertising expenses were $71,000 in the quarter ended September 30, 1997
compared to $92,000 in the same quarter of 1996. This is a decrease of 22.8%.
Expenses associated with certain promotional and media related transactions
were reduced in 1997.
Loan and collection expenses were $113,000 in the third quarter of 1997
compared to $97,000 for the same period in 1996, an increase of 16.5%. The
increase is primarily attributable to an increase in indirect consumer loan
volume and accordingly, an increase in dealer reserve expense.
13
<PAGE> 14
During the third quarter of 1997, the Company experienced a $12,000 loss on
security transactions compared to $0 for the same period in 1996. 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 expenses were $550,000 in the third quarter of 1997 compared to
$631,000 in the same period of 1996. The decrease in expense in 1997 is
attributable to a decline in fees paid to consultants.
TABLE 4
Three Months Ended
Analysis of Non-Interest Expense September 30,
- -----------------------------------------------------
(000's omitted)
1997 1996
- -----------------------------------------------------
Salaries and Benefits $1,215 $1,198
Equipment 361 330
Net Occupancy 165 174
FDIC Assessment 7 0
Office Supplies 66 67
Loan & Collection Expense 113 97
Advertising 71 92
Security Losses 12 0
Other Operating Expense 550 631
------ ------
Total Non-Interest Expense $2,560 $2,589
====== ======
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The exhibits listed on the "Exhibit Index" on page 16 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, 1997.
14
<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 11, 1997 By /s/ Donald L. Grill
----------------- --------------------
Donald L. Grill
Director
President & CEO
Date November 11, 1997 By /s/ Ronald L. Justice
----------------- ----------------------
Ronald L. Justice
Vice President (Authorized Signer)
Chief Financial Officer
Cashier
15
<PAGE> 16
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 *****
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16
<PAGE> 17
<TABLE>
<S><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 Agreements between the registrant and
Donald L. Grill and Richard A. Bagnall 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
******* Incorporated by reference to from 10Q-SB filed May 12, 1997
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,644
<INT-BEARING-DEPOSITS> 95
<FED-FUNDS-SOLD> 3,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 50,376
<INVESTMENTS-CARRYING> 9,294
<INVESTMENTS-MARKET> 9,357
<LOANS> 180,649
<ALLOWANCE> 2,979
<TOTAL-ASSETS> 262,155
<DEPOSITS> 230,245
<SHORT-TERM> 1,500
<LIABILITIES-OTHER> 2,766
<LONG-TERM> 1,185
0
0
<COMMON> 3,436
<OTHER-SE> 23,023
<TOTAL-LIABILITIES-AND-EQUITY> 262,155
<INTEREST-LOAN> 13,455
<INTEREST-INVEST> 2,419
<INTEREST-OTHER> 245
<INTEREST-TOTAL> 16,119
<INTEREST-DEPOSIT> 6,746
<INTEREST-EXPENSE> 6,876
<INTEREST-INCOME-NET> 9,243
<LOAN-LOSSES> 468
<SECURITIES-GAINS> (12)
<EXPENSE-OTHER> 7,700
<INCOME-PRETAX> 3,632
<INCOME-PRE-EXTRAORDINARY> 3,632
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,496
<EPS-PRIMARY> 3.63
<EPS-DILUTED> 3.63
<YIELD-ACTUAL> 5.22
<LOANS-NON> 1,773
<LOANS-PAST> 347
<LOANS-TROUBLED> 8
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,836
<CHARGE-OFFS> 372
<RECOVERIES> 47
<ALLOWANCE-CLOSE> 2,979
<ALLOWANCE-DOMESTIC> 2,979
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
