<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
-------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
--------------- --------------
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
---------------------------------------------------
(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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: August 08, 2000
Class - Common Stock Shares Outstanding - 1,713,912
<PAGE> 2
Fentura Bancorp, Inc.
Index to Form 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C>
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 21
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
JUNE 30, DEC. 31,
(000's omitted Except Per Share Data) 2000 1999
----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 14,154 12,714
Federal funds sold 12,600 900
-------------------------------
Total Cash & Cash Equivalents 26,754 13,614
Interest bearing deposits with banks 0 0
Investment securities-held to maturity,
at cost (market value of $13,237, and
$13,774 at June 30, 2000 and December 31, 1999,
respectively) 13,339 13,922
Investment securities-avail for sale,
at market 52,515 53,964
-------------------------------
Total investment securities 65,854 67,886
Loans:
Commercial 89,167 92,359
Tax exempt development loans 454 537
Real estate loans - mortgage 21,359 21,409
Real estate loans - construction 21,570 12,481
Consumer loans 68,724 64,280
-------------------------------
Total loans 201,274 191,066
Less: Reserve for loan losses (3,257) (2,961)
-------------------------------
Net loans 198,017 188,105
Loans held for sale 204 180
Bank premises and equipment 5,842 5,200
Accrued interest receivable 1,888 1,687
Other assets 5,640 6,949
-------------------------------
Total assets $ 304,199 283,621
===============================
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
LIABILITIES
Deposits:
Non-interest bearing deposits $ 35,518 31,524
Interest bearing deposits 217,796 215,527
-------------------------------
Total deposits 253,314 247,051
Federal Funds Purchased 13,300 0
Other borrowings 2,664 2,529
Accrued taxes, interest and
other liabilities 2,003 2,176
-------------------------------
Total liabilities 271,281 251,756
-------------------------------
STOCKHOLDERS' EQUITY
Common stock - $2.5 par value 1,713,912
shares issued (1,422,045 in December 30, 1999) 4,285 3,555
Surplus 25,824 18,317
Retained Earnings 4,086 11,078
Accumulated other comprehensive income (loss) (1,277) (1,085)
-------------------------------
Total stockholders' equity 32,918 31,865
-------------------------------
Total liabilities and
stockholders' equity $ 304,199 283,621
===============================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Statements of Income (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 4,728 4,320 9,181 8,342
Interest and dividends on
investment securities:
Taxable 829 706 1,669 1,488
Tax-exempt 165 134 336 269
Interest on federal funds sold 197 213 272 357
-------------------------------------------------------------
Total interest income 5,919 5,373 11,458 10,456
INTEREST EXPENSE
Deposits 2,275 1,904 4,494 3,827
Other borrowings 216 11 272 21
Long-term borrowings 21 21 42 43
-------------------------------------------------------------
Total interest expense 2,512 1,936 4,808 3,891
NET INTEREST INCOME 3,407 3,437 6,650 6,565
Provision for loan losses 201 130 370 325
-------------------------------------------------------------
Net interest income after
provision for loan losses 3,206 3,307 6,280 6,240
NON-INTEREST INCOME
Service charges on dep accts 486 499 953 975
Fiduciary income 159 144 321 299
Other operating income 408 357 730 726
Investment gains 0 0 0 26
-------------------------------------------------------------
Total non-interest income 1,053 1,000 2,004 2,026
NON-INTEREST EXPENSE
Salaries and benefits 1,486 1,421 2,941 2,749
Occupancy of bank premises 196 190 398 383
Equipment expense 408 342 781 683
Other operating expenses 986 937 1,838 1,750
-------------------------------------------------------------
Total non-interest expense 3,076 2,890 5,958 5,565
NET INCOME BEFORE TAXES 1,183 1,417 2,326 2,701
Applicable income taxes 353 437 623 835
-------------------------------------------------------------
NET INCOME $ 830 980 1,703 1,866
=============================================================
Per share:
Net income - basic........... $ 0.48 0.58 1.00 1.10
Net income - diluted......... $ 0.48 0.58 0.99 1.10
Dividends ................... $ 0.21 0.19 0.42 0.38
Average number of common
shares outstanding......... 1,711,525 1,698,764 1,709,593 1,694,970
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
-------------------------------------------------------------------------------------------------------
June 30, June 30,
(000's omitted) 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK
Balance, beginning of period $ 3,555 $ 3,521
Issuance of shares under
director stock purchase plan,
stock purchase plan, and
dividend reinvestment program 17 22
Impact of 20% stock dividend 713 0
---------------- ---------------
Balance, end of period 4,285 3,543
SURPLUS
Balance, beginning of period 18,317 17,644
Issuance of shares under
director stock purchase plan,
stock purchase plan, and
dividend reinvestment program 240 437
Impact of 20% stock dividend 7,267 0
---------------- ---------------
Balance, end of period 25,824 18,081
RETAINED EARNINGS
Balance, beginning of period 11,078 8,664
Net income 1,703 1,866
Impact of 20% stock dividend (7,980) 0
Cash dividends declared (715) (650)
---------------- ---------------
Balance, end of period 4,086 9,880
COMPREHENSIVE INCOME (LOSS)
Balance, beginning of period (1,085) 193
Change in unrealized gain (loss)
on securities, net of tax (192) (882)
---------------- ---------------
Balance, end of period (1,277) (689)
---------------- ---------------
TOTAL SHAREHOLDERS' EQUITY $ 32,918 $ 30,815
================ ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
Fentura Bancorp, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------------------------------------------------------------------
(000's omitted,
Except Per Share Data) 2000 1999
----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,703 $1,866
Adjustments to reconcile net income to cash
Provided by Operating Activities:
Depreciation and amortization 510 406
Provision for loan losses 370 325
Amortization (accretion) on securities (25) (30)
Loans originated for sale (2,995) (5,924)
Loans sold 2,971 6,030
Gain on investment securities 0 (26)
Decrease (increase) in interest receivable (201) 111
Decrease (increase) in other assets 1,408 (932)
Increase (decrease) in accrued taxes,
interest, and other liabilities (173) (666)
--------------------
Total Adjustments 1,865 (706)
--------------------
Net Cash Provided By (Used In) Operating Activities 3,568 1,160
--------------------
Cash Flows From Investing Activities:
Net decrease in deposits with other banks 0 0
Proceeds from maturities of investment activities - HTM 248 185
Proceeds from maturities of investment activities - AFS 1,518 56,767
Purchases of investment securities - HTM 0 0
Purchases of investment securities - AFS 0 (51,636)
Net (increase) in customer loans (10,282) (2,682)
Capital expenditures (net of disposed) (1,152) (1,194)
---------------------
Net Cash Used in Investing Activities (9,668) 1,440
Cash Flows From Financing Activities:
Net increase (decrease) in DDA/SAV deposits 3,995 533
Net increase (decrease) in Time deposits 2,268 (4,491)
Net increase (decrease) in borrowing's 13,435 893
Proceeds from stock issuance 257 458
Cash dividends (715) (650)
--------------------
Net Cash Provided By (Used In) Financing Activities 19,240 (3,257)
NET INCREASE IN CASH AND CASH EQUIVALENTS $13,140 ($657)
CASH AND CASH EQUIVALENTS - BEGINNING $13,614 $18,158
CASH AND CASH EQUIVALENTS - ENDING $26,754 $17,501
========================
CASH PAID FOR:
INTEREST $4,670 $4,305
INCOME TAXES $627 $950
</TABLE>
See notes to consolidated financial statements.
<PAGE> 8
Fentura Bancorp, Inc. and Subsidiaries
Statement of Comprehensive Income (Loss)
<TABLE>
<CAPTION>
Six Months Ended
(000's Omitted) June 30,
2000 1999
----------------------------
<S> <C> <C>
Net Income $1,703 $1,866
Other comprehensive income, net of tax:
Unrealized holding gains arising
during period ($192) ($856)
Less: reclassification adjustment for $0
gains included in net income $0 $26
----------------------------
Other comprehenisive income ($192) ($882)
----------------------------
Comprehensive income $1,511 $984
============================
</TABLE>
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 - 10Q
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 six months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
Note 2. Reclassifications
On April 26, 2000 the Corporation declared a 20% stock dividend payable
on May 26, 2000, to the stockholders of record as of April 26, 2000.
Accordingly, the per share amounts for June 30, 1999 and June 30, 2000,
have been retroactively adjusted to reflect the effect of the dividend.
Note 3. On March 13, 2000, Fentura Bancorp's subsidiary The State Bank spun off
two of its existing branches in Davison Michigan to create a De Novo
Bank (Davison State Bank). Davison State Bank is a wholly owned
subsidiary of Fentura Bancorp, Inc. This transaction did not have any
effect on the cosolidated financial statements.
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This item provides a narrative discussion and analysis of the consolidated
financial condition and results of operations of Fentura Bancorp, Inc. (the
Corporation), together with its operating subsidiaries, The State Bank and
Davison State Bank (the Banks), for the three and six months ended June 30, 2000
and 1999. The supplemental financial data included throughout should be read in
conjunction with the primary financial statements presented on pages 3 through
8. It provides a more detailed and comprehensive review of the operating results
and financial position than could be obtained from the financial statements
alone.
Table 1
Selected Financial Data
<TABLE>
<CAPTION>
Six Months Ended
June 30,
$ in thousands except per share data
and ratios 2000 1999
---------------------------------------------------------------------------------------------
<S> <C> <C>
Summary of Consolidated Statements of Earnings:
Interest Income $11,458 $10,456
Interest Expense 4,808 3,891
----------------------------------
Net Interest Income 6,650 6,565
Provision for Possible Credit Losses 370 325
----------------------------------
Net Interest Income after Provision 6,280 6,240
Total Other Operating Income 2,004 2,026
Total Other Operating Expense 5,958 5,565
----------------------------------
Income Before Income Taxes 2,326 2,701
Provision for Income Taxes 623 835
----------------------------------
Net Income $1,703 $1,866
==================================
Net Income Per Share - Basic $1.00 $1.10
Net Income Per Share - Diluted $0.99 $1.10
Summary of Consolidated Statements of Financial Condition:
Assets $304,199 $272,109
Securities 65,854 71,323
Loans 201,478 174,664
Deposits 253,314 237,147
Stockholders' Equity 32,918 30,815
Other Financial and Statistical Data:
Tier 1 Capital to Risk Weighted Assets 13.85% 13.59%
Total Capital to Risk Weighted Assets 15.10% 14.84%
Tier 1 Capital to Average Assets 12.66% 10.81%
Total Cash Dividends $715 $650
Book Value Per Share $19.21 $18.12
Cash Dividends Paid Per Share $0.42 $0.38
Period End Market Price Per Share $30.00 $45.00
Dividend Payout Ratio 41.98% 34.83%
Return on Average Stockholders'Equity 10.40% 11.98%
Return on Average Assets 1.16% 1.38%
Net Interest Margin (FTE) 5.01% 5.35%
Total Equity to Assets at Year End 10.82% 11.32%
</TABLE>
<PAGE> 10
Results of Operations
Table 1 summarizes selected financial data for the six months ended June 30,
2000 and 1999. As indicated earnings for the six months ended June 30, 2000 were
$1,703,000 compared to $1,866,000 for the same period in 1999. Earnings
decreased as a result of increased operating expenses. Despite this earnings
decline, core banking activities and new opportunities in our current and
surrounding markets remain strong and accordingly, management believes overall
performance will remain strong throughout 2000.
The banking industry uses standard performance indicators to help evaluate an
institution's performance. Return on average assets is one of these indicators.
For the six months ended June 30, 2000 the Coporation's return on average assets
was 1.16% compared to 1.38% for the same period in 1999. Total assets increased
approximately $32,000,000 from June 30, 1999 to $304,199,000 at June 30, 2000.
Stockholders' Equity increased approximately $2,100,000 from June 30, 1999 to
$32,918,000 at June 30, 2000. The increase in equity will allow the Corporation
to continue its growth strategy. Net income per share-basic was $1.00 in the
first six months of 2000 compared to $1.10 for the same period in 1999.
Net Interest Income
Net interest income and average balances and yields on major categories of
interest-earning assets and interest-bearing liabilities for the three and six
months ended June 30, 2000 and 1999 are summarized in Tables 3 and 4,
respectively. The effects of changes in average interest rates and average
balances are detailed in Table 2 below.
Table 2
CHANGES IN NET INTEREST INCOME
DUE TO CHANGES IN AVERAGE VOLUME
AND INTEREST RATES
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
2000 COMPARED TO 1999 2000 COMPARED TO 1999
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO: DUE TO:
-------------------------------------------------------------------------
YIELD/ YIELD/
(000'S OMITTED) VOL RATE TOTAL VOL RATE TOTAL
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST BEARING DEPOSITS IN BANKS 0 0 0 0 0 0
TAXABLE SECURITIES 59 64 123 63 118 181
TAX-EXEMPT SECURITIES 37 (6) 31 78 (11) 67
FEDERAL FUNDS SOLD (56) 40 (16) (147) 62 (85)
TOTAL LOANS 907 (320) 587 1,619 (420) 1,199
LOANS HELD FOR SALE (179) 0 (179) (361) 1 (360)
-------------------------------------------------------------------------
TOTAL EARNING ASSETS 768 (222) 546 1,252 (250) 1,002
INTEREST BEARING DEMAND DEPOSITS (4) 7 3 (57) 60 3
SAVINGS DEPOSITS 21 110 131 51 232 283
TIME CD'S $100,000 AND OVER 115 80 195 205 106 311
OTHER TIME DEPOSITS (2) 44 42 11 59 70
OTHER BORROWINGS 222 (17) 205 268 (18) 250
-------------------------------------------------------------------------
TOTAL INTEREST BEARING LIABILITIES 352 224 576 478 439 917
-------------------------------------------------------------------------
NET INTEREST INCOME $416 ($446) ($30) $774 ($689) $85
=========================================================================
</TABLE>
<PAGE> 11
As indicated in Table 2, during the six months ended June 30 2000, net interest
income increased over the same period in 1999 principally due to the increase in
the yield on earning assets as market interest rates increased. During the three
months ended June 30, 2000, net interest income decreased over the same time
period in 1999 because of an increase in rates paid on interest bearing deposit
liabilities.
Net interest income (displayed without consideration of full tax equivalency),
average balance sheet amounts, and the corresponding yields for the three months
ended June 30, 2000 and 1999 are shown in Table 3. Net interest income for the
three months ended June 30, 2000 was $3,407,000 a decrease of $30,000 over the
same period in 1999. This represents a decrease of .8%. The primary factors
contributing to the net interest income decrease is an increase in interest
expense. Interest expense increased because market interest rates rose during
the period causing the Corporation to increase interest rates paid on certain
deposit liabilities in order to remain competitive. Additionally, the
Corporation experienced an increase in federal funds purchased due to the impact
on the individual subsidiaries after the spin off transaction, and this also
caused an increase in interest expense
Net interest income (displayed without consideration of full tax equivalency),
average balance sheet amounts, and the corresponding yields for the six months
ended June 30, 2000 and 1999 are shown in Table 4. Net interest income for the
six months ended June 30, 2000 was 6,650,000 an increase of $85,000 over the
same period in 1999. This represents an increase of 1.3%. The primary factor
contributing to the net interest income increase is an increase in interest
income recognized from growth in loans and investment securities.
Management expects a continued strong local economy throughout 2000 and because
of this believes loan demand will remain strong. Accordingly, the Corporation
will aggressively seek out new loan opportunities while continuing to maintain
sound credit quality. Management also believes that continued loan growth will
increase net interest income in 2000.
As indicated in Table 3 and 4, for the three and six months ended June 30, 2000,
the Corporation's net interest margin (without consideration of full tax
equivalency) was 4.89% compared with 5.47% and 5.27%, respectively for the same
periods in 1999. These declines are attributable to an increase in the overall
cost of funds within deposits. The Corporation's cost of funds increased along
with increases in market interest rates.
Average earning assets increased 8.8% or approximately $22,000,000 comparing the
first half of 2000 to the same time period in 1999. Loans, the highest yielding
component of earning assets, represented 72.2% on average earning assets in the
six months ended June 30, 2000 compared to 65.3% for the same time period in
1999. Average interest bearing liabilities increased 8.8% or $18,400,000
comparing the first half of 2000 to the same time period in 1999. Non-interest
bearing deposits amounted to 12.3% of average earning assets in the first half
of 2000 compared with 11.2% in the same time period on 1999.
Management continually monitors the Corporation's balance sheet to insulate net
interest income from significant swings caused by interest rate volatility. If
market rates change in 2000, corresponding changes in funding costs would be
considered to avoid any potential negative impact on net interest income. The
Corporation's policies in this regard are further discussed in the section
titled "Interest Rate Risk".
<PAGE> 12
Table 3
<TABLE>
<CAPTION>
AVERAGE BALANCES AND RATES
THREE MONTHS ENDED JUNE 30,
2000 1999
-------------------------------- --------------------------------
(dollars in thousands) AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
ASSETS BALANCE EXPENSE RATE BALANCE EXPENSE RATE
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment securities:
U.S. Treasury and Government Agencies 50,635 814 6.47% 46,389 690 5.97%
State and Political 14,398 165 4.61% 11,248 134 4.78%
Other 1,077 15 5.60% 1,297 16 4.95%
-------------------------------- --------------------------------
Total Investment Securities 66,110 994 6.05% 58,934 840 5.72%
Fed Funds Sold 13,224 197 5.99% 17,969 213 4.75%
Loans:
Commercial 104,528 2,517 9.68% 88,849 2,330 10.52%
Tax Free 548 7 5.14% 286 4 5.61%
Real Estate-Mortgage 26,205 583 8.95% 13,808 324 9.41%
Consumer 69,679 1,617 9.33% 61,779 1,479 9.60%
-------------------------------- --------------------------------
Total loans 200,960 4,724 9.45% 164,722 4,137 10.07%
Allowance for Loan Loss (3,156) (2,896)
Net Loans 197,804 4,724 9.61% 161,826 4,137 10.25%
-------------------------------- --------------------------------
Loans Held for Sale 201 4 8.00% 10,496 183 6.99%
-------------------------------- --------------------------------
TOTAL EARNING ASSETS $280,495 $5,919 8.49% $252,121 $5,373 8.55%
-------------------------------------------------------------------
Cash Due from Banks 11,251 10,099
All Other Assets 13,048 11,047
----------- -----------
TOTAL ASSETS $301,638 $270,371
----------- -----------
LIABILITIES & SHAREHOLDERS' EQUITY:
Deposits:
Non-Interest bearing - DDA $34,776 $28,588
Interest bearing - DDA 41,660 183 1.77% 42,533 180 1.70%
Savings Deposits 68,122 585 3.45% 65,102 454 2.80%
Time CD's $100,000 and Over 33,263 514 6.22% 24,431 319 5.24%
Other Time CD's 74,302 993 5.38% 74,453 951 5.12%
-------------------------------- --------------------------------
Total Deposits 252,123 2,275 3.63% 235,107 1,904 3.25%
Other Borrowings 14,816 237 6.43% 1,860 32 6.90%
-------------------------------- --------------------------------
INTEREST BEARING LIABILITIES $232,163 $2,512 4.35% $208,379 $1,936 3.73%
-------------------------------------------------------------------
All Other Liabilities 1,277 1,900
Shareholders Equity 33,422 31,504
----------- -----------
TOTAL LIABILITIES and S/H EQUITY $301,638 $270,371
----------- --------- ----------- ----------
Net Interest Rate Spread 4.14% 4.82%
Impact of Non-Int Bearing Funds on Margin 0.75% 0.65%
--------- ----------
Net Interest Income/Margin $3,407 4.89% $3,437 5.47%
===================== =====================
</TABLE>
<PAGE> 13
Table 4
<TABLE>
<CAPTION>
AVERAGE BALANCES AND RATES
SIX MONTHS ENDED JUNE 30,
2000 1999
-------------------------------- ---------------------------------
(dollars in thousands) AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
ASSETS BALANCE EXPENSE RATE BALANCE EXPENSE RATE
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment securities:
U.S. Treasury and Government Agencies 51,182 1,638 6.44% 48,873 1,457 6.01%
State and Political 14,580 336 4.63% 11,304 269 4.80%
Other 1,077 31 5.79% 1,281 31 4.88%
-------------------------------- ---------------------------------
Total Investment Securities 66,839 2,005 6.03% 61,458 1,757 5.77%
Fed Funds Sold 8,984 272 6.09% 15,263 357 4.72%
Loans:
Commercial 103,273 4,885 9.51% 87,297 4,293 9.92%
Tax Free 568 16 5.66% 291 8 5.54%
Real Estate-Mortgage 25,761 1,118 8.73% 14,783 712 9.71%
Consumer 67,747 3,155 9.37% 61,764 2,962 9.67%
-------------------------------- ---------------------------------
Total loans 197,349 9,174 9.35% 164,135 7,975 9.80%
Allowance for Loan Loss (3,070) (2,862)
Net Loans 194,279 9,174 9.50% 161,273 7,975 9.97%
-------------------------------- ---------------------------------
Loans Held for Sale 192 7 7.33% 10,498 367 7.05%
-------------------------------- ---------------------------------
TOTAL EARNING ASSETS $273,364 $11,458 8.43% $251,354 $10,456 8.39%
--------------------------------------------------------------------
Cash Due from Banks 10,991 10,030
All Other Assets 13,119 11,003
----------- -----------
TOTAL ASSETS $294,404 $269,525
----------- -----------
LIABILITIES & SHAREHOLDERS' EQUITY:
Deposits:
Non-Interest bearing - DDA $33,718 $28,106
Interest bearing - DDA 41,449 370 1.80% 42,649 367 1.74%
Savings Deposits 67,848 1,161 3.44% 64,122 878 2.76%
Time CD's $100,000 and Over 32,586 964 5.95% 24,818 653 5.31%
Other Time CD's 75,180 1,999 5.35% 74,764 1,929 5.20%
-------------------------------- ---------------------------------
Total Deposits 250,781 4,494 3.60% 234,459 3,827 3.29%
Other Borrowings 9,517 314 6.63% 1,839 64 7.02%
-------------------------------- ---------------------------------
INTEREST BEARING LIABILITIES $226,580 $4,808 4.27% $208,192 $3,891 3.77%
--------------------------------------------------------------------
All Other Liabilities 1,368 2,078
Shareholders Equity 32,738 31,149
----------- -----------
TOTAL LIABILITIES and S/H EQUITY $294,404 $269,525
----------- --------- ----------- -----------
Net Interest Rate Spread 4.16% 4.62%
Impact of Non-Int Bearing Funds on Margin 0.73% 0.65%
--------- -----------
Net Interest Income/Margin $6,650 4.89% $6,565 5.27%
===================== ======================
</TABLE>
<PAGE> 14
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 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 June 30, 2000, the ALL was $3,257,000, or
1.62% of total loans, including those loans held for sale. This compares with
$2,920,000, or 1.67%, at June 30, 1999. The decrease in the ALL percentage of
total loans is a result of the increase in loan balances.
The provision for loan losses was $201,000 and $370,000 for the three and six
months, respectively, ended June 30, 2000 and $130,000 and $325,000 for the same
periods in 1999. The primary reason for increasing the provision in 2000 was to
increase the allowance for loan losses because of the increase in loan balances
and the increase in non-accrual loans.
Table 5 ANALYSIS OF THE ALLOWANCE FOR POSSIBLE CREDIT LOSSES
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(000's omitted) June 30, June 30,
2000 1999 2000 1999
----------------------------------------------
<S> <C> <C> <C> <C>
Balance at Beginning of Period $3,046 $2,850 $2,961 $2,783
----------------------------------------------
Charge-Offs:
Domestic:
Commercial, Financial and Agriculture 0 0 (9) (72)
Real Estate-Mortgage 0 0 0 (2)
Installment Loans to Individuals (77) (83) (176) (171)
Lease Financing 0 0 0 0
----------------------------------------------
Total Charge-Offs (77) (83) (185) (245)
----------------------------------------------
Recoveries:
Domestic:
Commercial, Financial and Agriculture 70 4 71 10
Real Estate-Mortgage 0 0 0 0
Installment Loans to Individuals 17 19 40 47
Lease Financing 0 0 0 0
----------------------------------------------
Total Recoveries 87 23 111 57
----------------------------------------------
Net Charge-Offs 10 (60) (74) (188)
----------------------------------------------
Provision 201 130 370 325
----------------------------------------------
Balance at End of Period $3,257 $2,920 $3,257 $2,920
==============================================
Ratio of Net Charge-Offs During the Period 0.00% 0.14% 0.04% 0.22%
==============================================
</TABLE>
NON-INTEREST INCOME
TABLE 6
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Analysis of Non-Interest Income June 30, June 30,
-------------------------------------------------------------------------------------------------
(000's omitted)
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Service Charges on Deposit Accounts $486 $499 $953 $975
Gain on Sale of Mortgages $52 $31 $65 $83
Mortgage Servicing Fees $63 $72 $128 $148
Fiduciary Income $159 $144 $321 $299
Other Operating Income $293 $254 $537 $495
Investment Gains $0 $0 $0 $26
------------------------------------------------
Total Non-Interest Income $1,053 $1,000 $2,004 $2,026
================================================
</TABLE>
<PAGE> 15
Non-interest income increased in the three months ended June 30, 2000 as
compared to the same period in 1999 due to increases in other operating income
and the gain on sale of mortgages. For the six months ended June 30, 2000
comparing to the same period in 1999 non-interest income decreased. This decline
is primarily attributable to a decrease in service charges on deposit accounts
and investment security gains. Overall non-interest income was $1,053,000 and
$2,004,000 in the three and six months, respectively, ended June 30, 2000
compared to $1,000,000 and $2,026,000 for the same periods in 1999. Table 6
provides a more detailed breakdown of the components of non-interest income and
the following discussion provides a detailed analysis of the changes from each
period.
The most significant category of non-interest income is service charges on
deposit accounts. These fees were $486,000 in the three months ended June 30,
2000 and $953,000 in the six months ended June 30, 2000 compared to $499,000 and
$975,000, respectively, for the same periods of 1999. These represent decreases
of 2.6% and 2.3%, respectively. An increase in average balances maintained in
savings accounts, offsetting service charges is the primary reason for the
declines in 2000.
Gains on the sale of mortgage loans originated by the bank and sold in the
secondary market were $52,000 in the quarter ended June 30, 2000 and $31,000 in
the same period in 1999. These gains were $65,000 in the six months ended June
30, 2000 and $83,000 in the same period of 1999. The increase in the quarter
ended June 30, 2000 compared to 1999 is attributable to an increase in per loan
profit margin on sold loans. Profit margins per loan increased because the
Corporation began to sell loans in the secondary market with servicing released.
For the six months end June 30, 2000, gains on sale of mortgage loans declined
due to a reduction in the volume of loans sold during the period.
Mortgage servicing fees were $63,000 and $128,000 for the three and six months
ended June 30, 2000, respectively compared to $72,000 and $148,000 for the same
periods, respectively, in 1999. The declines are attributable to lower serviced
loan balances in 2000 due to payoffs throughout 1999 and the first half of 2000
and the Corporation's retention of certain new mortgages as opposed to selling
those loans and recognizing servicing fees.
Fiduciary income increased $15,000 in the three months ended June 30, 2000 and
increased $22,000 in the six months ended June 30, 2000 comparing to the same
time periods in the prior year. These 10.4% and 7.4%, respectively, increases 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, merchant account income, ATM income, and other miscellaneous income items.
Other operating income was $293,000 for the three months ended June 30, 2000 and
$254,000 for the same period in 1999. This is a increase of 15.4% compared to
the same time period in 1999. For the six months ended June 30, 2000 other
income was $537,000 compared to $495,000 to the same period in 1999. This is an
increase of 8.5%. These increases occurred primarily because of an increase in
fees paid to one subsidiary for support services.
Gains on the sale of investments were $26,000 in the first half of 1999. These
gains occurred from sales of investments which had lower yield potential and
longer maturities in connection with forecasts relating to yield curve movements
and the expected impact on market rates. Proceeds from these transactions are
being used to invest in other securities with stronger yields within certain
maturity horizons. During the first half of 2000 there were no sales
transactions of investment securities.
<PAGE> 16
Non-Interest Expense
TABLE 7
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Analysis of Non-Interest Expense June 30, June 30,
-------------------------------------------------------------------------------------------------
(000's omitted)
2000 1999 2000 1999
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Salaries and Benefits $1,486 $1,421 $2,941 $2,749
Equipment $408 $342 $781 $683
Net Occupancy $196 $190 $398 $383
FDIC Assessment $13 $7 $25 $14
Office Supplies $87 $68 $161 $133
Loan & Collection Expense $85 $103 $206 $163
Advertising $71 $108 $126 $160
Other Operating Expense $730 $651 $1,320 $1,280
------------------------------------------------
Total Non-Interest Expense $3,076 $2,890 $5,958 $5,565
================================================
</TABLE>
Total non-interest expense was $3,076,000 in the three months ended June 30,
2000 compared with $2,890,000 in the same period of 1999. This is an increase of
6.4%. For the six months ended June 30, 2000 non-interest expenses were
$5,958,000 compared to $5,565,000 in the same time period of 1999, an increase
of 7.1%. These increases occurred due to increases in salaries and benefits,
equipment, and other operating expenses.
Salary and benefit costs, Fentura's largest non-interest expense category, were
$1,486,000 in the quarter ended June 30, 2000, compared with $1,421,000, or an
increase of 4.6%, for the same time period in 1999. These costs were $2,941,000
in the six months ended June 30, 2000, and $2,749,000, or an increase of 7.0%,
for the same time period in 1999. Increased costs are primarily a result of a
change in the mix of full time and part time employees, normal annual salary
increases, and an increase in payroll taxes.
During the three months ended June 30, 2000 equipment expenses were $408,000
compared to $342,000 for the same period in 1999, an increase of 19.3%. For the
six months ended June 30, 2000 these expenses were $781,000 compared to $683,000
for the same time period in 1999, a increase of 14.3%. These increases in
expense are attributable to an increase in equipment depreciation. Depreciation
increased due to new equipment purchases including a new mainframe computer
system.
Occupancy expenses increased in both the three and six months ended June 30,
2000 comparing to the same periods in 1999. These expenses were $196,000 and
$398,000 in the three and six months ended June 30, 2000, respectively, and
$190,000 and $383,000 in the same periods, respectively, in 1999. This is a 3.2%
increase in the three months ended June 30, 2000 compared to the same period in
1999, and a 3.9% increase in the six months ended June 30, 2000 compared to the
same period in 1999. These modest increases are attributable to increases in
facility repairs and maintenance contracts expenses.
As indicated in Table 7, during the three and six months ended June 30, 2000
office supplies expense increased to $87,000 and $161,000, respectively,
comparing to the same periods in 1999. These increases are attributable to
volume increases of regular office supplies and preprinted forms including
creating the initial supply of office products for the De Novo Bank.
Loan and collection expenses decreased $18,000 to $85,000 in the three months
ended June 30, 2000 an increase of 17.5% comparing to $103,000 for the same time
period in 1999. This decrease is attributable to a decrease in dealer service
fees paid in connection with indirect auto lending in the second quarter of
2000. For the six months ended June 30, 2000, loan and collection expenses were
$206,000 compared to $163,000 for the same time period in 1999. This $43,000
decrease, or 26.4%, is attributable to an increase in dealer service fees paid
in connection with indirect auto lending in the first quarter of 2000.
<PAGE> 17
Advertising expenses were $71,000 and $126,000 for the three and six months
ended June 30, 2000, respectively, compared to $108,000 and $160,000 for the
same periods in 1999, respectively. This is an decrease of 34.3% for the three
months ended June 30, 2000 comparing to the same period in 1999, and a decrease
of 27.0% for the six months ended June 30, 2000 comparing to the same period in
1999. These decreases are attributable to an effort to control costs in
shareholder communications, promotional activities, advertising expenses, and
expenses connected with our senior citizens programs.
Other operating expenses were $1,320,000 in the six months ended June 30, 2000
compared to $1,280,000 in the same time period in 1999, an increase of 3.1%.
These expenses increased comparing the two periods primarily because of
increases in fees paid for professional and support services. Professional fees
in 2000 have included expenses to create and open the De Novo Bank subsidiary.
NONPERFORMING ASSETS
Non-performing assets include loans on which interest accruals have ceased,
loans which have been renegotiated, and real estate acquired through
foreclosure. Past due loans are loans which were delinquent 90 days or more, but
have not been placed on non-accrual status. Table 8 displays the levels of these
assets at June 30, 2000 and 1999.
Non-performing assets increased modestly at June 30, 2000 compared to June 30,
1999. This increase is attributable to an increase in non-accrual loans.
Non-accrual loans increased due to one commercial account relationship.
Agreements are in process that require specific action plans, collateral
pledges, and related performance expectations for this relationship. The
relationship will be closely monitored. While the non-accrual loan increase is
of concern, overall asset quality remains strong.
The level and composition of non-performing assets are affected by economic
conditions in the Corporation's local markets. Non-performing assets,
charge-offs, and provisions for possible credit losses tend to decline in a
strong economy and increase in a weak economy, potentially impacting the
Corporation's operating results. In addition to non-performing loans, management
carefully monitors other credits that are current in terms of principal and
interest payments but, in management's opinion, may deteriorate in quality if
economic conditions change.
Table 8
Non-Performing Assets and Past Due Loans
<TABLE>
<CAPTION>
June 30,
2000 1999
------------------------------
<S> <C> <C>
Non-Performing Loans:
Loans Past Due 90 Days or More & Still
Accruing $172,000 $264,000
Non-Accrual Loans 1,058,000 359,000
Renegotiated Loans 0 6,000
------------------------------
Total Non-Performing Loans 1,230,000 629,000
------------------------------
Other Non-Performing Assets:
Other Real Estate 89,000 172,000
REO in Redemption 0 182,000
Other Non-Performing Assets 24,000 4,000
------------------------------
Total Other Non-Performing Assets 113,000 358,000
------------------------------
Total Non-Performing Assets $1,343,000 $987,000
==============================
Non-Performing Loans as a % of Total Loans 0.61% 0.36%
Non-Performing Assets as a % of
Total Loans and Other Real Estate 0.67% 0.56%
Allowance for Loan Losses as a % of Non-Performing Loans 264.80% 464.23%
Allowance for Loan Losses, Other Real
Estate, and In-Substance Foreclosures
as a % of Non-Performing Assets 249.14% 331.71%
Accruing Loans Past Due 90 Days or More to Loans 0.09% 0.15%
Non-performing Assets as a % of Total Assets 0.44% 0.36%
</TABLE>
<PAGE> 18
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 six
months of 2000 and 1999. While these sources of funds are expected to continue
to be available to provide funds in the future, the mix and availability of
funds will depend upon future economic conditions. The Corporation does not
foresee any difficulty in meeting its funding requirements.
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 June 30, 2000 federal funds sold represented
4.1% of total assets. 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 is
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 2000 due to a increase in deposits and borrowings.
Comparatively, in the first six months of 1999, cash flows from financing
activities decreased because of a decrease in time deposit balances. Cash flows
from investing activities were $9,668,000 during the first six months of 2000
and an inflow of $1,440,000 in the same period of 1999. The primary reason for
the increase in investing activities in 2000 was growth of loan balances. In
1999 there was an inflow because investment maturities exceeded new investment
purchases and growth of loan balances.
CAPITAL MANAGEMENT
Total shareholders' equity rose 6.8% to $32,918,000 at June 30, 2000 compared
with $30,815,000 at June 30, 1999. The Company's equity to asset ratio was 10.8%
at June 30, 2000 and 11.3% at June 30, 1999. The increase in the amount of
capital was obtained through retained earnings and the proceeds from the
issuance of new shares. In the first half of 2000, the Corporation increased its
cash dividends per share by 10.5% to $.42 per share compared with $.38 in the
first half of 1999. These per share amounts have been adjusted for the stock
dividend in 2000.
As indicated on the balance sheet on page 4, at June 30, 2000 the Company had an
unrealized loss on securities available for sale (AFS) of $1,277,000 compared to
an unrealized loss at June 30, 1999 of $689,000 reflected as accumulated other
comprehensive losses. The increase in unrealized loss is attributable to market
interest rates and the interest rate structures on those securities held in the
AFS portfolio.
<PAGE> 19
Regulatory Capital Requirements
Bank holding companies and their bank subsidiaries are required by banking
industry regulators to meet certain levels of capital adequacy. These are
expressed in the form of certain ratios. Capital is separated into two levels,
Tier I capital (essentially total common stockholders' equity less goodwill) and
Tier II capital (essentially the reserve for loan losses limited to 1.25% of
gross risk-weighted assets). These ratios are based on the degree of credit risk
in the Corporation's assets. All assets and off-balance sheet items such as
out-standing loan commitments are assigned risk factors to create an overall
risk weighted asset total. Capital levels are then measured as a percentage of
total risk weighted assets. The regulatory minimum for Tier I capital to risk
weighted assets is 4% and the minimum for Total capital (Tier I plus Tier II) to
risk weighted assets is 8%. The Tier I leverage ratio measures Tier I capital to
average assets and must be a minimum of 4%. As reflected in Table 8, at June 30,
1999 and 2000, the Corporation was well in excess of the minimum capital and
leverage requirements necessary to be considered a "well capitalized" banking
company.
The FDIC has adopted a risk-based insurance premium system based in part on a
corporation's capital adequacy. Under this system a depository institution is
classified as well capitalized, adequately capitalized, or undercapitalized
according to its regulatory capital levels.
Subsequently, a financial institution's premium levels are based on these
classifications and its regulatory supervisory rating (the higher the
classification the lower the premium). It is the Corporation's goal to maintain
capital levels sufficient to receive a designation of "well capitalized".
Table 9
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Capital Ratios Regulatory
Minimum For
"Well June 30, December 31, June 30,
Capitalization" 2000 1999 1999
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Risk Based Capital:
Total Capital 10% 15.10% 14.55% 14.84%
Tier 1 6% 13.85% 13.30% 13.59%
Tier 1 Leverage 5% 12.66% 12.03% 10.81%
</TABLE>
INTEREST RATE SENSITIVITY MANAGEMENT
Interest rate sensitivity management seeks to maximize net interest income as a
result of changing interest rates, within prudent ranges of risk. The
Corporation attempts to accomplish this objective by structuring the balance
sheet so that re-pricing opportunities exist for both assets and liabilities in
roughly equivalent amounts at approximately the same time intervals. Imbalances
in these re-pricing opportunities at any point in time constitute a bank's
interest rate sensitivity. The Corporation currently does not utilize
derivatives in managing interest rate risk.
An indicator of the interest rate sensitivity structure of a financial
institution's balance sheet is the difference between rate sensitive assets and
rate sensitive liabilities, and is referred to as "GAP".
Table 10 sets forth the distribution of re-pricing of the Corporation's earning
assets and interest bearing liabilities as of June 30, 2000, the interest rate
sensitivity GAP, as defined above, the cumulative interest rate sensitivity GAP,
the interest rate sensitivity GAP ratio (i.e. interest rate sensitive assets
divided by interest rate sensitive liabilities) and the cumulative sensitivity
GAP ratio. The table also sets forth the time periods in which earning assets
and liabilities will mature or may re-price in accordance with their contractual
terms.
<PAGE> 20
<TABLE>
<CAPTION>
Table 10 GAP ANALYSIS JUNE 30, 2000
(000's Omitted) Within Three One to After
Three Months- Five Five
Months One Year Years Years Total
<S> <C> <C> <C> <C> <C>
Earning Assets:
Interest Bearing Bank Deposits $0 $0 $0 $0 0
Federal Funds Sold 12,600 0 0 0 12,600
Investment Securities 3,774 557 31,951 29,572 65,854
Loans 72,881 6,616 80,295 41,482 201,274
Loans Held for Sale 204 0 0 0 204
------------------------------------------------------------
Total Earning Assets $89,459 $7,173 $112,246 $71,054 $279,932
============================================================
Interest Bearing Liabilities:
Interest Bearing Demand Deposits $40,280 $0 $0 $0 $40,280
Savings Deposits 23,685 0 0 46,628 70,313
Time Deposits Less than $100,000 13,414 36,508 23,845 64 73,831
Time Deposits Greater than $100,000 16,937 13,273 3,162 0 33,372
Federal Funds Purchased 13,300 0 0 0 13,300
Other Borrowings 1,500 0 40 1,124 2,664
------------------------------------------------------------
Total Interest Bearing Liabilities $109,116 $49,781 $27,047 $47,816 $233,760
============================================================
Interest Rate Sensitivity GAP ($19,657) ($42,608) $85,199 $23,238 $46,172
Cumulative Interest Rate
Sensitivity GAP ($19,657) ($62,265) $22,934 $46,172
Interest Rate Sensitivity GAP -0.82 -0.14 4.15 1.49
Cumulative Interest Rate
Sensitivity GAP Ratio -0.82 -0.61 1.12 1.20
</TABLE>
As indicated in Table 10, the short-term (one year and less) cumulative interest
rate sensitivity gap is negative. Accordingly, if market interest rates
increase, this negative gap position would have a short- term negative impact on
interest margin. However, gap analysis is limited and may not provide an
accurate indication of the impact of general interest rate movements on the net
interest margin since the re-pricing of various categories of assets and
liabilities is subject to the Corporation's needs, competitive pressures, and
the needs of the Corporation's customers. In addition, various assets and
liabilities indicated as re-pricing within the same period may in fact re-price
at different times within such period and at different rate indices.
Additionally, simulation modeling, which measures the impact of upward and
downward movements of interest rates on interest margin and the market value of
equity, indicates that an upward movement of interest rates would not
significantly reduce net interest income.
Forward Looking Statement
This discussion and analysis of financial condition and results of operations,
and other sections of the Financial Statements, contain forward looking
statements that are based on management's beliefs, assumptions, current
expectations, estimates and projections about the financial services industry,
the economy, and about the Corporation itself. Words such as "anticipates,"
"believes," "estimates," "expects," "forecasts," "intends," "is likely,"
"plans," "projects," variations of such words and similar expressions are
intended to identify such forward looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions ("Future Factors") which are difficult to predict with regard to
timing, extent, likelihood and degree of occurrence. Therefore, actual results
and outcomes may materially differ from what may be expressed or forecast in
such forward looking statements. The Corporation undertakes no obligation to
update, amend or clarify forward looking statements as a result of new
information, future events, or otherwise.
Future Factors that could cause a difference between an ultimate actual outcome
and a preceding forward looking statement include, but are not limited to,
changes in interest rate and interest rate relationships, demands for products
and services, the degree of competition by traditional and non-traditional
competitors, changes in banking laws or regulations, changes in tax laws, change
in prices, the impact of technological advances, government and regulatory
policy changes, the outcome of pending and future litigation and contingencies,
trends in customer's behaviors as well as their ability to repay loans, and the
local economy.
<PAGE> 21
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 June 30, 2000.
<PAGE> 22
FENTURA BANCORP, INC.
2000 Quarterly Report on Form 10Q
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> 23
<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 Agreements between the registrant and
Donald L. Grill and Richard A. Bagnall dated March 20, 1997 *******
27.0 Financial Data Schedule
</TABLE>
* 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
<PAGE> 24
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 August 10, 2000 By /s/ Donald L. Grill
--------------- --------------------
Donald L. Grill
Director
President & CEO
Date August 10, 2000 By /s/ Ronald L. Justice
--------------- ----------------------
Ronald L. Justice
Vice President (Authorized Signer)
Chief Financial Officer
Cashier
<PAGE> 25
Exhibit Index
Exhibit No. Description
27 Financial Data Schedule
