-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O9h6w2VMtao9+OaYOefcU6JH90rwIaSk/JOP4dH5m9UHFkkykG+Ljd9D46iY38X0 ab3ONOAnfxomUUeFC6IyiA== 0000950124-97-004197.txt : 19970813 0000950124-97-004197.hdr.sgml : 19970813 ACCESSION NUMBER: 0000950124-97-004197 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FENTURA BANCORP INC CENTRAL INDEX KEY: 0000919865 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 382806518 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-23550 FILM NUMBER: 97656919 BUSINESS ADDRESS: STREET 1: ONE FENTON SQUARE STREET 2: P O BOX725 CITY: FENTON STATE: MI ZIP: 48430-0725 BUSINESS PHONE: 8106292263 MAIL ADDRESS: STREET 1: ONE FENTON SQ P O BOX 725 CITY: FENTON STATE: MI ZIP: 48430-0725 10QSB 1 FORM 10QSB 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 June 30, 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: August 7, 1997 -------------- Class - Common Stock ($5 par value) Shares Outstanding - 685,455 Transitional Small Business Disclosure Format (Check one): Yes ; No X ---- ----- 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 14 3 PART I - FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS FENTURA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) - ------------------------------------------------------------------------ JUN 30, DEC 31, JUN 30, (000's omitted Except Per Share Data) 1997 1996 1996 - ------------------------------------------------------------------------ ASSETS Cash and due from banks $ 9,790 11,921 11,122 Federal funds sold 8,150 8,450 6,000 ---------------------------- Total Cash & Cash Equivalents 17,940 20,371 17,122 Interest bearing deposits with banks 95 95 95 Investment securities-held to maturity, at cost (market value of $6,800, and $8,060 at June 30, 1997 and 1996, respectively) 6,772 6,530 8,103 Investment securities-avail for sale, at market 48,773 44,355 39,194 ---------------------------- Total investment securities 55,545 50,885 47,297 Loans: Commercial 78,341 78,699 74,267 Tax exempt development loans 670 751 1,041 Real estate loans - mortgage 14,491 15,924 15,164 Real estate loans - construction 19,563 15,467 19,286 Consumer loans 67,384 64,388 60,298 ---------------------------- Total loans 180,449 175,229 170,056 Less: Reserve for loan losses (2,930) (2,836) (2,810) ---------------------------- Net loans 177,519 172,393 167,246 Loans held for sale 1,119 1,007 881 Bank premises and equipment 4,375 4,794 4,706 Accrued interest receivable 1,810 1,835 1,816 Other assets 3,328 3,001 2,997 ---------------------------- Total assets $261,731 254,381 242,160 ============================ 4 LIABILITIES Deposits: Non-interest bearing deposits $ 27,172 28,206 27,530 Interest bearing deposits 203,674 195,843 186,587 ---------------------------- Total deposits 230,846 224,049 214,117 Federal Funds Purchased 0 0 0 Other borrowings 3,025 2,369 2,695 Accrued taxes, interest and other liabilities 2,309 3,854 2,849 ---------------------------- Total liabilities 236,180 230,272 219,661 ---------------------------- STOCKHOLDERS' EQUITY Common stock - $5 par value 685,455 shares issued (677,147 in Dec., 3,427 3,386 3,337 1996 and 667,514 in June, 1996) Surplus 16,595 16,266 15,925 Retained Earnings 5,690 4,632 3,816 Unrealized loss on sec avail for sale (161) (175) (579) ---------------------------- Total stockholder's equity 25,551 24,109 22,499 ---------------------------- Total liabilities and stockholder's equity $261,731 254,381 242,160 ============================ See notes to consolidated financial statements. 5 FENTURA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, - ---------------------------------------------------------------------- (000's omitted, Except Per Share Data) 1997 1996 1997 1996 - ---------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $ 4,464 4,282 $ 8,897 8,512 Interest and dividends on investment securities: Taxable 715 561 1,385 1,087 Tax-exempt 87 121 175 254 Int on deposits with banks 3 4 5 8 Interest on federal funds sold 82 81 173 186 --------------- ---------------- Total interest income 5,351 5,049 10,635 10,047 INTEREST EXPENSE Deposits 2,266 2,049 4,474 4,113 Short-term borrowings 44 37 87 92 --------------- ---------------- Total interest expense 2,310 2,086 4,561 4,205 NET INTEREST INCOME 3,041 2,963 6,074 5,842 Provision for loan losses 156 150 312 330 --------------- ---------------- Net interest income after provision for loan losses 2,885 2,813 5,762 5,512 NON-INTEREST INCOME Service chrgs on dep accts 396 327 758 638 Fiduciary income 114 81 220 153 Other operating income 356 475 695 906 --------------- ---------------- Total non-interest income 866 883 1,673 1,697 NON-INTEREST EXPENSE Salaries and benefits 1,226 1,124 2,515 2,217 Occupancy of bank premises 160 157 337 308 Equipment expense 354 330 693 632 Other operating expenses 792 920 1,595 1,702 Investment gains (losses) 0 2 0 67 --------------- ---------------- Total non-interest expense 2,532 2,533 5,140 4,926 NET INCOME BEFORE TAXES 1,219 1,163 2,295 2,283 Applicable income taxes 378 329 719 668 --------------- ---------------- NET INCOME $ 841 834 $ 1,576 1,615 =============== ================ Per share: (685,455 shares) Net income .................. $ 1.23 1.22 $ 2.30 2.35 Dividends ................... $ 0.38 0.35 $ 0.76 0.71 See notes to consolidated financial statements. 6 FENTURA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, - ------------------------------------------------------------------------ (000's omitted, Except Per Share Data) 1997 1996 - ------------------------------------------------------------------------ OPERATING ACTIVITIES: Net income $ 1,576 $ 1,614 Adjustments to reconcile net inc to cash Provided by Operating Activities: Depreciation and amortization 492 431 Provision for loan losses 312 330 Amortization (accretion) on securities 57 76 Loans originated for sale (10,415) (10,965) Loans sold 10,303 11,009 Gain on investment securities 0 67 Decrease (increase) in interest receivable 25 (139) Decrease (increase) in other assets (332) 561 Increase (decrease) in accrued taxes, interest, and other liabilities (1,545) 286 --------------------- Total Adjustments (1,103) 1,656 --------------------- Net Cash Provided By (Used In) Operating Activities 473 3,270 --------------------- Cash Flows From Investing Activities: Net decrease in deposits with other banks 0 95 Proceeds from maturities of inv activities - HTM 550 2,230 Proceeds from maturities of inv activities - AFS 4,537 9,935 Purchases of investment securities - HTM (797) (995) Purchases of investment securities - AFS (8,988) (13,575) Net (increase) in customer loans (5,438) (2,658) Capital expenditures (73) (1,250) --------------------- Net Cash Used in Investing Activities (10,209) (6,218) Cash Flows From Financing Activities: Net increase (decrease) in DDA/SAV deposits 1,907 (3,187) Net increase (decrease) in Time deposits 4,890 5,819 Net increase (decr) in borrowing's 656 64 Proceeds from stock issuance 370 17 Cash dividends (518) (488) --------------------- Net Cash Provided By (Used In) Financing Activities 7,305 2,225 NET DECREASE IN CASH AND CASH EQUIVALENTS ($2,431) ($723) CASH AND CASH EQUIVALENTS - BEGINNING $ 20,371 $ 17,845 CASH AND CASH EQUIVALENTS - ENDING $ 17,940 $ 17,122 ===================== CASH PAID FOR: INTEREST $ 4,471 $ 4,176 INCOME TAXES $ 631 $ 800 See notes to consolidated financial statements. 7 FENTURA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED) SIX MONTHS SIX MONTHS ENDED ENDED - -------------------------------------------------------------------- June 30, June 30, (000's omitted) 1997 1996 - -------------------------------------------------------------------- COMMON STOCK Balance, beginning of period $ 3,386 $ 3,335 Issuance of shares under director stock purchase plan and dividend reinvestment prog 41 2 Stock dividend 0 0 --------- ---------- Balance, end of period 3,427 3,337 SURPLUS Balance, beginning of period 16,266 15,910 Issuance of shares under director stock purchase plan and dividend reinvestment prog 329 15 Stock dividend 0 0 --------- ---------- Balance, end of period 16,595 15,925 RETAINED EARNINGS Balance, beginning of period 4,632 2,690 Net income 1,576 1,614 Cash dividends declared (518) (488) --------- ---------- Balance, end of period 5,690 3,816 UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE Balance, beginning of period (175) (55) Change in unrealized gain (loss) on securities, net of tax $83 14 (524) --------- ---------- Balance, end of period (161) (579) --------- ---------- TOTAL SHAREHOLDERS' EQUITY $ 25,551 $ 22,499 ========= ========== See notes to consolidated financial statements. 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 six months ended June 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. 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 six months ended June 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. SIX MONTHS, 1997 VERSUS SIX 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 six months ended June 30, 1997 was $10,635,000 compared to $10,047,000 for the same period in 1996. This represents an increase of 5.9%. 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 six months ended June 30, 1997 was $4,561,000 compared to $4,205,000 for the same period in 1996. This represents an increase of 8.5%. 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 June 30, 1997, the ALL was $2,930,000, or 1.62% of total loans. This compares with $2,810,000, or 1.65%, at June 30, 1996. The provision for loan losses was $312,000 for the first six months of 1997 and $330,000 for the same period in 1996. The primary reason for decreasing the provision was the maintenance of an adequate allowance. NON-INTEREST INCOME Non-interest income was $1,673,000 for the first half of 1997 and $1,697,000 in the same period of 1996. This figure represents an decrease of 1.4% 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 $758,000 in the first half of 1997 and $638,000 in the same period of 1996. This represents an increase of 18.8% The increase occurred from the deposit growth the company experienced in its existing and new markets from June 30, 1996 to June 30, 1997. Gain on the sale of mortgage loans originated by the bank and sold in the secondary market were $135,000 in the first six months of 1997 and $194,000 in the same period in 1996. This 30.4% 10 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 six months of 1997 compared to $140,000 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. In 1997 the Corporation had and sold fewer other real estate properties. Fiduciary income increased $67,000 in the first six months of 1997 compared to the same time period in the prior year. This 43.8% 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, mortgage servicing rights income, and other miscellaneous income items, was $363,000 in the first six months of 1997 compared to $376,000 in the same period of 1996. This decrease of 3.5% 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 SIX Months Ended Analysis of Non-Interest Income June 30, - --------------------------------------------------------- (000's omitted) 1997 1996 - --------------------------------------------------------- Service Charges on Deposit Accounts $ 758 $ 638 Gain on Sale of Mortgages 135 194 Gain on Sale of Real Estate Owned 1 140 Mortgage Servicing Fees 196 196 Fiduciary Income 220 153 Other Operating Income 363 376 -------- -------- Total Non-Interest Income $ 1,673 $ 1,697 ======== ======== Non-Interest Expense Total non-interest expense was $5,140,000 in the first half of 1997 compared with $4,926,000 in the same period of 1996. This is an increase of 4.3%. Salary and benefit costs, Fentura's largest non-interest expense category, were $2,515,000 in the first six months of 1997, compared with $2,217,000 for the first six months of 1996. 1997 salary costs represent an increase of 13.4% 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 six months of 1997 equipment expenses were $693,000 compared to $632,000 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 $337,000 in the first half of 1997 compared to $308,000 in the same period of 1996. This represents an increase of 9.4%. 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 $199,000 in the first half of 1997 compared to $186,000 for the same period in 1996, an increase of 7.0%. The increase is primarily attributable to an increase in indirect consumer loan volume and accordingly, an increase in dealer reserve expense. 11 FDIC assessment expense was $13,000 in the first six 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. In the first half of 1997, the Company did not experience a 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 $1,088,000 in the first half of 1997 compared to $1,208,000 in the first half 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 Six Months Ended Analysis of Non-Interest Expense June 30, - -------------------------------------------------------- (000's omitted) 1997 1996 - -------------------------------------------------------- Salaries and Benefits $2,515 $2,217 Equipment 693 632 Net Occupancy 337 308 FDIC Assessment 13 1 Office Supplies 128 127 Loan & Collection Expense 199 186 Advertising 167 180 Security Losses 0 67 Other Operating Expense 1,088 1,208 ------ ------ Total Non-Interest Expense $5,140 $4,926 ====== ====== 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 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 June 30, 1997 federal funds sold represented 3.1% of total assets, compared to 2.5% at June 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. 12 As indicated in the statement of cash flows, cash flows from financing activities have increased due to growth in deposits. In the first six months of 1997 time deposits increased $4,890,000 and demand and savings deposits increased $1,907,000. Comparatively, in the first six months of 1996, cash flows from financing activities were growth in Time deposits of $5,819,000 and a decline of demand and savings deposits of $3,187,000. Cash flows from investing activities were ($10,209,000) during the first six months of 1997 and ($6,218,000) in the same period of 1996. The primary reason for the increase in investing activities was an increase in deposits creating funding for increases in the investment and loan portfolios. CAPITAL MANAGEMENT Total shareholders' equity rose 13.6% to $25,551,000 at June 30, 1997 compared with $22,499,000 at June 30, 1996. The Company's equity to asset ratio was 9.8% at June 30, 1997 and 9.3% at June 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 half of 1997, the Company increased its cash dividends by 7.0% to $.76 per share compared with $.71 in the first half of 1996. As indicated on the balance sheet on page 4, at June 30, 1997 the Company had an unrealized loss on securities available for sale (AFS) of $161,000 compared to an unrealized loss at June 30, 1996 of $579,000. This decrease in unrealized loss is attributable to market interest rates and the interest rate structures on those securities held in the Company's AFS portfolio. SECOND QUARTER, 1997 VERSUS SECOND 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 June 30, 1997 was $5,351,000 and compared to $5,049,000 for the same period in 1996. This represents an increase of 6.0%. 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 June 30, 1997 was $2,310,000 compared to $2,086,000 for the same period in 1996. This represents an increase of 10.7%. 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 June 30, 1997 and $150,000 for the same period in 1996. NON-INTEREST INCOME Non-interest income was $866,000 in the second quarter of 1997 and $883,000 in the same period of 1996. This figure represents an decrease of 1.9% 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 $396,000 in the second quarter of 1997 and $327,000 in the same period of 1996. This represents an increase of 21.1%. The increase occurred from the deposit growth the company experienced in its existing and new markets throughout the last year. 13 During the second quarter of 1997 there were no gains on the sale of other real estate compared to $140,000 for the same period in 1996. This increase occurred because the Corporation began 1996 with several pieces of other real estate which were sold in the second quarter. In the second quarter of 1997 the Corporation had no other real estate properties. Fiduciary income was $114,000 in the second quarter of 1997 compared to $82 in the same period of 1996, an increase of $32,000 or 39.0%. 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 June 30, - ----------------------------------------------------------- (000's omitted) 1997 1996 - ----------------------------------------------------------- Service Charges on Deposit Accounts $ 396 $ 327 Gain on Sale of Mortgages 72 70 Gain on Sale of Real Estate Owned 0 140 Mortgage Servicing Fees 98 98 Fiduciary Income 114 82 Other Operating Income 186 166 --------- --------- Total Non-Interest Income $ 866 $ 883 ========= ========= Non-Interest Expense Total non-interest expense was $2,532,000 in the second quarter of 1997 compared with $2,533,000 in the same period of 1996. Salary and benefit costs, Fentura's largest non-interest expense category, were $1,226,000 in the quarter ended June 30, 1997, compared with $1,124,000 for the same period in 1996. 1997 salary costs represent an increase of 9.1% 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 second quarter of 1997 equipment expenses were $354,000 compared to $330,000 for the same period in 1996, an increase of 7.3%. 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 second quarter of 1997 compared to $1,000 in the same period of 1996. The increase is attributable to the FDIC's reinstatement of required reserves Advertising expenses were $67,000 in the quarter ended June 30, 1997 compared to $96,000 in the same quarter of 1996. This is a decrease of 30.2%. Expenses associated with certain promotional and media related transactions were reduced in 1997. Other operating expenses were $556,000 in the second quarter of 1997 compared to $659,000 in the same period 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. 14 TABLE 4 Three Months Ended Analysis of Non-Interest Expense June 30, - ----------------------------------------------------- (000's omitted) 1997 1996 - ----------------------------------------------------- Salaries and Benefits $1,226 $1,124 Equipment 354 330 Net Occupancy 160 157 FDIC Assessment 7 1 Office Supplies 65 69 Loan & Collection Expense 97 95 Advertising 67 96 Security Losses 0 2 Other Operating Expense 556 659 --------- --------- Total Non-Interest Expense $2,532 $2,533 ========= ========= 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, 1997. 15 FENTURA BANCORP, INC. 1997 Quarterly Report on Form 10Q-SB EXHIBIT INDEX Exhibit No. Exhibit Location - ------- ----------------------------------------------------------- ---------- 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 ***** 16 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 17 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 8, 1997 By /s/ Donald L. Grill -------------- -------------------- Donald L. Grill Director President & CEO Date August 8, 1997 By /s/ Ronald L. Justice -------------- ---------------------- Ronald L. Justice Vice President (Authorized Signer) Chief Financial Officer Cashier 18 INDEX TO EXHIBITS EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule EX-27 2 EXHIBIT 27
9 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 9,790 95 8,150 0 48,773 6,772 6,800 180,449 2,930 261,731 230,846 1,500 2,649 1,185 0 0 3,427 22,124 261,731 8,897 1,565 173 10,635 4,474 4,561 6,074 312 0 5,140 2,295 2,295 0 0 1,576 2.30 2.30 5.18 1,665 192 0 0 2,836 256 38 2,930 2,930 0 0
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