-----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, FlMKfYQNzx+lV9L5kESmo+QX+tk02QXBI0IyJbVAwcVNPR7i/5ij6E7+GgU392W4 /qLDB+Vl6LoL7+JbLcivaw== /in/edgar/work/0000950124-00-006790/0000950124-00-006790.txt : 20001114 0000950124-00-006790.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950124-00-006790 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FENTURA BANCORP INC CENTRAL INDEX KEY: 0000919865 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 382806518 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23550 FILM NUMBER: 760997 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 10-Q 1 k58467e10-q.txt FORM 10-Q 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 SEPTEMBER 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 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: NOVEMBER 08, 2000 CLASS - COMMON STOCK SHARES OUTSTANDING - 1,717,549 2 FENTURA BANCORP, INC. INDEX TO FORM 10-Q 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 21 3 PART I - FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
FENTURA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) - --------------------------------------------------------------------------------------------------- SEPT 30, DEC 31, (000's omitted Except Per Share Data) 2000 1999 - --------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 13,421 12,714 Federal funds sold 12,150 900 ------------------------------- Total Cash & Cash Equivalents 25,571 13,614 Interest bearing deposits with banks 0 0 Investment securities-held to maturity, at cost (market value of $13,069, at Sept. 2000 and $11,695 at Dec. 1999) 13,083 13,922 Investment securities-avail for sale, at market 52,912 53,964 ------------------------------- Total investment securities 65,995 67,886 Loans: Commercial 91,637 92,359 Tax exempt development loans 636 537 Real estate loans - mortgage 10,325 10,673 Real estate loans - construction 21,357 12,481 Consumer loans 68,517 64,280 ------------------------------- Total loans 192,472 180,330 Less: Reserve for loan losses (3,308) (2,961) ------------------------------- Net loans 189,164 177,369 Loans held for sale 10,707 10,916 Bank premises and equipment 5,657 5,200 Accrued interest receivable 2,128 1,687 Other assets 5,720 6,949 ------------------------------- Total assets $ 304,942 283,621 ===============================
4 LIABILITIES Deposits: Non-interest bearing deposits $ 41,088 31,524 Interest bearing deposits 213,973 215,527 ------------------------------- Total deposits 255,061 247,051 Federal funds purchased 11,150 0 Other Borrowings 2,322 2,529 Accrued Taxes, Interest and other liabilities 2,269 2,176 ------------------------------- Total liabilities 270,802 251,756 ------------------------------- STOCKHOLDERS' EQUITY Common stock - $2.5 par value 1,717,549 shares issued (1,422,045 in 4,293 3,555 December 1999) Surplus 25,914 18,317 Retained Earnings 4,741 11,078 Accumulated other comprehensive income (loss) (808) (1,085) ------------------------------- Total stockholder's equity 34,140 31,865 ------------------------------- Total liabilities and stockholder's equity $ 304,942 283,621 ===============================
See notes to consolidated financial statements. 5 Fentura Bancorp, Inc. and Subsidiaries Consolidated Statements of Income (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $ 4,813 4,186 13,994 12,528 Interest and dividends on investment securities: Taxable 813 847 2,482 2,335 Tax-exempt 160 144 496 413 Interest on deposits with banks 0 0 0 0 Interest on federal funds sold 181 99 453 456 ------------------------------------------------------------- Total interest income 5,967 5,276 17,425 15,732 INTEREST EXPENSE Deposits 2,342 1,933 6,836 5,760 Short-term borrowings 217 34 531 98 ------------------------------------------------------------- Total interest expense 2,559 1,967 7,367 5,858 NET INTEREST INCOME 3,408 3,309 10,058 9,874 Provision for loan losses 153 165 523 490 ------------------------------------------------------------- Net interest income after Provision for loan losses 3,255 3,144 9,535 9,384 NON-INTEREST INCOME Service charges on deposit accounts 484 495 1,437 1,470 Fiduciary income 206 154 527 453 Other operating income 404 436 1,134 1,162 Investment gains 0 (2) 0 24 ------------------------------------------------------------- Total non-interest income 1,094 1,083 3,098 3,109 NON-INTEREST EXPENSE Salaries and benefits 1,472 1,363 4,413 4,112 Occupancy of bank premises 199 203 597 586 Equipment expense 377 372 1,158 1,055 Other operating expenses 844 826 2,682 2,576 ------------------------------------------------------------- Total non-interest expense 2,892 2,764 8,850 8,329 NET INCOME BEFORE TAXES 1,457 1,463 3,783 4,164 Applicable income taxes 437 447 1,060 1,282 ------------------------------------------------------------- NET INCOME $ 1,020 1,016 2,723 2,882 ============================================================= Per share: Net income - basic $ 0.59 0.60 1.59 1.70 Net income - diluted $ 0.59 0.60 1.58 1.70 Dividends $ 0.21 0.19 0.63 0.58 Average number of common shares outstanding 1,714,456 1,700,875 1,711,226 1,696,960
See notes to consolidated financial statements. 6 FENTURA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS NINE MONTHS ENDED ENDED - ------------------------------------------------------------------------------------------------------- SEPT 30, SEPT 30, (000's omitted) 2000 1999 - ------------------------------------------------------------------------------------------------------- COMMON STOCK Balance, beginning of period 3,555 3,521 Stock repurchase (1) 0 Issuance of shares under director stock purchase plan, stock purchase plan, and dividend reinvestment program 26 26 Impact of 20% stock dividend 713 0 ---------------- --------------- Balance, end of period 4,293 3,547 SURPLUS Balance, beginning of period 18,317 17,644 Issuance of shares under director stock purchase plan, stock purchase plan, and dividend reinvestment program 330 528 Impact of 20% stock dividend 7,267 0 ---------------- --------------- Balance, end of period 25,914 18,172 RETAINED EARNINGS Balance, beginning of period 11,078 8,664 Net income 2,723 2,882 Cash dividends declared (1,075) (976) Impact of 20% stock dividend (7,980) 0 Stock repurchase (5) 0 ---------------- --------------- Balance, end of period 4,741 10,570 UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE Balance, beginning of period (1,085) 193 Change in unrealized gain (loss) on securities, net of tax 277 (917) ---------------- --------------- Balance, end of period (808) (724) ---------------- --------------- TOTAL SHAREHOLDERS' EQUITY $ 34,140 $ 31,565 ================ ===============
See notes to consolidated financial statements. 7 FENTURA BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, - ---------------------------------------------------------------------------------------- (000'S omitted, Except Per Share Data) 2000 1999 - ---------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $2,723 $2,882 Adjustments to reconcile net income to cash Provided by Operating Activities: Depreciation and amortization 692 636 Provision for loan losses 523 490 Amortization (accretion) on securities (27) (24) Loans originated for sale (6,472) (6,694) Loans sold 6,681 6,663 Gain on investment securities 0 (26) Decrease (increase) in interest receivable (441) (207) Decrease (increase) in other assets 1,059 (1,448) Increase (decrease) in accrued taxes, interest, and other liabilities 93 (658) ------------------------ Total Adjustments 2,108 (1,268) ------------------------ Net Cash Provided By (Used In) Operating Activities 4,831 1,614 ------------------------ Cash Flows From Investing Activities: Net decrease in deposits with other banks 0 0 Proceeds from maturities of investment activities - HTM 3,503 355 Proceeds from maturities of investment activities - AFS 2,299 55,073 Proceeds from sales of investment activities - AFS 0 12,321 Purchases of investment securities - HTM (3,000) (3,100) Purchases of investment securities - AFS (500) (53,653) Net (increase) in customer loans (12,255) (11,289) Net capital expenditures (1,149) (1,438) ------------------------ Net Cash Used in Investing Activities (11,102) (1,731) Cash Flows From Financing Activities: Net increase (decrease) in DDA/SAV deposits 2,680 736 Net increase (decrease) in Time deposits 5,330 (602) Net increase (decrease) in borrowing's 10,943 1,448 Net proceeds from stock issuance and purchases 350 554 Cash dividends (1,075) (976) ------------------------ Net Cash Provided By (Used In) Financing Activities 18,228 1,160 NET INCREASE IN CASH AND CASH EQUIVALENTS $11,957 $1,043 CASH AND CASH EQUIVALENTS - BEGINNING $13,614 $18,158 CASH AND CASH EQUIVALENTS - ENDING $25,571 $19,201 ======================== CASH PAID FOR: INTEREST $6,598 $6,244 INCOME TAXES $1,102 $1,575
See notes to consolidated financial statements. 8 FENTURA BANCORP, INC. AND SUBSIDIARIES STATEMENT OF COMPREHENSIVE INCOME (LOSS)
NINE MONTHS ENDED (000's Omitted) SEPTEMBER 30, 2000 1999 ---------------------------- Net Income $2,723 $2,882 Other comprehensive income, net of tax: Unrealized holding gains arising during period $277 ($893) Less: reclassification adjustment for $0 gains included in net income $0 $24 ---------------------------- Total Other comprehensive income $277 ($917) ---------------------------- Comprehensive income $3,000 $1,965 ============================
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 nine months ended September 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 September 30, 1999 and September 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 consolidated financial statements. 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 nine months ended September 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
NINE MONTHS ENDED SEPTEMBER 30, $ in thousands except per share data and ratios 2000 1999 - --------------------------------------------------------------------------------------------- Summary of Consolidated Statements of Earnings: Interest Income $17,425 $15,732 Interest Expense 7,367 5,858 ---------------------------------- Net Interest Income 10,058 9,874 Provision for Possible Credit Losses 523 490 ---------------------------------- Net Interest Income after Provision 9,535 9,384 Total Other Operating Income 3,098 3,109 Total Other Operating Expense 8,850 8,329 ---------------------------------- Income Before Income Taxes 3,783 4,164 Provision for Income Taxes 1,060 1,282 ---------------------------------- Net Income $2,723 $2,882 ================================== Net Income Per Share - Basic $1.59 $1.70 Net Income Per Share - Diluted $1.58 $1.70 Summary of Consolidated Statements of Financial Condition: Assets $304,942 $277,514 Securities 65,995 65,621 Loans (including loans held for sale) 203,179 183,503 Deposits 255,061 241,239 Stockholders' Equity 34,140 31,565 Other Financial and Statistical Data: Tier 1 Capital to Risk Weighted Assets 14.46% 13.22% Total Capital to Risk Weighted Assets 15.71% 14.18% Tier 1 Capital to Average Assets 11.97% 11.04% Total Cash Dividends $1,075 $976 Book Value Per Share $19.88 $18.54 Cash Dividends Paid Per Share $0.63 $0.58 Period End Market Price Per Share $24.63 $38.88 Dividend Pay-out Ratio 39.48% 33.87% Return on Average Stockholders' Equity 10.97% 12.27% Return on Average Assets 1.22% 1.42% Net Interest Margin (FTE) 5.02% 5.36% Total Equity to Assets at Year End 11.20% 11.37% - ---------------------------------------------------------------------------------------------
10 Results of Operations Table 1 summarizes selected financial data for the nine months ended September 30, 2000 and 1999. As indicated earnings for the nine months ended September 30, 2000 were $2,723,000 compared to $2,882,000 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 nine months ended September 30, 2000 the Corporation's return on average assets was 1.22% compared to 1.42% for the same period in 1999. Total assets increased approximately $27,428,000 from September 30, 1999 to $304,942,000 at September 30, 2000. Stockholders' Equity increased approximately $2,575,000 from September 30, 1999 to $34,140,000 at September 30, 2000. The increase in equity will allow the Corporation to continue its growth strategy. Net income per share-basic was $1.59 in the first nine months of 2000 compared to $1.70 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 nine months ended September 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
THREE MONTHS ENDED SEPT. 30 NINE MONTHS ENDED SEPT. 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 - ------------------------------------------------------------------------------------------------------------------------- INTEREST BEARING DEPOSITS IN BANKS 0 0 0 0 0 0 TAXABLE SECURITIES (58) 24 (34) 3 144 147 TAX-EXEMPT SECURITIES 20 (4) 16 99 (16) 83 FEDERAL FUNDS SOLD 46 36 82 (106) 103 (3) TOTAL LOANS 581 43 624 1,687 (240) 1,447 LOANS HELD FOR SALE 3 0 3 15 4 19 ------------------------------------------------------------------------- TOTAL EARNING ASSETS 592 99 691 1,698 (5) 1,693 INTEREST BEARING DEMAND DEPOSITS (6) 22 16 14 5 19 SAVINGS DEPOSITS 1 79 80 51 312 363 TIME CD'S $100,000 AND OVER 137 84 221 345 187 532 OTHER TIME DEPOSITS 6 86 92 3 159 162 OTHER BORROWINGS 199 (16) 183 465 (32) 433 ------------------------------------------------------------------------- TOTAL INTEREST BEARING LIABILITIES 337 255 592 878 631 1,509 ------------------------------------------------------------------------- NET INTEREST INCOME $255 ($156) $99 $820 ($636) $184 =========================================================================
11 As indicated in Table 2, during the nine months ended September 30 2000, net interest income increased over the same period in 1999 principally due to loan growth and an increase in the yield on earning assets as market interest rates increased. During the three months ended September 30, 2000, net interest income increased over the same time period in 1999 because of loan growth and an increase in the yield on earning assets as market interest rates increased. Net interest income (displayed without consideration of full tax equivalency), average balance sheet amounts, and the corresponding yields for the three months ended September 30, 2000 and 1999 are shown in Table 3. Net interest income for the three months ended September 30, 2000 was $3,408,000 an increase of $99,000 over the same period in 1999. This represents an increase of 3.0%. The primary factors contributing to the net interest income increase is an increase in loans. 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. Interest expense also increased because of greater competition and increases in market interest rates. Net interest income (displayed without consideration of full tax equivalency), average balance sheet amounts, and the corresponding yields for the nine months ended September 30, 2000 and 1999 are shown in Table 4. Net interest income for the nine months ended September 30, 2000 was $10,058,000 an increase of $184,000 over the same period in 1999. This represents an increase of 1.9%. 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 nine months ended September 30, 2000, the Corporation's net interest margin (without consideration of full tax equivalency) was 4.86% and 4.88% compared with 5.20% and 5.24%, 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 $23,363,000 comparing the first nine months of 2000 to the same time period in 1999. Loans, the highest yielding component of earning assets, represented 68.4% on average earning assets in the nine months ended September 30, 2000 compared to 65.5% for the same time period in 1999. Average interest bearing liabilities increased 9.1% or $18,995,000 comparing the first nine months of 2000 compared to the same time period in 1999. Non-interest bearing deposits amounted to 12.6% of average earning assets in the first nine months of 2000 compared with 11.5% 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". 12
TABLE 3 AVERAGE BALANCES AND RATES THREE MONTHS ENDED SEPTEMBER 30 (DOLLARS IN THOUSANDS) 2000 1999 -------------------------------- -------------------------------- ASSETS AVG BAL INC/EXP YIELD AVG BAL INC/EXP YIELD ------------------------------------------------------------------- Interest bearing deposits in Banks $0 $0 0.00% $0 $0 0.00% Investment securities: U.S. Treasury and Government Agencies 50,410 797 6.29% 54,534 832 6.05% State and Political 14,026 160 4.54% 12,269 144 4.66% Other 1,077 16 5.91% 822 15 7.24% -------------------------------- -------------------------------- Total Investment Securities 65,513 973 5.91% 67,625 991 5.81% Fed Funds Sold 11,420 181 6.31% 7,755 99 5.06% Loans: Commercial 106,136 2,577 9.66% 90,714 2,184 9.55% Tax Free 492 7 5.66% 306 5 6.48% Real Estate-Mortgage 15,363 390 10.10% 13,301 321 9.57% Consumer 69,186 1,650 9.49% 62,316 1,490 9.49% -------------------------------- -------------------------------- Total loans 191,177 4,624 9.62% 166,637 4,000 9.52% Allowance for Loan Loss (3,283) (2,967) Net Loans 187,894 4,624 9.79% 163,670 4,000 9.70% -------------------------------- -------------------------------- Loans Held for Sale 10,645 189 7.06% 10,496 186 7.03% -------------------------------- -------------------------------- TOTAL EARNING ASSETS $278,755 $5,967 8.52% $252,513 $5,276 8.29% ------------------------------------------------------------------- Cash Due from Banks 11,589 9,848 All Other Assets 13,784 12,259 ----------- ----------- TOTAL ASSETS $300,845 $271,653 ----------- ----------- LIABILITIES & SHAREHOLDERS' EQUITY: Deposits: Non-Interest bearing - DDA $37,082 $30,418 Interest bearing - DDA 40,264 188 1.86% 41,625 172 1.64% Savings Deposits 66,689 574 3.42% 66,572 494 2.94% Time CD's $100,000 and Over 32,639 522 6.36% 22,310 301 5.35% Other Time CD's 74,405 1,058 5.66% 74,872 966 5.12% -------------------------------- -------------------------------- Total Deposits 251,079 2,342 3.71% 235,797 1,933 3.25% Other Borrowings 13,587 217 6.35% 1,959 34 6.89% -------------------------------- -------------------------------- INTEREST BEARING LIABILITIES $227,584 $2,559 4.47% $207,338 $1,967 3.76% ------------------------------------------------------------------- All Other Liabilities 2,433 2,240 Shareholders Equity 33,746 31,657 ----------- ----------- TOTAL LIABILITIES AND S/H EQUITY $300,845 $271,653 ----------- --------- ----------- ---------- Net Interest Rate Spread 4.04% 4.53% Impact of Non-Int. Bearing Funds on Margin .82% .67% Net Interest Income/Margin $3,408 4.86% $3,309 5.20% ===================== =====================
13
TABLE 4 AVERAGE BALANCES AND RATES NINE MONTHS ENDED SEPTEMBER 30, (DOLLARS IN THOUSANDS) 2000 1999 -------------------------------- --------------------------------- ASSETS AVG BAL INC/EXP YIELD AVG BAL INC/EXP YIELD Interest bearing deposits in Banks $0 $0 0.00% $0 $0 0.00% Investment securities: U.S. Treasury and Government Agencies 50,868 2,435 6.39% 50,604 2,289 6.05% State and Political 14,395 496 4.60% 11,625 413 4.75% Other 1,077 47 5.83% 1,284 46 4.79% -------------------------------- --------------------------------- Total Investment Securities 66,340 2,978 6.00% 63,513 2,748 5.78% Fed Funds Sold 9,796 453 6.18% 12,760 456 4.78% Loans: Commercial 104,227 7,469 9.57% 88,436 6,477 9.79% Tax Free 543 23 5.66% 296 13 5.87% Real Estate-Mortgage 15,159 1,131 9.97% 14,264 1,033 9.68% Consumer 68,227 4,799 9.40% 61,948 4,452 9.61% -------------------------------- --------------------------------- Total loans 188,156 13,422 9.53% 164,944 11,975 9.71% Allowance for Loan Loss (3,141) (2,897) Net Loans 185,015 13,422 9.69% 162,047 11,975 9.88% -------------------------------- --------------------------------- Loans Held for Sale 10,811 572 7.07% 10,523 553 7.03% -------------------------------- --------------------------------- TOTAL EARNING ASSETS $275,103 $17,425 8.46% $251,740 $15,732 8.36% -------------------------------------------------------------------- Cash Due from Banks 11,191 9,969 All Other Assets 13,288 11,422 ----------- ----------- TOTAL ASSETS $296,441 $270,234 ----------- ----------- LIABILITIES & SHAREHOLDERS' EQUITY: Deposits: Non-Interest bearing - DDA $34,711 $28,878 Interest bearing - DDA 41,007 558 1.82% 42,135 539 1.71% Savings Deposits 67,506 1,735 3.43% 65,109 1,372 2.82% Time CD's $100,000 and Over 32,696 1,486 6.07% 24,021 954 5.31% Other Time CD's 74,829 3,057 5.46% 74,760 2,895 5.18% -------------------------------- --------------------------------- Total Deposits 250,749 6,836 3.64% 234,903 5,760 3.28% Other Borrowings 10,878 531 6.52% 1,896 98 6.91% -------------------------------- --------------------------------- INTEREST BEARING LIABILITIES $226,916 $7,367 4.34% $207,921 $5,858 3.77% -------------------------------------------------------------------- All Other Liabilities 1,717 2,115 Shareholders Equity 33,097 31,320 ----------- ----------- TOTAL LIABILITIES and S/H EQUITY $296,441 $270,234 ----------- --------- ----------- ----------- Net Interest Rate Spread 4.12% 4.59% Impact of Non-Int. Bearing Funds on Margin 0.76% 0.66% Net Interest Income/Margin $10,058 4.88% $9,874 5.24% ===================== ======================
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 September 30, 2000, the ALL was $3,308,000, or 1.63% of total loans, including those loans held for sale. This compares with $3,043,000, or 1.66%, at September 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 $153,000 and $523,000 for the three and nine months, respectively, ended September 30, 2000 and $165,000 and $490,000 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
Three Months Ended Nine Months Ended (000's omitted) September 30, September 30, 2000 1999 2000 1999 ---------------------------------------------- Balance at Beginning of Period $3,257 $2,920 $2,961 $2,783 ---------------------------------------------- Charge-Offs: Domestic: Commercial, Financial and Agriculture (9) 0 (18) (72) Real Estate-Mortgage 0 0 0 (2) Installment Loans to Individuals (157) (58) (333) (229) Lease Financing 0 0 0 0 ---------------------------------------------- Total Charge-Offs (166) (58) (351) (303) ---------------------------------------------- Recoveries: Domestic: Commercial, Financial and Agriculture 35 2 106 12 Real Estate-Mortgage 0 0 0 0 Installment Loans to Individuals 29 14 69 61 Lease Financing 0 0 0 0 ---------------------------------------------- Total Recoveries 64 16 175 73 ---------------------------------------------- Net Charge-Offs (102) (42) (176) (230) ---------------------------------------------- Provision 153 165 523 490 ---------------------------------------------- Balance at End of Period $3,308 $3,043 $3,308 $3,043 ============================================== Ratio of Net Charge-Offs During the Period 0.05% 0.09% 0.09% 0.17% ==============================================
NON-INTEREST INCOME TABLE 6
Three Months Ended Nine Months Ended Analysis of Non-Interest Income September 30, September 30, - ------------------------------------------------------------------------------------------------- (000's omitted) 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------- Service Charges on Deposit Accounts $484 $495 $1,437 $1,470 Gain on Sale of Mortgages $60 $10 $125 $93 Mortgage Servicing Fees $62 $68 $190 $216 Fiduciary Income $206 $154 $527 $453 Other Operating Income $282 $358 $819 $853 Investment Gains $0 ($2) $0 $24 ------------------------------------------------ Total Non-Interest Income $1,094 $1,083 $3,098 $3,109 ================================================
15 Non-interest income increased in the three months ended September 30, 2000 as compared to the same period in 1999 due to increases in the gain on sale of mortgages and an increase in fiduciary income. For the nine months ended September 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. Overall non-interest income was $1,094,000 and $3,098,000 in the three and nine months, respectively, ended September 30, 2000 compared to $1,083,000 and $3,109,000 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 $484,000 in the three months ended September 30, 2000 and $1,437,000 in the nine months ended September 30, 2000 compared to $495,000 and $1,470,000, respectively, for the same periods of 1999. These represent decreases of 2.2% and 2.2%, 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 $60,000 in the quarter ended September 30, 2000 and $10,000 in the same period in 1999. These gains were $125,000 in the nine months ended September 30, 2000 and $93,000 in the same period of 1999. The increases for the three and nine months ending September 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. Mortgage servicing fees were $62,000 and $190,000 for the three and nine months ended September 30, 2000, respectively compared to $68,000 and $216,000 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 nine months of 2000 and the Corporation's retention of certain new mortgages as opposed to selling those loans and recognizing servicing fees. Fiduciary income increased $52,000 in the three months ended September 30, 2000 and increased $74,000 in the nine months ended September 30, 2000 comparing to the same time periods in the prior year. These 33.8% and 16.3%, respectively, increases in fees are attributable 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 $282,000 for the three months ended September 30, 2000 and $358,000 for the same period in 1999. This is a decrease of 21.2% compared to the same time period in 1999. For the nine months ended September 30, 2000 other income was $819,000 compared to $853,000 to the same period in 1999. This is an decrease of 4.0%. These decreases occurred primarily because of a decrease in ATM income. Gains on the sale of investments were $24,000 in the first nine months 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 nine months of 2000 there were no sales transactions of investment securities. 16 Non-Interest Expense TABLE 7
Three Months Ended Nine Months Ended Analysis of Non-Interest Expense September 30, September 30, - ------------------------------------------------------------------------------------------------- (000's omitted) 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------- Salaries and Benefits $1,472 $1,363 $4,413 $4,112 Equipment $377 $372 $1,158 $1,055 Net Occupancy $199 $203 $597 $586 Office Supplies $74 $62 $235 $195 Loan & Collection Expense $44 $100 $250 $263 Advertising $63 $48 $189 $208 Other Operating Expense $663 $616 $2,008 $1,910 ------------------------------------------------ Total Non-Interest Expense $2,892 $2,764 $8,850 $8,329 ================================================
Total non-interest expense was $2,892,000 in the three months ended September 30, 2000 compared with $2,764,000 in the same period of 1999. This is an increase of 4.6%. For the nine months ended September 30, 2000 non-interest expenses were $8,850,000 compared to $8,829,000 in the same time period of 1999, an increase of 6.3%. 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 $1,472,000 in the quarter ended September 30, 2000, compared with $1,363,000, or an increase of 8.0%, for the same time period in 1999. These costs were $4,413,000 in the nine months ended September 30, 2000, and $4,112,000, or an increase of 7.3%, 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 September 30, 2000 equipment expenses were $377,000 compared to $372,000 for the same period in 1999, an increase of 1.3%. For the nine months ended September 30, 2000 these expenses were $1,158,000 compared to $1,055,000 for the same time period in 1999, a increase of 9.8%. 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 decreased in the three months ended September 30, 2000 and increased in the nine months ended September 30, 2000 comparing to the same periods in 1999. These expenses were $199,000 and $597,000 in the three and nine months ended September 30, 2000, respectively, and $203,000 and $586,000 in the same periods, respectively, in 1999. This is a 2% decrease in the three months ended September 30, 2000 compared to the same period in 1999, and a 1.9% increase in the nine months ended September 30, 2000 compared to the same period in 1999. The increase in expense for the nine months ended September 30, 2000 is attributable to an increase in facility repairs and maintenance contracts expenses. As indicated in Table 7, during the three and nine months ended September 30, 2000 office supplies expense increased to $74,000 and $235,000, respectively, comparing to $62,000 and $195,000 in the same periods, respectively, 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 $56,000 to $44,000 in the three months ended September 30, 2000 a decrease of 56% comparing to $100,000 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 and a decrease in fees paid by the Corporation for the origination of home equity loans. For the nine months ended September 30, 2000, loan and collection expenses were $250,000 compared to $263,000 for the same time period in 1999. This $13,000 decrease, or 4.9%, is attributable to an decrease in dealer service fees paid in connection with indirect auto lending and a decrease in fees paid by the Corporation for the origination of home equity loans in the first nine 17 months of 2000. Advertising expenses were $63,000 and $189,000 for the three and nine months ended September 30, 2000, respectively, compared to $48,000 and $208,000 for the same periods in 1999, respectively. This is an increase of 31.3% for the three months ended September 30, 2000 comparing to the same period in 1999, and a decrease of 9.1% for the nine months ended September 30, 2000 comparing to the same period in 1999. The decrease in the nine months ended September 30, 2000 is 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 $2,008,000 in the nine months ended September 30, 2000 compared to $1,910,000 in the same time period in 1999, an increase of 5.1%. 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 September 30, 2000 and 1999. Non-performing assets increased at September 30, 2000 compared to September 30, 1999. This increase is attributable primarily 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
September 30, 2000 1999 ------------------------------ Non-Performing Loans: Loans Past Due 90 Days or More & Still Accruing $205,000 $170,000 Non-Accrual Loans 975,000 227,000 Renegotiated Loans 0 6,000 ------------------------------ Total Non-Performing Loans 1,180,000 403,000 ------------------------------ Other Non-Performing Assets: Other Real Estate 89,000 172,000 REO in Redemption 0 275,000 Other Non-Performing Assets 237,000 61,000 ------------------------------ Total Other Non-Performing Assets 326,000 508,000 ------------------------------ Total Non-Performing Assets $1,506,000 $911,000 ============================== Non-Performing Loans as a % of Total Loans 0.61% 0.22% Non-Performing Assets as a % of Total Loans and Other Real Estate 0.78% 0.50% Allowance for Loan Losses as a % of Non-Performing Loans 280.34% 755.09%
18 Allowance for Loan Losses and Other Real Estate as a % of Non-Performing Assets 225.56% 383.10% Accruing Loans Past Due 90 Days or More to Total Loans 0.11% 0.09% Non-Performing Assets as a % of Total Assets 0.49% 0.32%
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 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 September 30, 2000 federal funds sold represented 4.0% 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 an increase in deposits and borrowings. Comparatively, in the first nine months of 1999, cash flows from financing activities increased only modestly because of an increase in borrowings. Cash flows from investing activities were $11,029,000 during the first nine months of 2000 and an inflow of $1,731,000 in the same period of 1999. The primary reason for the increase in investing activities in 2000 is the 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 8.2% to $34,140,000 at September 30, 2000 compared with $31,565,000 at September 30, 1999. The Company's equity to asset ratio was 11.2% at September 30, 2000 and 11.4% at September 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 nine months of 2000, the Corporation increased its cash dividends per share by 8.6% to $.63 per share 19 compared with $.58 in the same time period 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 September 30, 2000 the Company had an unrealized loss on securities available for sale (AFS) of $808,000 compared to an unrealized loss at September 30, 1999 of $725,000 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. 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 September 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 - ------------------------------------------------------------------------------------------ Regulatory Minimum For "Well September 30, December 31, September 30, Capital Ratios Capitalization" 2000 1999 1999 - ------------------------------------------------------------------------------------------ Risk Based Capital: Total Capital 10% 15.71% 14.55% 14.18% Tier 1 6% 14.46% 13.30% 13.22% Tier 1 Leverage 5% 11.97% 12.03% 11.04%
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". 20 Table 10 sets forth the distribution of re-pricing of the Corporation's earning assets and interest bearing liabilities as of September 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.
Table 10 GAP ANALYSIS SEPTEMBER 30, (000's Omitted) Within Three One to After Three Months- Five Five Months One Year Years Years Total Earning Assets: Interest Bearing Bank Deposits $0 $0 $0 $0 0 Federal Funds Sold 12,550 0 0 0 12,550 Investment Securities 1,489 4,730 31,940 27,836 65,995 Loans 66,819 9,765 81,979 33,909 192,472 Loans Held for Sale 209 0 0 10,498 10,707 ------------------------------------------------------------ Total Earning Assets $81,067 $14,495 $113,919 $72,243 $281,724 ============================================================ Interest Bearing Liabilities: Interest Bearing Demand Deposits $38,975 $0 $0 $0 $38,975 Savings Deposits 21,178 0 0 44,409 65,587 Time Deposits Less than $100,000 20,831 29,345 25,616 68 75,860 Time Deposits Greater than $100,000 16,085 13,670 3,796 0 33,551 Federal Funds Purchased 11,150 Other Borrowings 1,158 0 40 1,124 2,322 ------------------------------------------------------------ Total Interest Bearing Liabilities $109,377 $43,015 $29,452 $45,601 $216,295 ============================================================ Interest Rate Sensitivity GAP ($28,310) ($28,520) $84,467 $26,642 $65,429 Cumulative Interest Rate Sensitivity GAP ($28,310) ($56,830) $27,637 $54,279 Interest Rate Sensitivity GAP -0.74 -0.34 3.87 1.58 Cumulative Interest Rate Sensitivity GAP Ratio -0.74 -0.63 1.15 1.24
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 21 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. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. Exhibits The exhibits listed on the "Exhibit Index" on page 15 of this report are incorporated herein by reference. b. Report on Form 8-k No reports on Form 8-k were filed for the quarter ended September 30, 2000. 22 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 8,2000 By /s/ Donald L. Grill --------------- -------------------- Donald L. Grill Director President & CEO Date November 8, 2000 By /s/ Ronald L. Justice --------------- ---------------------- Ronald L. Justice Vice President (Authorized Signer) Chief Financial Officer Cashier 23 FENTURA BANCORP, INC. 2000 Quarterly Report on Form 10Q 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 *****
24 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
EX-27 2 k58467ex27.txt FINANCIAL DATA SCHEDULE
9 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 13,421 0 12,150 0 52,912 13,083 13,069 192,472 3,308 304,942 255,061 1,158 2,269 1,164 0 4,293 0 29,847 304,942 13,994 2,978 453 17,425 6,836 7,367 10,058 523 0 8,850 3,783 3,783 0 0 2,723 1.59 1.58 8.46 975 205 0 0 2,961 351 175 3,308 3,308 0 0
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