-----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, Ullnx4HxJQw9nPEXc4IZ9ouOdbdfTPNk73sqgqudhs/XnW+QsxN7FMAu9sFdyisx EHopGtA+/abpagrv+ygC8Q== 0000950124-97-002798.txt : 19970513 0000950124-97-002798.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950124-97-002798 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 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: 97600653 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 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 March 31, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to --------------- --------------- Commission file number 0-23550 Fentura Bancorp, Inc. --------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Michigan 38-2806518 - -------------------------------------- --------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) One Fenton Sq, P.O. Box 725, Fenton, Michigan 48430 ---------------------------------------------------- (Address of Principal Executive Offices) (810) 629-2263 -------------------------- (Issuer's telephone number) None ------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No --- ---- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: May 7, 1997 Class - Common Stock ($5 par value) Shares Outstanding - 683,895 Transitional Small Business Disclosure Format (Check one): Yes ; No X --- --- 2 Fentura Bancorp, Inc. Index to Form 10-QSB Page ---- Part I - Financial Information Item 1 - Consolidated Financial Statements 3 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II - Other Information Item 1 - 6 Miscellaneous Information 13 3 PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Fentura Bancorp, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited)
- ---------------------------------------------------------------------------------------------------------------- MAR 31, DEC 31, MAR 31, (000's omitted Except Per Share Data) 1997 1996 1996 - ---------------------------------------------------------------------------------------------------------------- ASSETS Cash and due from banks $ 9,659 11,921 9,322 Federal funds sold 5,200 8,450 8,500 ---------------------------------------------- Total Cash & Cash Equivalents 14,859 20,371 17,822 Interest bearing deposits with banks 95 95 190 Investment securities-held to maturity, at cost (market value of $7,477, and $10,418 at March 31, 1997 and 1996, respectively) 7,466 6,530 10,368 Investment securities-avail for sale, at market 45,075 44,355 39,470 ---------------------------------------------- Total investment securities 52,541 50,885 49,838 Loans: Commercial 76,656 78,699 72,383 Tax exempt development loans 713 751 1,089 Real estate loans - mortgage 15,297 15,924 13,759 Real estate loans - construction 19,018 15,467 18,910 Consumer loans 66,108 64,388 59,354 ---------------------------------------------- Total loans 177,792 175,229 165,495 Less: Reserve for loan losses (2,913) (2,836) (2,703) ---------------------------------------------- Net loans 174,879 172,393 162,792 Loans held for sale 768 1,007 1,107 Bank premises and equipment 4,566 4,794 4,157 Accrued interest receivable 1,738 1,835 1,783 Other assets 3,784 3,001 4,466 ---------------------------------------------- Total assets $ 253,230 254,381 242,155 ==============================================
4 LIABILITIES Deposits: Non-interest bearing deposits $ 25,417 28,206 25,427 Interest bearing deposits 197,930 195,843 188,281 ---------------------------------------------- Total deposits 223,347 224,049 213,708 Federal Funds Purchased 0 0 0 Other borrowings 2,695 2,369 3,500 Accrued taxes, interest and other liabilities 2,653 3,854 2,799 ---------------------------------------------- Total liabilities 228,695 230,272 220,007 ---------------------------------------------- STOCKHOLDERS' EQUITY Common stock - $5 par value 679,895 shares issued (677,147 in Dec., 3,399 3,386 3,335 1996 and 667,079 in March, 1996) Surplus 16,371 16,266 15,910 Retained Earnings 5,109 4,632 3,221 Unrealized loss on sec avail for sale (344) (175) (318) ---------------------------------------------- Total stockholder's equity 24,535 24,109 22,148 ---------------------------------------------- Total liabilities and stockholder's equity $ 253,230 254,381 242,155 ==============================================
See notes to consolidated financial statements. 5 Fentura Bancorp, Inc. and Subsidiaries Consolidated Statements of Income (Unaudited)
Three Months Ended March 31, - ------------------------------------------------------------------------------- (000's omitted, Except Per Share Data) 1997 1996 - ------------------------------------------------------------------------------- INTEREST INCOME Interest and fees on loans $4,433 4,229 Interest and dividends on investment securities: Taxable 670 526 Tax-exempt 88 133 Int on deposits with banks 2 4 Interest on federal funds sold 91 105 --------------------- Total interest income 5,284 4,997 INTEREST EXPENSE Deposits 2,208 2,064 Short-term borrowings 43 55 --------------------- Total interest expense 2,251 2,119 NET INTEREST INCOME 3,033 2,878 Provision for loan losses 156 180 --------------------- Net interest income after provision for loan losses 2,877 2,698 NON-INTEREST INCOME Service chrgs on dep accts 376 329 Fiduciary income 105 71 Other operating income 352 440 --------------------- Total non-interest income 833 840 NON-INTEREST EXPENSE Salaries and benefits 1,288 1,093 Occupancy of bank premises 177 151 Equipment expense 339 302 Other operating expenses 830 808 Investment gains (losses) 0 65 --------------------- Total non-interest expense 2,634 2,419 NET INCOME BEFORE TAXES 1,076 1,119 Applicable income taxes 341 339 --------------------- NET INCOME $ 735 780 ===================== Per share: (679,895 shares) Net income .................. $ 1.08 1.15 Dividends ................... $ 0.38 0.37
See notes to consolidated financial statements. 6 Fentura Bancorp, Inc. and Subsidiaries Consolidated Statements of Cash Flows
Three Months Ended March 31, - --------------------------------------------------------------------------------------------------- (000's omitted, Except Per Share Data) 1997 1996 - --------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES: Net income $733 $780 Adjustments to reconcile net inc to cash Provided by Operating Activities: Depreciation and amortization 247 204 Provision for loan losses 156 180 Amortization (accretion) on securities 26 47 Mortgages originated for sale (4,903) (5,465) Mortgages sold 5,142 5,283 Gain on investment securities 0 65 Decrease (increase) in interest receivable 97 (106) Decrease (increase) in other assets (692) (1,043) Increase (decrease) in accrued taxes, interest, and other liabilities (1,201) 236 --------------------- Total Adjustments (1,128) (599) --------------------- Net Cash Provided By (Used In) Operating Activities (395) 181 --------------------- Cash Flows From Investing Activities: Net decrease in deposits with other banks 0 0 Proceeds from maturities of inv activities - HTM 10 20 Proceeds from maturities of inv activities - AFS 3,565 4,998 Purchases of investment securities - HTM (552) (995) Purchases of investment securities - AFS (4,964) (8,542) Net (increase) in customer loans (2,642) 1,946 Capital expenditures (19) (474) --------------------- Net Cash Used in Investing Activities (4,602) (3,047) Cash Flows From Financing Activities: Net increase (decrease) in DDA/SAV deposits (3,663) (3,927) Net increase (decrease) in Time deposits 2,961 6,150 Net increase (decr) in short-term borrowing's 326 869 Proceeds from stock issuance 119 0 Cash dividends (258) (249) --------------------- Net Cash Provided By (Used In) Financing Activities (515) 2,843 NET DECREASE IN CASH AND CASH EQUIVALENTS ($5,512) ($23) CASH AND CASH EQUIVALENTS - BEGINNING $20,371 $17,845 CASH AND CASH EQUIVALENTS - ENDING $14,859 $17,822 ===================== CASH PAID FOR: INTEREST $2,233 $2,074 INCOME TAXES $0 $37
See notes to consolidated financial statements. 7 Fentura Bancorp, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Three Months Three Months Ended Ended - -------------------------------------------------------------------------------------------------- March 31, March 31, (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 13 0 Stock dividend 0 0 ----------------- ----------------- Balance, end of period 3,399 3,335 SURPLUS Balance, beginning of period 16,266 15,910 Issuance of shares under director stock purchase plan and dividend reinvestment prog 105 0 Stock dividend 0 0 ----------------- ----------------- Balance, end of period 16,371 15,910 RETAINED EARNINGS Balance, beginning of period 4,632 2,690 Net income 735 780 Cash dividends declared (258) (249) ----------------- ----------------- Balance, end of period 5,109 3,221 UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE Balance, beginning of period (175) (55) Change in unrealized gain (loss) on securities, net of tax $177 (169) (263) ----------------- ----------------- Balance, end of period (344) (318) ----------------- ----------------- TOTAL STOCKHOLDERS' EQUITY $ 24,535 $ 22,148 ================= =================
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 three months ended March 31, 1997 are not necessarily indicative of the results that may be expected for the year ended December 31, 1997. Note 2. Reclassifications Certain prior year amounts have been reclassified to conform to the current year financial statement presentation. 9 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations The following narrative discussion and analysis is intended to address significant factors affecting the Corporation's consolidated financial statements during the three months ended March 31, 1997 and 1996. It provides a more detailed and comprehensive review of the operating results and financial position than could be obtained from the financial statements alone. THREE MONTHS, 1997 VERSUS THREE MONTHS, 1996 Net Interest Income Net interest income, the principal source of earnings, is the amount of interest income generated by earning assets (principally investment securities and loans) less interest expense paid on interest bearing liabilities (largely deposits and other borrowings). As indicated in the income statement on page 5 interest income for the three months ended March 31, 1997 was $5,284 thousand compared to $4,997 thousand for the same period in 1996. This represents an increase of 5.7%. The primary factors contributing to the interest income increase are growth in the Company's loan portfolio (the largest group of earning assets) and in investment securities. Also indicated in the income statement, interest expense for the three months ended March 31, 1997 was $2,251 thousand compared to $2,119 thousand for the same period in 1996. This represents an increase of 6.2%. Increases in the Company's certificate of deposit balances, savings account balances, and interest rates caused the increase in interest expense. Balances increased due to greater market penetration in existing markets, growth in new market areas, and a change in consumer behavior toward certificates and savings products as market interest rates increased. ALLOWANCE AND PROVISION FOR LOAN LOSSES The allowance for loan losses (ALL) reflects management's judgment as to the level considered appropriate to absorb potential losses inherent in the loan portfolio. Fentura's subsidiary, The State Bank's, methodology in determining the adequacy of the ALL includes a review of individual loans and off-balance sheet arrangements, historical loss experience, current economic conditions, portfolio trends, and other pertinent factors. Although reserves have been allocated to various portfolio segments, the ALL is general in nature and is available for the portfolio in its entirety. At March 31, 1997, the ALL was $2,913 thousand, or 1.64% of total loans. This compares with $2,703 thousand, or 1.63%, at March 31, 1996. The provision for loan losses was $156 thousand for the first three months of 1997 and $180 thousand for the same period in 1996. The primary reason for decreasing the provision was the maintenance an adequate allowance. NON-INTEREST INCOME Non-interest income was $833 thousand in the first three months of 1997 and $840 thousand in the same period of 1996. This figure represents an decrease of .8% in 1997. The following discussion is intended to provide details of the variance from year to year. Table 1 provides a more detailed breakdown of the components of non-interest income than can be found in the income statement on page 5. The most significant component of non-interest income is service charges on deposit accounts. As indicated in Table 1, these customer charges were $376 thousand in the first three months of 1997 and $329 thousand in the same period of 1996, an increase of $47 thousand or 14.3%. Growth in the number of accounts and certain account activities account for the increase. 10 Gain on the sale of mortgage loans originated by the bank and sold in the secondary market were $63 thousand in the first three months of 1997 and $123 thousand in the same period in 1996. This 48.8% decrease occurred because of strong competitive pressures and a reduction in the margins of these sold mortgage loans. Fiduciary income increased $34 thousand in the first three months of 1997 compared to the same time period in the prior year. This 47.9% increase in fees is attributed to growth in the assets under management within the Corporation's Investment Trust Department. Other operating income, which includes income from the sale of checks, safe deposit box rent, and other miscellaneous income transactions, was $190 thousand in the first three months of 1997 compared to $219 thousand in the same period of 1996. This decrease of 13.2% is primarily attributable to a one time credit insurance premium refund received in 1996 which was based on loss experience for the preceding calendar year. TABLE 1
Three Months Ended Analysis of Non-Interest Income March 31, - -------------------------------------------------------------------------- (000's omitted) 1997 1996 - -------------------------------------------------------------------------- Service Charges on Deposit Accounts $376 $329 Gain on Sale of Mortgages 63 123 Gain on Sale of Real Estate Owned 1 0 Mortgage Servicing Fees 98 98 Fiduciary Income 105 71 Other Operating Income 190 219 --------- --------- Total Non-Interest Income $833 $840 ========= =========
Non-Interest Expense Total non-interest expense was $2,634 thousand in the first three months of 1997 compared with $2,419 thousand in the same period of 1996. This is an increase of 8.9%. Salary and benefit costs, Fentura's largest non-interest expense category, were $1,288 thousand in the first three months of 1997, compared with $1,093 thousand for the first three months of 1996. 1997 salary costs represent an increase of 17.8% over 1996. Increased costs are primarily a result of adding new positions to staff two new branches opened in the last half on 1996. During the first three months of 1997 equipment expenses were $339 thousand compared to $302 thousand for the same period in 1996, an increase of 12.3%. Depreciation on equipment (mostly computer hardware and software) for the new branches and increased costs for maintenance contracts on the Corporation's computer systems are the primary contributors to the increase in equipment expense. Occupancy expenses associated with the Company's facilities were $177 thousand in the first three months of 1997 compared to $151 thousand in the same period of 1996. This represents an increase of 17.2%. The primary reason for the increase in occupancy expense is the costs associated with leasing and operating the two new branch facilities. FDIC assessment expense was $6 thousand in the first three months of 1997 compared to $1 thousand in the same period of 1996. The increase is attributable to the FDIC's reinstatement of required assessments. Loan and collection expenses were $102 thousand in the first quarter of 1997 compared to $91 thousand for the same period in 1996, an increase of 12.1%. The increase is primarily attributable 11 to an increase in indirect consumer loan volume and accordingly, an increase in dealer reserve expense. Advertising expense was $99 thousand in the first three months of 1997 compared to $84 thousand for the same period in 1996. This is an increase of 17.9%. The increase in 1997 is attributable to an increase in promotional activities to the Corporation's customers and shareholders. In the first quarter of 1996 the Corporation had security losses of $65 thousand. These losses were associated with the sale of investment securities which the Company sold in order to reinvest in issues with higher interest rates. During the first quarter of 1997 the Company had no net losses associated with security transactions. TABLE 2
Three Months Ended Analysis of Non-Interest Expense March 31, - -------------------------------------------------------------------------- (000's omitted) 1997 1996 - -------------------------------------------------------------------------- Salaries and Benefits $1,288 $1,093 Equipment 339 302 Net Occupancy 177 151 FDIC Assessment 6 1 Office Supplies 63 58 Loan & Collection Expense 102 91 Advertising 99 84 Security Losses 0 65 Other Operating Expense 560 574 --------- --------- Total Non-Interest Expense $2,634 $2,419 ========= =========
LIQUIDITY AND INTEREST RATE RISK MANAGEMENT Asset/Liability management procedures are designed to assure liquidity and reduce interest rate risks. The goal in managing interest rate risk is to maintain a strong and relatively stable net interest margin. It is the responsibility of the Asset/Liability Management Committee (ALCO) to set policy guidelines and to establish short-term and long-term strategies with respect to interest rate exposure and liquidity. ALCO, which is comprised of key members of management, meets regularly to review Fentura's financial performance and soundness, including interest rate risk and liquidity exposure in relation to present and prospective markets, business conditions, and product lines. Accordingly, the committee adopts funding and balance sheet management strategies that are intended to determine that earnings, liquidity, and growth rates are consistent with policy and prudent business standards. Liquidity maintenance together with a solid capital base and strong earnings performance are key objectives of the Corporation. The Bank's liquidity is derived from a strong deposit base comprised of individual and business deposits. Deposit accounts of customers in the mature markets represent a substantial portion of deposits of individuals. The Bank's deposit base plus other funding sources (federal funds purchased, other liabilities and shareholders' equity) provided primarily all funding needs in the first three months of 1997 and 1996. Primary liquidity is provided through short-term investments or borrowings (including federal funds sold and purchased) and secondary liquidity is provided by the investment portfolio. As of March 31, 1997, federal funds sold represented 2.1% of total assets, compared to 3.5% at March 31, 1996. The Corporation regularly monitors liquidity to ensure adequate cash flows to cover unanticipated reductions in the availability of funding sources. 12 Interest rate risk is managed by controlling and limiting the level of earnings volatility arising from rate movements. The Corporation regularly performs reviews and analysis of those factors impacting interest rate risk. Factors include maturity and repricing frequency of balance sheet components, impact of rate changes on interest margin and prepayment speeds, market value impacts of rate changes, and other issues. Both actual and projected performance are reviewed, analyzed, and compared to policy and objectives to assure present and future financial viability. As indicated in the statement of cash flows, cash flows from financing activities have decreased slightly due to a decline in demand deposit and saving accounts. In the first three months of 1997 these deposits decreased $3,663 thousand partially offset by an increase in Time deposits of $2,961 thousand. In 1996, cash flows from financing activities were principally growth in short term borrowings which increased $869 thousand in the first three months and growth of time deposits which increased $6,150 thousand. Cash flows from investing activities were ($4,602) thousand during the first three months of 1997 and ($3,047) thousand in the same period of 1996. The primary reason for the increase in investing activities was the increase in loans in the first quarter of 1997 compared to a decrease in loans for the same time period in 1996. CAPITAL MANAGEMENT Total shareholders' equity rose 10.8% to $24,535 thousand at March 31, 1997 compared with 22,148 thousand at March 31, 1996. The Company's equity to asset ratio was 9.7% at March 31, 1997 and 9.1% at March 31, 1996. The increase in the amount of capital was obtained through retained earnings and the proceeds from the issuance of new shares. In the first quarter of 1997, the Company increased its cash dividends by 2.7% to $.38 per share compared with $.37 in the first quarter of 1996. As indicated on the balance sheet on page 4, at March 31, 1997 the Company had an unrealized loss on securities available for sale (AFS) of $344 thousand compared to an unrealized loss at March 31, 1996 of $318 thousand. This increase in unrealized loss is attributable to market interest rates and the interest rate structures on those securities held in the Company's AFS portfolio. 13 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Fentura Bancorp, Inc.'s Annual Meeting of Shareholders was held on March 19, 1997 at which the following directors were elected: Yes No Votes Votes ----- ----- Donald L. Grill 540,841 530 Forrest A. Shook 540,809 562 Additionally, the shareholders approved an increase of the authorized shares of common stock from 1,000,000 to 2,000,000 in the following vote: Yes No Votes Votes Abstentions ----- ----- ----------- 500,576 25,145 17,092 There were no others matters submitted to a vote of security holders. Item 6. Exhibits and Reports on Form 8-K a. Exhibits The exhibits listed on the "Exhibit Index" on page 14 of this report are incorporated herein by reference. b. Report on Form 8-k No reports on Form 8-k were filed for the quarter ended March 31, 1997. 14 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 *****
15 10.19 Stock Purchase Plan between The State Bank and Donald E. Johnson, Jr., Mary Alice J. Heaton, and Linda J. LeMieux dated November 27, 1996 ****** 10.20 Severance Compensation Agreement between the registrant and Donald L. Grill dated March 20, 1997 27.0 Financial Data Schedule * Incorporated by reference to form 10-SB registration number 0-23550 ** Incorporated by reference to form 8-K filed July 8, 1994 *** Incorporated by reference to form 10K-SB filed March 20, 1995 **** Incorporated by reference to form 10Q-SB filed May 2, 1996 ***** Incorporated by reference to form 10K-SB filed March 27, 1996 ****** Incorporated by reference to form 10K-SB filed March 20, 1997
16 Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FENTURA BANCORP, INC. Date May 7, 1997 By /s/ Donald L. Grill ----------- -------------------- Donald L. Grill Director President & CEO Date May 7, 1997 By /s/ Ronald L. Justice ----------- ---------------------- Ronald L. Justice Vice President (Authorized Signer) Chief Financial Officer Cashier 17 Exhibit Index Exhibit No. Description - ------- ----------- 10.20 Severance Compensation Agreement between the registrant and Donald L. Grill dated March 20, 1997 27.0 Financial Data Schedule EX-10.20 2 EX-10.20 1 EXHIBIT 10.20 SEVERANCE COMPENSATION AGREEMENT THIS SEVERANCE COMPENSATION AGREEMENT (the "Agreement"), has been made on March 20, 1997 by FENTURA BANCORP, INC., a Michigan corporation (the "Company"), THE STATE BANK, (the "Bank") and DONALD L. GRILL, an individual (the "Executive"). BACKGROUND STATEMENT: The Executive is a principal officer of the Bank and the Company and his continued services are important to the Bank, its depositors and customers, and the Company's shareholders. The Bank and the Company believe it is in their best interests that the Executive continue to render services to the Bank and the Company if a Change of Control is threatened or occurs, free from the distractions and vexations which might result if his personal economic security is made uncertain as a result of an impending Change of Control. 1. DEFINITIONS. The following words and phrases have the following meanings: A) "CAUSE" means (i) the willful and continuing failure by the Executive to substantially perform his duties with the Bank or the Company (other than any such failure resulting from the Executive's death or Disability) and which is not remedied in a reasonable period of time after receipt by Executive of written notice from the Bank specifying the duties the Executive has failed to perform, or (ii) the willful and continued engaging by Executive in gross misconduct that is materially injurious to the Bank or the Company and which is not ceased within a reasonable period of time after receipt by Executive of written notice from the Bank specifying the misconduct and the injury, or (iii) an adjudication of the Executive's guilt of any crime involving a serious and substantial breach of the Executive's fiduciary duties to the Bank. No act or failure to act on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him in bad faith 2 and without reasonable belief that his action or omission was in the best interest of the Bank or the Company. B) "CHANGE IN CONTROL" means (i) the acquisition, directly, indirectly and/or beneficially, by any person or group, of more than fifty percent (50%) of the voting securities of the Company or the Bank, (ii) the occurrence of any event at any time during any two (2) year period which results in a majority of the Board of Directors of the Company or the Bank being comprised of individuals who were not members of such Board at the commencement of that two (2) year period (the "Incumbent Board"); provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's or the Bank's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of the office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board, (iii) a sale of all or substantially all of the assets of the Company or the Bank to another entity, or (iv) a merger or reorganization of the Company or the Bank with another entity. C) "COMPENSATION" means with respect to the period under consideration, the aggregate of all amounts paid by the Company and the Bank to and includable in the Executive's earnings as base salary, bonuses, commissions, fees and any other compensation, but excluding contributions made to any welfare and pension benefit plans by the Bank and/or Company at its or their sole expense. D) "DISABILITY" means any physical or mental impairment which meets the definition of disability found in the long-term or short-term disability policy insuring the Executive at the time disability is alleged or if no such policy is in effect at that time, any physical or mental impairment that, on the basis of qualified medical opinion of three (3) medical doctors, has rendered Executive wholly and permanently unable to engage in the regular and continuous occupation or employment for remuneration or profit of a nature similar to his employment with the Bank for a period of six (6) -2- 3 consecutive months or more. E) "GOOD REASON" means any of the following, as determined by the Executive in his discretion: (i) the assignment to the Executive by the Bank or the Company of any duties inconsistent with his position, duties, responsibilities and status with the Bank or the Company immediately prior to a Change in Control, or a change adverse to Executive in Executive's reporting responsibilities, titles, terms of employment (including bonus, compensation, fringe benefits and vacation entitlement) or offices as in effect immediately prior to a Change in Control; or (ii) the Bank or the Company requiring Executive to be based anywhere other than within fifteen (15) miles of his present office location, or to travel on business of the Bank to an extent substantially greater than Executive's present business travel obligations; or (iii) the failure by the Company to obtain the assumption of this Agreement as contemplated in Section 6 hereof. If any of the foregoing result from, or follow, a termination of employment for Cause, then Good Reason will not have occurred. 2. INCOME PROTECTION BENEFITS. If the Executive is an employee of the Bank or the Company when a Change in Control occurs, and the Executive's employment is thereafter terminated without Cause either by the Bank or the Company, or by the Executive for Good Reason, or by any party because of the Executive's death or Disability, then: a) The Company and the Bank shall pay to the Executive, in a lump sum in cash within 30 days after the date of termination of employment the aggregate of the following amounts: i) that portion of the Executive's annual base salary and director's fees through the date of termination not theretofore paid, and ii) the product of (x) the sum of all commissions and bonuses of any kind paid or payable to Executive in the calendar year immediately preceding the year in which termination of employment occurs multiplied by (y) a fraction, the -3- 4 numerator of which is the number of days in the current calendar year through the date of termination, and the denominator of which is 365, and iii) any compensation previously deferred by the Executive (together with any accrued interest o earnings thereon), and iv) any accrued vacation pay. b) The Executive shall have the right within 90 days following termination of employment to exercise any stock options awarded him prior to the termination of his employment. c) The Bank and/or the Company shall thereafter pay to the Executive an annual amount equal to 50% of the highest amount of the Executive's annual Compensation in the five calendar years immediately preceding Executive's termination for a period of 5 years from and after the Executive's termination of employment, payable in equal monthly installments commencing the first day of the month coinciding with or immediately following the Executive's termination of employment. If the Executive dies after the Bank's and the Company's obligation to make these payments is triggered, the Bank and the Company shall thereafter pay to the Executive's Beneficiary a lump sum amount equal to the present value of the unpaid monthly installments, discounted using a ten percent (10%) per annum interest rate. In lieu of the foregoing installments, the Executive may elect by written notice to the Bank within ninety (90) days of the Executive's termination of employment to receive a lump sum amount equal to the present value of the monthly installments, discounted by using a ten percent (10%) per annum interest rate. d) The Bank and/or the Company shall provide to the Executive, at its expense, hospital and medical insurance coverage of the same or equivalent scope as he was covered by immediately prior to termination of his employment for a period of 5 years after the Executive's termination of employment. 3. MAXIMUM BENEFITS UPON CHANGE OF CONTROL. If the Bank's usual certified public accountants determine that any payment by the Bank or the Company to or for -4- 5 the benefit of the Executive (whether paid or payable pursuant to the terms of this Agreement or otherwise) (the "Payment") would be nondeductible by the Bank or the Company for Federal Income Tax purposes because of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code), then the aggregate present value of amounts payable to or for the benefit of the Executive pursuant to this Agreement (the "Agreement Payments") shall be reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" means an amount expressed in present value, determined in accordance with Section 280G(d)(4) of the Code, which maximizes the present value of all Agreement Payments without causing any Payment to be nondeductible by the Bank or the Company because of Section 280G of the Code. 4. TERM. Unless earlier terminated by mutual agreement of the Company and the Executive, this Agreement shall terminate upon the earliest of (a) the termination of the Executive's employment with the Bank and the Company for any reason prior to a Change in Control; or (b) five (5) years from the date of a Change in Control. Obligations under Section 2 of this Agreement created prior to termination shall survive termination. 5. TERMINATION PRIOR TO CHANGE IN CONTROL. Notwithstanding anything in this agreement to the contrary, if a Change of Control occurs and (i) if the Executive's employment with the Company or the Bank is terminated prior to the date on which Change of Control occurs, and if the termination of employment (a) was at the request or suggestion of a 3rd party who has taken steps reasonably calculated to effect the -5- 6 Change of Control or (b) otherwise arose in connection with or in anticipation of the Change of Control, or (ii) Executive has terminated his employment with Company and/or Bank for Good Cause prior to Change of Control, then Executive shall be entitled to the Income Protection Benefits and all other rights and privileges provided by this Agreement. 6. SUCCESSORS, BINDING AGREEMENTS. a) Any purchaser, successor or assign (whether direct or indirect), to or of all, substantially all, or any material part of the business, properties and assets of the Bank and/or the Company shall be bound by the terms of this Agreement, and the Bank and the Company shall require any such purchaser, successor or assign, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Bank and the Company would be required to perform if no such succession or assignment had taken place. b) The Bank and the Company each hereby guarantee the timely payment and performance, when due, of the other's obligations under this Agreement. c) This Agreement shall inure to the benefit of and be enforceable by the Executive's personal and legal representatives, executives, administrators, successors, heirs, distributees, devisees and legatees. -6- 7 7. NOTICES. Notices under this Agreement shall be in writing and shall be deemed given when hand delivered or three (3) days after being mailed by United States registered or certified mail, return receipt requested, postage prepaid, as follows: If to the Company Fentura Bancorp, Inc. or the Bank: One Fenton Square PO Box 725 Fenton, MI 48430-0725 If to the Executive: Mr. Donald L. Grill 14655 S. Fowlerville Rd Perry, MI 48872-9594 or to such other address as either party may designate. 8. AT WILL PRESERVED. This Agreement is intended only to provide an economic benefit for Executive if his employment with the Bank or the Company is terminated under the circumstances described herein. Even though this economic benefit may be payable, Executive's employment with the Bank and the Company shall continue to be "at will," and the Bank, the Company or the Executive may terminate Executive's employment with the Bank or the Company at any time, with or without cause. Further, the existence of this Agreement and the economic benefits herein provided shall not contradict, override, supersede or in any way detract from or affect the "at will" employment status of any other employee of the Bank or the Company. The employment terms set forth in the Bank's employee handbook or employee manual, as they may be in effect from time to time, shall control. -7- 8 9. MISCELLANEOUS. A) MODIFICATION; WAIVER. This Agreement may be modified, waived or discharged only in, and limited to the extent specifically set forth in, a written document signed by the Executive and the Company. B) VALIDITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. C) GOVERNING LAW. This Agreement shall be governed in all respects according to the laws of the State of Michigan. COMPANY: FENTURA BANCORP, INC., By: /s/Russell H. Van Gilder, Jr. ------------------------------ Russell H. Van Gilder, Jr., Chairman BANK: THE STATE BANK By: /s/Russell H. Van Gilder, Jr. ------------------------------ Russell H. Van Gilder, Jr., Chairman EXECUTIVE: /s/Donald L. Grill ------------------ Donald L. Grill -8- EX-27 3 EX-27
9 1,000 3-MOS DEC-31-1997 JAN-01-1996 MAR-31-1997 9,659 95 5,200 0 45,075 7,466 7,477 177,792 2,913 253,230 223,347 1,500 2,653 1,195 0 0 3,399 21,136 253,230 4,433 758 93 5,284 2,208 2,251 3,033 156 0 2,634 1,076 1,076 0 0 735 1.08 1.08 5.20 747 150 0 0 2,836 107 28 2,913 2,913 0 0
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