GlobeNewswire Inc | Feb 2, 2021 06:00PM EST

February 02, 2021

Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with the December31, 2020 presentation.

FENTON, Mich., Feb. 02, 2021 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces quarterly results of net income of $2,733 and $15,464 for the three and twelve month periods ended December31, 2020.

Ronald Justice, President and CEO, stated We are very pleased to report a solid quarter and another year of strong financial performance despite the many challenges presented by the COVID-19 pandemic. The extraordinary efforts of the Fentura team in implementing strategies to respond to the pandemic, allowed us to continue to effectively operate and meet all the banking needs of our clients and to support the communities we serve."

Justice continued, "Our commitment to provide PPP loans through the SBA to our business clients in need, an unprecedented level of residential mortgage loans processed, and the transition of transactions to technology channels during the shelter in place Orders, are examples of the teams response and strong contributors to our results. As we look forward, remaining mindful of the ongoing challenges from the COVID-19 pandemic, we remain confident that our long term strategic focus will lead to continued strong performance.

Following is a discussion of the Corporation's financial performance as of, and for the three and twelve months periods ended December31, 2020. At the end of this document is a list of abbreviations and acronyms.

Results of OperationsThe following table outlines the Corporation's QTD results of operations and provides certain performance measures as of, and for the three month periods ended:

12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019INCOMESTATEMENT DATAInterest $ 11,624 $ 12,070 $ 11,215 $ 11,070 $ 11,076 incomeInterest 972 1,189 1,618 2,145 2,158 expenseNet interest 10,652 10,881 9,597 8,925 8,918 incomeProvision for 982 1,109 2,001 1,542 436 loan lossesNoninterest 4,676 5,159 5,292 4,513 2,129 incomeNoninterest 10,971 8,218 7,809 7,686 7,415 expensesFederalincome tax 642 1,377 1,036 858 644 expenseNet income $ 2,733 $ 5,336 $ 4,043 $ 3,352 $ 2,552 PER SHARE Earnings $ 0.58 $ 1.14 $ 0.87 $ 0.72 $ 0.55 Dividends $ 0.075 $ 0.075 $ 0.075 $ 0.075 $ 0.07 Tangible book $ 24.00 $ 23.50 $ 22.44 $ 21.56 $ 20.87 value^(1)Quoted market valueHigh $ 22.25 $ 17.99 $ 18.95 $ 26.00 $ 25.50 Low $ 16.93 $ 16.80 $ 14.90 $ 12.55 $ 20.60 Close^(1) $ 22.00 $ 16.93 $ 17.35 $ 15.50 $ 25.23 PERFORMANCE RATIOSReturn onaverage 0.84 % 1.68 % 1.35 % 1.28 % 1.02 %assetsReturn onaverage 9.27 % 18.86 % 15.20 % 13.01 % 10.03 %shareholders'equityReturn onaveragetangible 9.58 % 19.54 % 15.79 % 13.54 % 10.46 %shareholders'equityEfficiency 71.57 % 51.23 % 52.45 % 57.20 % 67.12 %ratioYield onearning 3.75 % 3.97 % 3.94 % 4.47 % 4.66 %assets (FTE)Rate oninterest 0.50 % 0.63 % 0.91 % 1.28 % 1.36 %bearingliabilitiesNet interestmargin to 3.44 % 3.58 % 3.37 % 3.61 % 3.75 %earningassets (FTE)BALANCE SHEET DATA^(1)Totalinvestment $ 76,501 $ 78,179 $ 75,526 $ 76,312 $ 61,621 securitiesGross loans $ 1,066,562 $ 1,060,885 $ 1,044,564 $ 865,577 $ 870,555 Total assets $ 1,251,343 $ 1,284,845 $ 1,237,694 $ 1,071,180 $ 1,034,759 Total $ 1,071,976 $ 1,061,470 $ 1,018,287 $ 883,837 $ 863,102 depositsBorrowed $ 49,000 $ 96,217 $ 96,217 $ 71,500 $ 61,500 fundsTotalshareholders' $ 116,435 $ 114,081 $ 108,969 $ 104,828 $ 101,444 equityNet loans tototal 98.48 % 98.99 % 101.70 % 97.11 % 100.19 %depositsCommon shares 4,694,573 4,691,142 4,680,920 4,675,499 4,664,369 outstandingQTD BALANCESHEET AVERAGESTotal assets $ 1,288,199 $ 1,264,105 $ 1,200,966 $ 1,049,245 $ 994,094 Earning $ 1,235,895 $ 1,210,274 $ 1,146,941 $ 997,089 $ 944,692 assetsInterestbearing $ 773,132 $ 750,281 $ 711,500 $ 672,564 $ 629,454 liabilitiesTotalshareholders' $ 117,263 $ 112,565 $ 106,998 $ 103,646 $ 100,991 equityTotaltangible $ 113,444 $ 108,655 $ 102,999 $ 99,558 $ 96,796 shareholders'equityEarned commonshares 4,682,113 4,673,629 4,664,946 4,659,279 4,652,569 outstandingUnvested 14,208 14,208 14,208 13,481 9,947 stock grantsTotal commonshares 4,696,321 4,687,837 4,679,154 4,672,760 4,662,516 outstandingASSET QUALITY ^(1)Nonperformingloans to 0.75 % 0.07 % 0.10 % 0.10 % 0.17 %gross loansNonperformingassets to 0.64 % 0.06 % 0.08 % 0.12 % 0.14 %total assetsAllowance forloan losses 1.02 % 0.95 % 0.86 % 0.84 % 0.67 %to grossloansAllowance forloan lossesto gross 1.23 % 1.19 % 1.07 % 0.84 % 0.67 %loans, net ofPPP loansCAPITAL RATIOS^(1)Total capitalto risk 15.21 % 15.57 % 15.06 % 14.42 % 14.03 %weightedassetsTier 1capital to 14.00 % 14.40 % 14.00 % 13.56 % 13.33 %risk weightedassetsCET1 capitalto risk 12.44 % 12.77 % 12.34 % 11.91 % 11.64 %weightedassetsTier 1leverage 9.85 % 9.86 % 9.90 % 10.97 % 11.20 %ratio ^(1)At end of period

The following table outlines the Corporation's YTD results of operations and provides certain performance measures as of, and for the twelve month periods ended:

12/31/2020 12/31/2019 12/31/2018 12/31/2017 12/31/2016INCOMESTATEMENT DATAInterest $ 45,979 $ 43,541 $ 36,350 $ 30,111 $ 18,645 incomeInterest 5,924 8,627 5,827 3,120 2,372 expenseNet interest 40,055 34,914 30,523 26,991 16,273 incomeProvision for 5,634 1,335 1,057 609 (900 )loan lossesNoninterest 19,640 8,163 8,277 8,988 6,658 incomeNoninterest 34,684 27,223 25,310 23,818 17,097 expensesFederalincome tax 3,913 2,941 2,319 2,876 2,293 expenseNet income $ 15,464 $ 11,578 $ 10,114 $ 8,676 $ 4,441 PER SHARE Earnings $ 3.31 $ 2.49 $ 2.65 $ 2.39 $ 1.70 Dividends $ 0.30 $ 0.28 $ 0.24 $ 0.20 $ 0.40 Tangible book $ 24.00 $ 20.87 $ 18.32 $ 14.96 $ 12.41 value^(1)Quoted market valueHigh $ 26.00 $ 25.50 $ 23.00 $ 20.65 $ 16.00 Low $ 12.55 $ 20.05 $ 18.88 $ 15.10 $ 12.85 Close^(1) $ 22.00 $ 25.23 $ 21.00 $ 18.88 $ 16.00 PERFORMANCE RATIOSReturn onaverage 1.29 % 1.20 % 1.20 % 1.19 % 0.92 %assetsReturn onaverage 14.05 % 12.02 % 15.05 % 15.38 % 10.28 %shareholders'equityReturn onaveragetangible 14.57 % 12.59 % 16.23 % 16.63 % 10.28 %shareholders'equityEfficiency 58.10 % 63.20 % 65.23 % 66.20 % 74.56 %ratioYield onearning 4.01 % 4.77 % 4.57 % 4.55 % 4.38 %assets (FTE)Rate oninterest 0.82 % 1.41 % 1.07 % 0.65 % 0.76 %bearingliabilitiesNet interestmargin to 3.50 % 3.83 % 3.84 % 4.08 % 3.83 %earningassets (FTE)BALANCE SHEET DATA^(1)Totalinvestment $ 76,501 $ 61,621 $ 94,721 $ 55,323 $ 72,458 securitiesGross loans $ 1,066,562 $ 870,555 $ 772,227 $ 672,530 $ 515,775 Total assets $ 1,251,343 $ 1,034,759 $ 926,450 $ 781,443 $ 703,350 Total $ 1,071,976 $ 863,102 $ 763,124 $ 673,505 $ 603,367 depositsBorrowed $ 49,000 $ 61,500 $ 69,000 $ 46,000 $ 45,000 fundsTotalshareholders' $ 116,435 $ 101,444 $ 89,516 $ 59,447 $ 50,660 equityNet loans tototal 98.48 % 100.19 % 100.60 % 99.32 % 85.01 %depositsCommon shares 4,694,573 4,664,369 4,636,455 3,631,933 3,619,282 outstandingYTD BALANCESHEET AVERAGESTotal assets $ 1,200,605 $ 961,586 $ 844,673 $ 730,974 $ 484,042 Earning $ 1,147,570 $ 913,574 $ 796,283 $ 698,753 $ 429,547 assetsInterestbearing $ 726,869 $ 612,549 $ 544,344 $ 485,522 $ 306,614 liabilitiesTotalshareholders' $ 110,094 $ 96,358 $ 67,192 $ 56,429 $ 43,218 equityTotaltangible $ 106,140 $ 91,994 $ 62,329 $ 52,181 $ 43,218 shareholders'equityEarned commonshares 4,669,992 4,643,955 3,811,677 3,625,568 2,608,903 outstandingUnvested 14,026 9,917 756 ? ? stock grantsTotal commonshares 4,684,018 4,653,872 3,812,433 3,625,568 2,608,903 outstandingASSET QUALITY ^(1)Nonperformingloans to 0.75 % 0.17 % 0.14 % ? % ? %gross loansNonperformingassets to 0.64 % 0.14 % 0.12 % 0.02 % 0.04 %total assetsAllowance forloan losses 1.02 % 0.67 % 0.58 % 0.54 % 0.55 %to grossloansAllowance forloan lossesto gross 1.23 % 0.67 % 0.58 % 0.54 % 0.55 %loans, net ofPPP loansCAPITAL RATIOS^(1)Total capitalto risk 15.21 % 14.03 % 14.00 % 10.93 % 11.47 %weightedassetsTier 1capital to 14.00 % 13.33 % 13.40 % 10.39 % 10.95 %risk weightedassetsCET1 capitalto risk 12.44 % 11.64 % 11.52 % 8.27 % 8.40 %weightedassetsTier 1leverage 9.85 % 11.20 % 10.92 % 8.98 % 11.93 %ratio ^(1)At end of period

Income Statement Breakdown and Analysis

Quarter to Date 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/ 2019GAAP net income $ 2,733 $ 5,336 $ 4,043 $ 3,352 $ 2,552 Acquisitionrelated items (net of tax)Accretion on (82 ) (144 ) (110 ) (180 ) (126 )purchased loansAmortization ofcore deposit 71 72 71 71 89 intangiblesAmortization onacquired time 5 5 5 5 7 depositsAmortization onpurchased ? ? ? ? 3 mortgageservicing rightsTotal acquisitionrelated items (6 ) (67 ) (34 ) (104 ) (27 )(net of tax)Othernonrecurring items (net oftax)FHLB prepayment 1,507 ? ? ? ? penaltiesChange in fairvalue of equityinvestment due to ? ? ? (578 ) ? acquisitiontransactionChange in fairvalue of mortgage ? ? ? (567 ) ? bankinginstruments^(1)Interest writeofffrom loan 265 ? ? ? ? transferred tononaccrualNet gain fromCOLI death ? ? (173 ) ? ? benefitPrepaymentpenalties (97 ) (16 ) (12 ) (36 ) (42 )collectedMortgageservicing rights (188 ) (176 ) 191 173 ? (reduction of)impairmentTotal othernonrecurring 1,487 (192 ) 6 (1,008 ) (42 )items (net oftax)Adjusted netincome from $ 4,214 $ 5,077 $ 4,015 $ 2,240 $ 2,483 operations GAAP net interest $ 10,652 $ 10,881 $ 9,597 $ 8,925 $ 8,918 incomeAccretion on (104 ) (182 ) (139 ) (228 ) (160 )purchased loansInterest writeofffrom loan 335 ? ? ? ? transferred tononaccrualPrepaymentpenalties (123 ) (20 ) (15 ) (46 ) (53 )collectedAmortization onacquired time 6 6 6 6 9 depositsAdjusted net $ 10,766 $ 10,685 $ 9,449 $ 8,657 $ 8,714 interest income PERFORMANCE RATIOSBased on adjustednet income from operationsEarnings per $ 0.90 $ 1.09 $ 0.86 $ 0.48 $ 0.53 shareReturn on average 1.30 % 1.60 % 1.34 % 0.86 % 0.99 %assetsReturn on averageshareholders' 14.30 % 17.94 % 15.09 % 8.69 % 9.75 %equityReturn on averagetangible 14.78 % 18.59 % 15.68 % 9.05 % 10.18 %shareholders'equityEfficiency ratio 59.02 % 52.03 % 52.12 % 62.83 % 67.31 % Based on adjustednet interest incomeYield on earning 3.75 % 3.97 % 3.94 % 4.50 % 4.66 %assets (FTE)Rate on interestbearing 0.50 % 0.63 % 0.92 % 1.29 % 1.37 %liabilitiesNet interestmargin to earning 3.47 % 3.52 % 3.32 % 3.52 % 3.66 %assets (FTE)

Year to Date December Variance 31 2020 2019 Amount %GAAP net income $ 15,464 $ 11,578 $ 3,886 33.56 %Acquisition related items (net of tax)Accretion on purchased loans (516 ) (635 ) 119 (18.74 ) %Amortization of core deposit 285 356 (71 ) (19.94 )intangibles %Amortization on acquired 20 28 (8 ) (28.57 )time deposits %Amortization on purchased ? 12 (12 ) (100.00 )mortgage servicing rights %Total acquisition related (211 ) (239 ) 28 (11.72 )items (net of tax) %Other nonrecurring items (net of tax)FHLB prepayment penalties 1,507 ? 1,507 N/M Change in fair value ofequity investment due to (578 ) ? (578 ) N/M acquisition transactionChange in fair value ofmortgage banking instruments (567 ) ? (567 ) N/M ^(1)Interest writeoff from loan 265 ? 265 N/M transferred to nonaccrualNet gain from COLI death (173 ) ? (173 ) N/M benefitPrepayment penalties (161 ) (348 ) 187 (53.74 )collected %Mortgage servicing rights ? ? ? N/M (reduction of) impairmentTotal other nonrecurring 293 (348 ) 641 (184.20 )items (net of tax) %Adjusted net income from $ 15,546 $ 10,991 $ 4,555 41.44 %operations GAAP net interest income $ 40,055 $ 34,914 $ 5,141 14.72 %Accretion on purchased loans (653 ) (804 ) 151 (18.78 ) %Interest writeoff from loan 335 ? 335 N/M transferred to nonaccrualPrepayment penalties (204 ) (441 ) 237 (53.74 )collected %Amortization on acquired 24 35 (11 ) (31.43 )time deposits %Adjusted net interest income $ 39,557 $ 33,704 $ 5,853 17.37 % PERFORMANCE RATIOS Based on adjusted net income from operationsEarnings per share $ 3.33 $ 2.37 $ 0.96 40.51 %Return on average assets 1.29 % 1.14 % 0.15 %Return on average 14.12 % 11.41 % 2.71 %shareholders' equityReturn on average tangible 14.65 % 11.95 % 2.70 %shareholders' equityEfficiency ratio 56.16 % 63.92 % (7.76 ) % Based on adjusted net interest incomeYield on earning assets 3.97 % 4.64 % (0.67 )(FTE) %Rate on interest bearing 0.82 % 1.41 % (0.59 )liabilities %Net interest margin to 3.45 % 3.69 % (0.24 )earning assets (FTE) %

To effectively compare core operating results from period to period, the impact of acquisition related items and other nonrecurring items have been isolated.

(1)The Corporation adopted Staff Accounting Bulletin No. 109 as of January 1, 2020. This standard required the Corporation to record the servicing assets of interest rate lock commitments and loans held for sale at fair value. Changes in the fair value of these instruments is recognized as a component of noninterest income. Subsequent to the adoption of Staff Accounting Bulletin No. 109, changes in fair value related to mortgage banking are recurring in nature.

Average Balances, Interest Rate, and Net Interest Income

The following tables present the daily average amount outstanding for each major category of interest earning assets, nonearning assets, interest bearing liabilities, and noninterest bearing liabilities. These tables also present an analysis of interest income and interest expense for the periods indicated. All interest income is reported on a FTE basis using a federal income tax rate of 21%. Loans in nonaccrual status, for the purpose of the following computations, are included in the average loan balances.

Three Months Ended December 31, 2020 September 30, 2020 December 31, 2019 Average Tax Average Average Tax Average Average Tax Average Balance Equivalent Yield / Balance Equivalent Yield / Balance Equivalent Yield / Interest Rate Interest Rate Interest RateInterest earning assetsTotal loans $ 1,099,779 $ 11,268 4.08 % $ 1,086,629 $ 11,701 4.28 % $ 857,474 $ 10,581 4.90 %Taxableinvestment 62,866 238 1.51 % 62,490 256 1.63 % 49,982 307 2.44 %securitiesNontaxableinvestment 16,047 103 2.55 % 15,822 101 2.54 % 10,366 80 3.06 %securitiesFederal funds ? ? ? % ? ? ? % 16,833 66 1.56 %soldInterest earningcash and cash 53,715 15 0.11 % 41,845 9 0.09 % 6,887 28 1.61 %equivalentsFederal Home Loan 3,488 22 2.51 % 3,488 24 2.74 % 3,150 31 3.90 %Bank stockTotal earning 1,235,895 11,646 3.75 % 1,210,274 12,091 3.97 % 944,692 11,093 4.66 %assets Nonearning assets Allowance for (10,375 ) (9,255 ) (5,519 ) loan lossesFixed assets 15,465 15,349 15,395 Accrued income 47,214 47,737 39,526 and other assetsTotal assets $ 1,288,199 $ 1,264,105 $ 994,094 Interest bearing liabilitiesInterest bearing $ 218,627 $ 128 0.23 % $ 221,592 $ 144 0.26 % $ 140,368 $ 410 1.16 %demand depositsSavings deposits 291,856 114 0.16 % 271,260 116 0.17 % 225,219 217 0.38 %Time deposits 179,076 407 0.90 % 161,212 567 1.40 % 201,640 1,089 2.14 %Borrowed funds 83,573 323 1.54 % 96,217 362 1.50 % 62,227 442 2.82 %Total interestbearing 773,132 972 0.50 % 750,281 1,189 0.63 % 629,454 2,158 1.36 %liabilities Noninterestbearing liabilitiesNoninterest 385,032 388,904 254,858 bearing depositsAccrued interestand other 12,772 12,355 8,791 liabilitiesShareholders' 117,263 112,565 100,991 equityTotal liabilitiesand shareholders' $ 1,288,199 $ 1,264,105 $ 994,094 equityNet interest $ 10,674 $ 10,902 $ 8,935 income (FTE)Net interestmargin to earning 3.44 % 3.58 % 3.75 %assets (FTE)

Twelve Months Ended December 31, 2020 December 31, 2019 Average Tax Average Average Tax Average Balance Equivalent Yield / Balance Equivalent Yield / Interest Rate Interest RateInterestearning assetsTotal loans $ 1,028,303 $ 44,238 4.30 % $ 820,489 $ 41,102 5.01 %Taxableinvestment 61,288 1,170 1.91 % 63,661 1,703 2.68 %securitiesNontaxableinvestment 13,463 368 2.73 % 9,951 297 2.98 %securitiesFederal funds 8,397 116 1.38 % 10,904 216 1.98 %soldInterestearning cash 32,767 55 0.17 % 5,419 116 2.14 %and cashequivalentsFederal HomeLoan Bank 3,352 109 3.25 % 3,150 169 5.37 %stockTotal earning 1,147,570 46,056 4.01 % 913,574 43,603 4.77 %assets Nonearning assetsAllowance for (8,301 ) (5,018 ) loan lossesFixed assets 15,465 14,998 Accruedincome and 45,871 38,032 other assetsTotal assets $ 1,200,605 $ 961,586 Interestbearing liabilitiesInterestbearing $ 200,200 $ 996 0.50 % $ 96,713 $ 855 0.88 %demanddepositsSavings 260,498 569 0.22 % 238,656 1,115 0.47 %depositsTime deposits 181,859 2,848 1.57 % 216,839 4,835 2.23 %Borrowed 84,312 1,511 1.79 % 60,341 1,822 3.02 %fundsTotalinterest 726,869 5,924 0.82 % 612,549 8,627 1.41 %bearingliabilities Noninterestbearing liabilitiesNoninterestbearing 352,489 246,357 depositsAccruedinterest and 11,153 6,322 otherliabilitiesShareholders' 110,094 96,358 equityTotalliabilitiesand $ 1,200,605 $ 961,586 shareholders'equityNet interest $ 40,132 $ 34,976 income (FTE)Net interestmargin to 3.50 % 3.83 %earningassets (FTE)

Net Interest Income

Net interest income is the amount by which interest income on earning assets exceeds the interest expenses on interest bearing liabilities. Net interest income, which includes loan fees, is influenced by changes in the balance and mix of assets and liabilities and market interest rates. The Corporation exerts some control over these factors; however, FRB monetary policy and competition have a significant impact. For analytical purposes, net interest income is adjusted to a FTE basis by adding the income tax savings from interest on tax exempt loans, and nontaxable investment securities, thus making year-to-year comparisons more meaningful.

Volume and Rate Variance Analysis

The following table sets forth the effect of volume and rate changes on interest income and expense for the periods indicated. For the purpose of this table, changes in interest due to volume and rate were determined as follows:

Volume - change in volume multiplied by the previous period's rate.Rate - change in the FTE rate multiplied by the previous period's volume.

The change in interest due to both volume and rate has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Three Months Ended Three Months Ended Twelve Months Ended December 31, 2020 December 31, 2020 December 31, 2020 Compared To Compared To Compared To September 30, 2020 December 31, 2019 December 31, 2019 Increase (Decrease) Due to Increase (Decrease) Due to Increase (Decrease) Due to Volume Rate Net Volume Rate Net Volume Rate NetChanges ininterest incomeTotal loans $ 805 $ (1,238 ) $ (433 ) $ 9,263 $ (8,576 ) $ 687 $ 9,481 $ (6,345 ) $ 3,136 Taxableinvestment 10 (28 ) (18 ) 347 (416 ) (69 ) (62 ) (471 ) (533 )securitiesNontaxableinvestment 2 ? 2 99 (76 ) 23 98 (27 ) 71 securitiesFederal ? ? ? (33 ) (33 ) (66 ) (43 ) (57 ) (100 )funds soldInterestearningcash and 3 3 6 170 (183 ) (13 ) 129 (190 ) (61 )cashequivalentsFederalHome Loan ? (2 ) (2 ) 18 (27 ) (9 ) 10 (70 ) (60 )Bank stockTotalchanges in 820 (1,265 ) (445 ) 9,864 (9,311 ) 553 9,613 (7,160 ) 2,453 interestincome Changes ininterest expenseInterestbearing (2 ) (14 ) (16 ) 955 (1,237 ) (282 ) 625 (484 ) 141 demanddepositsSavings 29 (31 ) (2 ) 300 (403 ) (103 ) 95 (641 ) (546 )depositsTime 344 (504 ) (160 ) (110 ) (572 ) (682 ) (701 ) (1,286 ) (1,987 )depositsBorrowed (96 ) 57 (39 ) 635 (754 ) (119 ) 579 (890 ) (311 )fundsTotalchanges in 275 (492 ) (217 ) 1,780 (2,966 ) (1,186 ) 598 (3,301 ) (2,703 )interestexpenseNet changein netinterest $ 545 $ (773 ) $ (228 ) $ 8,084 $ (6,345 ) $ 1,739 $ 9,015 $ (3,859 ) $ 5,156 income(FTE)

Average Yield/Rate for the Three Month Periods Ended 12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 2020 2020 2020 2020 2019Total earning assets 3.75 % 3.97 % 3.94 % 4.47 % 4.66 %Total interest bearing 0.50 % 0.63 % 0.91 % 1.28 % 1.36 %liabilitiesNet interest margin to 3.44 % 3.58 % 3.37 % 3.61 % 3.75 %earning assets (FTE)

Quarter to Date Net Interest Income (FTE) 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019Interest $ 11,624 $ 12,070 $ 11,215 $ 11,070 $ 11,076 incomeFTE 22 21 18 17 17 adjustmentTotalinterest 11,646 12,091 11,233 11,087 11,093 income(FTE)Totalinterest 972 1,189 1,618 2,145 2,158 expenseNetinterest $ 10,674 $ 10,902 $ 9,615 $ 8,942 $ 8,935 income(FTE)

Noninterest Income

Quarter to Date 12/31/ 9/30/2020 6/30/2020 3/31/2020 12/31/ 2020 2019Net gain on sales $ 2,994 $ 3,130 $ 2,644 $ 970 $ 650 of mortgage loansATM and debit card 437 460 394 355 399 incomeTrust and 445 464 321 389 337 investment servicesChange in fairvalue of mortgage (449 ) (66 ) 1,225 833 ? banking instrumentsMortgage servicing 325 293 270 262 256 feesNet mortgageservicing rights 509 559 (163 ) (50 ) 130 incomeChange in fairvalue of equity (3 ) 2 7 749 (5 )investmentsService charges on 194 177 119 219 245 deposit accountsNet gain on sales ? ? ? 668 ? of commercial loansNet gain fromcorporate owned ? ? 173 ? ? life insurancedeath benefitOther income and 224 140 302 118 117 feesTotal noninterest $ 4,676 $ 5,159 $ 5,292 $ 4,513 $ 2,129 income Residential $ 3,379 $ 3,916 $ 3,976 $ 2,015 $ 1,036 mortgage operations

Year to Date December Variance 31 2020 2019 Amount %Net gain on sales of mortgage $ 9,738 $ 1,932 $ 7,806 404.04 %loansATM and debit card income 1,646 1,581 65 4.11 %Trust and investment services 1,619 1,519 100 6.58 %Change in fair value of 1,543 ? 1,543 N/M mortgage banking instrumentsMortgage servicing fees 1,150 940 210 22.34 %Net mortgage servicing rights 855 624 231 37.02 %incomeChange in fair value of 755 46 709 1541.30 %equity investmentsService charges on deposit 709 940 (231 ) (24.57 )accounts %Net gain on sales of 668 ? 668 N/M commercial loansNet gain from corporate owned 173 ? 173 N/M life insurance death benefitOther income and fees 784 581 203 34.94 %Total noninterest income $ 19,640 $ 8,163 $ 11,477 140.60 % Residential mortgage $ 13,286 $ 3,496 9,790 280.03 %operations

Residential Mortgage Operations

Net gain on sales of mortgage loans represents the income earned on the sale of residential mortgage loans into the secondary market. Throughout 2020, the interest rate environment was very advantageous for residential mortgage originations and refinancing, resulting in record gains. Although many consumers are facing uncertainty due to the COVID-19 pandemic, residential mortgage originations and refinancing activities were substantially greater in 2020. Throughout 2020, home values and housing costs continued to rise due to inventory shortages and a lack of new construction. The Corporation expects residential mortgage activity to moderate in 2021.

Change in fair value of mortgage banking instruments represents changes in the fair value of the Corporation's interest rate lock commitments, mortgage loans held-for-sale, and mandatory forward loan sales commitments. On January 1, 2020, the Corporation adopted SAB 109, resulting in the Corporation recognizing the value of servicing at the time of commitment, rather than at the time of delivery. Additionally, the Corporation also elected the fair value option for residential mortgage loans HFS on January 1, 2020. Generally, the adoption of SAB 109 resulted in the acceleration of the timing of revenue recognition in relation to the Corporation's secondary market mortgage production. Pursuant to this adoption, changes in the fair value of mortgage banking instruments and loans held for sale are included in noninterest income.

Mortgage servicing fees includes the fees earned for servicing loans that have been sold into the secondary market. The increase in mortgage servicing fees is directly related to the increase in the size of the serviced portfolio. Mortgage servicing fees are expected to continue to increase throughout 2021.

Net mortgage servicing rights income represents income generated from the capitalization of mortgage servicing rights, net of amortization and impairment. In each of the first two quarters of 2020, the Corporation recognized impairments in its servicing portfolio as a direct result of the low interest rate environment and record level of refinancing activity. During the third and fourth quarters of 2020, these impairments were reversed.

Overall revenues from residential mortgage operations (net gains from sale of mortgage loans, change in the fair value of mortgage banking instruments, mortgage servicing fees, and net mortgage servicing rights income) increased by $9,790 or 280.03% in 2020, which represented a record level of production for the Corporation's residential mortgage team. Included in the $487,342 of residential mortgage production in 2020, was $292,130 in refinancing activity. As refinancing activity is expected to decline in 2021, revenues from residential mortgage operations will likely decline in 2021.

All Other Noninterest Income

ATM and debit card income represents fees earned on ATM and debit card transactions. The Corporation expects these fees to increase modestly into 2021.

Trust and investment services includes income the Corporation earned from contracts with customers to manage assets for investment and/or to transact on their accounts. The wealth management component is strongly correlated to changes in the stock market and as such, can vary from period to period. Trust and investment services income is expected to increase modestly in 2021.

Change in fair value of equity investments represents the income earned on equities held in the Corporation's investment portfolio. During the first quarter of 2020, an equity position held by the Corporation was bought out through an acquisition, resulting in a recognized gain of $732. The Corporation does not anticipate any significant changes in fair value from equity sales in the foreseeable future.

Service charges on deposit accounts includes fees earned from deposit customers for transaction-based, account maintenance and overdraft services. The year-over-year decrease in service charges on deposit accounts is primarily due to a shift of customer demand toward deposit accounts with no or reduced service charges, as well as a temporary reduction in fees charged due to the COVID-19 pandemic. Service charges on deposit accounts are expected to approximate current levels into 2021.

Net gain on sales of commercial loans represents the income earned from the sale of commercial loans into the secondary market. During the first quarter of 2020, the Corporation sold the guaranteed portion of one SBA loan and one USDA loan. The Corporation does not expect to receive any gains from the sale of commercial loans in 2021.

Net gain from corporate owned life insurance death benefit is recognized in the event of the death of an insured individual. The death of an insured individual occurred in the second quarter of 2020. The Corporation does not expect to receive any gains from COLI death benefits in 2021.

Other income and fees includes miscellaneous other income items, none of which are individually significant. Other income and fees are expected to approximate current levels throughout 2021.

Noninterest Expenses

Quarter to Date 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/ 2019Total compensation $ 4,958 $ 4,531 $ 4,252 $ 4,248 $ 4,037 Professional 938 524 571 522 582 servicesFurniture and 607 614 618 610 575 equipmentData processing 501 503 535 442 362 FHLB prepayment 1,907 ? ? ? ? penaltyOccupancy 475 491 435 476 467 Loan and 359 292 229 162 203 collectionAdvertising and 184 284 255 252 232 promotionalATM and debit card 125 109 92 108 98 Amortization ofcore deposit 90 91 90 90 113 intangiblesTelephone and 64 91 86 96 115 communicationFDIC insurance 59 55 59 55 6 premiumsOther general and 704 633 587 625 625 administrativeTotal noninterest $ 10,971 $ 8,218 $ 7,809 $ 7,686 $ 7,415 expenses

Year to Date December Variance 31 2020 2019 Amount %Total compensation $ 17,989 $ 14,946 $ 3,043 20.36 %Professional services 2,555 1,960 595 30.36 %Furniture and equipment 2,449 1,998 451 22.57 %Data processing 1,981 1,416 565 39.90 %FHLB prepayment penalty 1,907 ? 1,907 N/M Occupancy 1,877 1,774 103 5.81 %Loan and collection 1,042 552 490 88.77 %Advertising and promotional 975 908 67 7.38 %ATM and debit card 434 402 32 7.96 %Amortization of core deposit 361 451 (90 ) (19.96 )intangibles %Telephone and communication 337 444 (107 ) (24.10 ) %FDIC insurance premiums 228 144 84 58.33 %Other general and administrative 2,549 2,228 321 14.41 %Total noninterest expenses $ 34,684 $ 27,223 $ 7,461 27.41 %

Total compensation includes salaries, commissions and incentives, employee benefits, and payroll taxes. Total compensation has increased due to annual merit increases and an increase in commissions and incentives paid. Fluctuations in commissions and incentives are primarily driven by residential mortgage originations, which can vary significantly from period to period, however, commissions are expected to decline in 2021.

Professional services include expenses relating to third-party professional services. These services include, but are not limited to, regulatory, auditing, consulting, and legal. These expenses are expected to increase in future periods to ensure compliance with audit and regulatory requirements.

Furniture and equipment and occupancy expenses primarily consist of depreciation, repairs and maintenance, property taxes, utilities, insurance, certain service contracts, and other related items. These expenses are expected to increase with the size and complexity of the Corporation.

Data processing primarily includes the expenses relating to the Corporation's core data processor. These expenses are expected to increase throughout 2021 with the size and complexity of the Corporation.

During the fourth quarter of 2020, the Corporation paid off three Federal Home Loan Bank borrowings, totaling $30,000. The Corporation incurred a one-time early payoff fee in the amount $1,907. The payoff was executed to enhance net interest income and net interest margins in each of the next three years. The weighted average rate of the three FHLB borrowings was 2.17%. The Corporation is expected to save approximately $650 during 2021.

Loan and collection includes expenses related to the origination and collection of loans, as well as expenses related to OREO. The increase in expenses is a direct result of increased loan volume, as the current low interest rate environment has been attractive for borrowers. The Corporation may continue to experience an increase in these expenses into 2021.

Advertising and promotional includes the Corporation's media costs and any donations or sponsorships made on behalf of the Corporation. The annual increase in expenses is a direct result of the Corporation enhancing its marketing efforts to attract new and expand existing customer loans and deposit accounts. In addition to traditional marketing strategies, the Corporation rolled out a new branding strategy in 2020, which resulted in elevated advertising and promotional expenses. Total advertising and promotional expenses are expected to decline slightly in 2021.

ATM and debit card expenses fluctuate based on customer and non-customer utilization of ATMs and customer debit card volumes. The Corporation expects these fees to increase modestly throughout 2021.

Amortization of core deposit intangibles relates to the core deposits acquired from Community Bancorp, Inc. on December 31, 2016 and is expected to continue to decline as the core deposit intangible is being amortized based on the sum-of-years-digits method.

Telephone and communication includes expenses relating to the Corporation's communication systems. These expenses are expected to maintain current levels throughout 2021.

FDIC insurance premiums typically fluctuate based on the size of the Corporation's balance sheet, capital position, overall risk profile, and examination ratings. FDIC insurance premiums decreased significantly in 2019 due to a Small Bank Assessment Credit issued by the FDIC. FDIC insurance premiums are expected to increase in 2021 primarily due to the Corporation's growth in total assets.

Other general and administrative includes miscellaneous other expense items, none of which are typically significant. Other general and administrative expenses are expected to approximate current levels into the foreseeable future.

Balance Sheet Breakdown and Analysis

12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019ASSETS Cash and cash $ 46,367 $ 75,032 $ 35,190 $ 71,140 $ 46,803 equivalentsTotalinvestment 76,501 78,179 75,526 76,312 61,621 securitiesLoans 27,306 34,833 46,354 21,154 19,491 held-for-saleGross loans 1,066,562 1,060,885 1,044,564 865,577 870,555 Lessallowance for 10,900 10,100 8,991 7,250 5,813 loan lossesNet loans 1,055,662 1,050,785 1,035,573 858,327 864,742 All other 45,507 46,016 45,051 44,247 42,102 assetsTotal assets $ 1,251,343 $ 1,284,845 $ 1,237,694 $ 1,071,180 $ 1,034,759 LIABILITIESAND SHAREHOLDERS'EQUITYTotal $ 1,071,976 $ 1,061,470 $ 1,018,287 $ 883,837 $ 863,102 depositsTotalborrowed 49,000 96,217 96,217 71,500 61,500 fundsAccruedinterestpayable and 13,932 13,077 14,221 11,015 8,713 otherliabilitiesTotal 1,134,908 1,170,764 1,128,725 966,352 933,315 liabilitiesTotalshareholders' 116,435 114,081 108,969 104,828 101,444 equityTotalliabilitiesand $ 1,251,343 $ 1,284,845 $ 1,237,694 $ 1,071,180 $ 1,034,759 shareholders'equity

12/31/2020 vs 9/30/2020 12/31/2020 vs 12/31/2019 Variance Variance Amount % Amount %ASSETS Cash and cash $ (28,665 ) (38.20 ) $ (436 ) (0.93 )equivalents % %Total investment (1,678 ) (2.15 ) 14,880 24.15 %securities %Loans held-for-sale (7,527 ) (21.61 ) 7,815 40.10 % %Gross loans 5,677 0.54 % 196,007 22.52 %Less allowance for loan 800 7.92 % 5,087 87.51 %lossesNet loans 4,877 0.46 % 190,920 22.08 %All other assets (509 ) (1.11 ) 3,405 8.09 % %Total assets $ (33,502 ) (2.61 ) $ 216,584 20.93 % % LIABILITIES AND SHAREHOLDERS' EQUITYTotal deposits $ 10,506 0.99 % $ 208,874 24.20 %Total borrowed funds (47,217 ) (49.07 ) (12,500 ) (20.33 ) % %Accrued interestpayable and other 855 6.54 % 5,219 59.90 %liabilitiesTotal liabilities (35,856 ) (1.61 ) 201,593 11.22 % %Total shareholders' 2,354 2.06 % 14,991 14.78 %equityTotal liabilities and $ (33,502 ) (2.61 ) $ 216,584 20.93 %shareholders' equity %

Cash and cash equivalents

12/31/2020 9/30/ 6/30/2020 3/31/2020 12/31/ 2020 2019Cash and cash equivalentsNoninterest bearing $ 22,712 $ 22,108 $ 20,369 $ 33,312 $ 17,754Interest bearing 23,655 52,924 14,821 37,828 6,049Federal funds sold ? ? ? ? 23,000Cash and cash $ 46,367 $ 75,032 $ 35,190 $ 71,140 $ 46,803equivalents

12/31/2020 vs 9/30/2020 12/31/2020 vs 12/31/ 2019 Variance Variance Amount % Amount %Cash and cash equivalents Noninterest bearing $ 604 2.73 % $ 4,958 27.93 %Interest bearing (29,269 ) (55.30 )% 17,606 291.06 %Federal funds sold ? N/M (23,000 ) (100.00 )%Cash and cash equivalents $ (28,665 ) (38.20 )% $ (436 ) (0.93 )%

Cash and cash equivalents, which is comprised of cash and due from banks and federal funds sold, fluctuate from period to period based on loan demand and variances in deposit accounts.

Primary and secondary liquidity sources

While the Corporation continues to maintain a strong liquidity position, it is important to monitor all liquidity sources. The following table outlines the Corporation's primary and secondary sources of liquidity as of:

12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019Cash andcash $ 46,367 $ 75,032 $ 35,190 $ 71,140 $ 46,803 equivalentsUnpledgedinvestment 59,025 58,739 52,647 51,889 40,094 securitiesFHLBborrowing 140,000 97,500 97,500 42,500 52,500 availabilityFederalfundspurchased 21,500 21,500 21,500 17,500 17,500 lines ofcreditFundsavailablethrough the 10,000 10,000 10,000 10,000 10,000 Fed DiscountWindowPPPLF 177,845 206,343 202,184 ? ? Totalliquidity $ 454,737 $ 469,114 $ 419,021 $ 193,029 $ 166,897 sources

Total investment securities

12/31/2020 9/30/ 6/30/2020 3/31/2020 12/31/ 2020 2019Available-for-sale U.S. Government $ 7,935 $ 19,311 $ 21,339 $ 23,610 $ 18,867and federal agencyState and 15,768 15,729 14,115 10,657 10,691municipalMortgage backed 19,101 20,886 12,335 10,176 10,748residentialCertificates of 5,180 5,921 6,665 8,644 6,659depositCollateralizedmortgage 23,110 11,141 15,736 18,288 9,527obligations -agenciesUnrealized gain/(loss) on 1,932 2,099 2,242 1,735 1,092available-for-salesecuritiesTotal 73,026 75,087 72,432 73,110 57,584available-for-saleHeld-to-maturitystate and 1,973 1,977 1,981 2,091 2,096municipalEquity securities 1,502 1,115 1,113 1,111 1,941Total investment $ 76,501 $ 78,179 $ 75,526 $ 76,312 $ 61,621securities



12/31/2020 vs 9/30/2020 12/31/2020 vs 12/31/2019 Variance Variance Amount % Amount %Available-for-sale U.S. Government and $ (11,376 ) (58.91 ) $ (10,932 ) (57.94 )federal agency % %State and municipal 39 0.25 % 5,077 47.49 %Mortgage backed (1,785 ) (8.55 ) 8,353 77.72 %residential %Certificates of deposit (741 ) (12.51 ) (1,479 ) (22.21 ) % %Collateralized mortgage 11,969 107.43 % 13,583 142.57 %obligations - agenciesUnrealized gain/(loss) )on available-for-sale (167 ) (7.96 % 840 76.92 %securitiesTotal (2,061 ) (2.74 ) 15,442 26.82 %available-for-sale %Held-to-maturity state (4 ) (0.20 ) (123 ) (5.87 )and municipal % %Equity securities 387 34.71 % (439 ) (22.62 ) %Total investment $ (1,678 ) (2.15 ) $ 14,880 24.15 %securities %

The amortized cost and fair value of AFS investment securities as of December31, 2020 were as follows:

Maturing After Securities Due in After One Five with Variable One Year Year But Years But After Ten Monthly Total or Less Within Within Years Payments or Five Years Ten Years Noncontractual MaturitiesU.S.Government and $ 4,994 $ 2,941 $ ? $ ? $ ? $ 7,935 federal agencyState and 1,784 6,237 5,665 2,082 ? 15,768 municipalMortgagebacked ? ? ? ? 19,101 19,101 residentialCertificates 990 4,190 ? ? ? 5,180 of depositCollateralizedmortgage ? ? ? ? 23,110 23,110 obligations -agenciesTotal $ 7,768 $ 13,368 $ 5,665 $ 2,082 $ 42,211 $ 71,094 amortized costFair value $ 7,847 $ 14,166 $ 5,909 $ 2,420 $ 42,684 $ 73,026

The amortized cost and fair value of HTM investment securities as of December31, 2020 were as follows:

Maturing After Securities Due in After One Five with Variable One Year But Years After Monthly Year or Within But Ten Payments or Total Less Five Within Years Noncontractual Years Ten Maturities YearsState and $ 413 $ 1,110 $ 370 $ 80 $ ? $ 1,973 municipalFair $ 416 $ 1,154 $ 398 $ 86 $ ? $ 2,054 value

Throughout 2020, yields on bonds that met the Corporation's investment standards declined significantly. An influx of liquidity during the year led the Corporation to make investment security purchases in order to stabilize net interest margin and generate additional net interest income. Total investment securities are expected to grow with overall balance sheet growth as it is an important source of liquidity and consistent earnings. The following table summarizes information as of December31, 2020 for investment securities purchased YTD:

Book Value Fully Taxable Equivalent Weighted Average YieldU.S. Government and federal $ ? ? %agencyState and municipal 7,087 1.69 %Collateralized mortgage 20,902 1.09 %obligations - agenciesCertificates of deposit ? ? %Mortgage backed residential 12,556 1.09 %Held-to-maturity state and ? ? %municipalTotal $ 40,545 1.19 %

Loans held-for-sale

Loans HFS represent the balance of loans that have been committed to be sold to the secondary market, but have not yet been delivered. The level of loans HFS fluctuates based on loan demand as well as the timing of loan deliveries to the secondary market.

During the first quarter of 2020, the Corporation opted to recognize loans HFS at fair value which represents the price at which the loans could be sold in the principal market at the measurement date.

Loans and allowance for loan losses

The following tables outline the composition and changes in the loan portfolio as of:

12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019Commercial $ 241,424 $ 271,113 $ 260,440 $ 67,731 $ 71,689 Commercial 517,054 483,275 469,039 462,561 455,289 real estateTotalcommercial 758,478 754,388 729,479 530,292 526,978 loansResidential 262,770 261,375 268,295 285,392 292,946 mortgageHome equity 39,900 39,456 40,114 43,222 41,987 Totalresidential 302,670 300,831 308,409 328,614 334,933 real estateloansConsumer 5,414 5,666 6,676 6,671 8,644 Gross loans 1,066,562 1,060,885 1,044,564 865,577 870,555 Allowancefor loan (10,900 ) (10,100 ) (8,991 ) (7,250 ) (5,813 )lossesLoans, net $ 1,055,662 $ 1,050,785 $ 1,035,573 $ 858,327 $ 864,742

12/31/2020 vs 9/30/2020 12/31/2020 vs 12/31/2019 Variance Variance Amount % Amount %Commercial $ (29,689 ) (10.95 ) $ 169,735 236.77 % %Commercial real estate 33,779 6.99 % 61,765 13.57 %Total commercial loans 4,090 0.54 % 231,500 43.93 %Residential mortgage 1,395 0.53 % (30,176 ) (10.30 ) %Home equity 444 1.13 % (2,087 ) (4.97 ) %Total residential real 1,839 0.61 % (32,263 ) (9.63 )estate loans %Consumer (252 ) (4.45 ) (3,230 ) (37.37 ) % %Gross loans 5,677 0.54 % 196,007 22.52 %Allowance for loan (800 ) 7.92 % (5,087 ) 87.51 %lossesLoans, net $ 4,877 0.46 % $ 190,920 22.08 %

The following table presents historical loan balances by portfolio segment and impairment evaluation as of:

12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019Originatedloanscollectively evaluatedforimpairmentCommercial $ 241,009 $ 270,174 $ 259,384 $ 66,524 $ 70,322 Commercial 497,133 469,353 452,084 446,713 436,626 real estateResidential 259,080 257,395 263,997 280,265 286,635 mortgageHome equity 37,701 37,022 37,663 40,459 39,023 Consumer 5,248 5,477 6,445 6,391 8,330 Subtotal 1,040,171 1,039,421 1,019,573 840,352 840,936 Originatedloansindividually evaluatedforimpairmentCommercial ? ? ? ? ? Commercial 8,872 2,204 3,290 1,658 1,668 real estateResidential 699 655 663 672 1,362 mortgageHome equity ? ? ? ? ? Consumer 2 3 3 5 ? Subtotal 9,573 2,862 3,956 2,335 3,030 Acquiredloanscollectively evaluatedforimpairmentCommercial 387 910 1,057 1,204 1,362 Commercial 10,755 11,368 13,293 13,630 16,346 real estateResidential 2,073 2,335 2,683 3,459 3,911 mortgageHome equity 2,173 2,415 2,432 2,743 2,943 Consumer 163 185 226 273 314 Subtotal 15,551 17,213 19,691 21,309 24,876 Acquiredloansindividually evaluatedforimpairmentCommercial ? ? ? ? ? Commercial ? ? ? ? ? real estateResidential 54 55 ? 58 58 mortgageHome equity 26 ? ? ? ? Consumer ? ? ? ? ? Subtotal 80 55 ? 58 58 Acquiredloans withdeteriorated creditqualityCommercial 28 29 (1 ) 3 5 Commercial 294 350 372 560 649 real estateResidential 864 935 952 938 980 mortgageHome equity ? 19 19 20 21 Consumer 1 1 2 2 ? Subtotal 1,187 1,334 1,344 1,523 1,655 Gross Loans $ 1,066,562 $ 1,060,885 $ 1,044,564 $ 865,577 $ 870,555 Totaloriginated $ 1,049,744 $ 1,042,283 $ 1,023,529 $ 842,687 $ 843,966 loansTotalacquired 16,818 18,602 21,035 22,890 26,589 loansGross loans $ 1,066,562 $ 1,060,885 $ 1,044,564 $ 865,577 $ 870,555

The following table presents historical allowance for loan losses allocations by portfolio segment and impairment evaluation as of:

12/31/2020 9/30/2020 6/30/2020 3/31/ 12/31 2020 /2019Originated loanscollectively evaluated for impairmentCommercial $ 673 $ 632 $ 535 $ 478 $ 358 Commercial real estate 5,561 5,113 4,564 3,609 2,790 Residential mortgage 3,282 3,281 3,080 2,442 1,917 Home equity 424 416 353 280 195 Consumer 97 101 102 89 87 Subtotal 10,037 9,543 8,634 6,898 5,347 Originated loansindividually evaluated for impairmentCommercial ? ? ? ? ? Commercial real estate 602 289 100 111 127 Residential mortgage 4 5 5 6 128 Home equity ? ? ? ? ? Consumer 2 3 3 5 ? Subtotal 608 297 108 122 255 Acquired loanscollectively evaluated for impairmentCommercial ? 1 1 1 1 Commercial real estate 9 7 9 7 5 Residential mortgage 8 9 9 9 8 Home equity 16 18 15 14 12 Consumer ? ? ? ? ? Subtotal 33 35 34 31 26 Acquired loans withdeteriorated credit qualityCommercial ? ? ? ? ? Commercial real estate 32 32 22 39 34 Residential mortgage 190 189 189 156 147 Home equity ? 4 4 4 4 Consumer ? ? ? ? ? Subtotal 222 225 215 199 185 Allowance for loan losses $ 10,900 $ 10,100 $ 8,991 $ 7,250 $ 5,813 Total originated loans $ 10,645 $ 9,840 $ 8,742 $ 7,020 $ 5,602 Total acquired loans 255 260 249 230 211 Allowance for loan losses $ 10,900 $ 10,100 $ 8,991 $ 7,250 $ 5,813 Commercial $ 673 $ 633 $ 536 $ 479 $ 359 Commercial real estate 6,204 5,441 4,695 3,766 2,956 Residential mortgage 3,484 3,484 3,283 2,613 2,200 Home equity 440 438 372 298 211 Consumer 99 104 105 94 87 Allowance for loan losses $ 10,900 $ 10,100 $ 8,991 $ 7,250 $ 5,813

The following table summarizes the Corporation's current, past due, and nonaccrual loans as of:

12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019Accruing interestCurrent $ 1,057,404 $ 1,058,437 $ 1,042,589 $ 862,581 $ 867,901 Past due 1,165 1,703 948 2,152 1,213 30-89 daysPast due90 days or 50 86 361 166 239 moreTotalaccruing 1,058,619 1,060,226 1,043,898 864,899 869,353 interestNonaccrual 7,943 659 666 678 1,202 Total $ 1,066,562 $ 1,060,885 $ 1,044,564 $ 865,577 $ 870,555 loansTotalloans pastdue and in $ 9,158 $ 2,448 $ 1,975 $ 2,996 $ 2,654 nonaccrualstatus

The following table summarizes the Corporation's nonperforming assets as of:

12/31/ 9/30/ 6/30/2020 3/31/2020 12/31/ 2020 2020 2019Nonaccrual loans $ 7,943 $ 659 $ 666 $ 678 $ 1,202 Accruing loans past due 50 86 361 166 239 90 days or moreTotal nonperforming loans 7,993 745 1,027 844 1,441 Other real estate owned ? ? ? 400 ? Total nonperforming $ 7,993 $ 745 $ 1,027 $ 1,244 $ 1,441 assets

The following table summarizes the Corporation's primary asset quality measures as of:

12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 2020 2020 2020 2020 2019Nonperforming loans to gross 0.75 % 0.07 % 0.10 % 0.10 % 0.17 %loansNonperforming assets to total 0.64 % 0.06 % 0.08 % 0.12 % 0.14 %assetsAllowance for loan losses to 1.02 % 0.95 % 0.86 % 0.84 % 0.67 %gross loansAllowance for loan losses to 1.23 % 1.19 % 1.07 % 0.84 % 0.67 %gross loans, less PPP loans

During the fourth quarter, the Corporation transferred one commercial real estate loan with an outstanding principal balance of $7,214 to nonaccrual. The underlying collateral for this loan is an extended stay hotel. The hotel's current cash flow is insufficient to service the debt in accordance with the contractual terms of the note and, as such, the loan continues to be on payment deferrals. A specific reserve has been established for the estimated collateral deficiency (based on a current appraisal), net of a 70% USDA guarantee.

The following table summarizes the balance of net unamortized discounts on purchased loans as of:

12/31/ 9/30/ 6/30/2020 3/31/2020 12/31/2019 2020 2020Netunamortizeddiscount on $ 773 $ 877 $ 1,058 $ 1,233 $ 1,462 purchasedloans

As outlined in the preceding tables, the Corporation has grown its loan portfolio over the past 12 months with most of the growth coming in the form of commercial and commercial real estate loans. Despite the significant growth, the Corporation has not relaxed its underwriting standards. Included in the increase in commercial loans since December31, 2019 were $177,845 of PPP loans.

Despite historically strong credit quality indicators, there continues to be significant uncertainty surrounding the overall impact of the COVID-19 pandemic on the loan portfolio. This uncertainty resulted in the Corporation increasing the ALLL by $5,087, or 87.51%, since December 31, 2019. Management will continue to monitor the loan portfolio to ensure that the ALLL remains appropriate.

The following table summarizes the average loan size as of:

12/31/ 9/30/ 6/30/ 3/31/ 12/31/ 2020 2020 2020 2020 2019Commercial $ 169 $ 166 $ 171 $ 214 $ 228 Commercial real estate 707 672 654 644 641 Total commercial loans 351 321 325 513 514 Residential mortgage 182 180 177 194 198 Home equity 45 45 45 46 44 Total residential real 130 129 128 137 138 estate loansConsumer 22 22 25 26 32 Gross loans $ 226 $ 215 $ 213 $ 234 $ 234

COVID-19, CARES Act and SBA activity

The communities which the Corporation serves are not immune to the fallout of the COVID-19 pandemic. The Corporation has committed significant efforts to work with customers through temporary loan modifications and participation in the PPP loan program through the SBA.

The Corporation considered the modification type on a loan-by-loan basis. Most modifications for loans held within the Corporation's loan portfolio resulted in the deferment of principal and interest payments for 6 months or less.

The Corporation also provides a variety of accommodations for loans that the Corporation services for FHLMC including providing mortgage forbearance for up to 12 months, waiving assessments of penalties and late fees, halting foreclosure actions and evictions, and offering loan modification options that lower payments or keep payments the same after the forbearance period.

As outlined in the following table, the majority of the Corporation's portfolio and serviced loans have returned to normal principal and interest payments. The balance of those loans with deferrals are actively monitored and specific reserves have been established where appropriate.

The table below outlines the active COVID-19 related loan modifications as of December31, 2020:

Number of Outstanding % of Modifications Balance PortfolioCommercial 2 $ 1,303 0.54 %Commercial real estate 8 15,504 3.00 %Total commercial loan 10 16,807 2.22 %modificationsPortfolio residential mortgage 5 333 0.13 %loansHome equity 1 21 0.05 %Total residential real estate 6 354 0.12 %loan modificationsConsumer ? ? ? %Total portfolio modifications 16 $ 17,161 1.61 % Residential mortgage loans 55 $ 9,423 1.80 %serviced for FHLMC

The accommodation industry was particularly impacted by the COVID-19 pandemic. Due to executive action put in place by the government, including stay-at-home orders and travel restrictions, hotel occupancy rates were reduced drastically. The Corporation has 15 commercial loans in its portfolio in the accommodation industry with a book balance of $19,980. Of these loans, approximately 52% are government-backed by guarantees from either the SBA or USDA.

The Corporation was extremely active in participating in the PPP loan program. As of December31, 2020, the Corporation funded 1,370 loans totaling $216,205. During the fourth quarter of 2020, the SBA began processing PPP forgiveness applications, which reduced the outstanding balance of PPP loans to $177,845 as of December31, 2020. As of December31, 2020, the Corporation received forgiveness payments for 232 PPP loans from the SBA.

The Corporation generated $6,799 in fees from the SBA through the PPP loan program. The income is being recognized over the life of the PPP loans (24 to 60 months) based on the level yield method. As of December31, 2020, the Corporation has recognized $3,560 in income, with $3,239 remaining as unearned income.

All other assets

The following tables outline the composition and changes in other assets as of:

12/31/2020 9/30/ 6/30/2020 3/31/2020 12/31/ 2020 2019Premises and $ 15,461 $ 15,267 $ 15,323 $ 15,533 $ 15,245equipment, netCorporate owned life 10,291 10,225 10,115 10,380 10,316insuranceAccrued interest 5,068 5,645 5,266 3,124 2,877receivableMortgage servicing 4,885 4,376 3,816 3,980 4,030rightsFederal Home Loan Bank 3,488 3,488 3,488 3,150 3,150stockGoodwill 3,219 3,219 3,219 3,219 3,219Derivatives 1,331 1,772 1,311 1,063 125Core deposit 541 632 722 812 902intangiblesRight-of-use assets 364 387 409 432 475Other real estate ? ? ? 400 ?ownedOther assets 859 1,005 1,382 2,154 1,763All other assets $ 45,507 $ 46,016 $ 45,051 $ 44,247 $ 42,102

12/31/2020 vs 9/30/2020 12/31/2020 vs 12/31/2019 Variance Variance Amount % Amount %Premises and equipment, net $ 194 1.27 % $ 216 1.42 %Corporate owned life 66 0.65 % (25 ) (0.24 )%insuranceAccrued interest receivable (577 ) (10.22 )% 2,191 76.16 %Mortgage servicing rights 509 11.63 % 855 21.22 %Federal Home Loan Bank stock ? ? % 338 10.73 %Goodwill ? ? % ? ? %Derivatives (441 ) (24.89 )% 1,206 964.80 %Core deposit intangibles (91 ) (14.40 )% (361 ) (40.02 )%Right-of-use assets (23 ) (5.94 )% (111 ) (23.37 )%Other real estate owned ? N/M ? N/M Other assets (146 ) (14.53 )% (904 ) (51.28 )%All other assets $ (509 ) (1.11 )% $ 3,405 8.09 %

Mortgage servicing rights are servicing assets that are recognized from the sales of mortgage loans. A portion of the cost of originating the loan is allocated to the servicing right based on relative fair value. The increase in mortgage servicing rights is due to the increased volume of residential mortgage loan sales. The Corporation expects mortgage servicing rights to increase, as residential real estate lending is expected to continue to remain strong into 2021.

Derivatives represent the fair value of interest rate lock commitments and mandatory forward loan sales commitments that are in a gain position. These balances can fluctuate from period to period based on changes in interest rates and the volume of the Corporation's loan pipeline.

Right-of-use assets were established pursuant to the adoption of ASU 2016-02, "Leases (Topic 842)", on January 1, 2019. Right-of-use assets are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease term, for leases that are longer than 12 months.

Total deposits

The following tables outline the composition and changes in the deposit portfolio as of:

12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/ 2019Noninterestbearing $ 378,733 $ 391,706 $ 383,452 $ 281,848 $ 260,503demandInterest bearingSavings 290,343 269,051 245,957 215,748 215,218Moneymarket 113,729 99,252 90,504 79,070 88,350demandNOW 101,419 120,681 122,477 83,910 75,976Time 187,752 180,780 175,897 223,261 223,055depositsTotal $ 1,071,976 $ 1,061,470 $ 1,018,287 $ 883,837 $ 863,102deposits

12/31/2020 vs 9/30/2020 12/31/2020 vs 12/31/2019 Variance Variance Amount % Amount %Noninterest bearing $ (12,973 ) (3.31 ) $ 118,230 45.39 %demand %Interest bearing Savings 21,292 7.91 % 75,125 34.91 %Money market demand 14,477 14.59 % 25,379 28.73 %NOW (19,262 ) (15.96 ) 25,443 33.49 % %Time deposits 6,972 3.86 % (35,303 ) (15.83 ) %Total deposits $ 10,506 0.99 % $ 208,874 24.20 %

The Corporation has continued its focus of growing non-contractual deposits while supplementing funding with time deposits. The Corporation has been able to drive this meaningful increase through enhanced organic growth strategies. The Corporation will continue to monitor deposit growth and adjust interest rates in order to minimize downward pressure on margins.

Schedule of time deposit maturities

The following table summarizes the contractual maturities of the time deposits as of December31, 2020:

Maturity Buckets 3 Months or 3 to 6 6 to 9 9 to 12 Beyond 12 Less Months Months Months MonthsBalance $ 70,975 $ 31,251 $ 33,057 $ 16,780 $ 35,689 Weightedaverage 0.63 % 0.82 % 0.77 % 0.54 % 0.99 %yield Cumulative Maturities 3 Months or Up to 6 Up to 9 Up to 12 Total Less Months Months MonthsBalance $ 70,975 $ 102,226 $ 135,283 $ 152,063 $ 187,752 Weightedaverage 0.63 % 0.69 % 0.71 % 0.69 % 0.75 %yield

The repricing of time deposits will have a significant impact on their weighted average yield. Current rates offered by the Corporation have time deposit rates ranging from 0.05% to 0.55% depending on the term and opening balance.

Total borrowed funds

The following tables outline the composition and changes in borrowed funds as of:

12/31/20 9/30/20 6/30/20 3/31/20 12/31/19Federal Home Loan Bank $ 35,000 $ 77,500 $ 77,500 $ 57,500 $ 47,500borrowingsSubordinated debentures 14,000 14,000 14,000 14,000 14,000PPPLF ? 4,717 4,717 ? ?Federal funds purchased ? ? ? ? ?Total borrowed funds $ 49,000 $ 96,217 $ 96,217 $ 71,500 $ 61,500

12/31/2020 vs 9/30/2020 12/31/2020 vs 12/31/ 2019 Variance Variance Amount % Amount %Federal Home Loan Bank $ (42,500 ) (54.84 ) $ (12,500 ) (26.32 )borrowings % %Subordinated debentures ? ? % ? ? %PPPLF (4,717 ) (100.00 ) ? N/M %Federal funds purchased ? ? % ? ? %Total borrowed funds $ (47,217 ) (49.07 ) $ (12,500 ) (20.33 ) % %

The Corporation utilizes a mix of borrowed funds and organic deposit growth to fund loan demand. The increase in Federal Home Loan Bank borrowings in the second quarter of 2020 was solely due to the Corporation funding PPP loans. The decrease in Federal Home Loan Bank borrowings in the fourth quarter of 2020 was primarily due to early payoffs of three FHLB borrowings totaling $30,000.

Total borrowed funds are expected to approximate current levels in 2021 as there are no scheduled maturities. The Corporation continually analyzes the market for opportunities and will borrow funds when deemed financially beneficial.

Wholesale funding sources

The following tables outline the composition and changes in wholesale funding sources as of:

12/31/20 9/30/20 6/30/20 3/31/20 12/31/19Federal HomeLoan Bank $ 35,000 $ 77,500 $ 77,500 $ 57,500 $ 47,500borrowingsBrokered money ? 25,029 25,010 ? ?market demandBrokered time 20,000 28,605 28,837 28,605 28,605depositsSubordinated 14,000 14,000 14,000 14,000 14,000debenturesInternet time 2,839 10,208 11,690 18,005 18,009depositsPPPLF ? 4,717 4,717 ? ?Totalwholesale $ 71,839 $ 160,059 $ 161,754 $ 118,110 $ 108,114funds

12/31/2020 vs 9/30/2020 12/31/2020 vs 12/31/ 2019 Variance Variance Amount % Amount %Federal Home Loan Bank $ (42,500 ) (54.84 ) $ (12,500 ) (26.32 )borrowings % %Brokered money market demand (25,029 ) (100.00 ) ? N/M %Brokered time deposits (8,605 ) (30.08 ) (8,605 ) (30.08 ) % %Subordinated debentures ? ? ? ? %Internet time deposits (7,369 ) (72.19 ) (15,170 ) (84.24 ) % %PPPLF (4,717 ) (100.00 ) ? N/M %Total wholesale funds $ (88,220 ) (55.12 ) $ (36,275 ) (33.55 ) % %

The Corporation utilizes wholesale funds to manage balance sheet growth. Wholesale funding has historically been more expensive than core deposits, however, due to the COVID-19 pandemic, the FRB has kept Fed funds rates near zero. The Corporation continually analyzes sources of wholesale funding when the increases in interest earning assets out-pace the increases in core deposits.

Accrued interest payable and other liabilities

Accrued interest payable and other liabilities includes accrued interest payable, federal income taxes payable, deferred federal income taxes payable, and all other liabilities (none of which are individually significant). Accrued interest payable and other liabilities are not expected to fluctuate significantly in future periods.

Total shareholders' equity

Total shareholders' equity includes common stock, retained earnings, and AOCI. Total shareholders' equity is expected to continue to grow throughout 2021 through the Corporation's earnings. In April 2020, the Corporation's Board of Directors amended its common stock repurchase plan to authorize the repurchase of up to $5,000 of common stock. During the fourth quarter of 2020, the Corporation repurchased 5,640 shares for $110.

Stock Performance

The following graph compares the cumulative total shareholder return on the Corporation's common stock for the last five years with the cumulative total return on the ABA NASDAQ Community Bank Index (NASDAQ: XX:ABAQ) over the same period. The graph assumes the value of an investment in the Corporation's common stock and the ABA NASDAQ Community Bank Index was $100 atDecember31, 2015and all dividends were reinvested.

The graphaccompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/d09cbdf7-6e1d-421d-b74d-c95960b6fe9a

Date FETM ABAQ Index12/31/2015 100.00 100.0012/31/2016 119.19 135.9812/31/2017 141.41 136.9812/31/2018 158.44 114.2212/31/2019 190.98 137.4412/31/2020 169.84 117.60

Abbreviations and Acronyms

ABA: American Bankers Association HTM: Held-to-maturityAFS: Available-for-sale IRA: Individual retirement accountALLL: Allowance for loan losses ITM: Interactive teller machineAOCI: Accumulated other MSR: Mortgage servicing rightscomprehensive incomeASU: Accounting Standards Update N/M: Not meaningfulATM: Automated teller machine NASDAQ: National Association of Securities Dealers Automated QuotationsCARES Act: Coronavirus Aid, Relief,and Economic Security Act NOW: Negotiable order of withdrawalCET1: Common equity tier 1 NSF: Non-sufficient fundsCOVID-19: Coronavirus Disease 2019 OREO: Other real estate ownedFDIC: Federal Deposit Insurance PPP: Paycheck Protection ProgramCorporationFHLB: Federal Home Loan Bank PPPLF: Paycheck Protection Program Liquidity FacilityFHLMC: Federal Home Loan Mortgage QTD: Quarter-to-dateCorporationFRB: Federal Reserve Bank SAB: Staff Accounting BulletinFTE: Fully taxable equivalent SBA: Small Business AssociationGAAP: Generally Accepted Accounting USDA: United States Department ofPrinciples AgricultureHFS: Held-for-sale YTD: Year-to-date

AboutFentura Financial, Inc.andThe State Bank

Fentura Financial, Inc. is the holding company for The State Bank. It was formed in 1987 and is traded on the OTCQX exchange under the symbol FETM, and was recognized as one of the Top 50 performing stocks in 2018 and 2019 on that exchange.

The State Bank is a full-service, 5-Star Bauer Financial rated commercial, retail and trust bank headquartered in Fenton, Michigan. It currently operates 15 full-service branches in Genesee, Livingston, Oakland, Saginaw, and Shiawassee Counties and a loan production office in Saginaw County. The State Bank was ranked #22 by S&P Global in terms of 2019 performance for banks under $2 billion in assets. The State Banks commercial department provides a complete array of products including lines of credit, term loans, commercial mortgages, SBA loans and a full-suite of cash management products. The retail department offers personal checking, savings, time and IRA deposit accounts and a wide array of loan products including home equity, auto and personal loans. The residential loan department offers construction, purchase and refinance residential mortgage loans. The wealth management department offers a full-service suite of trust and portfolio management services. More information can be found at www.thestatebank.com or www.fentura.com.

Cautionary Statement: This press release contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning future growth in earning assets and net income. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.

Contacts: Ronald L. Justice Aaron D. Wirsing President & CEO Chief Financial Officer Fentura Financial, Inc. Fentura Financial, Inc. 810.714.3902 810.714.3925 ronj@thestatebank.com aaronw@thestatebank.com