GlobeNewswire Inc | Jul 30, 2021 03:34PM EDT

July 30, 2021

Dollars in thousands except per share amounts. Certain items in the prior period financial statements have been reclassified to conform with the June30, 2021 presentation.

FENTON, Mich., July 30, 2021 (GLOBE NEWSWIRE) -- Fentura Financial, Inc. (OTCQX: FETM) announces quarterly results of net income of $4,726 and $9,382 for the three and six month periods ended June30, 2021.

Ronald Justice, President and CEO, stated, "Once again, I am pleased with our operating results for the quarter. Opportunities for new loan and core deposit relationships remain strong. Our team's outstanding efforts generated an increase in total loans (net of PPP loans) of $45,629 during the quarter and $62,446 on a year to date basis. These growth trends, along with continued strong residential mortgage activity and a solid net interest margin actively contributed to our strong operating results. While the COVID-19 pandemic continues to create uncertainties, client relationship growth, consistent asset quality, and stock performance trends are encouraging indicators."

Following is a discussion of the Corporation's financial performance as of, and for the three and six month periods ended June30, 2021. 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:

6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020INCOMESTATEMENT DATAInterest $ 11,658 $ 11,919 $ 11,624 $ 12,070 $ 11,215 incomeInterest 762 676 972 1,189 1,618 expenseNet interest 10,896 11,243 10,652 10,881 9,597 incomeProvision for 6 212 982 1,109 2,001 loan lossesNoninterest 4,230 3,854 4,676 5,159 5,292 incomeNoninterest 9,222 9,031 10,971 8,218 7,809 expensesFederalincome tax 1,172 1,198 642 1,377 1,036 expenseNet income $ 4,726 $ 4,656 $ 2,733 $ 5,336 $ 4,043 PER SHARE Earnings $ 1.02 $ 1.00 $ 0.58 $ 1.14 $ 0.87 Dividends $ 0.080 $ 0.080 $ 0.075 $ 0.075 $ 0.075 Tangible book $ 25.73 $ 24.75 $ 23.88 $ 23.50 $ 22.44 value^(1)Quoted market valueHigh $ 27.40 $ 24.75 $ 22.25 $ 17.99 $ 18.95 Low $ 23.55 $ 21.90 $ 16.93 $ 16.80 $ 14.90 Close^(1) $ 26.00 $ 23.30 $ 22.00 $ 16.93 $ 17.35 PERFORMANCE RATIOSReturn onaverage 1.45 % 1.50 % 0.84 % 1.68 % 1.35 %assetsReturn onaverage 15.64 % 15.86 % 9.27 % 18.86 % 15.20 %shareholders'equityReturn onaveragetangible 16.12 % 16.38 % 9.58 % 19.54 % 15.79 %shareholders'equityEfficiency 60.97 % 59.82 % 71.57 % 51.23 % 52.45 %ratioYield onearning 3.79 % 4.01 % 3.75 % 3.97 % 3.94 %assets (FTE)Rate oninterest 0.41 % 0.37 % 0.50 % 0.63 % 0.91 %bearingliabilitiesNet interestmargin to 3.55 % 3.79 % 3.44 % 3.58 % 3.37 %earningassets (FTE)BALANCE SHEET DATA^(1)Totalinvestment $ 129,944 $ 89,772 $ 76,111 $ 78,179 $ 75,526 securitiesGross loans $ 986,358 $ 1,028,117 $ 1,066,562 $ 1,060,885 $ 1,044,564 Total assets $ 1,309,685 $ 1,303,175 $ 1,251,446 $ 1,284,845 $ 1,237,694 Total $ 1,126,496 $ 1,122,508 $ 1,071,976 $ 1,061,470 $ 1,018,287 depositsBorrowed $ 49,500 $ 49,000 $ 49,000 $ 96,217 $ 96,217 fundsTotalshareholders' $ 122,986 $ 119,360 $ 115,868 $ 114,081 $ 108,969 equityNet loans tototal 86.60 % 90.60 % 98.48 % 98.99 % 101.70 %depositsCommon shares 4,638,614 4,673,932 4,694,275 4,691,142 4,680,920 outstandingQTD BALANCESHEET AVERAGESTotal assets $ 1,309,942 $ 1,259,119 $ 1,288,199 $ 1,264,105 $ 1,200,966 Earning $ 1,234,827 $ 1,206,411 $ 1,235,895 $ 1,210,274 $ 1,146,941 assetsInterestbearing $ 753,706 $ 735,159 $ 773,132 $ 750,281 $ 711,500 liabilitiesTotalshareholders' $ 121,235 $ 119,034 $ 117,263 $ 112,565 $ 106,998 equityTotaltangible $ 117,567 $ 115,298 $ 113,444 $ 108,655 $ 102,999 shareholders'equityEarned commonshares 4,644,833 4,664,893 4,682,063 4,673,629 4,664,946 outstandingUnvested 20,671 21,922 14,208 14,208 14,208 stock grantsTotal commonshares 4,665,504 4,686,815 4,696,271 4,687,837 4,679,154 outstandingASSET QUALITY ^(1)Nonperformingloans to 0.87 % 0.79 % 0.75 % 0.07 % 0.10 %gross loansNonperformingassets to 0.66 % 0.62 % 0.64 % 0.06 % 0.08 %total assetsAllowance forloan losses 1.09 % 1.08 % 1.02 % 0.95 % 0.86 %to grossloansAllowance forloan lossesto gross 1.14 % 1.23 % 1.23 % 1.19 % 1.07 %loans, net ofPPP loansCAPITAL RATIOS^(1)Total capitalto risk 14.35 % 15.02 % 15.14 % 15.57 % 15.06 %weightedassetsTier 1capital to 13.27 % 13.84 % 13.93 % 14.40 % 14.00 %risk weightedassetsCET1 capitalto risk 11.87 % 12.34 % 12.38 % 12.77 % 12.34 %weightedassetsTier 1leverage 10.19 % 10.31 % 9.80 % 9.86 % 9.90 %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 six month periods ended:

6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017INCOMESTATEMENT DATAInterest $ 23,577 $ 22,285 $ 21,225 $ 17,108 $ 13,681 incomeInterest 1,438 3,763 4,285 2,263 1,389 expenseNet interest 22,139 18,522 16,940 14,845 12,292 incomeProvision for 218 3,543 477 576 125 loan lossesNoninterest 8,084 9,805 3,772 3,814 3,372 incomeNoninterest 18,253 15,495 13,200 12,328 10,837 expensesFederalincome tax 2,370 1,894 1,424 1,163 1,476 expenseNet income $ 9,382 $ 7,395 $ 5,611 $ 4,592 $ 3,226 PER SHARE Earnings $ 2.02 $ 1.59 $ 1.21 $ 1.26 $ 0.89 Dividends $ 0.160 $ 0.150 $ 0.140 $ 0.120 $ 0.100 Tangible book $ 25.73 $ 22.44 $ 19.59 $ 16.00 $ 13.45 value^(1)Quoted market valueHigh $ 27.40 $ 26.00 $ 21.00 $ 21.25 $ 18.50 Low $ 21.90 $ 12.55 $ 20.05 $ 18.88 $ 15.10 Close^(1) $ 26.00 $ 17.35 $ 20.60 $ 21.10 $ 18.25 PERFORMANCE RATIOSReturn onaverage 1.47 % 1.32 % 1.20 % 1.16 % 0.90 %assetsReturn onaverage 15.75 % 14.13 % 12.14 % 15.13 % 12.32 %shareholders'equityReturn onaveragetangible 16.25 % 14.69 % 12.75 % 16.47 % 13.12 %shareholders'equityEfficiency 60.39 % 54.70 % 63.73 % 66.07 % 69.18 %ratioYield onearning 3.89 % 4.20 % 4.79 % 4.42 % 4.16 %assets (FTE)Rate oninterest 0.39 % 1.09 % 1.43 % 0.90 % 0.57 %bearingliabilitiesNet interestmargin to 3.65 % 3.49 % 3.82 % 3.82 % 3.73 %earningassets (FTE)BALANCE SHEET DATA^(1)Totalinvestment $ 129,944 $ 75,526 $ 73,285 $ 49,110 $ 70,699 securitiesGross loans $ 986,358 $ 1,044,564 $ 813,547 $ 707,364 $ 591,753 Total assets $ 1,309,685 $ 1,237,694 $ 949,790 $ 841,459 $ 730,511 Total $ 1,126,496 $ 1,018,287 $ 792,555 $ 702,035 $ 614,167 depositsBorrowed $ 49,500 $ 96,217 $ 54,000 $ 74,000 $ 59,000 fundsTotalshareholders' $ 122,986 $ 108,969 $ 95,504 $ 63,078 $ 54,255 equityNet loans tototal 86.60 % 101.70 % 102.02 % 100.18 % 95.85 %depositsCommon shares 4,638,614 4,680,920 4,653,343 3,640,060 3,629,097 outstandingYTD BALANCESHEET AVERAGESTotal assets $ 1,284,534 $ 1,125,064 $ 940,585 $ 797,594 $ 723,786 Earning $ 1,225,641 $ 1,068,847 $ 894,357 $ 749,755 $ 631,928 assetsInterestbearing $ 744,434 $ 692,035 $ 604,469 $ 509,294 $ 499,636 liabilitiesTotalshareholders' $ 120,134 $ 105,276 $ 93,239 $ 61,219 $ 52,786 equityTotaltangible $ 116,432 $ 101,233 $ 88,762 $ 56,221 $ 49,586 shareholders'equityEarned commonshares 4,654,863 4,662,113 4,638,208 3,635,446 3,624,719 outstandingUnvested 21,297 13,844 9,878 ? ? stock grantsTotal commonshares 4,676,160 4,675,957 4,648,086 3,635,446 3,624,719 outstandingASSET QUALITY ^(1)Nonperformingloans to 0.87 % 0.10 % 0.13 % 0.14 % 0.09 %gross loansNonperformingassets to 0.66 % 0.08 % 0.11 % 0.13 % 0.08 %total assetsAllowance forloan losses 1.09 % 0.86 % 0.62 % 0.57 % 0.52 %to grossloansAllowance forloan lossesto gross 1.14 % 1.07 % 0.62 % 0.57 % 0.52 %loans, net ofPPP loansCAPITAL RATIOS^(1)Total capitalto risk 14.35 % 15.06 % 14.18 % 11.20 % 11.25 %weightedassetsTier 1capital to 13.27 % 14.00 % 13.53 % 10.62 % 10.73 %risk weightedassetsCET1 capitalto risk 11.87 % 12.34 % 11.73 % 8.59 % 8.36 %weightedassetsTier 1leverage 10.19 % 9.90 % 11.16 % 9.14 % 8.99 %ratio ^(1)At end of period

Income Statement Breakdown and Analysis

Quarter to Date 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020GAAP net income $ 4,726 $ 4,656 $ 2,733 $ 5,336 $ 4,043 Acquisitionrelated items (net of tax)Accretion on (152 ) (151 ) (82 ) (144 ) (110 )purchased loansAmortization ofcore deposit 53 54 71 72 71 intangiblesAmortization onacquired time 2 2 5 5 5 depositsTotalacquisition (97 ) (95 ) (6 ) (67 ) (34 )related items(net of tax)Othernonrecurring items (net oftax)FHLB prepayment ? ? 1,507 ? ? penaltiesChange in fairvalue of equityinvestment due ? ? ? ? ? to acquisitiontransactionChange in fairvalue ofmortgage ? ? ? ? ? bankinginstrumentsInterestwriteoff fromloan ? ? 265 ? ? transferred tononaccrualNet gain fromCOLI death ? ? ? ? (173 )benefitPrepaymentpenalties (33 ) (17 ) (97 ) (16 ) (12 )collectedMortgageservicingrights ? ? (188 ) (176 ) 191 impairment(reduction ofimpairment)Total othernonrecurring (33 ) (17 ) 1,487 (192 ) 6 items (net oftax)Adjusted netincome from $ 4,596 $ 4,544 $ 4,214 $ 5,077 $ 4,015 operations GAAP net $ 10,896 $ 11,243 $ 10,652 $ 10,881 $ 9,597 interest incomeAccretion on (192 ) (191 ) (104 ) (182 ) (139 )purchased loansInterestwriteoff fromloan ? ? 335 ? ? transferred tononaccrualPrepaymentpenalties (42 ) (21 ) (123 ) (20 ) (15 )collectedAmortization onacquired time 3 3 6 6 6 depositsAdjusted net $ 10,665 $ 11,034 $ 10,766 $ 10,685 $ 9,449 interest income PERFORMANCE RATIOSBased onadjusted net income fromoperationsEarnings per $ 0.99 $ 0.97 $ 0.90 $ 1.09 $ 0.86 shareReturn on 1.41 % 1.46 % 1.30 % 1.60 % 1.34 %average assetsReturn onaverage 15.21 % 15.48 % 14.30 % 17.94 % 15.09 %shareholders'equityReturn onaveragetangible 15.68 % 15.98 % 14.78 % 18.59 % 15.68 %shareholders'equityEfficiency 61.46 % 60.20 % 59.02 % 52.03 % 52.12 %ratio Based onadjusted net interest incomeYield onearning assets 3.72 % 3.94 % 3.78 % 3.91 % 3.89 %(FTE)Rate oninterest 0.41 % 0.37 % 0.50 % 0.63 % 0.92 %bearingliabilitiesNet interestmargin to 3.47 % 3.71 % 3.47 % 3.52 % 3.32 %earning assets(FTE)

Year to Date June 30 Variance 2021 2020 Amount %GAAP net income $ 9,382 $ 7,395 $ 1,987 26.87 %Acquisition related items (net of tax)Accretion on purchased loans (303 ) (290 ) (13 ) 4.48 %Amortization of core deposit 107 142 (35 ) (24.65 )intangibles %Amortization on acquired 4 10 (6 ) (60.00 )time deposits %Total acquisition related (192 ) (138 ) (54 ) 39.13 %items (net of tax)Other nonrecurring items (net of tax)FHLB prepayment penalties ? ? ? ? %Change in fair value of )equity investment due to ? (578 ) 578 (100.00 %acquisition transactionChange in fair value of ? (448 ) 448 (100.00 )mortgage banking instruments %Interest writeoff from loan ? ? ? ? %transferred to nonaccrualNet gain from COLI death ? (173 ) 173 (100.00 )benefit %Prepayment penalties (50 ) (48 ) (2 ) 4.17 %collectedMortgage servicing rights )impairment (reduction of ? 364 (364 ) (100.00 %impairment)Total other nonrecurring (50 ) (883 ) 833 (94.34 )items (net of tax) %Adjusted net income from $ 9,140 $ 6,374 $ 2,766 43.40 %operations GAAP net interest income $ 22,139 $ 18,522 $ 3,617 19.53 %Accretion on purchased loans (383 ) (367 ) (16 ) 4.36 %Interest writeoff from loan ? ? ? ? %transferred to nonaccrualPrepayment penalties (63 ) (61 ) (2 ) 3.28 %collectedAmortization on acquired 6 12 (6 ) (50.00 )time deposits %Adjusted net interest income $ 21,699 $ 18,106 $ 3,593 19.84 % PERFORMANCE RATIOS Based on adjusted net income from operationsEarnings per share $ 1.96 $ 1.37 $ 0.59 43.07 %Return on average assets 1.43 % 1.14 % 0.29 %Return on average 15.34 % 12.18 % 3.16 %shareholders' equityReturn on average tangible 15.83 % 12.66 % 3.17 %shareholders' equityEfficiency ratio 60.84 % 56.94 % 3.90 % Based on adjusted net interest incomeYield on earning assets 3.81 % 4.12 % (0.31 )(FTE) %Rate on interest bearing 0.39 % 1.10 % (0.71 )liabilities %Net interest margin to 3.58 % 3.41 % 0.17 %earning assets (FTE)

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.

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 period-to-period comparisons more meaningful.

Three Months Ended June 30, 2021 March 31, 2021 June 30, 2020 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 $ 1,023,620 $ 11,220 4.40 % $ 1,074,096 $ 11,598 4.38 % $ 1,048,068 $ 10,788 4.14 %Taxableinvestment 89,467 322 1.44 % 58,859 202 1.39 % 62,829 323 2.07 %securitiesNontaxableinvestment 17,234 100 2.33 % 17,165 105 2.48 % 11,449 84 2.95 %securitiesFederal funds ? ? ? % ? ? ? % ? ? ? %soldInterest earningcash and cash 101,018 23 0.09 % 52,803 11 0.08 % 21,314 5 0.09 %equivalentsFederal Home 3,488 14 1.61 % 3,488 25 2.91 % 3,281 33 4.05 %Loan Bank stockTotal earning 1,234,827 11,679 3.79 % 1,206,411 11,941 4.01 % 1,146,941 11,233 3.94 %assets Nonearning assetsAllowance for (11,193 ) (11,143 ) (7,753 ) loan lossesFixed assets 16,104 15,757 15,509 Accrued income 70,204 48,094 46,269 and other assetsTotal assets $ 1,309,942 $ 1,259,119 $ 1,200,966 Interest bearing liabilitiesInterest bearing $ 223,420 $ 122 0.22 % $ 206,565 $ 121 0.24 % $ 189,981 $ 249 0.53 %demand depositsSavings deposits 320,000 108 0.14 % 310,830 109 0.14 % 247,687 140 0.23 %Time deposits 161,197 377 0.94 % 168,764 291 0.70 % 181,661 821 1.82 %Borrowed funds 49,089 155 1.27 % 49,000 155 1.28 % 92,171 408 1.78 %Total interestbearing 753,706 762 0.41 % 735,159 676 0.37 % 711,500 1,618 0.91 %liabilities Noninterestbearing liabilitiesNoninterest 425,353 393,751 371,320 bearing depositsAccrued interestand other 9,648 11,175 11,148 liabilitiesShareholders' 121,235 119,034 106,998 equityTotalliabilities and $ 1,309,942 $ 1,259,119 $ 1,200,966 shareholders'equityNet interest $ 10,917 $ 11,265 $ 9,615 income (FTE)Net interestmargin to 3.55 % 3.79 % 3.37 %earning assets(FTE)

Six Months Ended June 30, 2021 June 30, 2020 Average Tax Average Average Tax Average Balance Equivalent Yield / Balance Equivalent Yield / Interest Rate Interest RateInterestearning assetsTotal loans $ 1,048,858 $ 22,818 4.39 % $ 963,400 $ 21,269 4.44 %Taxableinvestment 74,162 524 1.42 % 59,896 676 2.27 %securitiesNontaxableinvestment 17,200 205 2.40 % 10,991 165 3.02 %securitiesFederal funds ? ? ? % 16,794 116 1.39 %soldInterestearning cash 81,933 34 0.08 % 14,551 31 0.43 %and cashequivalentsFederal HomeLoan Bank 3,488 39 2.25 % 3,215 63 3.94 %stockTotal earning 1,225,641 23,620 3.89 % 1,068,847 22,320 4.20 %assets Nonearning assetsAllowance for (11,168 ) (6,787 ) loan lossesFixed assets 15,930 15,523 Accruedincome and 54,131 47,481 other assetsTotal assets $ 1,284,534 $ 1,125,064 Interestbearing liabilitiesInterestbearing $ 214,993 $ 243 0.23 % $ 180,291 $ 724 0.81 %demanddepositsSavings 315,415 217 0.14 % 239,438 339 0.28 %depositsTime deposits 164,981 668 0.82 % 193,574 1,874 1.95 %Borrowed 49,045 310 1.27 % 78,732 826 2.11 %fundsTotalinterest 744,434 1,438 0.39 % 692,035 3,763 1.09 %bearingliabilities Noninterestbearing liabilitiesNoninterestbearing 409,553 318,010 depositsAccruedinterest and 10,413 9,743 otherliabilitiesShareholders' 120,134 105,276 equityTotalliabilitiesand $ 1,284,534 $ 1,125,064 shareholders'equityNet interest $ 22,182 $ 18,557 income (FTE)Net interestmargin to 3.65 % 3.49 %earningassets (FTE)

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 Six Months Ended June 30, 2021 June 30, 2021 June 30, 2021 Compared To Compared To Compared To March 31, 2021 June 30, 2020 June 30, 2020 Increase (Decrease) Due to Increase (Decrease) Due to Increase (Decrease) Due to Volume Rate Net Volume Rate Net Volume Rate NetChanges ininterest incomeTotal loans $ (736 ) $ 358 $ (378 ) $ (1,359 ) $ 1,791 $ 432 $ 2,230 $ (681 ) $ 1,549 Taxableinvestment 112 8 120 460 (461 ) (1 ) 337 (489 ) (152 )securitiesNontaxableinvestment 3 (8 ) (5 ) 112 (96 ) 16 129 (89 ) 40 securitiesFederal ? ? ? ? ? ? (58 ) (58 ) (116 )funds soldInterestearningcash and 11 1 12 18 ? 18 89 (86 ) 3 cashequivalentsFederalHome Loan ? (11 ) (11 ) 13 (32 ) (19 ) 14 (38 ) (24 )Bank stockTotalchanges in (610 ) 348 (262 ) (756 ) 1,202 446 2,741 (1,441 ) 1,300 interestincome Changes ininterest expenseInterestbearing 41 (40 ) 1 243 (370 ) (127 ) 341 (822 ) (481 )demanddepositsSavings (1 ) ? (1 ) 177 (209 ) (32 ) 213 (335 ) (122 )depositsTime (84 ) 170 86 (84 ) (360 ) (444 ) (245 ) (961 ) (1,206 )depositsBorrowed 2 (2 ) ? (157 ) (96 ) (253 ) (251 ) (265 ) (516 )fundsTotalchanges in (42 ) 128 86 179 (1,035 ) (856 ) 58 (2,383 ) (2,325 )interestexpenseNet changein netinterest $ (568 ) $ 220 $ (348 ) $ (935 ) $ 2,237 $ 1,302 $ 2,683 $ 942 $ 3,625 income(FTE)

Average Yield/Rate for the Three Month Periods Ended 6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 2021 2021 2020 2020 2020Total earning assets 3.79 % 4.01 % 3.75 % 3.97 % 3.94 %Total interest bearing 0.41 % 0.37 % 0.50 % 0.63 % 0.91 %liabilitiesNet interest margin to 3.55 % 3.79 % 3.44 % 3.58 % 3.37 %earning assets (FTE)

Quarter to Date Net Interest Income (FTE) 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020Interest $ 11,658 $ 11,919 $ 11,624 $ 12,070 $ 11,215 incomeFTE 21 22 22 21 18 adjustmentTotalinterest 11,679 11,941 11,646 12,091 11,233 income(FTE)Totalinterest 762 676 972 1,189 1,618 expenseNetinterest $ 10,917 $ 11,265 $ 10,674 $ 10,902 $ 9,615 income(FTE)

Noninterest Income

Quarter to Date 6/30/ 3/31/2021 12/31/ 9/30/ 6/30/2020 2021 2020 2020Net gain on sales of $ 1,253 $ 1,845 $ 2,545 $ 3,064 $ 3,869 mortgage loansNet mortgage servicing 1,119 138 509 559 (163 )rights incomeATM and debit card 511 448 437 460 394 incomeTrust and investment 403 468 445 464 321 servicesMortgage servicing fees 362 335 325 293 270 PPP referral fees 74 351 ? ? ? Service charges on 168 166 194 177 119 deposit accountsNet gain on sales of ? ? ? ? ? commercial loansNet gain from corporateowned life insurance ? ? ? ? 173 death benefitChange in fair value of 2 (19 ) (3 ) 2 7 equity investmentsOther income and fees 338 122 224 140 302 Total noninterest $ 4,230 $ 3,854 $ 4,676 $ 5,159 $ 5,292 income Residential mortgage $ 2,734 $ 2,318 $ 3,379 $ 3,916 $ 3,976 operations

Year to Date June 30 Variance 2021 2020 Amount %Net gain on sales of mortgage $ 3,098 $ 5,672 $ (2,574 ) (45.38 )loans %Net mortgage servicing rights 1,257 (214 ) 1,471 (687.38 )income %ATM and debit card income 959 749 210 28.04 %Trust and investment services 871 710 161 22.68 %Mortgage servicing fees 697 532 165 31.02 %PPP referral fees 425 ? 425 ? %Service charges on deposit 334 338 (4 ) (1.18 )accounts %Net gain on sales of ? 668 (668 ) (100.00 )commercial loans %Net gain from corporate owned ? 173 (173 ) (100.00 )life insurance death benefit %Change in fair value of equity (17 ) 756 (773 ) (102.25 )investments %Other income and fees 460 421 39 9.26 %Total noninterest income $ 8,084 $ 9,805 $ (1,721 ) (17.55 ) % Residential mortgage $ 5,052 $ 5,990 (938 ) (15.66 )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 advantageous for residential mortgage originations and refinancing, resulting in record gains. While residential mortgage originations and refinancing activity continues to be strong during the first half of 2021, it is likely to slow down due to lower housing inventory and expected increases in interest rates.

Net mortgage servicing rights income represents income generated from the capitalization of MSR, net of amortization. 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 a record level of refinancing activity. During the third and fourth quarters of 2020, these impairments had recovered.

In 2021 the Corporation elected to adopt the fair value measurement option for all MSR pursuant to ASC 860. This election resulted in a transfer of $301 to retained earnings to reflect the difference between the fair value and the carrying amount of MSR as of January 1, 2021, net of tax. Changes in the fair value of MSR are highly correlated to changes in interest rates. As a significant portion of the serviced loan portfolio has been originated over the past two years at low interest rates, management expects the value of the servicing portfolio to remain strong.

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 increase throughout the remainder of 2021 as the Corporation continues to add to the serviced portfolio. During the second quarter of 2021, the Corporations added a net $35,268 to its serviced loan portfolio

Throughout the remainder of 2021, overall revenues from residential mortgage operations (net gain from sale of mortgage loans, mortgage servicing fees, and net mortgage servicing rights income) are expected to remain strong, but are not expected to reach the elevated levels experienced during 2020 due to the constrained housing inventory and rising interest rates.

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 throughout 2021, as customers begin to venture out with the easing of COVID restrictions and spend more freely.

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 through the wealth management and trust department. Income generated from trust services has remained stable from fiduciary fees for estate settlement services and portfolio management. Revenue from wealth management has increased in 2021 due to strong demand from customers for annuities. Both the trust services and wealth management programs are subject to market fluctuations and interest rate changes. Trust and investment services income is expected to increase modestly throughout the remainder of 2021.

PPP referral fees represent referral fees the Corporation earned from the second round of the PPP loan program through the SBA. Due to strong portfolio loan demand, management elected to refer the second round of PPP requests to a third party for processing and funding. As such, the associated referral fees were recognized as a component of noninterest income. As the second round of the PPP loan program ended on May 31, 2021, the Corporation does not expect to earn additional PPP referral fees throughout the remainder of 2021.

Service charges on deposit accounts includes fees earned from deposit customers for transaction-based, account maintenance and overdraft services. Service charges on deposit accounts are expected to approximate current levels throughout the remainder of 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 sell any commercial loans over the remainder of 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.

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, the Corporation recorded a $732 gain from an equity investment in a financial institution that was sold. The Corporation does not anticipate any significant changes in fair value from equity sales in the foreseeable future.

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 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020Total compensation $ 5,000 $ 5,004 $ 4,958 $ 4,531 $ 4,252 Furniture and 712 637 607 614 618 equipmentProfessional 703 624 938 524 571 servicesData processing 583 509 501 503 535 Occupancy 508 495 475 491 435 Loan and 337 406 359 292 229 collectionAdvertising and 304 284 184 284 255 promotionalATM and debit card 144 122 125 109 92 FDIC insurance 79 155 59 55 59 premiumsTelephone and 130 94 64 91 86 communicationAmortization ofcore deposit 67 68 90 91 90 intangiblesFHLB prepayment ? ? 1,907 ? ? penaltyOther general and 655 633 704 633 587 administrativeTotal noninterest $ 9,222 $ 9,031 $ 10,971 $ 8,218 $ 7,809 expenses

Year to Date June Variance 30 2021 2020 Amount %Total compensation $ 10,004 $ 8,500 $ 1,504 17.69 %Furniture and equipment 1,349 1,228 121 9.85 %Professional services 1,327 1,093 234 21.41 %Data processing 1,092 977 115 11.77 %Occupancy 1,003 911 92 10.10 %Loan and collection 743 391 352 90.03 %Advertising and promotional 588 507 81 15.98 %ATM and debit card 266 200 66 33.00 %FDIC insurance premiums 234 114 120 105.26 %Telephone and communication 224 182 42 23.08 %Amortization of core deposit 135 180 (45 ) (25.00 )intangibles %FHLB prepayment penalty ? ? ? ? %Other general and administrative 1,288 1,212 76 6.27 %Total noninterest expenses $ 18,253 $ 15,495 $ 2,758 17.80 %

Total compensation includes salaries, commissions and incentives, employee benefits, and payroll taxes. Total compensation has increased due to additional employees, a reduction of deferred loan costs, annual merit increases and an increase in employee benefits. 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 throughout the remainder of 2021 as mortgage originations decline.

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 continue to increase with the size and complexity of the Corporation.

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 continue to increase in future periods to ensure compliance with audit and regulatory requirements. Professional services are also expected to be temporarily elevated over the remainder of 2021 from expenditures related to the acquisition of the Farmers State Bank of Munith.

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

Loan and collection includes expenses related to the origination and collection of loans. The increase in expenses throughout 2020 and into 2021 is a direct result of increased loan volume due to the low interest rate environment created by the Federal Reserve Bank's response to the COVID-19 pandemic. Loan and collections cost are expected to decline through the remainder of 2021, due to the declining loan volumes.

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 loan and deposit account relationships. In addition to traditional marketing strategies, the Corporation rolled out a new branding strategy in 2020, which resulted in elevated advertising and promotional expenses in both 2020 and 2021. Total advertising and promotional expenses are expected to increase modestly throughout the remainder of 2021 due to the growth of the Corporation.

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 the remainder of 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 are expected to moderate throughout the remainder of 2021.

Telephone and communication includes expenses relating to the Corporation's communication systems. These expenses are expected to increase throughout 2021 primarily due to the growth of the Corporation.

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.

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%. As a result of the early payoffs, the Corporation is expected to reduce interest expense by approximately $660 during 2021.

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

6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020ASSETS Cash and cash $ 132,676 $ 121,477 $ 46,757 $ 75,032 $ 35,190equivalentsTotalinvestment 129,944 89,772 76,111 78,179 75,526securitiesResidentialmortgage loans 7,670 26,322 27,306 34,833 46,354held-for-sale,at fair valueGross loans 986,358 1,028,117 1,066,562 1,060,885 1,044,564Less allowancefor loan and 10,800 11,100 10,900 10,100 8,991lease lossesNet loans 975,558 1,017,017 1,055,662 1,050,785 1,035,573All other 63,837 48,587 45,610 46,016 45,051assetsTotal assets $ 1,309,685 $ 1,303,175 $ 1,251,446 $ 1,284,845 $ 1,237,694 LIABILITIESAND SHAREHOLDERS'EQUITYTotal deposits $ 1,126,496 $ 1,122,508 $ 1,071,976 $ 1,061,470 $ 1,018,287Total borrowed 49,500 49,000 49,000 96,217 96,217fundsAccruedinterestpayable and 10,703 12,307 14,602 13,077 14,221otherliabilitiesTotal 1,186,699 1,183,815 1,135,578 1,170,764 1,128,725liabilitiesTotalshareholders' 122,986 119,360 115,868 114,081 108,969equityTotalliabilitiesand $ 1,309,685 $ 1,303,175 $ 1,251,446 $ 1,284,845 $ 1,237,694shareholders'equity

6/30/2021 vs 3/31/2021 6/30/2021 vs 6/30/2020 Variance Variance Amount % Amount %ASSETS Cash and cash $ 11,199 9.22 % $ 97,486 277.03 %equivalentsTotal investment 40,172 44.75 % 54,418 72.05 %securitiesResidential mortgage ) )loans held-for-sale, at (18,652 ) (70.86 % (38,684 ) (83.45 %fair valueGross loans (41,759 ) (4.06 ) (58,206 ) (5.57 ) % %Less allowance for loan (300 ) (2.70 ) 1,809 20.12 %and lease losses %Net loans (41,459 ) (4.08 ) (60,015 ) (5.80 ) % %All other assets 15,250 31.39 % 18,786 41.70 %Total assets $ 6,510 0.50 % $ 71,991 5.82 % LIABILITIES AND SHAREHOLDERS' EQUITYTotal deposits $ 3,988 0.36 % $ 108,209 10.63 %Total borrowed funds 500 1.02 % (46,717 ) (48.55 ) %Accrued interest payable (1,604 ) (13.03 ) (3,518 ) (24.74 )and other liabilities % %Total liabilities 2,884 0.13 % 57,974 2.70 %Total shareholders' 3,626 3.04 % 14,017 12.86 %equityTotal liabilities and $ 6,510 0.50 % $ 71,991 5.82 %shareholders' equity

Cash and cash equivalents

6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020Cash andcash equivalentsNoninterest $ 22,454 $ 25,698 $ 23,102 $ 22,108 $ 20,369 bearingInterest 110,222 95,779 23,655 52,924 14,821 bearingCash andcash $ 132,676 $ 121,477 $ 46,757 $ 75,032 $ 35,190 equivalents 6/30/2021 vs 3/31/2021 6/30/2021 vs 6/30/2020 Variance Variance Amount % Amount %Cash andcash equivalentsNoninterest $ (3,244 ) (12.62 )% $ 2,085 10.24 %bearingInterest 14,443 15.08 % 95,401 643.69 %bearingCash andcash $ 11,199 9.22 % $ 97,486 277.03 %equivalents

Cash and cash equivalents, which is comprised of cash and due from banks, fluctuate from period to period based on loan demand and variances in deposit accounts. In recent periods, the Corporation has experienced an inflow of customer deposits resulting in historically high levels of cash and cash equivalents. The increase in interest bearing cash in the first and second quarters of 2021 is primarily due to funds received from the SBA for forgiveness of PPP loans. The Corporation expects cash and cash equivalents to remain elevated throughout the remainder of the year primarily due to additional forgiveness of outstanding PPP loans totaling $35,195 as of June 30, 2021.

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:

6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020Cash andcash $ 132,676 $ 121,477 $ 46,757 $ 75,032 $ 35,190 equivalentsUnpledgedinvestment 118,019 76,384 59,025 58,739 52,647 securitiesFHLBborrowing 140,000 140,000 140,000 97,500 97,500 availabilityFederalfundspurchased 21,500 21,500 21,500 21,500 21,500 lines ofcreditFundsavailablethrough the 10,000 10,000 10,000 10,000 10,000 Fed DiscountWindowPPPLF 35,195 122,583 177,845 206,343 202,184 Totalliquidity $ 457,390 $ 491,944 $ 455,127 $ 469,114 $ 419,021 sources

Total investment securities

6/30/2021 3/31/2021 12/31/ 9/30/2020 6/30/2020 2020Available-for-sale U.S. Government $ 5,917 $ 5,942 $ 7,935 $ 19,311 $ 21,339 and federal agencyState and 23,096 17,080 15,768 15,729 14,115 municipalMortgage backed 60,390 32,135 19,101 20,886 12,335 residentialCertificates of 4,932 4,932 5,180 5,921 6,665 depositCollateralizedmortgage 31,281 25,505 23,110 11,141 15,736 obligations -agenciesUnrealized gain/(loss) on 1,334 1,117 1,932 2,099 2,242 available-for-salesecuritiesTotal 126,950 86,711 73,026 75,087 72,432 available-for-saleHeld-to-maturitystate and 1,859 1,968 1,973 1,977 1,981 municipalEquity securities 1,135 1,093 1,112 1,115 1,113 Total investment $ 129,944 $ 89,772 $ 76,111 $ 78,179 $ 75,526 securities 6/30/2021 vs 3/31/2021 6/30/2021 vs 6/30/2020 Variance Variance Amount % Amount %Available-for-sale U.S. Government $ (25 ) (0.42 ) $ (15,422 ) (72.27 )and federal agency % %State and 6,016 35.22 % 8,981 63.63 %municipalMortgage backed 28,255 87.93 % 48,055 389.58 %residentialCertificates of ? ? % (1,733 ) (26.00 )deposit %Collateralizedmortgage 5,776 22.65 % 15,545 98.79 %obligations -agenciesUnrealized gain/(loss) on 217 19.43 % (908 ) (40.50 )available-for-sale %securitiesTotal 40,239 46.41 % 54,518 75.27 %available-for-saleHeld-to-maturity ) )state and (109 ) (5.54 % (122 ) (6.16 %municipalEquity securities 42 3.84 % 22 1.98 %Total investment $ 40,172 44.75 % $ 54,418 72.05 %securities

The amortized cost and fair value of AFS investment securities as of June30, 2021 were as follows:

Maturing Securities Due in After One After Five with One Year Years But After Ten Variable Year or But Within Within Ten Years Monthly Total Less Five Years Payments or Years Noncontractual MaturitiesU.S.Government and $ 3,981 $ 971 $ 965 $ ? $ ? $ 5,917 federal agencyState and 2,301 8,272 10,639 1,884 ? 23,096 municipalMortgagebacked ? ? ? ? 60,390 60,390 residentialCertificates 1,726 3,206 ? ? ? 4,932 of depositCollateralizedmortgage ? ? ? ? 31,281 31,281 obligations -agenciesTotal $ 8,008 $ 12,449 $ 11,604 $ 1,884 $ 91,671 $ 125,616 amortized costFair value $ 8,141 $ 13,015 $ 11,719 $ 2,147 $ 91,928 $ 126,950

The amortized cost and fair value of HTM investment securities as of June30, 2021 were as follows:

Maturing After After Securities Due in One Year Five with One But Years After Variable Year or Within But Ten Monthly Total Less Five Within Years Payments or Years Ten Noncontractual Years MaturitiesState and $ 676 $ 803 $ 380 $ ? $ ? $ 1,859 municipalFair $ 682 $ 840 $ 402 $ ? $ ? $ 1,924 value

During the first and second quarters of 2021, the Corporation expanded its investment portfolio to generate additional interest income. Total investment securities are expected to continue to grow throughout the remainder of 2021 as management expects deposits to continue to grow at historically high levels. The following table summarizes information as of June30, 2021 for investment securities purchased YTD:

Fully Taxable Book Value Equivalent Weighted Average YieldU.S. Government and federal agency $ 965 1.04 %State and municipal 8,967 1.15 %Collateralized mortgage obligations - 12,760 1.28 %agenciesMortgage backed residential 45,447 1.50 %Total $ 68,139 1.41 %

Residential mortgage loans held-for-sale, at fair value

Loans HFS represent the fair value 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.

Loans and allowance for loan losses

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

6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020Commercial $ 101,070 $ 183,276 $ 241,424 $ 271,113 $ 260,440 Commercial 573,598 541,428 517,054 483,275 469,039 real estateTotalcommercial 674,668 724,704 758,478 754,388 729,479 loansResidential 265,323 258,333 262,770 261,375 268,295 mortgageHome equity 41,771 40,205 39,900 39,456 40,114 Totalresidential 307,094 298,538 302,670 300,831 308,409 real estateloansConsumer 4,596 4,875 5,414 5,666 6,676 Gross loans 986,358 1,028,117 1,066,562 1,060,885 1,044,564 Allowancefor loan (10,800 ) (11,100 ) (10,900 ) (10,100 ) (8,991 )and leaselossesLoans, net $ 975,558 $ 1,017,017 $ 1,055,662 $ 1,050,785 $ 1,035,573 6/30/2021 vs 3/31/2021 6/30/2021 vs 6/30/2020 Variance Variance Amount % Amount %Commercial $ (82,206 ) (44.85 )% $ (159,370 ) (61.19 )%Commercial 32,170 5.94 % 104,559 22.29 %real estateTotalcommercial (50,036 ) (6.90 )% (54,811 ) (7.51 )%loansResidential 6,990 2.71 % (2,972 ) (1.11 )%mortgageHome equity 1,566 3.90 % 1,657 4.13 %Totalresidential 8,556 2.87 % (1,315 ) (0.43 )%real estateloansConsumer (279 ) (5.72 )% (2,080 ) (31.16 )%Gross loans (41,759 ) (4.06 )% (58,206 ) (5.57 )%Allowancefor loan 300 (2.70 )% (1,809 ) 20.12 %lossesLoans, net $ (41,459 ) (4.08 )% $ (60,015 ) (5.80 )%

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

6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020Loanscollectivelyevaluated forimpairmentCommercial $ 100,424 $ 183,203 $ 241,424 $ 271,113 $ 260,440 Commercial 564,781 532,294 508,182 481,071 465,749 real estateResidential 264,448 257,543 262,017 260,665 267,632 mortgageHome equity 41,708 40,141 39,874 39,456 40,114 Consumer 4,596 4,875 5,412 5,663 6,673 Subtotal 975,957 1,018,056 1,056,909 1,057,968 1,040,608 Loansindividuallyevaluated forimpairmentCommercial $ 646 $ 73 $ ? $ ? $ ? Commercial 8,817 9,134 8,872 2,204 3,290 real estateResidential 875 790 753 710 663 mortgageHome equity 63 64 26 ? ? Consumer ? ? 2 3 3 Subtotal 10,401 10,061 9,653 2,917 3,956 Gross Loans $ 986,358 $ 1,028,117 $ 1,066,562 $ 1,060,885 $ 1,044,564

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

6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020Loanscollectively evaluated forimpairmentCommercial $ 585 $ 626 $ 673 $ 633 $ 536 Commercial real 6,264 6,026 5,602 5,152 4,595 estateResidential 2,814 3,280 3,480 3,479 3,278 mortgageHome equity 440 453 440 438 372 Consumer 85 92 97 101 102 Subtotal 10,188 10,477 10,292 9,803 8,883 Loansindividually evaluated forimpairmentCommercial $ 42 $ ? $ ? $ ? $ ? Commercial real 566 619 602 289 100 estateResidential 4 4 4 5 5 mortgageHome equity ? ? ? ? ? Consumer ? ? 2 3 3 Subtotal 612 623 608 297 108 Allowance for $ 10,800 $ 11,100 $ 10,900 $ 10,100 $ 8,991 loan losses

Commercial $ 627 $ 626 $ 673 $ 633 $ 536 Commercial 6,830 6,645 6,204 5,441 4,695 real estateResidential 2,818 3,284 3,484 3,484 3,283 mortgageHome equity 440 453 440 438 372 Consumer 85 92 99 104 105 Allowancefor loan $ 10,800 $ 11,100 $ 10,900 $ 10,100 $ 8,991 losses

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

6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020Accruing interestCurrent $ 976,852 $ 1,018,343 $ 1,057,404 $ 1,058,437 $ 1,042,589 Past due 923 1,636 1,165 1,703 948 30-89 daysPast due90 days or 36 120 50 86 361 moreTotalaccruing 977,811 1,020,099 1,058,619 1,060,226 1,043,898 interestNonaccrual 8,547 8,018 7,943 659 666 Total $ 986,358 $ 1,028,117 $ 1,066,562 $ 1,060,885 $ 1,044,564 loansTotalloans pastdue and in $ 9,506 $ 9,774 $ 9,158 $ 2,448 $ 1,975 nonaccrualstatus

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

6/30/2021 3/31/2021 12/31/ 9/30/ 6/30/2020 2020 2020Nonaccrual loans $ 8,547 $ 8,018 $ 7,943 $ 659 $ 666 Accruing loans past due 90 36 120 50 86 361 days or moreTotal nonperforming loans 8,583 8,138 7,993 745 1,027 Other real estate owned ? ? ? ? ? Total nonperforming assets $ 8,583 $ 8,138 $ 7,993 $ 745 $ 1,027

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

6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 2021 2021 2020 2020 2020Nonperforming loans to gross 0.87 % 0.79 % 0.75 % 0.07 % 0.10 %loansNonperforming assets to total 0.66 % 0.62 % 0.64 % 0.06 % 0.08 %assetsAllowance for loan losses to 1.09 % 1.08 % 1.02 % 0.95 % 0.86 %gross loansAllowance for loan losses to 1.14 % 1.23 % 1.23 % 1.19 % 1.07 %gross loans, less PPP loans

During the fourth quarter of 2020, 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. It was determined in the fourth quarter of 2020 that the hotel's cash flow was insufficient to service the debt in accordance with the contractual terms of the note. However, as COVID-19 restrictions eased in the second quarter of 2021, the hotel has begun making regular, consecutive principal and interest payments. A specific reserve has been established for the estimated collateral deficiency (based on a current appraisal), net of a 70% USDA guarantee and the loan will remain in a nonaccrual status until it is deemed that sufficient improvements in cash flows can be established.

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

6/30/ 3/31/ 12/31/ 9/30/ 6/30/2020 2021 2021 2020 2020Net unamortizeddiscount on $ 388 $ 580 $ 773 $ 877 $ 1,058 purchased loans

The following table summarizes the balance of PPP loans included in commercial loans as of:

6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020Outstanding PPP $ 35,195 $ 122,583 $ 177,845 $ 211,060 $ 206,901 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 $1,809, or 20.12%, since June30, 2020. 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:

6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 2021 2021 2020 2020 2020Commercial $ 168 $ 206 $ 169 $ 166 $ 171 Commercial real estate 761 727 707 672 654 Total commercial loans 498 444 351 321 325 Residential mortgage 199 183 182 180 177 Home equity 47 46 45 45 45 Total residential real 138 131 130 129 128 estate loansConsumer 24 22 22 22 25 Gross loans $ 262 $ 249 $ 226 $ 215 $ 213

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 provided 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 June30, 2021:

Number of Outstanding % of Modifications Balance PortfolioCommercial real estate 1 104 0.02 %Portfolio residential mortgage 5 1,356 0.51 %loansTotal portfolio modifications 6 $ 1,460 0.15 %Residential mortgage loans 25 $ 5,922 1.02 %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 $19,634. Of these loans, approximately 52% are at least partially government-backed by guarantees from either the SBA or USDA.

The Corporation was extremely active in participating in the PPP loan program. The Corporation funded 1,370 PPP 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 $35,195 as of June30, 2021.

The Corporation generated $6,799 in fees from the SBA through the first round of the PPP loan program since April 2020. The income is being recognized over the life of the PPP loans (24 to 60 months) based on the level yield method or upon forgiveness. As of June30, 2021, the Corporation has recognized $6,337 in income, with $462 remaining as unearned income.

During the first quarter of 2021, the SBA began processing applications for a second round of PPP loans. The Corporation is utilizing a third-party for the processing of applications and funding of these loans. The Corporation is generating referral fee income for the second round of the PPP loan program. As of June30, 2021, the Corporation generated $425 in referral fees.

All other assets

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

6/30/ 3/31/ 12/31/ 9/30/ 6/30/ 2021 2021 2020 2020 2020Corporate owned $ 25,638 $ 10,354 $ 10,291 $ 10,225 $ 10,115 life insurancePremises and 16,231 15,969 15,461 15,267 15,323 equipment, netMortgage servicing 6,523 5,404 4,885 4,376 3,816 rightsAccrued interest 4,423 5,451 5,068 5,645 5,266 receivableFederal Home Loan 3,488 3,488 3,488 3,488 3,488 Bank stockGoodwill 3,219 3,219 3,219 3,219 3,219 Right-of-use assets 1,364 1,139 364 387 409 Derivatives 601 1,009 1,331 1,772 1,311 Core deposit 406 474 541 632 722 intangiblesOther assets 1,944 2,080 962 1,005 1,382 All other assets $ 63,837 $ 48,587 $ 45,610 $ 46,016 $ 45,051 6/30/2021 vs 3/31/ 6/30/2021 vs 6/30/ 2021 2020 Variance Variance Amount % Amount %Corporate owned $ 15,284 147.61 % $ 15,523 153.47 %life insurancePremises and 262 1.64 % 908 5.93 %equipment, netMortgage servicing 1,119 20.71 % 2,707 70.94 %rightsAccrued interest (1,028 ) (18.86 ) (843 ) (16.01 )receivable % %Federal Home Loan ? ? % ? ? %Bank stockGoodwill ? ? % ? ? %Right-of-use assets 225 19.75 % 955 233.50 %Derivatives (408 ) (40.44 ) (710 ) (54.16 ) % %Core deposit (68 ) (14.35 ) (316 ) (43.77 )intangibles % %Other assets (136 ) (6.54 ) 562 40.67 % %All other assets $ 15,250 31.39 % $ 18,786 41.70 %

Corporate owned life insurance represents the cash surrender value of life insurance policies owned by the Corporation on the lives of key members of management. The increase in Corporate owned life insurance in the second quarter of 2021 is due to the purchase of $15,000 in additional policies.

Mortgage servicing rights are servicing assets that are recognized from the sales of mortgage loans. The increase in mortgage servicing rights is due to the increased volume of residential mortgage loan sales. The Corporation expects the serviced loan portfolio to continue to grow throughout the remainder of 2021 as mortgage loan demand has remained elevated.

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. The increase in the Corporation's right-of-use assets in the first quarter of 2021 is due to the recognition of two additional lease obligations.

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.

Other assets includes miscellaneous other asset items, none of which are individually significant.

Total deposits

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

6/30/2021 3/31/2021 12/31/ 9/30/2020 6/30/2020 2020Noninterestbearing $ 435,588 $ 422,013 $ 378,733 $ 391,706 $ 383,452 demandInterest bearingSavings 305,409 309,454 290,343 269,051 245,957 Moneymarket 113,088 109,101 113,729 99,252 90,504 demandNOW 102,046 103,342 101,419 120,681 122,477 Time 170,365 178,598 187,752 180,780 175,897 depositsTotal $ 1,126,496 $ 1,122,508 $ 1,071,976 $ 1,061,470 $ 1,018,287 deposits 6/30/2021 vs 3/31/2021 6/30/2021 vs 6/30/2020 Variance Variance Amount % Amount %Noninterestbearing $ 13,575 3.22 % $ 52,136 13.60 %demandInterest bearingSavings (4,045 ) (1.31 )% 59,452 24.17 %Moneymarket 3,987 3.65 % 22,584 24.95 %demandNOW (1,296 ) (1.25 )% (20,431 ) (16.68 )%Time (8,233 ) (4.61 )% (5,532 ) (3.15 )%depositsTotal $ 3,988 0.36 % $ 108,209 10.63 %deposits

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. Total deposits also increased due to government related stimulus programs. 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 June30, 2021:

Maturity Buckets 3 Months or 3 to 6 6 to 9 9 to 12 Beyond 12 Less Months Months Months MonthsBalance $ 72,467 $ 23,247 $ 17,262 $ 30,222 $ 27,167 Weightedaverage 0.44 % 0.46 % 0.55 % 0.48 % 0.90 %yield Cumulative Maturities 3 Months or Up to 6 Up to 9 Up to 12 Total Less Months Months MonthsBalance $ 72,467 $ 95,714 $ 112,976 $ 143,198 $ 170,365 Weightedaverage 0.44 % 0.44 % 0.46 % 0.46 % 0.53 %yield

Included in balances of 3 months or less is a brokered time deposit for $20,000, related to the Corporation's derivatives. 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:

6/30/21 3/31/21 12/31/20 9/30/20 6/30/20Federal HomeLoan Bank $ 35,000 $ 35,000 $ 35,000 $ 77,500 $ 77,500 borrowingsSubordinated 14,000 14,000 14,000 14,000 14,000 debenturesPPPLF ? ? ? 4,717 4,717 Other borrowings 500 ? ? ? ? Total borrowed $ 49,500 $ 49,000 $ 49,000 $ 96,217 $ 96,217 funds 6/30/2021 vs 3/31/ 6/30/2021 vs 6/30/2020 2021 Variance Variance Amount % Amount %Federal Home )Loan Bank $ ? ? % $ (42,500 ) (54.84 %borrowingsSubordinated ? ? % ? ? %debenturesPPPLF ? ? % (4,717 ) (100.00 ) %Other borrowings 500 N/M 500 N/M Total borrowed $ 500 1.02 % $ (46,717 ) (48.55 )funds %

The Corporation utilizes a mix of borrowed funds and organic deposit growth to fund loan demand. 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 throughout 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:

6/30/21 3/31/21 12/31/20 9/30/20 6/30/20Federal HomeLoan Bank $ 35,000 $ 35,000 $ 35,000 $ 77,500 $ 77,500 borrowingsSubordinated 14,000 14,000 14,000 14,000 14,000 debenturesPPPLF ? ? ? 4,717 4,717 Other 500 ? ? ? ? borrowingsBrokeredmoney market ? ? ? 25,029 25,010 demandBrokeredtime 20,000 20,234 20,000 28,605 28,837 depositsInternettime 2,739 2,739 2,839 10,208 11,690 depositsTotalwholesale $ 72,239 $ 71,973 $ 71,839 $ 160,059 $ 161,754 funds 6/30/2021 vs 3/31/2021 6/30/2021 vs 6/30/2020 Variance Variance Amount % Amount %Federal Home )Loan Bank $ ? ? % $ (42,500 ) (54.84 %borrowingsSubordinated ? ? % ? ? %debenturesPPPLF ? ? % (4,717 ) (100.00 ) %Other 500 N/M 500 N/M borrowingsBrokered )money market ? ? % (25,010 ) (100.00 %demandBrokered ) )time (234 ) (1.16 % (8,837 ) (30.64 %depositsInternet )time ? ? % (8,951 ) (76.57 %depositsTotal )wholesale $ 266 0.37 % $ (89,515 ) (55.34 %funds

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. As of June30, 2021, the Corporation's capital ratios remained strong and are expected to exceed well capitalized provisions for the foreseeable future, inclusive of the projected impact of the acquisition of The Farmers State Bank of Munith in the fourth quarter.

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. The following table outlines the number shares and dollar amount associated with the Corporation's common stock repurchase plan for the quarters ended:

6/30/21 3/31/ 12/31/ 9/30/ 6/30/20 21 20 20Number of Shares Repurchased 40,383 37,315 5,342 ? ?Dollar Amount of Shares $ 1,059 $ 880 $ 110 $ ? $ ?Repurchased

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 atJune30, 2016and all dividends were reinvested.

The graph accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/5ffc65ef-6755-4ffd-aca9-10334f71da96

Date FETM ABAQ Index6/30/2016 100.00 100.006/30/2017 141.88 134.656/30/2018 164.96 146.736/30/2019 163.16 129.536/30/2020 140.90 95.746/30/2021 208.27 148.38

Abbreviations and Acronyms

ABA: American Bankers Association HTM: Held-to-maturityAFS: Available-for-sale IRA: Individual retirement accountALLL: Allowance for loan and lease ITM: Interactive teller machinelossesAOCI: 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, NOW: Negotiable order of withdrawaland Economic Security ActCET1: 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: U.S. Small Business AdministrationGAAP: 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 Best 50 performing stocks in 2018 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 17 full-service branches in Genesee, Livingston, Oakland, Saginaw, and Shiawassee Counties. 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.

Aaron D. Wirsing Ronald L. Justice Chief Financial Officer President & CEOContacts: Fentura Financial, Inc. Fentura Financial, Inc. 810.714.3925 810.714.3902 aaron.wirsing@thestatebank.com ron.justice@thestatebank.com