# U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# FORM 10-K

|[ X ]                                   | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--------------------------------------- | ------------------------------------------------------------------------------
|For fiscal year ended December 31, 2001
|                                        |                                                                               
|[     ]                                 | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT               
|                                        | For the transition period from_______________ to ______________               

Commission file
number 0-23550

FENTURA BANCORP, INC.
(Exact name of registrant as specified in its charter)

|Michigan
     (State or other jurisdiction of
      incorporation or organization)175 North Leroy, Fenton, Michigan
 (Address of Principal Executive Offices) | 38-2806518
                               (IRS Employer Identification No.)48430-0725 
                                            (Zip Code)
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------

Registrant's telephone number, including area code (810) 750-8725

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:  Common Stock

Indicate by check mark
whether the registrant (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. X Yes ___ No

Indicate  by check mark if  disclosure  of  delinquent  filers in  response  to Item 405 of  Regulation  S-K is not
contained  herein,  and will not be  contained,  to the best of  registrant's  knowledge,  in  definitive  proxy or
information  statements  incorporated  by  reference  in Part III of this Form 10-K or any  amendment  to this Form
10-K.     [X]

Aggregate market value
of the voting stock held by non-affiliates of the registrant computed by
reference to the average bid and asked prices of such stock was approximately
$46,858,392 as of March 1, 2002.

State the number of
shares outstanding of each of issuers classes of common equity, as of the
latest practicable date. 1,735,496 shares of Common Stock as of March 1, 2002.

# DOCUMENTS
INCORPORATED BY REFERENCE

Portions of the Fentura
Bancorp, Inc. Proxy Statement for its annual meeting of shareholders to be held
April 24, 2002 and its Rule 14a-3 annual report are incorporated by reference
into Parts II and III.

1

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Fentura Bancorp, Inc.
                                          2001 Annual Report on Form 10-K
                                                 Table Of Contents

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Page                                             
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------
|PART I
    Item 1.    Description of Business
    Item 2.    Description of Property
    Item 3.    Legal Proceedings
    Item 4.    Submission of Matters to a Vote of Security Holders
    Additional Item - Executive Officers of Registrant
PART II
    Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters
    Item 6.    Selected Financial Data
    Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations
    Item 7a.   Quantitative and Qualitative Disclosures About Market Risk
    Item 8.    Financial Statements and Supplementary Data
    Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
    Item 10.   Directors and Executive Officers of the Registrant
    Item 11.   Executive Compensation
    Item 12.   Security Ownership of Certain Beneficial Owners and Management
    Item 13.   Certain Relationships and Related Transactions
PART IV
    Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX | 3
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# PART I

## ITEM 1. DESCRIPTION OF BUSINESS

## The Company

Fentura  Bancorp,  Inc. (the  "Company" or  "Fentura") is a financial  holding  company  headquartered  in
Fenton,  Michigan.  As of December 31, 2001,  Fentura owned two banks,  see "The Banks" below.  All  information in
this Item 1 is as of December 31, 2001.  The Company's  subsidiary  banks operate nine  community  banking  offices
offering a full range of banking  services  principally to  individuals,  small business,  and government  entities
throughout  mid-Michigan.  At the close of business on  December  31, 2001 the Company had assets of $309  million,
deposits of $265  million,  and  shareholders'  equity of $38 million.  Trust assets under  management  totaled $55
million.

Fentura was  incorporated in 1987 to serve as the holding  company of its sole subsidiary  bank, The State
Bank ("TSB" or one of the  "Banks").  TSB traces its origins to its  predecessor,  The  Commercial  Savings Bank of
Fenton,  which was  incorporated  in 1898.  See "The Banks".  On March 13, 2000 a second bank  subsidiary,  Davison
State Bank ("DSB" or one of the "Banks") commenced operation.

In  August  of  2000  Fentura  converted  from a bank  holding  company  to a  financial  holding  company
registered  with the Board of Governors of the Federal  Reserve  System under the Bank Holding  Company Act and the
Gramm-Leach-Bliley  Act (the "GLB Act").  The  Company  has  corporate  power to engage in such  activities  as are
permitted to business  corporations under the Michigan Business  Corporation Act, subject to the limitations of the
Bank Holding Company Act and GLB Act and  regulations of the Board of Governors of the Federal  Reserve System.  In
general,  the Bank Holding  Company Act and  regulations  restrict  the Company with respect to its own  activities
that are closely  related to the  business of banking.  The GLB Act and  regulations  expand the  authority of bank
holding  companies  that are also financial  holding  companies  allowing them to enter into business  combinations
with  other  financial  institutions,  including  insurance  companies,  and  securities  firms to  create a single
financial  services  organization  in order to offer  customers a more  complete  array of  financial  products and
services.  See "Supervision and Regulation."

The Company's principal  executive offices are located at 175 North Leroy,  Fenton,  Michigan  48430-0725,
and its telephone number is (810) 750-8725.

## The Banks

TSB's original  predecessor was incorporated as a state banking  corporation under the laws of Michigan on
September  16, 1898 under the name "The  Commercial  Savings Bank of Fenton." In 1931, it changed its name to State
Savings  Bank of  Fenton,  and in 1988  became  The State  Bank.  For over 100 years  TSB has been  engaged  in the
general banking  business in the Fenton,  Michigan area. Its deposits are insured by the Federal Deposit  Insurance
Corporation  (the "FDIC"),  but it is not a member of the Federal  Reserve  System.  As a state bank, it is subject
to federal and state laws  applicable  to banks and to  regulation  and  supervision  by the FDIC and the  Michigan
Office of Financial and Insurance Services, Division of Financial Institutions.  See "Supervision and Regulation."

DSB  commenced  operations  on March 13,  2000,  and is engaged in the  general  banking  business  in the
Davison,  Michigan area. Its deposits are insured by the Federal Deposit  Insurance  Corporation (the "FDIC"),  but
it is not a member of the  Federal  Reserve  System.  As a state  bank,  it is subject  to  federal  and state laws
applicable  to banks and to  regulation  and  supervision  by the FDIC and the  Michigan  Office of  Financial  and
Insurance Services, Division of Financial Institutions.  See "Supervision and Regulation."

3

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Both Banks are  community-oriented  providers  of  financial  services  engaged in the business of general
commercial  banking.  Their  activities  include  investing  in state  and  federal  securities,  accepting  demand
deposits,  savings and other time  deposits,  extending  retail,  commercial,  consumer  and real  estate  loans to
individuals  and  businesses,  providing  safe  deposit  boxes and credit  card  services,  transmitting  funds and
providing  other  services  generally  associated  with full  service  commercial  banking.  Lending  is focused on
individuals  and small  businesses  in the local market  regions of the Banks.  In  addition,  TSB operates a trust
department offering a full range of fiduciary services.

TSB is  headquartered  in the City of Fenton,  Michigan,  and  considers  its primary  service  area to be
portions of Genesee,  Oakland,  and  Livingston  counties in Michigan.  As of December 31, 2001,  TSB operated five
offices in the City of Fenton,  Michigan, one office in the City of Linden,  Michigan, one office in the Village of
Holly,  Michigan,  and one office in the Township of Grand  Blanc,  Michigan.  Its main office is located  downtown
Fenton.

DSB is  headquartered in the Township of Davison,  Michigan,  and considers its primary service area to be
portions of Genesee and Lapeer  Counties.  As of December  31,  2001,  DSB  operated two offices in the Township of
Davison, Michigan.

As of December 31, 2001, TSB employed 112 full time  personnel,  including 32 officers,  and an additional
26 part time employees.  TSB considers its employee relations to be excellent.

As of December 31, 2001, DSB employed 10 full time  personnel,  including 3 officers,  and an additional 6
part time employees.  DSB considers its employee relations to be excellent.

## Competition

The financial  services  industry is highly  competitive.  The Banks compete with other commercial  banks,
many of which are subsidiaries of bank holding companies,  for loans, deposits,  trust accounts, and other business
on the basis of interest rates,  fees,  convenience  and quality of service.  The Banks also compete with a variety
of other financial  services  organizations  including savings and loan associations,  finance companies,  mortgage
banking  companies,  brokerage  firms,  credit  unions  and  other  financial  organizations.  Many  of the  Banks'
competitors have substantially greater resources than the Banks.

## Supervision and Regulation

The  following  is a summary of certain  statutes  and  regulations  affecting  the Company and the Banks.
This summary is  qualified  in its  entirety by such  statutes  and  regulations.  A change in  applicable  laws or
regulations may have a material effect on the Company, the Banks and the business of the Company and the Banks.

## General

Financial  institutions  and their holding  companies are  extensively  regulated  under federal and state
law.  Consequently,  the growth and earnings  performance  of the Company and the Banks can be affected not only by
management  decisions  and  general  economic  conditions,  but  also  by the  statutes  administered  by,  and the
regulations and policies of, various governmental  regulatory  authorities.  Those authorities include, but are not
limited to, the Board of Governors of the Federal  Reserve  System (the "Federal  Reserve  Board"),  the FDIC,  the
Commissioner  of the Michigan Office of Financial and Insurance  Services  ("Commissioner"),  the Internal  Revenue
Service,  and state taxing authorities.  The effect of such statutes,  regulations and policies can be significant,
and cannot be predicted with a high degree of certainty.

Federal and state laws and regulations  generally  applicable to financial  institutions and their holding
companies  regulate,  among other things, the scope of business,  investments,  reserves against deposits,  capital
levels  relative to operations,  lending  activities and practices,  the nature and amount of collateral for loans,
the  establishment of branches,  mergers,  consolidations  and dividends.  The system of supervision and regulation
applicable to the Company and the Banks establishes a comprehensive  framework for their respective  operations and
is intended  primarily for the protection of the FDIC's deposit  insurance  funds, the depositors of the Banks, and
the public, rather than shareholders of the Banks or the Company.

4

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Federal law and regulations  establish  supervisory  standards applicable to the lending activities of the
Banks,  including internal controls,  credit  underwriting,  loan documentation and loan-to-value  ratios for loans
secured by real property.

## The Company

General.  In August of 2000, the Company  became a financial  holding  company,  within the meaning of the
Gramm-Leach-Bliley  Act of 1999 ("GLB Act"),  and is registered  with,  and subject to  regulation  by, the Federal
Reserve  Board  under the Bank  Holding  Company  Act,  as amended  (the  "BHCA").  Under the BHCA,  the Company is
subject to periodic  examination  by the Federal  Reserve Board,  and is required to file with the Federal  Reserve
Board periodic reports of its operations and such additional information as the Federal Reserve Board may require.

In accordance with Federal  Reserve Board policy,  the Company is expected to act as a source of financial
strength to the Banks and to commit  resources to support the Banks in  circumstances  where the Company  might not
do so  absent  such  policy.  In  addition,  if the  Commissioner  deems  a  Bank's  capital  to be  impaired,  the
Commissioner  may require the Bank to restore  its capital by a special  assessment  upon the Company as the Bank's
sole  shareholder.  If the Company  were to fail to pay any such  assessment,  the  directors  of the Bank would be
required,  under  Michigan  law, to sell the shares of the Bank's stock owned by the Company to the highest  bidder
at either a public or private auction and use the proceeds of the sale to restore the Bank's capital.

Investments and Activities.  In general,  any direct or indirect  acquisition by the Company of any voting
shares of any bank which would result in the Company's  direct or indirect  ownership or control of more than 5% of
any class of voting  shares of such bank,  and any merger or  consolidation  of the Company with another  financial
holding  company or bank holding  company,  will require the prior  written  approval of the Federal  Reserve Board
under the BHCA. No Federal  Reserve Board  approval is required for the Company to acquire a company,  other than a
bank holding  company or bank,  engaged in  activities  that are  financial in nature as  determined by the Federal
Reserve Board.

The merger or  consolidation  of an existing  bank  subsidiary  of the Company with another  bank,  or the
acquisition  by such a subsidiary of assets of another  bank,  or the  assumption of liability by such a subsidiary
to pay any  deposits  in  another  bank,  will  require  the prior  written  approval  of the  responsible  Federal
depository  institution  regulatory  agency  under the Bank  Merger  Act.  In  addition,  in certain  such cases an
application to, and the prior approval of, the Federal Reserve Board under the BHCA and/or the  Commissioner  under
the Michigan Banking Code, may be required.

Financial holding companies, such as the Company, may engage in various lending,  advisory,  insurance and
insurance  underwriting,  securities  underwriting,  dealing and market making, and merchant banking activities (as
well as those  activities  previously  approved for bank holding  companies by the Federal  Reserve Board) together
with such  other  activities  as may be  determined  by the  Federal  Reserve  Board (in  coordination  with  other
regulatory  authorities) to be financial in nature,  incidental to any such financial activity, or complementary to
any such  financial  activity,  and which do not pose a  substantial  risk to the safety or soundness of depository
institutions  or the  financial  system  generally.  In order to maintain the benefits and  flexibility  of being a
financial  holding  company,  each  of  the  Company's  subsidiary  depository  institutions  must  continue  to be
"well-capitalized"  and  "well-managed"  under  applicable  regulatory  standards  and each  subsidiary  depository
institution must maintain at least a satisfactory or above Community Reinvestment Act rating.

Capital  Requirements.  The Federal Reserve Board uses capital adequacy  guidelines in its examination and
regulation  of bank holding  companies.  If capital  falls below minimum  guidelines,  a bank holding  company may,
among other things, be denied approval to acquire or establish additional banks or non-bank businesses.

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The Federal  Reserve  Board's  capital  guidelines  establish the  following  minimum  regulatory  capital
requirements  for bank holding  companies:  (i) a leverage capital  requirement  expressed as a percentage of total
average assets,  and (ii) a risk-based  requirement  expressed as a percentage of total  risk-weighted  assets. The
leverage  capital  requirement  consists  of a  minimum  ratio of Tier 1 capital  (which  consists  principally  of
shareholders'  equity)  to  total  average  assets  of 3%  for  the  most  highly  rated  companies,  with  minimum
requirements of 4% to 5% for all others.  The risk-based  requirement  consists of a minimum ratio of total capital
to total risk-weighted assets of 8%, of which at least one-half must be Tier 1 capital.

Dividends.  The Company is a  corporation  separate and  distinct  from the Banks.  Most of the  Company's
revenues  are  received  by it in the form of  dividends  paid by the Banks.  Thus,  the  Company's  ability to pay
dividends  to its  shareholders  is  indirectly  limited by  statutory  restrictions  on the Banks'  ability to pay
dividends described below.  Further,  in a policy statement,  the Federal Reserve Board has expressed its view that
a bank holding company  experiencing  earnings weaknesses should not pay cash dividends exceeding its net income or
which can only be funded in ways that weaken the bank holding  company's  financial  health,  such as by borrowing.
Additionally,  the Federal  Reserve  Board  possesses  enforcement  powers over bank  holding  companies  and their
non-bank  subsidiaries  to prevent or remedy  actions that represent  unsafe or unsound  practices or violations of
applicable  statutes and  regulations.  Among these powers is the ability to proscribe  the payment of dividends by
banks and bank  holding  companies.  Similar  enforcement  powers  over the Banks are  possessed  by the FDIC.  The
"prompt  corrective  action"  provisions  of federal law and  regulation  authorizes  the Federal  Reserve Board to
restrict the payment of dividends by the Company for an insured bank which fails to meet specified capital levels.

In addition to the restrictions on dividends  imposed by the Federal Reserve Board, the Michigan  Business
Corporation  Act  provides  that  dividends  may be  legally  declared  or paid  only if after the  distribution  a
corporation,  such as the  Company,  can pay its  debts as they come due in the usual  course of  business  and its
total  assets  equal or exceed  the sum of its  liabilities  plus the amount  that  would be needed to satisfy  the
preferential  rights upon dissolution of any holders of preferred stock whose  preferential  rights are superior to
those receiving the distribution.

## The Banks

General.  The Banks are  Michigan  banking  corporations,  and their  deposit  accounts are insured by the
Bank Insurance Fund (the "BIF") of the FDIC. As a BIF insured  Michigan  chartered  banks, the Banks are subject to
the  examination,  supervision,  reporting and  enforcement  requirements  of the  Commissioner,  as the chartering
authority for Michigan  banks,  and the FDIC, as  administrator  of BIF.  These  agencies and the federal and state
laws applicable to the Banks and their  operations,  extensively  regulate  various aspects of the banking business
including,  among other things,  permissible types and amounts of loans, investments and other activities,  capital
adequacy,  branching,  interest rates on loans and on deposits, the maintenance of non-interest bearing reserves on
deposit accounts, and the safety and soundness of banking practices.

Deposit  Insurance.  As  FDIC-insured  institutions,  the  Banks are  required  to pay  deposit  insurance
premium  assessments  to the FDIC.  The FDIC has adopted a  risk-based  assessment  system  under which all insured
depository  institutions are placed into one of nine categories and assessed insurance  premiums,  based upon their
respective levels of capital and results of supervisory  evaluation.  Institutions  classified as  well-capitalized
(as  defined by the FDIC) and  considered  healthy pay the lowest  premium  while  institutions  that are less than
adequately  capitalized (as defined by the FDIC) and considered of substantial  supervisory concern pay the highest
premium.  Risk  classification  of all insured  institutions  is made by the FDIC for each  semi-annual  assessment
period.

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The Federal  Deposit  Insurance  Act ("FDIA")  requires the FDIC to establish  assessment  rates at levels
which will  maintain the Deposit  Insurance  Fund at a mandated  reserve  ratio of not less than 1.25% of estimated
insured  deposits.  For  several  years,  the BIF  reserve  ratio  has  been at or above  the  mandated  ratio  and
assessments  have ranged from 0% of deposits for  institutions  in the lowest risk  category to .27% of deposits in
the highest  risk  category.  However,  there is  speculation  that the reserve may fall below the  mandated  ratio
resulting in increased assessments in the second half of 2002.

FICO  Assessments.  The Banks,  as members of the BIF, are subject to assessments to cover the payments on
outstanding  obligations of the Financing  Corporation  ("FICO").  FICO was created to finance the recapitalization
of the  Federal  Savings  and Loan  Insurance  Corporation,  the  predecessor  to the  FDIC's  Savings  Association
Insurance  Fund (the  "SAIF")  which  insures the deposits of thrift  institutions.  From now until the maturity of
the outstanding  FICO  obligations in 2019, BIF members and SAIF members will share the cost of the interest on the
FICO bonds on a pro rata  basis.  It is  estimated  that FICO  assessments  during  this  period  will be less than
0.025% of deposits.

Commissioner Assessments.
Michigan banks are required to pay  supervisory  fees to the  Commissioner  to
fund the operations of the  Commissioner.  The amount of  supervisory  fees paid by a bank is based upon the bank's
total assets, as reported to the Commissioner.

Capital Requirements.   The  FDIC  has   established  the  following   minimum  capital   standards  for
state-chartered,  FDIC  insured  non-member  banks,  such as the Banks:  a  leverage  requirement  consisting  of a
minimum  ratio of Tier 1  capital  to total  average  assets of 3% for the most  highly-rated  banks  with  minimum
requirements  of 4% to 5% for all others,  and a risk-based  capital  requirement  consisting of a minimum ratio of
total  capital to total  risk-weighted  assets of 8%, at least  one-half  of which  must be Tier 1 capital.  Tier 1
capital  consists  principally  of  shareholders'  equity.  These capital  requirements  are minimum  requirements.
Higher  capital  levels  will be  required  if  warranted  by the  particular  circumstances  or risk  profiles  of
individual institutions.

Federal law provides the federal banking  regulators with broad power to take prompt  corrective action to
resolve the problems of  undercapitalized  institutions.  The extent of the  regulators'  powers depends on whether
the institution in question is "well capitalized,"  "adequately  capitalized,"  "undercapitalized,"  "significantly
undercapitalized,"  or  "critically  undercapitalized."  Federal  regulations  define these  capital  categories as
follows:

`Total                Tier 1
                                        Risk-Based           Risk-Based
                                        Capital Ratio        Capital Ratio         Leverage Ratio

Well capitalized                        10% or above         6% or above           5% or above
Adequately capitalized                    8% or above        4% or above           4% or above
Undercapitalized                        Less than 8%         Less than 4%          Less than 4%
Significantly undercapitalized          Less than 6%         Less than 3%          Less than 3%
Critically undercapitalized                       --                   --          A ratio of tangible
                                                                                   equity to total assets
                                                                                   of 2% or less`

As of  December  31,  2001,  each  of the  Banks'  ratios  exceeded  minimum  requirements  for  the  well
capitalized category.

Depending  upon the capital  category to which an  institution  is assigned,  the  regulators'  corrective
powers  include:  requiring  the  submission  of a capital  restoration  plan;  placing  limits on asset growth and
restrictions  on activities;  requiring the institution to issue  additional  capital stock  (including  additional
voting  stock) or to be acquired;  restricting  transactions  with  affiliates;  restricting  the interest rate the
institution  may pay on deposits;  ordering a new election of directors of the  institution;  requiring that senior
executive  officers  or  directors  be  dismissed;   prohibiting  the  institution  from  accepting  deposits  from
correspondent  banks;  requiring  the  institution  to divest  certain  subsidiaries;  prohibiting  the  payment of
principal or interest on subordinated debt; and ultimately, appointing a receiver for the institution.

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In general,  a depository  institution  may be  reclassified  to a lower category than is indicated by its
capital levels if the appropriate  federal depository  institution  regulatory agency determines the institution to
be  otherwise  in an unsafe or unsound  condition  or to be engaged  in an unsafe or unsound  practice.  This could
include a failure by the  institution,  following  receipt of a  less-than-satisfactory  rating on its most  recent
examination report, to correct the deficiency.

Dividends.  Under  Michigan law, the Banks are  restricted as to the maximum  amount of dividends they may
pay on their common stock.  The Banks may not pay dividends  except out of net income after  deducting their losses
and bad  debts.  A  Michigan  state  bank may not  declare  or pay a  dividend  unless  the bank will have  surplus
amounting to at least 20% of its capital after the payment of the dividend.

Federal law generally prohibits a depository  institution from making any capital distribution  (including
payment of a dividend) or paying any management  fee to its holding  company if the  depository  institution  would
thereafter  be  undercapitalized.  The FDIC may  prevent an insured  bank from paying  dividends  if the bank is in
default  of  payment  of any  assessment  due to the FDIC.  In  addition,  the FDIC may  prohibit  the  payment  of
dividends by an insured bank, if such payment is determined,  by reason of the financial  condition of the bank, to
be an unsafe and unsound banking practice.

Insider Transactions.  The Banks are subject to certain  restrictions  imposed by the Federal Reserve Act
on any extensions of credit to the Company or its  subsidiaries,  on  investments in the stock or other  securities
of the  Company or its  subsidiaries  and the  acceptance  of the stock or other  securities  of the Company or its
subsidiaries  as  collateral  for  loans.  Certain  limitations  and  reporting  requirements  are also  placed  on
extensions of credit by the Banks to their  directors  and  officers,  to directors and officers of the Company and
its  subsidiaries,  to  principal  shareholders  of the  Company,  and to "related  interests"  of such  directors,
officers and  principal  shareholders.  In addition,  federal law and  regulations  may affect the terms upon which
any person becoming a director or officer of the Company or one of its  subsidiaries or a principal  shareholder of
the Company may obtain credit from banks with which the Banks maintain a correspondent relationship.

Safety and  Soundness  Standards.  The federal  banking  agencies  have adopted  guidelines to promote the
safety and  soundness of federally  insured  depository  institutions.  These  guidelines  establish  standards for
internal controls, information systems, internal audit systems, loan documentation,  credit underwriting,  interest
rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

Investments and Other Activities.  Under federal law and FDIC  regulations,  FDIC -insured state banks are
prohibited,  subject to certain  exceptions,  from  making or  retaining  equity  investments  of a type,  or in an
amount,  that are not  permissible  for a national  bank.  Federal law, as implemented  by FDIC  regulations,  also
prohibits  FDIC  insured  state  banks and their  subsidiaries,  subject to certain  exceptions,  from  engaging as
principal in any activity that is not permitted for a national  bank or its  subsidiary,  respectively,  unless the
bank meets,  and  continues to meet,  its minimum  regulatory  capital  requirements  and the FDIC  determines  the
activity  would  not  pose a  significant  risk to the  deposit  insurance  fund of  which  the  bank is a  member.
Impermissible  investments and activities  must be divested or  discontinued  within certain time frames set by the
FDIC in accordance  with federal law. These  restrictions  are not currently  expected to have a material impact on
the operations of the Banks.

Consumer  Protection  Laws.  The  Banks'  businesses  include  making  a  variety  of  types  of  loans to
individuals.  In making  these  loans,  the Banks are  subject to State  usury and  regulatory  laws and to various
federal statutes,  including the privacy of consumer  financial  information  provisions of the  Gramm-Leach-Bliley
Act and regulations  promulgated  thereunder,  the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the
Truth in Lending Act, the Real Estate  Settlement  Procedures  Act, and the Home Mortgage  Disclosure  Act, and the
regulations  promulgated  thereunder,  which prohibit  discrimination,  specify disclosures to be made to borrowers
regarding  credit and  settlement  costs,  and  regulate  the  mortgage  loan  servicing  activities  of the Banks,
including  the  maintenance  and  operation  of escrow  accounts and the transfer of mortgage  loan  servicing.  In
receiving  deposits,  the Banks are subject to extensive  regulation  under State and federal law and  regulations,
including  the Truth in Savings Act, the Expedited  Funds  Availability  Act, the Bank Secrecy Act, the  Electronic
Funds  Transfer  Act,  and the  Federal  Deposit  Insurance  Act.  Violation  of these  laws  could  result  in the
imposition of significant damages and fines upon the Bank and its directors and officers.

8

---

Branching Authority.  Michigan  banks,  such as the  Banks,  have the  authority  under  Michigan  law to
establish  branches  anywhere in the State of Michigan,  subject to receipt of all required  regulatory  approvals.
Banks may establish  interstate  branch networks through  acquisitions of other banks. The establishment of de novo
interstate  branches  or the  acquisition  of  individual  branches  of a bank in another  state  (rather  than the
acquisition of an out-of-state bank in its entirety) is allowed only if specifically authorized by state law.

Michigan  permits both U.S.  and non-U.S.  banks to  establish  branch  offices in Michigan.  The Michigan
Banking Code permits,  in appropriate  circumstances  and with the approval of the Michigan Office of Financial and
Insurance Services,  Division of Financial  Institutions,  (1) acquisition of Michigan banks by FDIC-insured banks,
savings banks or savings and loan  associations  located in other  states,  (2) sale by a Michigan bank of branches
to an FDIC-insured bank,  savings bank or savings and loan association  located in a state in which a Michigan bank
could purchase  branches of the purchasing  entity,  (3)  consolidation of Michigan banks and  FDIC-insured  banks,
savings banks or savings and loan associations  located in other states having laws permitting such  consolidation,
(4) establishment of branches in Michigan by FDIC-insured  banks located in other states,  the District of Columbia
or U.S.  territories  or  protectorates  having  laws  permitting  a Michigan  bank to  establish  a branch in such
jurisdiction, and (5) establishment by foreign banks of branches located in Michigan.

## ITEM 2. DESCRIPTION OF PROPERTY

All properties have maintenance contracts and are maintained in good condition.

## ITEM 3. LEGAL
PROCEEDINGS

From time to time, the Company and its subsidiaries are parties to various legal  proceedings  incident to
their business.  At December 31, 2001, there were no legal  proceedings  which management  anticipates would have a
material adverse effect on the Company.

## ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No  matters  were  submitted  during the fourth  quarter of the year  covered by this  report to a vote of
security holders through the solicitation of proxies or otherwise.

9

---

## ADDITIONAL ITEM - EXECUTIVE OFFICERS OF REGISTRANT

The  following  information  concerning  executive  officers  of the  Company  has been  omitted  from the
Registrant's proxy statement pursuant Instruction 3 to Regulation S-K, Item 401(b).

Officers of the Company are  appointed  annually by the Board of Directors of the Company and serve at the
pleasure of the Board of  Directors.  Certain of the officers  named below are  appointed  annually by the Board of
Directors  of one or the  other of the  Banks and  serve at the  pleasure  of the Board of the Bank that  appointed
them.  The Bank  officers are included in the listing of  executive  officers of the Company  because of the nature
of the office they hold.  Information concerning these executive officers is given below:

| | Donald L. Grill (age 53) was appointed as President and Chief  Executive  Officer of the
Company and of TSB in late 1996. From 1983 to 1996, Mr. Grill was employed by First of America
Bank Corporation and served as President and Chief Executive Officer of First of America Bank -
Frankenmuth.                                      
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                           
| | Ronald  L.  Justice  (age  37) is the  Chief  Financial  Officer  and  Secretary  of the
Company. Mr. Justice was promoted to Senior Vice President and Chief Financial Officer of TSB
in 1999 and prior to that served as Chief Financial Officer and Vice President since 1995.
Prior to that Mr. Justice held other positions with TSB.
| |                                                                                                                                                                                                                                                                                                                                           
| | Robert E. Sewick (age 52) is Senior Vice President and Senior Loan Officer of TSB.
Mr. Sewick was appointed to that position in June of 1999. Mr. Sewick has 29 years of banking
experience, most recently as Senior Vice President/Regional Credit Officer of Huntington
National Bank for Western Michigan.                             
| |                                                                                                                                                                                                                                                                                                                                           
| | John A. Emmendorfer, Jr. (age 39) was appointed President and Chief Executive Officer
of Davison on February 24, 2000. Prior to that time Mr. Emmendorfer was an employee of TSB
from 1988 to 1999 and most recently served as TSB's Vice President and Director of Commercial
Lending.                                                   

# PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The market and dividend  information  required by this item appears  under the caption  "Fentura  Bancorp,
Inc.  Common  Stock" and "Table 14 on page 47 under the title  "MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS",  of the Company's 2001 Rule 14a-3 annual report,  and is incorporated  herein
by reference.

The  holders of record  information  required by this item  appears  under the  caption  "Stock  Ownership
Information" on page 4 of the Company's 2002 Notice of Annual Meeting of Shareholders and Proxy  Statement,  and is
incorporated herein by reference.

## ITEM 6. SELECTED FINANCIAL DATA

The  information  required by this item appears under the title  "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF
FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS",  appearing in Table 1 on page 30 of the Company's 2001 Rule 14a-3
annual report, and is incorporated herein by reference.

10

---

## ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The  information  required by this item appears under the title  "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF
FINANCIAL  CONDITION AND RESULTS OF OPERATIONS",  appearing on pages 30 through 47 of the Company's 2001 Rule 14a-3
annual report, and is incorporated herein by reference.

## ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  information  required by this item appears  under the  headings  "Liquidity  and  Interest  Rate Risk
Management" on pages 42and 43 and  "Quantitative  and Qualitative  Disclosure  About Market Risk" on page 43 and 44
under the title  "MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF  OPERATIONS" of the
Company's 2001 Rule 14a-3 annual report, and is incorporated herein by reference.

## ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  consolidated  financial  statements  of the  Company  and Report of Crowe,  Chizek and  Company  LLP,
Independent  Auditors appear on pages 1 through 29 of the Financial  Statements  portion of the Company's 2001 Rule
14a-3 annual report, and are incorporated herein by reference.

## ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March  26,2001,  the Company  dismissed  Grant  Thornton LLP as the  Company's  principal  accountants.
The former  accountants'  reports on the Company's  financial  statements for the past two years ended December 31,
1999 and December 31, 2000 did not contain any adverse  opinion or  disclaimer  of opinion nor were they  qualified
or modified as to  uncertainty,  audit scope or  accounting  principles.  The  decision to change  accountants  was
recommended  and  approved  by the Audit  Committee  of the  Company  and by its  Board of  Directors.  During  the
Company's two most recent fiscal years and  subsequent  interim  periods,  preceding the  dismissal,  there were no
disagreements  with the  former  accountants  on any  matter  of  accounting  principles  or  practices,  financial
statement  disclosure,  or auditing scope or procedure which disagreements,  if not resolved to the satisfaction of
the former  accountants,  would have caused them to make  reference to the subject  matter of the  disagreement  in
connection  with  their  report.  No  "reportable  events"  as defined  in Item  304(a)(1)(v)  occurred  within the
Company's  two most recent  fiscal  years and any  subsequent  interim  periods  preceding  the former  accountants
dismissal.

On March  26,2001,  the Company  engaged  Crowe,  Chizek and Company LLP as its principal  accountants  to
audit the  Company's  financial  statements  for the year ending  December 31, 2001.  During the Company's two most
recent fiscal years and any subsequent  interim period prior to engaging the new  accountants,  the Company did not
consult with the newly engaged accountants regarding any of the matters described in Item 304(a)(2)(i) or (ii).

The  letter  of the  former  accountants  required  by Items  304(a)(3)  was  filed as  Exhibit  16 to the
Company's  report on Form 8-K reporting the change in certifying  accountants and is incorporated in this Report by
reference.

11

---

# PART III

## ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company's  Executive  officers are  identified in  "Additional  Item" in Part I of this Report on Form
10-K. The other  information  required by this item appears under the captions  "2002 Election of Directors,"  "The
Corporation's  Board of  Directors,"  "Committees  of the  Corporation  Board,"  and  "Compliance  with  Section 16
Reporting" on pages 3, 4, 5, and 13,  respectively,  of the Company's  2002 Notice of Annual  Shareholders  Meeting
and Proxy Statement, and is incorporated herein by reference.

## ITEM 11. EXECUTIVE COMPENSATION

The information  required by this item appears under the captions  "Executive  Compensation,"  "Directors'
Compensation,"  "Executive  Compensation,"  "Retirement and Change in Control Arrangements" and "Shareholder Return
Performance  Graph"  on pages 5 and 6, and 8 through  13,  respectively,  of the  Company's  2002  Notice of Annual
Shareholders Meeting and Proxy Statement, and is incorporated herein by reference.

## ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

## ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required by this item appears under the caption "Other  Information - Transactions  with
Certain  Interested  Persons"  on page 13 of the  Company's  2002 Notice of Annual  Shareholders  Meeting and Proxy
Statement, and is incorporated herein by reference.

# PART IV

## ITEM 14. EXHIBITS. FINANCIAL STATEMENT SCHEDULES,  AND REPORTS ON FORM 8-K

|(a) | 1. | Financial Statements:
The following consolidated financial statements of the Company and Report of Crowe,
Chizek and Company LLP, Independent Auditors are incorporated by reference under
Item 8 Financial Statements and Supplementary Data of this document:
     Consolidated Balance Sheets
     Consolidated Statements of Income
     Consolidated Statements of Comprehensive Income
     Consolidated Statements of Changes in Stockholders' Equity
     Consolidated Statements of Cash Flows
     Notes to the Consolidated Financial statements
     Report of Crowe Chizek LLP, Independent Auditors
|--- | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 2. | Financial Statement Schedules
All schedules are omitted -- see Item 14(d) below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

12

---

|    | 3.                                                                                                                                                                                                                                                                 | Exhibits:
The exhibits listed on the Exhibit Index following the signature page of
this report are filed herewith and are incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Report on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 2001.                                                                                                                                                                  
|(c) | Exhibits:
The "Exhibit Index" follows the signature page of this report and is incorporated herein by reference.                                                                                                                                                  
|(d) | Financial Statement Schedules:
All financial statement schedules normally required by Article 9 of Regulation S-X
are omitted since they are either not applicable or the required information is
shown in the consolidated financial statements or notes thereto.

13

---

# Signatures

In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of 1934,  the  Registrant  caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|Fentura Bancorp, Inc.
       (Registrant)                                                                                       |                     
|------------------------------------------------------------------------------------------------------------------------------- | --------------------
|By  /s/Donald L. Grill
      Donald L. Grill
      On behalf of the registrant
      and as President & CEO,
      and Director | Date: March 13, 2002

In accordance with the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated. Each director of the Registrant, whose signature appears below,
hereby appoints Russell H. Van Gilder, Jr. and Donald L. Grill, and each of
them severally, as his or her attorney-in-fact, to sign his or her name and on
his or her behalf, as a director of the Registrant, and to file with the
Commission any and all amendments to this report on Form 10-K.

|Signature                                                                                                                                                                                                                                                                      | Capacity                                                                                                                                                                             | Date                                                                                                    
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------
|/s/Russell H. VanGilder, Jr.
Russell H. VanGilder, Jr./s/Forrest A. Shook
Forrest A. Shook/s/David A. Duthie
David A. Duthie/s/Peggy L. Haw Jury
Peggy L. Haw Jury/s/J. David Karr
J. David Karr/s/Thomas P. McKenney
Thomas P. McKenney/s/Ronald L. Justice
Ronald L. Justice | Chairman of the Board
and Director
Vice Chairman of the Board
Director
Director
Director
Director
Director
Chief Financial Officer and Secretary
(Also Principal Accounting Officer) | March 13, 2002
March 13, 2002
March 13, 2002
March 13, 2002
March 13, 2002
March 13, 2002
March 13, 2002

14

---

# FENTURA BANCORP, INC.2001 Annual
Report on Form 10-K
EXHIBIT INDEX

|Exhibit      Number | Exhibit                                                                                                                                                                                                       
|------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                                                                               
|3(i)                | Articles  of  Incorporation  of  Fentura  Bancorp,  Inc.  (Incorporated  by  reference  to Form 10-SB
Registration Number 0-23550)                                                                            
|                    |                                                                                                                                                                                                               
|3(ii)               | Bylaws of Fentura Bancorp, Inc. (Incorporated by reference to Form 10-SB Registration Number 0-23550)                                                                                                         
|                    |                                                                                                                                                                                                               
|3(iii)              | Amendment to the Articles of  Incorporation of Fentura  Bancorp,  Inc.  (Incorporated by reference to
Form 10-K Filed March 20, 2001)                                                                         
|                    |                                                                                                                                                                                                               
|4(i)                | Amended and Restated Automatic Dividend  Reinvestment Plan (Incorporated by reference to Registration
Statement on Form S-3 - Registration No. 333-75194)                                                     
|                    |                                                                                                                                                                                                               
|10.7                | Lease of Davison  Branch Bank Site between The State Bank and VG's Food Center,  Inc. dated April 27,
1993 (Incorporated by reference to Form 10-SB Registration Number 0-23550)                              
|                    |                                                                                                                                                                                                               
|10.10               | Lease of Fenton Silver Parkway Branch site between The State Bank and VGs
Food Centers dated March 26, 1996 (Incorporated by reference to Form 10Q-SB
filed on May 2, 1996)                                  
|                    |                                                                                                                                                                                                               
|10.11               | Lease of Davison (second) Branch site between The State Bank and VGS Food
Centers dated November 12, 1996 (Incorporated by reference to Form 10K-SB filed
on March 20, 1997)                                 
|                    |                                                                                                                                                                                                               
|10.12               | Directors Stock Purchase Plan (Incorporated by reference to Form 10K-SB filed on March 17, 1996)                                                                                                              
|                    |                                                                                                                                                                                                               
|10.13               | Non-Employee  Director Stock Option Plan (Incorporated by reference to Form 10K-SB filed on March 17, 1996)                                                                                                   
|                    |                                                                                                                                                                                                               
|10.14               | Form of Non-Employee Director Stock Option Agreement  (Incorporated by reference to Form 10Q-SB filed
on May 2, 1996)                                                                                         
|                    |                                                                                                                                                                                                               
|10.15               | Retainer Stock Plan for Directors (Incorporated by reference to Form 10K-SB filed on March 17, 1996)                                                                                                          
|                    |                                                                                                                                                                                                               
|10.16               | Employee Stock Option Plan(Incorporated by reference to Form 10K-SB filed on March 17, 1996)                                                                                                                  
|                    |                                                                                                                                                                                                               
|10.17               | Form of Employee  Stock  Option Plan  Agreement  (Incorporated  by  reference to Form 10K-SB filed on
March 17, 1996)                                                                                         
|                    |                                                                                                                                                                                                               
|10.18               | Executive Stock Bonus Plan (Incorporated by reference to Form 10K-SB filed on March 17, 1996)                                                                                                                 
|                    |                                                                                                                                                                                                               
|10.19               | Stock  Purchase  Plan between The State Bank and Donald E. Johnson,  Jr.,  Mary Alice J. Heaton,  and
Linda J. LeMieux dated November 17, 1996 (Incorporated by reference to Form 10K-SB filed March 20,
1997)
|                    |                                                                                                                                                                                                               
|10.20               | Severance  Compensation  Agreement  between the  Registrant  and Donald L. Grill dated March 20, 1997
(Incorporated by reference to Form 10Q-SB filed May 12, 1997)                                           

15

---

|Exhibit      Number | Exhibit                                                                                                                                                      
|------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                              
|13                  | Rule 14a-3 Annual Report to Security Holders (Filed herewith)                                                                                                
|                    |                                                                                                                                                              
|16                  | Letter of former accountants required by Item 304(a)(3) of Regulation S-K
(Incorporated by reference to Registrants Report on Form 8-K filed March
28, 2001)
|                    |                                                                                                                                                              
|21.1                | Subsidiaries of the Registrant (Filed herewith)                                                                                                              
|                    |                                                                                                                                                              
|21.1                | Consent of Independent Accountants (Filed herewith)                                                                                                          

16

---

# Exhibit 13

# Rule 14a-3
annual report

---

# FINANCIAL
STATEMENTS AND REPORT OF

INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

FENTURA
BANCORP, INC.


DECEMBER 31,
2001, 2000 AND 1999

# and

# Management's Discussion
and Analysis of
Financial
Condition and Results of Operations

---

# CONTENTS

|                                                                                                                                       | PAGE 
|-------------------------------------------------------------------------------------------------------------------------------------- | -----
|                                                                                                                                       |      
|Reports of Independent Certified Public Accountants...............................................                                     | 3    
|                                                                                                                                       |      
|FINANCIAL STATEMENTS                                                                                                                   |      
|                                                                                                                                       |      
|Consolidated Balance Sheet......................................................................................                       | 5    
|                                                                                                                                       |      
|Consolidated Statements of Income.........................................................................                             | 6    
|                                                                                                                                       |      
|Consolidated Statements of Comprehensive Income...............................................                                         | 7    
|                                                                                                                                       |      
|Consolidated Statements of Stockholders' Equity...................................................                                     | 8    
|                                                                                                                                       |      
|Consolidated Statements of Cash Flows.................................................................                                 | 9    
|                                                                                                                                       |      
|Notes to Consolidated Financial Statements...........................................................                                  | 10-32
|                                                                                                                                       |      
|Management's Discussion and Analysis of
Financial Conditions and Results of Operations................................................ | 33-51

---

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Fentura Bancorp, Inc.
Fenton, Michigan

We have audited the
accompanying consolidated balance sheet of Fentura Bancorp, Inc. as of
December 31, 2001 and the related consolidated statements of income,
statements of comprehensive income, changes in stockholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Corporations management. Our responsibility is to express an
opinion on these financial statements based on our audits. The consolidated
financial statements of the Corporation as of and for each of the two years in
the period ended December 31, 2000 were audited by other auditors whose
report dated January 26, 2001, expressed an unqualified opinion on those
statements.

We conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 2001
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Fentura Bancorp, Inc. as of
December 31, 2001, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.

|                                        | Crowe, Chizek and Company LLP
|--------------------------------------- | -----------------------------
|Grand Rapids, Michigan
January 25, 2002 |                              

3.

---

REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of Directors
Fentura Bancorp, Inc.

We have audited the
accompanying consolidated balance sheet of Fentura Bancorp, Inc. and
subsidiaries as of December 31, 2000 and the related consolidated
statements of income, comprehensive income, stockholders' equity, and cash flows
for each of the two years in the period ended December 31, 2000. These financial
statements are the responsibility of the Corporations management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in
accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Fentura Bancorp, Inc.
and subsidiaries as of December 31, 2000 and the consolidated results of
their operations and their cash flows for each of the two years in the period
ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.

|                                      | Grant Thornton LLP
|------------------------------------- | ------------------
|Southfield, Michigan
January 26, 2002 |                   

4.

---

FENTURA BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2000
(000's omitted except per share data)

---

`CONSOLIDATED BALANCE SHEETS
                                            December 31, 2001 and 2000
                                       (000's omitted except per share data)

--------------------------------------------------------------------------------------------------
                                                                         2001            2000
ASSETS                                                                   ----            ----
     Cash and due from banks                                        $     19,038     $     13,459
     Federal funds sold                                                   22,800            7,250
                                                                    ------------     ------------
         Total cash and cash equivalents                                  41,838           20,709

     Securities available for sale, at market                             25,792           52,599
     Securities held to maturity (fair value of $13,508 at
       December 31, 2001 and $13,419 at December 31, 2000)                13,375           13,283

     Loans held for sale                                                   1,710              187
     Loans, net of allowance for loan losses of
       $3,125 and $2,932, respectively                                   211,005          192,176

     Bank premises and equipment                                           8,532            6,547
     Accrued interest receivable                                           1,445            1,924
     Federal Home Loan Bank stock                                            822              822
     Other assets                                                          4,571            4,643
                                                                    ------------     ------------
                                                                    $    309,090     $    292,890
                                                                    ============     ============
LIABILITIES AND STOCKHOLDERS' EQUITY
     Deposits:
         Noninterest-bearing deposits                               $     42,524     $     34,762
         Interest-bearing deposits                                       222,746          213,894
                                                                    ------------     ------------
              Total deposits                                             265,270          248,656

     Short-term borrowings                                                 2,100            4,680
     Federal Home Loan Bank Advances                                       1,138            1,151
     Accrued taxes, interest and other liabilities                         2,149            2,649
                                                                    ------------     ------------
         Total liabilities                                               270,657          257,136

Stockholders' equity
     Common stock - $2.50 par value 1,735,496
       shares issued (1,722,308 in 2000)                                   4,338            4,305
     Surplus                                                              26,326           26,016
     Retained earnings                                                     7,677            5,648
     Accumulated other comprehensive income (loss)                            92             (215)
                                                                    ------------     ------------
                                                                          38,433           35,754
                                                                    ------------     ------------
                                                                    $    309,090     $    292,890
                                                                    ============     ============

          See accompanying notes to consolidated financial statements.`

5.

---

`CONSOLIDATED STATEMENTS OF INCOME
                                   Years ended December 31, 2001, 2000 and 1999
                                       (000's omitted except per share data)

--------------------------------------------------------------------------------------------------

                                                    2001              2000              1999
Interest income
     Loans, including fees                     $       17,555     $       18,710    $        16,882
     Securities:
         Taxable                                        2,426              3,350              3,163
         Tax-exempt                                       660                624                577
     Short-term investments                               926                643                592
                                               --------------     --------------    ---------------
         Total interest income                         21,567             23,327             21,214

Interest expense
     Deposits                                           8,958              9,266              7,881
     Short-term borrowings                                 47                 86                 93
     Federal Home Loan Bank Advances                       86                538                 39
                                               --------------     --------------    ---------------
         Total interest expense                         9,091              9,890              8,013
                                               --------------     --------------    ---------------
Net interest income                                    12,476             13,437             13,201

Provision for loan losses                                 751                584                545
                                               --------------     --------------    ---------------
Net interest income after provision for loan losses    11,725             12,853             12,656

Noninterest income
     Service charges on deposit accounts                2,286              1,915              1,972
     Gain on sale of mortgages                            659                179                108
     Mortgage servicing                                                      631                153
     Trust income                                         566                695                581
     Gain on sale of securities                           674                                    24
     Other income and fees                              1,178              1,108              1,424
                                               --------------     --------------    ---------------
         Total noninterest income                       5,363              4,528              4,262

Noninterest expense
     Salaries and employee benefits                     5,988              5,801              5,564
     Occupancy                                            886                784                797
     Furniture and equipment                            1,411              1,552              1,429
     Office supplies                                      300                311                274
     Loan and collection                                  178                289                373
     Advertising and promotional                          320                263                257
     Other professional services                        1,144              1,000                804
     Other general and administrative                   1,473              1,436              1,638
                                               --------------     --------------    ---------------
         Total noninterest expense                     11,700             11,436             11,136
                                               --------------     --------------    ---------------
Net income before taxes                                 5,388              5,945              5,782

Applicable income taxes                                 1,611              1,729              1,782
                                               --------------     --------------    ---------------
Net income                                     $        3,777     $        4,216    $         4,000
                                               ==============     ==============    ===============
Per share:
     Earnings - basic                                $    2.18          $   2.46           $   2.36
     Earnings - diluted                                   2.18              2.45               2.35
Average number of common shares outstanding          1,728,983         1,712,971          1,698,581


          See accompanying notes to consolidated financial statements.`

6.

---

`CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   Years ended December 31, 2001, 2000 and 1999
                                       (000's omitted except per share data)

---------------------------------------------------------------------------------------------------------

                                                                    2001            2000           1999
                                                                    ----            ----           ----
Net income                                                     $     3,777    $     4,216     $     4,000

Other comprehensive income (loss):
     Unrealized holding gains (losses) on available
       for sale securities                                           1,139          1,318          (1,912)
     Less: reclassification adjustment for gains and
       losses later recognized in income                               674                             24
                                                               -----------    -----------     -----------
         Net unrealized gains (losses)                                 465          1,318          (1,936)
     Tax effect on unrealized holding gains (losses)                  (158)          (448)            658
                                                               -----------    -----------     -----------
         Other comprehensive income (loss), net of tax                 307            870          (1,278)
                                                               -----------    -----------     -----------
     Comprehensive income                                      $     4,084    $     5,086     $     2,722
                                                               ===========    ===========     ===========

          See accompanying notes to consolidated financial statements.`

7.

---

`CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                   Years ended December 31, 2001, 2000 and 1999
                                       (000's omitted except per share data)

-------------------------------------------------------------------------------------------------------------------

                                                                                                                                                    Accumulated
                                                                                                                                                       Other             Total
                                                        Common        Capital      Retained     Comprehensive     Stockholders'
                                                         Stock        Surplus      Earnings      Income (Loss)       Equity

Balance, January 1, 1999                              $   3,521     $   17,644     $   8,664      $   193         $   30,022

Net Income                                                                             4,000                           4,000

Cash Dividends ($.93 per share)                                                       (1,586)                         (1,586)

Issuance of shares under stock purchase plans                34            673                                           707

Other comprehensive income (net of tax)                                                            (1,278)            (1,278)
                                                      ---------     ----------     ---------     --------         ----------
Balance, December 31, 1999                                3,555         18,317        11,078       (1,085)            31,865

Net Income                                                                                          4,216              4,216

Cash Dividends ($.97 per share)                                                                    (1,659)            (1,659)

Issuance of shares under stock purchase plans                38            432                                           470

Stock repurchase                                             (1)                          (7)                             (8)

Stock dividend                                              713          7,267        (7,980)

Other comprehensive income (net of tax)                                                               870                870
                                                      ---------     ----------     ---------     --------         ----------
Balance, December 31, 2000                                4,305         26,016         5,648         (215)            35,754

Net Income                                                                             3,777                           3,777

Cash Dividends ($1.01 per share)                                                      (1,748)                         (1,748)

Issuance of shares under stock purchase plans                33            310                                           343

Other comprehensive income (net of tax)                                                               307                307
                                                      ---------     ----------     ---------     --------         ----------
Balance, December 31, 2001                            $   4,338     $   26,326      $  7,677      $    92        $    38,433
                                                      =========     ==========     =========     ========        ===========

          See accompanying notes to consolidated financial statements.`

8.

---

`CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   Years ended December 31, 2001, 2000 and 1999
                                       (000's omitted except per share data)

-------------------------------------------------------------------------------------------------------------------
                                                                 2001            2000           1999
Cash flows from operating activities                             ----            ----           ----
     Net income                                               $  3,777     $    4,216     $     4,000
     Adjustments to reconcile net income to
       net cash from operating activities
         Depreciation and amortization                             968            941             851
         Deferred income taxes (benefit)                          (170)          (100)            (35)
         Provision for loan losses                                 751            584             545
         Gain on sale of mortgage servicing rights                               (467)
         Gain on sale of loans                                    (659)          (179)           (108)
         Loans originated for sale                             (48,585)        (9,494)         (7,482)
         Proceeds from the sale of loans                        47,721          9,501           7,593
         Gain on sales of securities - AFS                        (674)                           (24)
         Net change in accrued interest receivable                 440           (237)            (29)
         Net change in accrued interest payable and
           other liabilities                                      (377)           915          (3,135)
                                                              --------     ----------      ----------
              Net cash from operating activities                 3,192          5,680           2,176

Cash flows from investing activities
     Proceeds from maturities of securities - HTM                4,054
     Proceeds from maturities of securities - AFS                8,620          6,539          56,628
     Proceeds from calls of securities - AFS                    20,596
     Proceeds from sales of securities - AFS                    27,274                         12,321
     Purchases of securities - HTM                              (4,235)
     Purchases of securities - AFS                             (28,487)        (3,995)        (60,763)
     Originations of loans, net of principal repayments        (19,580)        (4,390)        (19,203)
     Proceeds from sale of mortgage servicing rights                              887
     Acquisition of premises and equipment                      (2,921)        (1,336)         (2,083)
                                                              --------     ----------      ----------
         Net cash from investing activities                      5,321         (2,295)        (13,100)

Cash flows from financing activities
     Net change in deposits                                     16,614          1,605           5,946
     Net change in short-term borrowings                        (2,580)         3,315           1,324
     Repayments on advances from Federal
       Home Loan Bank                                              (13)           (13)            (11)
     Cash dividends paid                                        (1,748)        (1,659)         (1,586)
     Net proceeds from stock issuance and purchases                343            462             707
                                                              --------     ----------      ----------
         Net cash from financing activities                     12,616          3,710           6,380
                                                              --------     ----------      ----------
Net increase in cash and cash equivalents                       21,129          7,095          (4,544)

Cash and cash equivalents at beginning of year                  20,709         13,614          18,158
                                                              --------     ----------      ----------
Cash and cash equivalents at end of year                   $    41,838    $    20,709     $    13,614
                                                           ===========    ===========     ===========
Supplemental disclosure of cash flow information
     Cash paid during the year for
         Interest $                                              8,861     $    9,652     $     8,279
         Income taxes                                            1,710          1,627           2,054


          See accompanying notes to consolidated financial statements.`

9.

---

FENTURA BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001 and 2000

---

## NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and
Principles of Consolidation: The consolidated financial statements include
Fentura Bancorp, Inc. (The Corporation) and its wholly-owned subsidiaries, The
State Bank in Fenton, Michigan and Davison State Bank in Davison, Michigan (the
Banks). Intercompany transactions and balances are eliminated in consolidation.

Davison State Bank was
formed March 13, 2000 as a de novo bank resulting from the spin-off of two
existing branches of The State Bank. This transaction was accounted for at
historical cost and therefore did not have any effect on the consolidated
financial statements.

The Corporation provides
banking and trust services principally to individuals, small businesses and
governmental entities through its nine community banking offices in Genesee,
Livingston and Oakland Counties in eastern Michigan. Its primary deposit
products are checking, savings, and term certificate accounts, and its primary
lending products are residential mortgage, commercial, and installment loans.
Substantially all loans are secured by specific items of collateral including
business assets, consumer assets and real estate. Commercial loans are expected
to be repaid from cash flow from operations of businesses. Real estate loans are
secured by both residential and commercial real estate. Other financial
instruments which potentially represent concentrations of credit risk include
deposit accounts in other financial institutions and federal funds sold.

Use of Estimates: To
prepare financial statements in conformity with accounting principles generally
accepted in the United States of America, management makes estimates and
assumptions based on available information. These estimates and assumptions
affect the amounts reported in the financial statements and the disclosures
provided, and future results could differ. The allowance for loan losses, fair
values of securities, fair values of financial instruments and status of
contingencies are particularly subject to change.

Cash Flows: Cash and
cash equivalents includes cash, deposits with other financial institutions under
90 days, and federal funds sold. Net cash flows are reported for loan and
deposit transactions.

Securities:
Securities are classified as held to maturity and carried at amortized cost when
management has the positive intent and ability to hold them to maturity.
Securities are classified as available for sale when they might be sold before
maturity. Securities available for sale are carried at fair value, with
unrealized holding gains and losses reported in other comprehensive income.
Trading securities are carried at fair value, with changes in unrealized
holding gains and losses included in income. Other securities such as Federal Home Loan
Bank stock are carried at cost.

10.

---

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interest income includes
amortization of purchase premium or discount. Gains and losses on sales are
based on the amortized cost of the security sold. Securities are written down to
fair value when a decline in fair value is not temporary.

Loans: Loans that
management has the intent and ability to hold for the foreseeable future or
until maturity or payoffs are reported at the principal balance outstanding, net
of unearned interest, deferred loan fees and costs, and an allowance for loan
losses. Loans held for sale are reported at the lower of cost or market, on an
aggregate basis.

Interest income is reported
on the interest method and includes amortization of net deferred loan fees and
costs over the loan term. Interest income is not reported when full loan
repayment is in doubt, typically when the loan is impaired or payments are past
due over 90 days (180 days for residential mortgages). Payments received on such
loans are reported as principal reductions.

Allowance for Loan
Losses: The allowance for loan losses is a valuation allowance for probable
incurred credit losses, increased by the provision for loan losses and decreased
by charge-offs less recoveries. Management estimates the allowance balance
required using past loan loss experience, the nature and volume of the
portfolio, information about specific borrower situations and estimated
collateral values, economic conditions, and other factors. Allocations of the
allowance may be made for specific loans, but the entire allowance is available
for any loan that, in managements judgment, should be charged-off. Loan
losses are charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed

A loan is impaired when
full payment under the loan terms is not expected. Impairment is evaluated in
total for smaller-balance loans of similar nature such as residential mortgage,
consumer, and credit card loans, and on an individual loan basis for other
loans. If a loan is impaired, a portion of the allowance is allocated so that
the loan is reported, net, at the present value of estimated future cash flows
using the loans existing rate or at the fair value of collateral if
repayment is expected solely from the collateral.

Foreclosed Assets:
Assets acquired through or instead of loan foreclosure are initially recorded at
fair value when acquired, establishing a new cost basis. If fair value declines,
a valuation allowance is recorded through expense. Costs after acquisition are
expensed.

Premises and
Equipment: Land is carried at cost. Premises and equipment are stated at
cost less accumulated depreciation. Depreciation is computed using the
straight-line method over useful lives ranging from 3 to 50 years.

11.

---

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Long-term Assets:
Premises and equipment and other long-term assets are reviewed for impairment
when events indicate their carrying amount may not be recoverable from future
undiscounted cash flows. If impaired, the assets are recorded at discounted
amounts.

Stock Compensation:
Employee compensation expense under stock option plans is reported if options
are granted below market price at grant date. Pro forma disclosures of net
income and earnings per share are shown using the fair value method of SFAS
No. 123 to measure expense for options granted after 1994, using an option
pricing model to estimate fair value.

Income Taxes: Income
tax expense is the total of the current year income tax due or refundable and
the change in deferred tax assets and liabilities. Deferred tax assets and
liabilities are the expected future tax amounts for the temporary differences
between carrying amounts and tax bases of assets and liabilities, computed using
enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets
to the amount expected to be realized.

Financial
Instruments: Financial instruments include off-balance sheet credit
instruments, such as commitments to make loans and standby letters of credit,
issued to meet customer financing needs. The face amount for these items
represents the exposure to loss, before considering customer collateral or
ability to repay. Such financial instruments are recorded when they are funded.

Earnings Per Common
Share: Basic earnings per common share is net income divided by the weighted
average number of common shares outstanding during the period. ESOP shares are
considered outstanding for this calculation unless unearned. Diluted earnings
per common share includes the dilutive effect of additional potential common
shares issuable under stock options. Earnings and dividends per share are
restated for all stock splits and dividends through the date of issue of the
financial statements.

Comprehensive
Income: Comprehensive income consists of net income and other comprehensive
income. Other comprehensive income includes unrealized gains and losses on
securities available for sale, which are also recognized as separate components
of equity.

New Accounting
Pronouncements: A new accounting standard requires all business combinations
to be recorded using the purchase method of accounting for any transaction
initiated after June 30, 2001. Under the purchase method, all identifiable
tangible and intangible assets and liabilities of the acquired company must be
recorded at fair value at date of acquisition, and the excess of cost over fair
value of net assets acquired is recorded as goodwill. Identifiable intangible
assets must be separated from goodwill. Identifiable intangible assets with
finite useful lives will be amortized under the new standard, whereas goodwill,
both amounts previously recorded and future amounts purchased, will cease being
amortized starting in 2002. Annual impairment testing will be required for
goodwill with impairment being recorded if the carrying amount of goodwill
exceeds its implied fair value. Adoption of this standard on January 1, 2002 did
not have a material effect on the Corporations financial statements.

12.

---

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loss Contingencies:
Loss contingencies, including claims and legal actions arising in the ordinary
course of business, are recorded as liabilities when the likelihood of loss is
probable and an amount or range of loss can be reasonably estimated. Management
does not believe there now are such matters that will have a material effect on
the financial statements.

Restrictions on
Cash: Cash on hand or on deposit with the Federal Reserve Bank of $5,324,000
and $3,123,000 was required to meet regulatory reserve and clearing requirements
at year end 2001 and 2000. These balances do not earn interest.

Dividend
Restriction: Banking regulations require maintaining certain capital levels
and may limit the dividends paid by the banks to the holding company or by the
holding company to shareholders.

Fair Value of Financial
Instruments: Fair values of financial instruments are estimated using
relevant market information and other assumptions, as more fully disclosed in a
separate note. Fair value estimates involve uncertainties and matters of
significant judgment regarding interest rates, credit risk, prepayments, and
other factors, especially in the absence of broad markets for particular items.
Changes in assumptions or in market conditions could significantly affect the
estimates.

Operating Segments:
While the Corporations chief decision-makers monitor the revenue streams
of the various Corporation products and services, the identifiable segments are
not material and operations are managed and financial performance is evaluated
on a Corporate-wide basis. Accordingly, all of the Corporations financial
service operations are considered by management to be aggregated in one
reportable operating segment.

Reclassifications:  Some items in the prior year financial  statements were  reclassified to conform to the current
presentation.

13.

---

## NOTE 2 -
EARNINGS PER SHARE

The factors in the earnings per share computation follow.

`2001              2000               1999
     Basic                                                   ----              ----               ----
         Net income                                    $   3,777,000     $   4,216,000    $    4,000,000
                                                       =============     =============    ==============
         Weighted average common shares
           outstanding                                     1,728,983         1,712,971         1,698,581
                                                       -------------     -------------    --------------
         Basic earnings per common share               $        2.18     $        2.46    $         2.36
                                                       =============     =============    ==============
     Diluted
         Net income                                    $   3,777,000     $   4,216,000    $    4,000,000
                                                       =============     =============    ==============
     Weighted average common shares outstanding
       for basic earnings per common share                 1,728,983         1,712,971         1,698,581
     Add:  Dilutive effects of assumed exercises of
       stock options                                           3,456             4,486             6,709
                                                       -------------     -------------    --------------
     Average shares and dilutive potential
       common shares                                       1,732,439         1,717,457         1,705,290
                                                       =============     =============    ==============
     Diluted earnings per common share                 $        2.18     $        2.45    $         2.35
                                                       =============     =============    ==============`

Stock options for 6,841,
10,176, and 8,832 shares of common stock were not considered in computing
diluted earnings per common share for 2001, 2000, and 1999 because they were
antidilutive.

14.

---

## NOTE 3 -
SECURITIES

Year-end securities are as follows (in thousands):

`Available for Sale
                                                                 Gross           Gross
                                                 Amortized      Unrealized      Unrealized        Fair
                                                   Cost           Gains          Losses          Value
2001                                               ----           -----          ------          -----
----
     U.S. Government and federal agency        $     8,767    $        56    $        (5)    $     8,818
     State and municipal                             3,710              3            (34)          3,679
     Mortgage-backed                                 7,815             65            (10)          7,870
     Corporate                                       5,361             64                          5,425
                                               -----------    -----------    -----------     -----------
                                               $    25,653    $       188    $       (49)    $    25,792
                                               ===========    ===========    ===========     ===========
2000
----
     U.S. Government and federal agency        $    32,144    $        40    $       (59)    $    32,125
     State and municipal                               964                                           964
     Mortgage-backed                                19,352             53           (168)         19,237
     Equity securities                                 465                          (192)            273
                                               -----------    -----------    -----------     -----------
                                               $    52,925    $        93    $      (419)    $    52,599
                                               ===========    ===========    ===========     ===========
Held to Maturity

2001
----
     State and municipal                       $    13,375    $       174    $       (41)    $    13,508
                                               ===========    ===========    ===========     ===========
2000
----
     State and municipal                       $    13,283    $       153    $       (17)    $    13,419
                                               ===========    ===========    ===========     ===========

 Sales of available for sale securities were as follows (in thousands):

                                                                2001            2000           1999
                                                                ----            ----           ----
     Proceeds                                                $    27,274                    $    12,321
     Gross gains                                                     674                             73
     Gross losses                                                                                    49`

15.

---

NOTE 3 - SECURITIES (Continued)

| | Contractual
maturities of debt securities at year-end 2001 were as follows. Securities not
due at a single maturity date, primarily mortgage-backed securities, are shown
separately (in thousands).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Held to Maturity             Available for Sale
                                                    ----------------             ------------------
                                                Amortized        Fair          Amortized        Fair
                                                  Cost           Value           Cost           Value
                                                  ----           -----           ----           -----
     Due in one year or less                   $     5,234    $     5,260    $     1,237     $     1,239
     Due from one to five years                      3,823          3,892         14,147          14,250
     Due from five to ten years                      2,747          2,793          1,141           1,141
     Due after ten years                             1,571          1,563          1,313           1,292
     Mortgage-backed                                                               7,815           7,870
                                               -----------    -----------    -----------     -----------
                                               $    13,375    $    13,508    $    25,653     $    25,792
                                               ===========    ===========    ===========     ===========`

Securities  pledged at year end 2001 and 2000 had a carrying  amount of $2,123,000 and $2,120,000 and were pledged
 to secure public deposits and repurchase agreements.

NOTE 4 - LOANS

Major categories of loans at December 31, are as follows (in thousands):

`2001            2000
                                                                          ----            ----
     Commercial                                                     $    118,894     $    101,925
     Real estate - construction                                           25,434           17,471
     Real estate - mortgage                                               11,158           10,514
     Consumer                                                             58,644           65,198
                                                                    ------------     ------------
                                                                         214,130          195,108
     Less allowance for loan losses                                        3,125            2,932
                                                                    ------------     ------------
                                                                    $    211,005     $    192,176
                                                                    ============     ============`

| | The
Corporation originates primarily residential and commercial real estate loans,
commercial, construction and installment loans. The Corporation estimates that
80% of their loan portfolio is based in Genesee and Livingston counties within
southeast Michigan with the remainder of the portfolio distributed throughout
Michigan. The ability of the Corporation's debtors to honor their contracts is
dependent upon the real estate and general economic conditions in this area.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16.

---

NOTE 4 - LOANS (Continued)

Certain directors and
executive officers of the Corporation, including their affiliates are loan
customers of the Banks. Such loans were made in ordinary course of business at
the Banks' normal credit terms and interest rates, and do not represent more
than a normal risk of collection. Total loans to these persons at December 31,
2001, 2000, and 1999 amounted to $1,532,000, $1,134,000, and $909,000,
respectively. During 2001, $601,000 of new loans were made to these persons and
repayments totaled $203,000.

Activity in the allowance for loan losses for the years are as follows (in thousands)

`2001            2000           1999
                                                                  ----            ----           ----
     Balance, beginning of year                               $     2,932    $     2,961     $     2,783
     Provision for loan losses                                        751            584             545
                                                              -----------    -----------     -----------
                                                                    3,683          3,545           3,328
     Loans charged off                                               (713)          (806)           (451)
     Loan recoveries                                                  155            193              84
                                                              -----------    -----------     -----------
     Balance, end of year                                     $     3,125    $     2,932     $     2,961
                                                              ===========    ===========     ===========`

Loan  impairment is measured by estimating the expected  future cash flows and  discounting  them at the respective
effective  interest  rate or by valuing the  underlying  collateral.  The recorded  investment in these loans is as
follows at December 31, (in thousands):

`2001           2000
                                                                         ----           ----
     Principal amount not requiring allowance                        $         0     $         0
     Principal amount requiring specific allowance                         2,880           2,315
                                                                     -----------     -----------
                                                                     $     2,880     $     2,315
     Amount of the allowance for loan loss                           ===========     ===========
         Allocated                                                   $       819     $       715`

Loans which  accrual of interest  have been  discontinued  at December 31, 2001,  and 2000 amounted to $321,000 and
$731,000 respectively and are included in the impaired loans above.

Interest income recognized on impaired loans based on cash collections totaled  approximately  $142,000,  $146,000,
and  $299,000  for the  years  ended  December  31,  2001,  2000,  and 1999,  respectively.  The  average  recorded
investment in impaired  loans was  $2,597,000,  $1,932,000,  $1,848,000  during the years ended  December 31, 2001,
2000, and 1999.

17.

---

NOTE 5 - PREMISES AND EQUIPMENT, NET

Bank premises and equipment is comprised of the following at December 31 (in thousands):

`2001           2000
                                                                         ----           ----
     Land and land improvements                                      $     1,305     $     1,273
     Building and building improvements                                    6,933           4,208
     Furniture and equipment                                               8,159           7,963
     Construction in progress                                                911             995
                                                                     -----------     -----------
                                                                          17,308          14,439
     Less accumulated depreciation                                         8,776           7,892
                                                                     -----------     -----------
                                                                     $     8,532     $     6,547
                                                                     ===========     ===========`

Depreciation expense was
$935,568, $983,946, and $879,466 for 2001, 2000, and 1999 respectively.

Rent expense for 2001 was
$133,420, for 2000 was $130,160, and for 1999 was $140,740. Rent commitments
under noncancelable operating leases were as follows, before considering renewal
options that generally are present.

`2002                                               $   138,090
                  2003                                                   129,240
                  2004                                                   129,240
                  2005                                                   105,240
                  2006                                                    66,300
                  Thereafter                                                   0
                                                                     -----------
                                                                     $   568,110
                                                                     ===========`

18.

---

## NOTE 6 -
DEPOSITS

The following is a summary of deposits at December 31 (in thousands):

`2001            2000
     Noninterest-bearing:                                                ----            ----
         Demand                                                     $     42,524     $     34,762
     Interest-bearing:
         Savings                                                          80,090           66,186
         Money market demand                                              40,930           37,165
         Time, $100,000 and over                                          22,597           34,259
         Time, $100,000 and under                                         79,129           76,284
                                                                    ------------     ------------
                                                                    $    265,270     $    248,656
                                                                    ============     ============

Scheduled maturities of time deposits at December 31, were as follows (in thousands):

                                                                          2001            2000
                                                                          ----            ----
     In one year                                                    $     77,796     $     75,269
     In two years                                                         11,522           22,598
     In three years                                                        7,456            6,423
     In four years                                                         3,441            3,784
     In five years                                                         1,296            2,198
     Thereafter                                                              215              271
                                                                    ------------     ------------
                                                                    $    101,726     $    110,543
                                                                    ============     ============`

## NOTE 7 - OTHER
BORROWINGS

Short-Term Borrowings

Short-term borrowings
consist of term federal funds purchased and treasury tax and loan deposits and
generally are repaid within one to 120 days from the transaction date.

Federal Home Loan Bank Advances

The Bank has the authority
and approval from the Federal Home Loan Bank (FHLB) to borrow up to $20 million
collateralized by 1-4 family mortgage loans, government and agency securities,
and mortgage-backed securities. Advances outstanding at December 31, 2001, 2000,
and 1999 mature in 2016, can be prepaid without penalty and bear interest at
7.34%. The amount of pledged assets are $18,867,000.

19.

---

## NOTE 8 -
INCOME TAXES

The provision for income
taxes reflected in the consolidated statements of income for the years ended
December 31, consists of the following (in thousands):

`2001            2000           1999
                                                           ----            ----           ----
     Current expense                                  $     1,781    $     1,829     $     1,817
     Deferred (benefit) expense                              (170)          (100)            (35)
                                                      -----------    -----------     -----------
                                                      $     1,611    $     1,729     $     1,782
                                                      ===========    ===========     ===========

Income tax expense was less than the amount  computed by applying the statutory  federal  income tax rate to income
before income taxes.  The reasons for the difference are as follows in (in thousands):

                                                           2001            2000           1999
                                                           ----            ----           ----
     Income tax at statutory rate                     $     1,832    $     2,021     $     1,966
     Tax exempt interest                                     (179)          (203)           (173)
     Other                                                    (42)           (89)            (11)
                                                      -----------    -----------     -----------
                                                      $     1,611    $     1,729     $     1,782
                                                      ===========    ===========     ===========

The net deferred tax asset  recorded  includes the  following  amounts of deferred tax assets and  liabilities  (in
thousands):
                                                                          2001           2000
                                                                          ----           ----
     Deferred tax assets
         Allowance for loan losses                                   $       852     $       805
         Unrealized losses on securities available for sale                                  111
         Compensation                                                        167             137
         Other                                                                66              60
                                                                     -----------     -----------
                                                                           1,085           1,113
     Deferred tax liabilities
         Accretion                                                           (11)            (57)
         Unrealized gain on securities available for sale                    (47)
         Depreciation                                                        (99)            (79)
         Other                                                               (28)            (89)
                                                                     -----------     -----------
                                                                            (185)           (225)
                                                                     -----------     -----------
                                                                     $       900     $       888
                                                                     ===========     ===========`

A valuation allowance
related to deferred tax assets is required when it is considered more likely
than not that all or part of the benefit related to such assets will not be
realized. Management has determined that no valuation allowance is required at
December 31, 2001 or 2000.

20.

---

## NOTE 9 -
BENEFIT PLANS

The Corporation has a
noncontributory discretionary employee stock ownership plan (Plan) covering
substantially all of its employees. It is a requirement of the plan to invest
principally in the Corporation's common stock. The contribution to the Plan in
2001, 2000, and 1999 was $100,000, $120,000, and $120,000, respectively.

The Corporation has also
established a 401(k) Plan in which 50% of the employees' contribution can be
matched with a discretionary contribution by the Corporation up to a maximum of
6% of gross wages. The contribution to the 401(k) Plan for 2001, 2000, and 1999
was $84,000, $79,000 and $80,000, respectively.

## NOTE 10 -
STOCK PURCHASE AND OPTION PLANS

Director and Employee Plans

On December 26, 2001, the
Corporation announced a stock repurchase plan of 50,000 shares of its common
stock.

The Directors Stock
Purchase Plan permits directors of the Corporation to purchase shares of common
stock made available for purchase under the plan at the fair market value on the
fifteenth day prior to the annual issuance date. The total number of shares
issuable under this plan is limited to 9,600 shares in any calendar year.

The Retainer Stock Plan
allows directors to elect to receive shares of common stock in full or partial
payment of the director's retainer fees and fees for attending meetings. The
number of shares is determined by dividing the dollar amount of fees to be paid
in shares by the market value of the stock on the first business day prior to
the payment date.

The Executive Stock Bonus
Plan permits the administrator of the plan to grant shares of the Corporation's
common stock to eligible employees. Any executive or managerial level employee
is eligible to receive grants under the plan. The Board of Directors administers
the plan.

Dividend Investment Plan

The Automatic Dividend
Reinvestment Plan ("DRIP") permits enrolled shareholders to
automatically use dividends paid on common stock to purchase additional shares
of the Corporation's common stock at the fair market value on the investment
date. Any shareholder who is the beneficial or record owner of not more than
9.9% of the issued and outstanding shares of the Corporation's common stock is
eligible to participate in the plan.

21.

---

NOTE 10 - STOCK PURCHASE AND OPTION PLANS (Continued)

Pursuant to a separate
agreement with a family who collectively holds more than 9.9% of the
Corporation's stock on or prior to January 31 of each year beginning January 31,
1997, the Corporation is to advise the family, in a written notice, of the
number of shares sold under the DRIP. Each family member will have the option,
until February 28 of the same year, to purchase from the Corporation one-third
of the total number of shares that would be sufficient to prevent the dilution
to all family members as a group that result solely as a result of the DRIP
shares. The purchase price under this agreement is the fair market value on
December 31 of the year immediately preceding the year in which the written
notice is given.

Stock Option Plans

The Nonemployee Director
Stock Option Plan grants options to nonemployee directors to purchase the
Corporation's common stock on April 1 each year. The purchase price of the
shares is the fair market value at the date of the grant, and there is a
three-year vesting period before options may be exercised. Options to acquire no
more than 6,720 shares of stock may be granted under the Plan in any calendar
year and options to acquire not more than 67,200 shares in the aggregate may be
outstanding at any one time.

The Employee Stock Option
Plan grants options to eligible employees to purchase the Corporation's common
stock at or above, the fair market value of the stock at the date of the grant.
Awards granted under this plan are limited to an aggregate of 72,000 shares. The
administrator of the plan is a committee of directors. The administrator has the
power to determine the number of options to be granted, the exercise price of
the options and other terms of the options, subject to consistency with the
terms of the plan.

The following summarizes shares issued under the various plans:

`2001            2000           1999
                                                            ----            ----           ----
     Automatic dividend reinvestment plan                  10,407         12,607           8,846
     Director stock purchase & retainer stock                              1,018           5,800
     Other issuance of stock                                2,781          1,912           1,685
                                                          -------        -------         -------
                                                           13,188         15,537          16,331
                                                          =======        =======         =======`

22.

---

NOTE 10 - STOCK PURCHASE AND OPTION PLANS (Continued)

The following table summarizes stock option activity:

`Number of        Weighted
                                                                         Options       Average Price
                                                                         -------       -------------
     Options outstanding at January 1, 1999                               12,696       $  19.64
     Options granted 1999                                                  5,208          37.25
                                                                         -------
     Options outstanding at December 31, 1999                             17,904          24.77
     Options granted 2000                                                  1,767          39.58
                                                                         -------
     Options outstanding at December 31, 2000                             19,671          26.09
     Options granted 2001                                                  3,244          25.13
     Options forfeited 2001                                                 (332)         30.80
                                                                         -------
     Options outstanding at December 31, 2001                             22,583       $  25.89
                                                                         =======

Information pertaining to options outstanding at December 31, is as follows:

                                                                       Weighted
                                                                        Average           Weighted
                                            Number      Remaining       Average             Number
   Range of Exercise Price                Outstanding      Life           Price           Exercisable
   -----------------------                -----------      ----           -----           -----------
2001
----
     $15.00 - $20.00                         7,728         4.75        $   17.35              7,728
     $20.00 - $30.00                         8,014         7.31            23.94              4,968
     $30.00 - $40.00                         6,601         8.00            37.45
     $40.00 - $50.00                           240         7.51            45.00
                                           -------                                          -------
     Outstanding at end of year             22,583                                           12,696
                                           =======                                          =======
2000
----
     $15.00 - $20.00                         7,728         5.75        $   17.35              3,864
     $20.00 - $30.00                         4,968         7.23            23.21
     $30.00 - $40.00                         6,735         9.00            37.59
     $40.00 - $50.00                           240         8.52            45.00
                                           -------                                          -------
     Outstanding at end of year             19,671         7.27        $   26.10              3,864
                                           =======                                          =======`

23.

---

NOTE 10 - STOCK PURCHASE AND OPTION PLANS (Continued)

The stock option plans are
accounted for in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) as permitted under
Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation (SFAS 123). In accordance with APB 25, no compensation expense
is required nor has been recognized for the options issued under existing plans.
Had the Corporation chosen not to elect APB 25, SFAS 123 would apply and
compensation expense would have been recognized, and the Corporation's earnings
would have been as follows (in thousands, except per share data):

`2001            2000           1999
     Net income                             ----            ----           ----
         As reported                  $     3,777    $     4,216     $     4,000
         Proforma                           3,767          4,171           3,977

     Basic net income per share
         As reported                         2.18           2.46            2.36
         Proforma                            2.18           2.44            2.34

     Diluted net income per share
         As reported                         2.18           2.45            2.35
         Proforma                            2.17           2.43            2.33`

Proforma net income
includes compensation cost for the Corporation's stock option plan based on the
fair values of the grants as of the dates of the awards consistent with the
method prescribed by SFAS 123. The fair value of each option grant is estimated
using the Black-Scholes option-pricing model. Assumptions used in the model for
options granted during 2001 were as follows: an expected life of 10 years, a
dividend yield of 3%, a risk free return of 6.88% and expected volatility of
52%.

## NOTE 11 -
REGULATORY MATTERS

The Corporation (on a consolidated
basis) and its Bank subsidiaries are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could have
a direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Corporation and the Banks must meet specific capital guidelines that involve
quantitative measures of assets, liabilities, and certain off-balance-sheet
items are calculated under regulatory accounting practices. The capital amounts
and classifications are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors. Prompt corrective action
provisions are not applicable to bank holding companies.

24.

---

NOTE 11 - REGULATORY MATTERS (Continued)

Quantitative measures
established by regulation to ensure capital adequacy require the Corporation and
the Banks to maintain minimum amounts and ratios (set forth in the table below)
of total and Tier 1 capital (as defined in the regulations) to risk-weighted
assets (as defined), and of Tier 1 capital (as defined) to average assets (as
defined). Management believes, as of December 31, 2001, that the Corporation and
the Banks meet all capital adequacy requirements to which they are subject. As
of December 31, 2001 and 2000, the most recent notifications from Federal
Deposit Insurance Corporation categorized the Corporation and the Banks as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Corporation and the Banks must maintain
minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set
forth in the table. There are no conditions or events since the notifications
that management believes have changed the Banks' category.

`To Be Well
                                                                   For Capital         Capitalized Under
                                                                    Adequacy           Prompt Corrective
                                           Actual                   Purposes           Action Provisions
                                      Amount      Ratio         Amount      Ratio      Amount      Ratio
                                      ------      -----         ------      -----      ------      -----
As of December 31, 2001
Total Capital
  (to Risk Weighted Assets)
     Consolidated                    $  41,466     16.2%     $  20,440      8.0%      $  25,550    10.0%
     The State Bank                     35,072     15.2         18,473      8.0          23,091    10.0
     Davison State Bank                  3,123     12.3          2,024      8.0           2,531    10.0

Tier 1 Capital
  (to Risk Weighted Assets)
     Consolidated                       38,341     15.0         10,220      4.0          15,330     6.0
     The State Bank                     32,283     13.9          9,236      4.0          13,854     6.0
     Davison State Bank                  2,832     11.2          1,012      4.0           1,518     6.0

Tier 1 Capital (to Average Assets)
     Consolidated                       38,341     12.5         12,270      4.0          15,338     5.0
     The State Bank                     32,283     11.7         11,076      4.0          13,845     5.0
     Davison State Bank                  2,832      9.1          1,244      4.0           1,556     5.0`

25.

---

NOTE 11 - REGULATORY MATTERS (Continued)

`To Be Well
                                                                   For Capital        Capitalized Under
                                                                    Adequacy          Prompt Corrective
                                           Actual                   Purposes          Action Provisions
                                      Amount      Ratio         Amount      Ratio     Amount      Ratio
                                      ------      -----         ------      -----     ------      -----
As of December 31, 2000
Total Capital
  (to Risk Weighted Assets)
     Consolidated                  $    38,974     16.2%     $  19,232      8.0%    $    24,040    10.0%
     The State Bank                     32,822     14.9         17,667      8.0          22,084    10.0
     Davison State Bank                  3,232     16.8          1,539      8.0           1,924    10.0
Tier 1 Capital
  (to Risk Weighted Assets)
     Consolidated                       35,969     15.0          9,616      4.0%         14,424     6.0
     The State Bank                     30,061     13.6          8,333      4.0          13,250     6.0
     Davison State Bank                  2,291     15.5            770      4.0           1,154     6.0
Tier 1 Capital (to Average Assets)
     Consolidated                       35,969     12.1         11,839      4.0          14,799     5.0
     The State Bank                     30,061     11.0         10,938      4.0          13,673     5.0
     Davison State Bank                  2,991     13.5            886      4.0           1,108     5.0`

## NOTE 12 -
FINANCIAL INSTRUMENTS

The estimated fair values
of the Corporation's financial instruments at December 31, are as follows (in
thousands):

`2 0 0 1                       2 0 0 0
                                                          -------                       -------
                                                  Carrying         Fair          Carrying         Fair
                                                   Amount          Value          Amount          Value
                                                   ------          -----          ------          -----
     Assets:
         Cash and cash equivalents             $    41,838    $    41,838    $    20,709     $    20,709
         Securities - available for sale            25,792         25,792         52,599          52,599
         Securities - held to maturity              13,375         13,508         13,283          13,419
         FHLB stock                                    822            822            822             822
         Loans held for sale                         1,710          1,729            187             188
         Loans                                     211,005        213,913        192,176         193,017
         Accrued Interest Receivable                 1,445          1,445          1,924           1,924
     Liabilities:
         Deposits                                  265,270        268,384        248,656         249,267
         Short-term borrowings                       2,100          2,100          4,680           4,680
         FHLB Advances                               1,138          1,132          1,151           1,202
         Accrued Interest Payable                      738            738            969             969`

26.

---

NOTE 12 - FINANCIAL INSTRUMENTS (Continued)

The following methods and
assumptions were used by the Corporation in estimating its fair value
disclosures for financial instruments:

Cash and cash equivalents
The carrying amounts
reported in the balance sheet for cash and short-term instruments approximate
their fair values.

Securities (including mortgage-backed securities)
Fair values for securities
are based on quoted market prices, where available. If quoted market prices are
not available, fair values are based on quoted market prices of comparable
instruments.

Loans held for sale
The market value of these
loans represents estimated fair value. The market value is determined in the
aggregate on the basis of existing forward commitments or fair values
attributable to similar loans.

Loans
For variable rate loans
that reprice frequently and with no significant change in credit risk, fair
values are based on carrying values. The fair value for other loans are
estimated using discounted cash flow analysis, using interest rates currently
being offered for loans with similar terms to borrowers of similar credit
quality. The carrying amount of accrued interest receivable approximates its
fair value.

Off-balance-sheet instruments
The Corporation's off-balance-sheet instruments approximate their fair values.

Deposit liabilities
The fair values disclosed
for demand deposits are, by definition equal to the amount payable on demand at
the reporting date. The carrying amounts for variable rate, fixed term money
market accounts and certificates of deposit approximate their fair values at the
reporting date. Fair values for fixed certificates of deposit are estimated
using discounted cash flow calculation that applies interest rates currently
being offered on similar certificates. The carrying amount of accrued interest
payable approximates its fair value.

Short-term borrowings
The carrying amounts of
federal funds purchased, borrowings under repurchase agreements, and other
short-term borrowings approximate their fair values.

27.

---

NOTE 12 - FINANCIAL INSTRUMENTS (Continued)

FHLB advances
Rates currently available
for FHLB debt with similar terms and remaining maturities are used to estimate
the fair value of the existing debt.

Limitations
Fair value estimates are
made at a specific point in time, based on relevant market information and
information about the financial instrument. These estimates do not reflect any
premium or discount that could result from offering for sale at one time the
Corporation's entire holdings of a particular financial instrument. Because no
market exists for a significant portion of the Corporation's financial
instruments, fair value estimates are based on management's judgments regarding
future expected loss experience, current economic conditions, risk
characteristics and other factors. These estimates are subjective in nature and
involve uncertainties and matters of significant judgment and therefore cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates.

Off-balance-sheet risk
Some financial instruments,
such as loan commitments, credit lines, letters of credit, and overdraft
protection, are issued to meet customer financing needs. These are agreements to
provide credit or to support the credit of others, as long as conditions
established in the contract are met, and usually have expiration dates.
Commitments may expire without being used. Off-balance-sheet risk to credit loss
exists up to the face amount of these instruments, although material losses are
not anticipated. The same credit policies are used to make such commitments as
are used for loans, including obtaining collateral at exercise of the
commitment.

The contractual amount of
financial instruments with off-balance-sheet risk was as follows at year end.

`2001           2000
                                                                          ----           ----
     Commitments to make loans (at market rates)                     $    21,096     $     5,856
     Unused lines of credit and letters of credit                         41,359          38,328`

Commitments to make loans are
generally made for periods of 90 days or less. At December 31, 2001,
$3,789,000 of the outstanding loan commitments had fixed interest rates ranging
from 7.0% to 8.5% and maturities ranging from one year to five years.

28.

---

## NOTE 13 -
PARENT ONLY CONDENSED FINANCIAL INFORMATION

The condensed financial
information that follows presents the financial condition of Fentura Bancorp,
Inc. (parent company only), along with the results of its operations and its
cash flows.

`CONDENSED BALANCE SHEETS
                                            December 31 (in thousands)

                                                                          2001           2000
     ASSETS                                                               ----           ----
         Cash and cash equivalents                                   $     3,200     $     2,452
         Securities                                                                          273
         Land held for investment
         Other assets                                                         27              65
         Investment in subsidiaries                                       35,206          32,964
                                                                     -----------     -----------
                                                                     $    38,433     $    35,754
                                                                     ===========     ===========
     STOCKHOLDERS' EQUITY
         Common stock                                                $     4,338     $     4,305
         Additional paid in capital                                       26,326          26,016
         Retained earnings                                                 7,677           5,648
         Accumulated other comprehensive income (loss)                        92            (215)
                                                                     -----------     -----------
                                                                     $    38,433     $    35,754
                                                                     ===========     ===========

                                          CONDENSED STATEMENTS OF INCOME
                                      Years ended December 31 (in thousands)

                                                                2001            2000           1999
                                                                ----            ----           ----
     Gain on sale of securities                            $        26
     Dividends from subsidiaries                                 1,769    $     1,659     $     1,586
     Operating expenses                                           (106)           (69)            (79)
     Equity in undistributed income of subsidiaries              2,088          2,626           2,493
                                                           -----------    -----------     -----------
     Net income                                            $     3,777    $     4,216     $     4,000
                                                           ===========    ===========     ===========`

29.

---

NOTE 13 - PARENT ONLY CONDENSED FINANCIAL INFORMATION (Continued)

`CONDENSED STATEMENTS OF CASH FLOWS
                                      Years ended December 31 (in thousands)

                                                                  2001            2000           1999
     Cash flows from operating activities                         ----            ----           ----
         Net income                                           $     3,777    $     4,216     $     4,000
         Gain on sale of securities                                   (26)
         Change in other assets                                        (1)
         Equity in undistributed income of subsidiary              (2,088)        (2,626)         (2,493)
                                                              -----------    -----------     -----------
              Net cash provided by operating activities             1,662          1,590           1,507

     Cash flows provided by investing activities
         Sale of equity securities                                    491                             10
         (Increase) decrease in land held in investment                              414
                                                              -----------    -----------     -----------
              Net cash provided by investing activities               491            414              10

     Cash flows used in financing activities
         Dividends paid                                            (1,748)        (1,659)         (1,586)
         Proceeds from stock issuance                                 343            462             707
                                                              -----------    -----------     -----------
              Net cash used in financing activities                (1,405)        (1,197)           (879)
                                                              -----------    -----------     -----------
     Increase(decrease) in cash and cash equivalents                  748            807             638

     Cash and cash equivalents at beginning of year                 2,452          1,645           1,007
                                                              -----------    -----------     -----------
     Cash and cash equivalents at end of year                 $     3,200    $     2,452     $     1,645
                                                              ===========    ===========     ===========`

30.

---

## NOTE 14 -
SUMMARY OF QUARTERLY FINANCIAL DATA  UNAUDITED

The unaudited quarterly
results of operations for 2001, 2000, and 1999 are as follows (in thousands
except per share data):

`First         Second           Third         Fourth
                                                 Quarter        Quarter         Quarter        Quarter
                                                 -------        -------         -------        -------
2001
----
     Interest income                          $     5,786    $     5,577    $     5,368     $     4,836
     Interest expense                               2,619          2,362          2,239           1,871
     Provision for loan losses                        138            255            179             179
     Noninterest income                             1,028          1,339          1,345           1,651
     Noninterest expenses                           2,899          2,957          3,135           2,709
     Income before income taxes                     1,158          1,342          1,160           1,728
     Provision for income taxes                       339            400            354             518
     Net income                                       819            942            806           1,210

     Earnings per share
         Basic                                        .48            .54            .47             .70
         Diluted                                      .47            .54            .46             .70

2000
----
     Interest income                          $     5,539    $     5,919    $     5,967     $     5,902
     Interest expense                               2,296          2,512          2,559           2,523
     Provision for loan losses                        169            201            153              61
     Noninterest income                               951          1,053          1,094           1,430
     Noninterest expenses                           2,882          3,076          2,892           2,586
     Income before income taxes                     1,143          1,183          1,457           2,162
     Provision for income taxes                       270            353            437             669
     Net income                                       873            830          1,020           1,493

     Earnings per share
         Basic                                        .51            .48            .60             .88
         Diluted                                      .51            .48            .59             .87`

31.

---

NOTE 14 - SUMMARY OF QUARTERLY FINANCIAL DATA - UNAUDITED (Continued)

`First         Second           Third         Fourth
                                         Quarter        Quarter         Quarter        Quarter
                                         -------        -------         -------        -------
1999
----
     Interest income                   $     5,083    $     5,373    $     5,276     $     5,482
     Interest expense                        1,955          1,936          1,967           2,155
     Provision for loan losses                 195            130            165              55
     Noninterest income                      1,026          1,000          1,083           1,153
     Noninterest expenses                    2,675          2,890          2,764           2,807
     Income before income taxes              1,284          1,417          1,463           1,618
     Provision for income taxes                398            437            447             500
     Net income                                886            980          1,016           1,118

     Earnings per share (a)
         Basic                                 .52            .58            .60             .66
         Diluted                               .52            .58            .60             .65


(a)  Per share amounts have been restated to reflect the 20% stock dividend declared April 26, 2000.`

32.

---

## Managements
Discussion and Analysis of Financial Condition and Results of Operations

This section provides a
narrative discussion and analysis of the consolidated financial condition and
results of operations of Fentura Bancorp, Inc. (the Corporation), together with
its subsidiaries, The State Bank and Davison State Bank (the Banks), for the
years ended December 31, 2001, 2000, and 1999. The supplemental financial data
included throughout this discussion should be read in conjunction with the
primary financial statements presented on pages 2 through 29 of this report. It
provides a more detailed and comprehensive review of operating results and
financial position than could be obtained from a reading of the financial
statements alone.

`TABLE 1                                                         Selected Financial Data
$ in thousands except per share data
  And ratios                                        2001       2000       1999       1998       1997
------------------------------------------------------------------------------------------------------
Summary of Consolidated Statements of Earnings:
Interest Income                                    $21,567    $23,327    $21,214    $21,440    $21,601
Interest Expense                                     9,091      9,890      8,013      8,648      9,167
                                                ------------------------------------------------------
Net Interest Income                                 12,476     13,437     13,201     12,792     12,434
Provision for Loan Losses                              751        584        545        724        624
                                                ------------------------------------------------------
Net Interest Income after Provision                 11,725     12,853     12,656     12,068     11,810
Total Other Operating Income                         5,363      4,528      4,262      4,028      3,472
Total Other Operating Expense                       11,700     11,436     11,136     10,548     10,242
                                                ------------------------------------------------------
Income Before Income Taxes                           5,388      5,945      5,782      5,548      5,040
Provision for Income Taxes                           1,611      1,729      1,782      1,728      1,580
                                                ------------------------------------------------------
Net Income                                          $3,777     $4,216     $4,000     $3,820     $3,460
                                                ======================================================
Net Income Per Share - Basic                         $2.18      $2.46      $2.36      $2.28      $2.11
Net Income Per Share - Diluted                       $2.18      $2.45      $2.35      $2.28      $2.11

Summary of Consolidated Statements of
   Financial Condition:
Assets                                            $309,090   $292,890   $283,621   $275,047   $262,798
Securities, including FHLB stock                    39,989     66,704     67,886     77,956     56,050
Loans                                              215,840    195,295    191,246    172,413    184,198
Deposits                                           265,270    248,656    247,051    241,105    230,534
Stockholders' Equity                                38,433     35,754     31,865     30,022     26,742

Other Financial and Statistical Data:
Tier 1 Capital to Risk Weighted Assets              15.01%     14.96%     13.01%     13.30%     12.22%
Total Capital to Risk Weighted Assets               16.23%     16.21%     14.26%     14.55%     13.47%
Tier 1 Capital to Average Assets                    12.50%     12.15%     11.15%     10.60%      9.99%
Total Cash Dividends                                $1,748     $1,659     $1,586     $1,464     $1,784
Book Value Per Share                                $22.15     $20.76     $18.68     $17.77     $16.09
Cash Dividends Paid Per Share                        $1.01      $0.97      $0.93      $0.88      $1.09
Period End Market Price Per Share                   $25.50     $25.13     $36.87     $41.67     $21.88
Dividend Pay-out Ratio                              46.28%     39.35%     39.65%     38.32%     51.56%
Return on Average Stockholders' Equity              10.01%     12.56%     12.66%     13.19%     13.76%
Return on Average Assets                             1.23%      1.42%      1.46%      1.45%      1.35%
Net Interest Margin                                  4.53%      5.07%      5.32%      5.28%      5.26%
Total Equity to Assets at Period End                12.43%     12.21%     11.24%     10.92%     10.18%`

33.

---

## RESULTS OF
OPERATIONS

The Corporation achieved
net income of $3,777,000 for the year of 2001. Net Income for 2001 decreased
$439,000 or 10.4%. Net income decreased primarily due to the eleven interest
rate drops during 2001. Contributing to the 2001 results was the increase in
other operating income of $835,000 or 18.4%. Non-interest expense increased by
$264,000 or 2.3%. The Corporation anticipates that the interest rate environment
will improve throughout 2002, which should have a positive impact on operations.

Standard performance
indicators used in the banking industry help Management evaluate the
Corporations performance. Two of these performance indicators are return
on average assets and return on average equity. For 2001, 2000, and 1999
respectively, the Corporation posted a return on average assets of 1.23%, 1.42%,
and 1.46%. Return on average equity was 10.01% in 2001, 12.56% in 2000, and
12.66% in 1999. Equity increased 7.5% in 2001, which will allow the Corporation
to continue its growth strategy. Total assets increased $16 million in 2001, $9
million in 2000, and $9 million in 1999. Basic earnings per share were $2.18 in
2001, $2.46 in 2000, and $2.36 in 1999.

## NET INTEREST
INCOME

Net interest income, the principal
source of income, is the amount of interest income generated by earning assets
(principally securities and loans) less interest expense paid on interest
bearing liabilities (largely deposits and other borrowings).

A critical task of
management is to price assets and liabilities so that the spread between the
interest earned on assets and the interest paid on liabilities is maximized
without unacceptable risk. While interest rates on interest earning assets and
interest bearing liabilities are subject to market forces, in general, the
Corporation can exert more control over deposit costs than earning assets rates.
Loan products carry either fixed rates of interest or rates tied to market
indices determined independently. The Corporation sets its own rates on
deposits, providing management with some flexibility in determining the timing
and proportion of rate changes for the cost of its deposits.

Table 2 summarizes the
changes in net interest income resulting from changes in volume and rates for
the years ended December 31, 2001 and 2000. Net interest income (displayed with
consideration of full tax equivalency), average balance sheet amounts, and the
corresponding yields for the last three years are shown in Table 3. Net interest
income decreased $979,000 in 2001, or 7.1% as compared with an increase of
$318,000 or 2.3% in 2000. The primary factor contributing to the decrease in net
interest income in 2001 was the eleven prime rate cuts during 2001, which
reduced interest income more than the reduction in interest expense. In 2000,
the primary factor contributing to the increase in net interest income was the
reduction of interest expense. Interest expense was reduced even though
interest-bearing liabilities increased. This reduction in expense occurred
because of continuing progress in promoting lower cost core deposits while
reducing reliance on higher rate retail or negotiated certificates of deposit as
well as the re-pricing that occurred on maturing certificates of deposit in
response to earlier drops in prime rates.

As indicated in Table 3,
for the year ended December 31, 2001, the Corporations net interest margin
was 4.53% compared with 5.07% and 5.32% for the same period in 2000 and 1999
respectively, and continues to remain substantially above peer performance. The
decrease in margin in 2001 is attributable to a decrease in the
Corporations earning assets yields due to the cuts in the prime rate. Cost
of funding decreased in response to decreases in treasury rates and local
competitors rates. The increase in net interest income in 2000 and in 1999
is attributable to the change in balance sheet mix achieved through growth and
the continued emphasis on lowering the cost of funds outlined in the paragraph
above. Management anticipates steady loan growth and accordingly, growth in net
interest income in 2002.

34.

---

Average earning assets
increased 4.0% in 2001, 7.4% in 2000, and 2.9% in 1999. Loans, the highest
yielding component of earning assets, represented 71.1% of earning assets in
2001, compared to 72.3% in 2000 and 69.9% in 1999. Average interest bearing
liabilities increased 1.4% in 2001, 7.0% in 2000, and 2.5% in 1999. Non-interest
bearing deposits amounted to 13.7% of average earning assets in 2001 compared
with 13.1% in 2000 and 11.7% in 1999.

`TABLE 2                                                   Changes in Net Interest Income
                                                          Due to Changes in Average Volume
                                                                   and Interest Rates
                                                              Years Ended December 31,
                                                  INCREASE (DECREASE)           INCREASE (DECREASE)
                                                          2001                       2000
                                                          DUE TO:                    DUE TO:
                                              --------------------------------------------------------
                                                          YIELD/                     YIELD/
(000's omitted)                                    VOL      RATE   TOTAL      VOL      RATE     TOTAL
------------------------------------------------------------------------------------------------------
TAXABLE SECURITIES                               ($625)   ($256)   ($881)      $4      $146      $150
TAX-EXEMPT SECURITIES                                4      (36)     (32)     141        19       160
FEDERAL FUNDS SOLD                               1,022     (739)     283     (137)      188        51

TOTAL LOANS                                        420   (1,658)  (1,238)   1,866       (33)    1,826
LOANS HELD FOR SALE                                 92       (2)      90        0         1         1
                                              --------------------------------------------------------

                         TOTAL EARNING ASSETS      913   (2,691)  (1,778)   1,874       321     2,195


INTEREST BEARING DEMAND DEPOSITS                   (68)     (74)    (142)     (31)       51        20
SAVINGS DEPOSITS                                   217     (632)    (415)      22       346       368
TIME CDs $100,000 AND OVER                         (11)    (237)    (248)     420       263       683
OTHER TIME DEPOSITS                                450       47      497       15       299       314
OTHER BORROWINGS                                  (478)     (13)    (491)     526       (34)      492
                                              --------------------------------------------------------

           TOTAL INTEREST BEARING LIABILITIES      110     (909)    (799)     952       925     1,877
                                              --------------------------------------------------------

                          NET INTEREST INCOME     $803  ($1,782)   ($979)    $922     ($604)     $318
                                              ========================================================`

35.

---

`TABLE 3                                                      Summary of Net Interest Income
(000's omitted)                                                 Years Ended December 31,
                                          2001                         2000                           1999
ASSETS                          AVG BAL  INC/EXP  YIELD      AVG BAL  INC/EXP  YIELD        AVG BAL  INC/EXP  YIELD
                                -------------------------------------------------------------------------------------
 Securities:
   U.S. Treasury and              38,674   2,253   5.83%       50,884   3,244    6.38%        51,098   3,092   6.05%
Government Agencies
   State and Political (1)        14,471   1,036   7.16%       14,298   1,068    7.47%        12,365     908   7.34%
   Other                           3,472     173   4.98%        1,086      63    5.80%           814      65   7.99%
                                -------------------------    --------------------------     -------------------------
   Total Securities               56,617   3,462   6.11%       66,268   4,375    6.60%        64,277   4,065   6.32%
   Fed Funds Sold                 24,129     926   3.84%        9,306     643    6.91%        12,100     592   4.89%
 Loans:
   Commercial                    122,712  10,557   8.60%      105,276  10,120    9.61%        90,985   8,803   9.68%
   Tax Free (1)                    1,021      73   7.12%          618      52    8.34%           366      33   9.11%
   Real Estate-Mortgage           12,857   1,162   9.85%       23,552   2,130    9.04%        24,442   2,085   8.53%
   Consumer                       65,635   5,684   8.66%       68,342   6,412    9.38%        62,367   5,960   9.56%
                                -------------------------    --------------------------     -------------------------
 Total loans                     202,225  17,476   8.64%      197,788  18,714    9.46%       178,160  16,881   9.48%
 Allowance for Loan Loss          (3,050)                      (3,157)                        (2,928)
 Net Loans                       199,175  17,476   8.77%      194,631  18,714    9.61%       175,232  16,881   9.63%
                                -------------------------    --------------------------     -------------------------
Loans Held for Sale                1,595     104   6.52%          184      14    7.61%           180      13   7.22%
                                -------------------------    --------------------------     -------------------------
 TOTAL EARNING ASSETS           $284,566 $21,968   7.72%     $273,546 $23,746    8.68%      $254,717 $21,551   8.46%
                                -------------------------------------------------------------------------------------
 Cash Due from Banks              11,466                       12,202                         10,149
 All Other Assets                 13,880                       13,390                         11,842
                                ---------                    ---------                      ---------
TOTAL ASSETS                    $306,862                     $295,981                       $273,780
                                ---------                    ---------                      ---------
LIABILITIES & SHAREHOLDERS'
EQUITY:
  Deposits:
   Interest bearing - DDA         36,457     591   1.62%       40,199     733    1.82%        41,996     713   1.70%
   Savings Deposits               73,151   1,896   2.59%       66,890   2,311    3.45%        66,141   1,943   2.94%
   Time CD's $100,000 and Over    32,847   1,794   5.46%       33,025   2,042    6.18%        25,226   1,359   5.39%
   Other Time CD's                83,197   4,677   5.62%       75,124   4,180    5.56%        74,827   3,866   5.17%
                                -------------------------    --------------------------     -------------------------
 Total Interest Bearing          225,652   8,958   3.97%      215,238   9,266    4.31%       208,190   7,881   3.79%
Deposits
 Other Borrowings                  2,240     133   5.94%        9,509     624    6.56%         1,908     132   6.92%
                                -------------------------    --------------------------     -------------------------
  INTEREST BEARING LIABILITIES  $227,892  $9,091   3.99%     $224,747  $9,890    4.40%      $210,098  $8,013   3.81%
                                -------------------------------------------------------------------------------------
 Non-interest bearing - DDA       39,014                       35,711                         29,912

 All Other Liabilities             2,237                        1,958                          2.175
 Shareholders Equity              37,719                       33,565                         31,595
                                ---------                    ---------                      ---------
 TOTAL LIABILITIES and S/H      $306,862                     $295,981                       $273,780
EQUITY                          ---------        --------    ---------        ---------     ---------        --------
Net Interest Rate Spread                           3.73%                         4.28%                         4.65%
Net Interest Income/Margin               $12,877   4.53%              $13,856    5.07%               $13,538   5.32%
                                         ================             =================              ================

(1) - Presented on a fully taxable equivalent basis using a federal income tax rate of 34%.`

36.

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## ALLOWANCE AND
PROVISION FOR LOAN LOSSES

The allowance for loan
losses reflects managements judgment as to the level considered
appropriate to absorb losses inherent in the loan portfolio. The
Corporations methodology in determining the adequacy of the allowance
includes a review of individual loans, size and composition of the loan
portfolio, historical loss experience, current economic conditions, financial
condition of borrowers, the level and composition of non-performing loans,
portfolio trends, estimated net charge-offs, and other pertinent factors.
Although reserves have been allocated to various portfolio segments, the
allowance is general in nature and is available for the portfolio in its
entirety. At December 31, 2001, the allowance for loan losses was $3,125,000 or
1.46% of total loans. This compares with $2,932,000 or 1.50% at December 31,
2000 and $2,961,000, or 1.55%, at December 31, 1999. The Corporation has lowered
the allowance for loan losses as a percent of total loans because of an
improvement in overall asset quality.

The provision for loan
losses was $751,000 in 2001 and $584,000 and $545,000 in 2000 and 1999
respectively. The increase in the provision in 2001 reflects managements
effort to maintain adequate reserves commensurate with loan growth. Loans
charged-off increased in 2000 because of a non-repetitive, substantial
charge-off on a non-performing commercial loan and an increase in loans
charged-off in the indirect loan portfolio. This increased charge-off level
resulted in an increase in provision for loan losses. The decrease in the
provision in 1999 reflected an improvement in asset quality and a reduction in
loans charged-off from the prior year.

Table 4 summarizes loan
losses and recoveries from 1999 through 2001. During 2001 the Corporation
experienced net charge-offs of $558,000, compared with net charge-offs of
$613,000 and $367,000 in 2000 and 1999, respectively. The net charge-off ratio
is the net of charge-off loans minus the recoveries from loans divided by gross
loans. Accordingly, the net charge-off ratio for 2001 was .28% compared to .31%
and .19% at the end of 2000 and 1999, respectively. The net charge-off ratio
decreased slightly due to fewer charge-offs from the commercial and consumer
portfolios in 2001. The net charge-off ratio increased in 2000 primarily due to
a write down on a non-performing commercial loan. The net charge-off ratio
decreased significantly in 1999 due to an increase in overall asset quality.

The Corporation maintains
formal policies and procedures to control and monitor credit risk. Management
believes the allowance for loan losses is adequate to meet normal credit risks
in the loan portfolio. The Corporations loan portfolio has no significant
concentrations in any one industry or any exposure in foreign loans. The
Corporation has not extended credit to finance highly leveraged transactions nor
does it intend to do so in the future. Employment levels and other economic
conditions in the Corporations local markets may have a significant impact
on the level of credit losses. Management continues to identify and devote
attention to credits that may not be performing as agreed. Because of these
factors and the uncertainty of economic conditions, management expects to
maintain the current level of the allowance for loan losses as a percentage of
gross loans in 2002. Non-performing loans are discussed further in the section
titled Non-Performing Assets.

37.

---

`TABLE 4
Analysis of the Allowance for Loan Losses      Years Ended December 31,

(000's omitted)                                2001     2000       1999      1998      1997
--------------------------------------------------------------------------------------------
Balance Beginning of Period                  $2,932   $2,961     $2,783    $2,955    $2,836
                                          --------------------------------------------------
Charge-offs:
    Commercial, Financial and                  (226)    (284)       (72)     (454)      (69)
Agricultural
    Real Estate-Construction                      0        0          0         0         0
    Real Estate-Mortgage                          0        0         (2)      (77)        0
    Installment Loans to Individuals           (487)    (522)      (377)     (537)     (500)
                                          --------------------------------------------------
      Total Charge-offs                        (713)    (806)      (451)   (1,068)     (569)
                                          --------------------------------------------------
Recoveries:
    Commercial, Financial and                    28      107         13        43        15
Agricultural
    Real Estate-Construction                      0        0          0         0         0
    Real Estate-Mortgage                          2        0          0        37         4
    Installment Loans to Individuals            125       86         71        92        45
                                          --------------------------------------------------
Total Recoveries                                155      193         84       172        64
                                          --------------------------------------------------
Net Charge-offs                                (558)    (613)      (367)     (896)     (505)
                                          --------------------------------------------------
Provision                                       751      584        545       724       624
                                          --------------------------------------------------
Balance at End of Period                     $3,125   $2,932     $2,961    $2,783    $2,955
                                          ==================================================
Ratio of Net Charge-Offs During the           0.28%    0.31%      0.19%     0.55%     0.28%
Period`

## NON-INTEREST
INCOME

Non-interest income was
$5,363,000 in 2001, $4,528,000 and $4,262,000 in 2000 and 1999 respectively.
These amounts represent an increase of 18.4% in 2001 compared to 2000 and an
increase of 6.2% comparing 2000 to 1999.

The most significant
category of non-interest income is service charges on deposit accounts. These
fees were $2,286,000 in 2001, compared to $1,915,000 and $1,972,000 in 2000 and
1999 respectively. This is an increase of $371,000 or 19.4% in 2001 and a
decrease of $57,000 or 2.9% in 2000. In 2001, the increase was due to higher
overdraft charges and deposit account service charges being higher due to
deposit growth. The decrease in 2000 is attributable to higher individual
checking and saving account balances offsetting service charges.

Gains on the sale of
mortgage loans originated by the Bank and sold in the secondary market were
$659,000 in 2001, $179,000 in 2000, and $108,000 in 1999. The 268.2% increase in
2001 is due to the increase in mortgage loan production because of the low
interest rates during the year and an increase in loans sold in the secondary
market. The 65.7% increase in 2000 is attributable to increases in mortgage
loans made and subsequently sold in the secondary market due to an increase in
new home purchase activity. The Corporation sells the majority of the mortgage
loans originated in the secondary market on a servicing released basis; thus the
Corporation did not receive mortgage-servicing fees in 2001. The fees increased
from $153,000 in 1999 to $631,000 in 2000. The increase is attributable to a
gain on the sale of mortgage servicing rights associated with loans previously
sold in the secondary market.

Trust income decreased
$129,000 in 2001 to $566,000 compared to $695,000 in 2000 and $581,000 in 1999.
The 18.6% decrease in 2001 is due to a drop in assets under management and the
market value of these assets. The increases in the prior years were attributable
to growth in the assets under management within the Corporations
Investment Trust Department and the market value of assets under management.

In 2001, the Corporation
recognized a $674,000 gain on security transactions compared to no gains in
2000, and $24,000 in security gains in 1999. These gains are a result of several
transactions wherein the Corporation sold investment securities and reinvested
in issues, which will provide greater total income potential.

Other income and fees
includes income from the sale of checks, safe deposit box rent, merchant account
income, ATM income, and other miscellaneous income items. Other income and fees
was $1,178,000 in 2001 compared to $1,108,000 and $1,424,000 in 2000 and 1999
respectively. The increase in 2001 is due to an increase in income from the sale
of official checks. The decrease in 2000 compared to 1999 is primarily
attributable to a one-time gain representing a premium received for deposits
sold in connection with a branch sale.

38.

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## NON-INTEREST
EXPENSE

Total non-interest expense
was $11,700,000 in 2001 compared to $11,436,000 in 2000 and $11,136,000 in 1999.
This is an increase of 2.3% in 2001 and 2.7% in 2000.

Salaries and employee
benefits, the Corporations largest other operating expense category, were
$5,988,000 in 2001, compared with $5,801,000 in 2000, and $5,564,000 in 1999.
Increased costs are a result of annual salary increases and staff additions in
connection with the spin-off of two branches to form Davison State Bank.

In 2001, equipment expenses
were $1,411,000 compared to $1,552,000 in 2000 and $1,429,000 in 1999, a
decrease of 9.1% in 2001 and an increase of 8.6% in 2000. The decrease is
attributable to equipment maintenance costs. Equipment maintenance expense
decreased due to better-negotiated contracts in 2001. The increase in 2000 is
attributable to depreciation costs. Depreciation expense increased in connection
with equipment leases and purchases including a new mainframe system.

Occupancy expenses
associated with the Corporations facilities were $886,000 in 2001 compared
to $784,000 in 2000 and $797,000 in 1999. In 2001, this is an increase of 13.0%
and in 2000 a decrease of 1.6%. The increase in 2001 is due to the opening of
the new main office of Davison State Bank and the new Grand Blanc office of The
State Bank. The decrease in 2000 is attributable to lower lease expense as a
result of a sale of a leased branch in 1999.

Office supplies were
$300,000 in 2001 compared to $311,000 in 2000 and $ 274,000 in 1999. In 2001,
this is a decrease of 3.5% and in 2000 an increase of 13.5 %. The increase in
2000 is attributable to the opening of Davison State Bank and printing with new
logo and new name for the spin-off on letterhead and other various office
supplies. The decrease in 2001 is due to the reduction of office supplies
expenses from 2000 where expenses were higher for the initial supplies for the
new Davison State Bank.

Loan and collection
expenses were $178,000 in 2001 compared to $289,000 in 2000, and $373,000 in
1999. The decrease of $111,000 or 38.4% is due to the decrease in dealer service
fees paid in connection with indirect auto lending. The $84,000 or 22.5%
decrease in 2000 is attributable to a decrease in dealer service fees paid in
connection with indirect auto lending and a decrease in fees paid by the
Corporation for the origination of home equity loans.

Advertising expenses were
$320,000 in 2001 compared to $263,000 in 2000, and $257,000 in 1999. The
increase of $57,000 or 21.7% is due to the promotion of the new Davison State
Bank and the promotion of the new Grand Blanc office of The State Bank. The
$6,000 or 2.3% increase from 1999 to 2000 is due to the regular cost increases
of advertising.

The makeup of other
professional fees includes audit fees, consulting fees, legal fees, and various
other professional services. Other professional services were $1,144,000 in 2001
compared to $1,000,000 in 2000, and $804,000 in 1999. The increase of $144,000
or 14.4% was attributable to the costs of researching a potential stock offering
for Davison State Bank and increases in audit and legal fees for both banks. In
2000, the increase of $196,000 or 24.4% was due to the legal fees for the
startup of Davison State Bank.

Other general and
administrative expenses were $1,473,000 in 2001 compared to $1,436,000 in 2000,
and $1,638,000 in 1999. These expenses were higher in 2001 because of an
increase in other losses from charged off accounts and increases in check
processing costs. The decrease in 2000 is due to lower costs for check
production.

39.

---

## FINANCIAL
CONDITION

Proper management of the
volume and composition of the Corporations earning assets and funding
sources is essential for ensuring strong and consistent earnings performance,
maintaining adequate liquidity and limiting exposure to risks caused by changing
market conditions. The Corporations securities portfolio is structured to
provide a source of liquidity through maturities and generate an income stream
with relatively low levels of principal risk. The Corporation does not engage in
securities trading. Loans comprise the largest component of earning assets and
are the Corporations highest yielding assets. Client deposits are the
primary source of funding for earning assets while short-term debt and other
sources of funds could be utilized if market conditions and liquidity needs
change.

The Corporations
total assets averaged $307 million for 2001 exceeding 2000s average of
$296 million by $11 million or 3.7%. Average loans comprised 65.9% of total
average assets during 2001 compared to 66.8% in 2000. Loans grew $4.4 million on
average with commercial loans leading the advance by $17.4 million or 16.6%. The
ratio of average non-interest bearing deposits to total deposits was 14.7% in
2001 compared to 14.2% during 2000. Interest bearing deposits comprised 99.0% of
total average interest bearing liabilities during 2001, increased from 95.8%
during 2000. The Corporations yearend total assets were $309 million for
2001 up from $293 million in 2000. The increase is due to the loan demand being
high during 2001.

## SECURITIES
PORTFOLIO

Securities totaled
$39,167,000 at December 31, 2001 compared to $65,882,000 at December 31, 2000.
This is a decrease of $26,715,000 or 40.5% and the decrease in 2001 resulted
principally from the selling of securities throughout the year. As management
chose to capture the gain available in the securities portfolio to offset a
portion of the net interest income compression. At December 31, 2001 these
securities comprised 14.1% of earning assets, down from 24.8% at December 31,
2000. The Corporation considers all of its securities as available for sale
except for Michigan tax-exempt securities, which are classified as held to
maturity. Increases in loan balances from new loan growth in excess of the
amount of deposit growth, coupled with the decrease in securities in 2001
accounts for the increase in federal funds sold.

The Corporations
present policies with respect to the classification of securities are discussed
in Note 1 to the Consolidated Financial Statements. As of December 31, 2001, the
estimated aggregate fair value of the Corporations securities portfolio
was $272,000 above amortized cost. At December 31, 2001 gross unrealized gains
were $362,000 and gross unrealized losses were $90,000. A summary of estimated
fair values and unrealized gains and losses for the major components of the
securities portfolio is provided in Note 3 to the Consolidated Financial
Statements.

40.

---

## TABLE 5

## Analysis and
Maturities of Securities

`Amortized      Fair
(000's omitted)                    Cost         Value       Yield
----------------------------------------------------------------------
AVAILABLE FOR SALE
U.S. Agencies
  One year or less                        $0           $0       0.00%
  Over one through five years          7,709        7,757       4.72%
  Over five through ten years          1,058        1,061       6.31%
  Over ten years                           0            0       0.00%
                               ---------------------------
    Total                              8,767        8,818

Mortgage-Backed
  One year or less                       $45          $46       6.19%
  Over one through five years          6,169        6,226       6.00%
  Over five through ten years          1,601        1,598       6.80%
  Over ten years                           0            0       0.00%
                               ---------------------------
    Total                              7,815        7,870

State and Political
  One year or less                    $1,237       $1,239       3.18%
  Over one through five years          1,078        1,068       5.43%
  Over five through ten years             83           80       8.98%
  Over ten years                       1,312        1,292       7.43%
                               ---------------------------
    Total                              3,710        3,679

Corporate Bonds
  One year or less                        $0           $0       0.00%
  Over one through five years          5,361        5,425       5.26%
  Over five through ten years              0            0       0.00%
  Over ten years                           0            0       0.00%
                               ---------------------------
    Total                              5,361        5,425

HELD TO MATURITY
State and Political
  One year or less                    $5,234       $5,260       7.30%
  Over one through five years          3,823        3,892       7.71%
  Over five through ten years          2,747        2,793       8.00%
  Over ten years                       1,571        1,563       8.24%
                               ---------------------------
    Total                             13,375       13,508

Total Securities                     $39,028      $39,300`

41.

---

## LOAN PORTFOLIO

The Corporation extends
credit primarily within in its local markets in Genesee, Oakland, and Livingston
counties. The Corporations commercial loan portfolio is widely diversified
with no concentration within a single industry that exceeds 10% of total loans.
The Corporations respective loan portfolio balances are summarized in
Table 6.

Total loans increased
$18,829,000 at December 31, 2001, with total loans comprising 76.5% of earning
assets as compared to 72.5% of December 31, 2000 earning assets. Local economic
conditions remained reasonably steady throughout 2001. The steadiness of the
local economy supported continued commercial business growth including
commercial development. Accordingly, the Corporation experienced strong demand
for commercial loans. In 2001, commercial loans increased approximately
$16,969,000 to $118,894,000 or 16.6%. Additionally, real estate construction and
development loans increased $7,963,000 or 45.6% to $25,434,000 at December 31,
2001. Consumer loans decreased in 2001 while real estate mortgage loans
increased approximately $644,000 due to an increase in new mortgage volume
because of refinance activity with lower interest rates. In 2000, real estate
construction and development loans increased $4,990,000 or 40% to $17,471,000 at
December 31, 2000. Consumer loans increased modestly in 2000 while real estate
mortgage loans decreased due to the sale of approximately $10,000,000 in fixed
rate mortgage loans in the last quarter of 2000.

Management expects the
local economy to support continued growth and development in 2002 and will
aggressively seek out new loan opportunities while continuing to maintain sound
credit quality.

## TABLE 6

## Loan Portfolio

`December 31,
(000's omitted)                      2001          2000         1999          1998          1997
-----------------------------------------------------------------------------------------------------
Commercial                            $118,894     $101,925       $92,896       $78,832      $81,544
Real estate - construction              25,434       17,471        12,481         9,010       14,589
Real estate - mortgage                  11,158       10,514        21,409        11,641       15,007
Consumer                                58,644       65,198        64,280        62,423       69,533
                                 --------------------------------------------------------------------
  Total                               $214,130     $195,108      $191,066      $161,906     $180,673
                                 ====================================================================`

The Corporation originates
primarily residential and commercial real estate loans, commercial,
construction, and consumer loans. The Corporation estimates that 80% of the loan
portfolio is based in Genesee and Livingston counties within southeast Michigan.
The ability of the Corporations debtors to honor their contracts is
dependent upon the real estate and general economic conditions in the area

## TABLE 7

## Maturities of
the Loan Portfolio

`December 31, 2001                         Within       One-        After
(000's omitted)                            One         Five         Five
                                           Year        Years       Years        Total
                                           ----        -----       -----        -----
Commercial                              $  29,021   $  79,299    $ 10,574    $  118,894
Real estate - construction                 19,614       5,820           -        25,434
Real estate - mortgage                        882       2,623       7,653        11,158
Consumer                                   10,229      32,600      15,815        58,644
                                        ---------   ---------    --------    ----------
                                        $  61,487   $ 118,601    $ 34,042    $  214,130
                                        =========   =========    ========    ==========`

42.

---

## NON-PERFORMING
ASSETS

Non-performing assets
include loans on which interest accruals have ceased, loans which have been
re-negotiated, real estate acquired through foreclosure, and loans past due 90
days or more and still accruing. Table 8 represents the levels of these assets
at December 31, 1997 through 2001.

The improvement in total
non-performing assets at December 31, 2001 compared to 2000 is attributable to
reduction in non-accrual and past due loans accruing over 90 days. This is due
to the improvement in loan quality over the past few years. The improvement or
decrease in non-performing loans in 2000 as compared to 1999 is attributable to
the sale and disposition of other real estate owned and in redemption.

The level and composition
of non-performing assets are affected by economic conditions in the
Corporations local markets. Non-performing assets, charge-offs, and
provisions for loan losses tend to decline in a strong economy and increase in a
weak economy, potentially impacting the Corporations operating results. In
addition to non-performing loans, management carefully monitors other credits
that are current in terms of principal and interest payments but, in
managements opinion, may deteriorate in quality if economic conditions
change.

## TABLE 8

## Non-Performing
Assets and Past Due Loans

`December 31,
                                             2001         2000         1999           1998      1997
                                         ----------------------------------------------------------------
Non-Performing Loans:
  Loans Past Due 90 Days or More & Still
    Accruing                                 $186,000     $489,000     $240,000    $168,000     $618,000
  Non-Accrual Loans                           321,000      731,000      859,000   1,102,000    1,866,000
  Renegotiated Loans                                0            0        6,000       7,000        8,000
                                         ----------------------------------------------------------------
    Total Non-Performing Loans                507,000    1,220,000    1,105,000   1,277,000    2,492,000
                                         ----------------------------------------------------------------
Other Non-Performing Assets:
  Other Real Estate                                 0            0      288,000     172,000            0
  Other Real Estate Owned in Redemption             0            0      179,000      96,000            0
  Other Non-Performing  Assets                 10,000      159,000       56,000      39,000       94,000
                                         ----------------------------------------------------------------
    Total Other Non-Performing Assets          10,000      159,000      523,000     307,000       94,000
                                         ----------------------------------------------------------------
Total Non-Performing Assets                  $517,000   $1,379,000   $1,628,000  $1,584,000   $2,586,000
                                         ================================================================
Non-Performing Loans as a % of
  Total Loans                                   0.24%        0.63%        0.58%       0.79%        1.38%
Non-Performing Assets as a % of
  Total Loans and Other Real Estate             0.25%        0.71%        0.85%       0.98%        1.43%
Allowance for Loan Losses as a % of
  Non-Performing Loans                        616.37%      240.33%      267.96%     217.93%      118.58%
Allowance for Loan Losses, Other Real
  Estate, and In-Substance Foreclosures
  as a % of Non-Performing Assets             604.45%      212.62%      199.57%     192.61%      114.27%
Accruing Loans Past Due 90 Days or
  More to Total Loans                           0.09%        0.25%        0.13%       0.10%        0.34%
Non-performing Assets as a % of
  Total Assets                                  0.17%        0.47%        0.57%       0.58%        0.98%`

Table 9 reflects the
allocation of the allowance for loan losses and is based upon ranges of
estimates and is not intended to imply either limitations on the usage of the
allowance or precision of the specific amounts. The Corporation does not view
the allowance for loan losses as being divisible among the various categories of
loans. The entire allowance is available to absorb any future losses without
regard to the category or categories in which the charged-off loans are
classified. Table 9 also reflects the percentage ratio of outstanding loans by
category to total loans at the end of the respective year.

43.

---

## TABLE 9

## Allocation of
the Allowance for Loan Losses

`2001              2000             1999             1998             1997
December 31,                        Loan             Loan              Loan             Loan              Loan
(000's omitted)           Amount     %      Amount     %     Amount     %      Amount     %     Amount     %
-----------------------------------------------------------------------------------------------------------------
Commercial                 $2,121   67.40%   $1,645  58.69%   $1,682   53.19%   $1,270  51.69%   $1,416   49.65%
Real estate mortgage           60    5.21%       94   7.89%      144   13.17%      130   9.76%      153   11.86%
Consumer                      819   27.39%      890  33.42%      963   33.64%      983  38.56%    1,376   38.49%
Unallocated                   125               303              172               400               10
-----------------------------------------------------------------------------------------------------------------
  Total                    $3,125  100.00%   $2,932 100.00%   $2,961  100.00%   $2,783 100.00%   $2,955  100.00%
                         ========================================================================================`

The following describes the
Corporations policy and related disclosures for impaired loans. The
Corporation maintains an allowance for impaired loans. A loan is considered
impaired when management determines it is probable that the principal and
interest due under the contractual terms of the loan will not be collected. In
most instances, impairment is measured based on the fair value of the underlying
collateral. Impairment may also be measured based on the present value of
expected future cash flows discounted at the loans effective interest
rate. Interest income on impaired non-accrual loans is recognized on a cash
basis. Interest income on all other impaired loans is recorded on an accrual
basis.

Certain of the
Corporations non-performing loans included in Table 8 are considered
impaired. The Corporation measures impairment on all large balance non-accrual
commercial loans. Certain large balance accruing loans rated substandard or
worse are also measured for impairment. Impairment losses are adequately covered
by the provision for loan losses. The policy does not apply to large groups of
smaller balance homogeneous loans that are collectively evaluated for
impairment. Loans collectively evaluated for impairment include certain smaller
balance commercial loans, consumer loans, residential real estate loans, and
credit card loans, and are not included in the impaired loan data in the
following paragraphs.

At December 31, 2001, loans
considered to be impaired totaled $2,880,000. All amounts included within
impaired loans required specific allowance. The average recorded investment in
impaired loans was $2,597,000 in 2001. The interest income recognized on
impaired loans based on cash collections totaled $142,000 during 2001.

At December 31, 2000, loans
considered to be impaired totaled $2,315,000. All amounts included in impaired
loans required specific allowance. The average recorded investment in impaired
loans was $1,932,000 in 2000. The interest income recognized on impaired loans
based on cash collections totaled $146,000 during 2000.

The Corporation maintains
policies and procedures to identify and monitor non-accrual loans. A loan is
placed on non-accrual status when there is doubt regarding collection of
principal or interest, or when principal or interest is past due 90 days or
more. Interest accrued but not collected is reversed against income for the
current quarter and charged to the allowance for loan losses for prior quarters
when the loan is placed on non-accrual status.

44.

---

## DEPOSITS

## TABLE 10

## Average
Deposits

`Years Ended December 31,      2001             2000              1999             1998               1997
                        Average  Average  Average Average  Average  Average  Average  Average  Average  Average
(000's omitted)         Balance    Rate   Balance   Rate   Balance    Rate   Balance   Rate    Balance    Rate
-----------------------------------------------------------------------------------------------------------------
Non-int. bearing demand  $39,014          $35,711           $29,912           $27,202           $26,447
Interest-bearing demand   36,457    1.62%  40,199    1.82%   41,996    1.70%   35,982   2.12%    32,380    2.30%
Savings                   73,151    2.59%  66,890    3.45%   66,141    2.94%   62,172   2.88%    59,892    3.31%
Time                     116,044    5.58% 108,149    5.75%  100,053    5.23%  104,529   5.68%   107,388    5.84%
                        -----------------------------------------------------------------------------------------
  Total                 $264,666    3.38% $250,949   3.69% $238,102    3.31% $229,885   3.69%  $226,107    3.98%
                        =========================================================================================`

The Corporations
average deposit balances and rates for the past five years are summarized in
Table 10. Total average deposits were 5.5% higher in 2001 as compared to 2000.
Deposit growth was derived primarily from increases in non-interest bearing
demand, savings and time deposits. Interest-bearing demand deposits comprised
13.8% of total deposits while savings deposits comprised 27.6% of total
deposits.

As of December 31, 2001
certificates of deposit of $100,000 or more accounted for approximately 8.5% of
total deposits compared to 13.8% at December 31, 2000. The maturities of these
deposits are summarized in Table 11.

## TABLE 11

## Maturity of
Time Certificates of Deposit of $100,000 or More

`December 31, December 31,
(000's omitted)                      2001         2000
----------------------------------------------------------
Three months or less                 $12,309      $16,673
Over three through six months          4,004        9,453
Over six through twelve months         1,768        3,822
Over twelve months                     4,516        4,311
                               ---------------------------
  Total                              $22,597      $34,259
                               ===========================`

## FEDERAL INCOME
TAXES

The Corporations
effective tax rate was 29.9% for 2001, 29.1% for 2000 and 31% for 1999. The
principal difference between the effective tax rates and the statutory tax rate
of 34% is the Corporations investment in securities and loans, which
provide income exempt from federal income tax. Additional information relating
to federal income taxes is included in Note 8 to the Consolidated Financial
Statements.

45.

---

## LIQUIDITY AND
INTEREST RATE RISK MANAGEMENT

Asset/Liability management
is designed to assure liquidity and reduce interest rate risks. The goal in
managing interest rate risk is to maintain a strong and relatively stable net
interest margin. It is the responsibility of the Asset/Liability Management
Committee (ALCO) to set policy guidelines and to establish short-term and
long-term strategies with respect to interest rate exposure and liquidity. The
ALCO, which is comprised of key members of senior management, meets regularly to
review financial performance and soundness, including interest rate risk and
liquidity exposure in relation to present and prospective markets, business
conditions, and product lines. Accordingly, the committee adopts funding and
balance sheet management strategies that are intended to maintain earnings,
liquidity, and growth rates consistent with policy and prudent business
standards.

Liquidity maintenance,
together with a solid capital base and strong earnings performance are key
objectives of the Corporation. The Corporations liquidity is derived from
a strong deposit base comprised of individual and business deposits. Deposit
accounts of customers in the mature market represent a substantial portion of
deposits of individuals. The Corporations deposit base plus other funding
sources (federal funds purchased, other liabilities and shareholders
equity) provided primarily all funding needs in 2001, 2000, and 1999. While
these sources of funds are expected to continue to be available to provide funds
in the future, the mix and availability of funds will depend upon future
economic and market conditions. The Corporation does not foresee any difficulty
in meeting its funding requirements.

Primary liquidity is
provided through short-term investments or borrowings (including federal funds
sold and purchased), while the security portfolio provides secondary liquidity
along with FHLB advances. As of December 31, 2001 federal funds sold represented
7.4% of total assets, compared to 2.5% at the end of 2000. The Corporation
regularly monitors liquidity to ensure adequate cash flows to cover
unanticipated reductions in the availability of funding sources.

Interest rate risk is
managed by controlling and limiting the level of earnings volatility arising
from rate movements. The Corporation regularly performs reviews and analyses of
those factors impacting interest rate risk. Factors include maturity and
re-pricing frequency of balance sheet components, impact of rate changes on
interest margin and prepayment speeds, market value impacts of rate changes, and
other issues. Both actual and projected performance, are reviewed, analyzed, and
compared to policy and objectives to assure present and future financial
viability.

The Corporation had cash
flows from financing activities resulting primarily from the inflow of savings
deposits and short-term borrowings. In 2001, these deposits increased
$16,614,000 and these borrowings decreased $2,580,000. Cash provided by
investing activities was $5,321,000 in 2001 compared to cash used of $12,784,000
in 2000. The change in investing activities from 2000 is due to the sales and
calls of securities in 2001.

## RISK ELEMENTS
AND MANAGEMENT

Credit risk is managed via
specific credit approvals and monitoring procedures. The Corporations
outside loan review function examines the loan portfolio on a periodic basis for
compliance with credit policies and for identification of problem loans. These
procedures provide management with information for setting appropriate direction
and taking corrective action as needed.

The Corporation closely
monitors its construction and commercial mortgage loan portfolios. Construction
loans at December 31, 2001, which comprised 12.1% of total loans, totaled
$25,434,000 as compared to $17,471,000 and $12,481,000 at the end of 2000 and
1999 respectively.

The construction and
commercial real estate loan properties are located principally in the
Corporations local markets. Included are loans to various industries and
professional organizations. The Corporation believes that these portfolios are
well diversified and do not present a significant risk to the institution.

46.

---

## CAPITAL
RESOURCES

Management closely monitors
capital levels to provide for current and future business needs and to comply
with regulatory requirements. Regulations prescribed under the Federal Deposit
Insurance Corporation Improvement Act of 1991 have defined well
capitalized institutions as those having total risk-based ratios, tier 1
risk-based capital ratios and tier 1 leverage ratios of at least 10%, 6%, and 5%
respectively. At December 31, 2001, the Corporation was well in excess of the
minimum capital and leverage requirements necessary to be considered a
well capitalized banking company as defined by federal law.

Total shareholders
equity rose 7.5% to $38,433,000 at December 31, 2001, compared with $35,754,000
at December 31, 2000. The Corporations equity to asset ratio was 12.4% at
December 31, 2001, compared to 12.2% at December 31, 2000. The increase in the
amount of capital was obtained through retained earnings and the proceeds from
the issuance of new shares. In 2001, the Corporation increased its cash
dividends by 4.1% to $1.01 per share compared with $.97 in 2000.

At December 31, 2001, the
Corporations tier 1 and total risk-based capital ratios were 15.0% and
16.2%, respectively, compared with 15.0% and 16.2% in 2000. The
Corporations tier 1 leverage ratio was 12.5% at December 31, 2001 compared
with 12.1% at December 31, 2000. These increases in risk-based capital ratios
are largely attributable to an increase in federal funds sold investments at
December 31, 2000, and the increases in capital.

## QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Fentura Bancorp, Inc. faces
market risk to the extent that both earnings and the fair value of its financial
instruments are affected by changes in interest rates. The Corporation manages
this risk with static GAP analysis and has begun simulation modeling. Throughout
2001, the results of these measurement techniques were within the
Corporations policy guidelines. The Corporation does not believe that
there has been a material change in the nature of the Corporations
substantially influenced market risk exposures, including the categories of
market risk to which the Corporation is exposed and the particular markets that
present the primary risk of loss to the Corporation, or in how those exposures
are managed in 2001 compared to 2000.

The Corporations
market risk exposure is mainly comprised of its vulnerability to interest rate
risk. Prevailing interest rates and interest rate relationships in the future
will be primarily determined by market factors, which are outside of the
Corporations control. All information provided in this section consists of
forward-looking statements. Reference is made to the section captioned
Forward Looking Statements in this annual report for a discussion of
the limitations on the Corporations responsibility for such statements.

The following table
provides information about the Corporations financial instruments that are
sensitive to changes in interest rates as of December 31, 2001. The table shows
expected cash flows from market sensitive instruments for each of the next five
years and thereafter. The expected maturity date values for loans and securities
(at amortized cost) were calculated without adjusting the instruments
contractual maturity dates for expected prepayments. Maturity date values for
interest bearing core deposits were not based on estimates of the period over
which the deposits would be outstanding, but rather the opportunity for
re-pricing. The Corporation believes that re-pricing dates, as opposed to
expected maturity dates, may be more relevant in analyzing the value of such
instruments and are reported as such in the following table.

47.

---

## TABLE 12

`(000's omitted)                    2002      2003      2004     2005     2006    Thereafter   Total
------------------------------------------------------------------------------------------------------
         Rate Sensitive Assets:
      Fixed interest rate loans    $14,692   $14,037   $28,615 $14,872   $24,527    $27,192  $123,935
          Average interest rate      9.07%     9.63%     8.36%  10.00%     7.86%      6.07%
   Variable interest rate loans    $46,795    $9,008    $7,253  $9,386   $10,903     $6,850   $90,195
          Average interest rate      6.88%     5.48%     6.71%   5.95%     5.69%      5.87%
            Fixed interest rate     $6,519    $9,750    $5,822  $5,183    $1,802     $6,752   $35,828
                     securities
          Average interest rate      6.83%     6.22%     7.14%   7.17%     7.80%      7.90%
         Variable Interest rate               $1,199       $22    $441       $79     $1,598    $3,339
                     securities
          Average interest rate                                  6.13%                6.80%
                                           5.76%     6.92%             5.12%
  Other interest bearing assets    $22,800                                                    $22,800
          Average interest rate      1.00%

    Rate Sensitive Liabilities:
      Interest-bearing checking    $40,930                                                    $40,930
          Average interest rate      1.62%
                        Savings    $80,090                                                    $80,090
          Average interest rate      2.59%
                           Time    $80,388    $9,139    $7,341  $3,442    $1,194       $222  $101,726
          Average interest rate      4.71%     5.07%     4.64%   4.91%     4.38%      4.32%
          Short term borrowings     $2,100                                                     $2,100
          Average interest rate      1.81%
                  FHLB advances        $14       $16       $17     $18       $20     $1,053    $1,138
          Average interest rate      7.34%     7.34%     7.34%   7.34%     7.34%      7.34%`

## INTEREST RATE
SENSITIVITY MANAGEMENT

Interest rate sensitivity management
seeks to maximize net interest income as a result of changing interest rates,
within prudent ranges of risk. The Corporation attempts to accomplish this
objective by structuring the balance sheet so that re-pricing opportunities
exist for both assets and liabilities in roughly equivalent amounts at
approximately the same time intervals. Imbalances in these re-pricing
opportunities at any point in time constitute a banks interest rate
sensitivity. The Corporation currently does not utilize derivatives in managing
interest rate risk.

An indicator of the
interest rate sensitivity structure of a financial institutions balance
sheet is the difference between its interest rate sensitive assets and interest
rate sensitive liabilities, and is referred to as GAP.

Table 13 sets forth the
distribution of re-pricing of the Corporations earning assets and interest
bearing liabilities as of December 31, 2001, the interest rate sensitivity GAP,
as defined above, the cumulative interest rate sensitivity GAP, the interest
rate sensitivity GAP ratio (i.e. interest rate sensitive assets divided by
interest rate sensitive liabilities) and the cumulative sensitivity GAP ratio.
The table also sets forth the time periods in which earning assets and
liabilities will mature or may re-price in accordance with their contractual
terms.

48.

---

## TABLE 13 Gap
Analysis

`December 31, 2001
                                                 Within       Three      One to       After
                                                  Three     Months-        Five        Five
(000's Omitted)                                  Months    One Year       Years       Years       Total
--------------------------------------------------------------------------------------------------------
  Interest Bearing Bank Deposits                    $0          $0          $0          $0          $0
  Federal Funds Sold                             22,800           0           0           0      22,800
  Investment Securities                           2,346       6,041      25,096       5,684      39,167
  Loans                                         100,735      15,582      78,484      19,329     214,130
  Loans Held for Sale                             1,710           0           0           0       1,710
                                            ------------------------------------------------------------
    Total Earning Assets                       $127,591     $21,623    $103,580     $25,013    $277,807
                                            ============================================================
Interest Bearing Liabilities:
  Interest Bearing Demand Deposits              $40,930          $0          $0          $0     $40,930
  Savings Deposits                               80,090           0           0           0      80,090
  Time Deposits Less than $100,000               21,775      37,579      19,562         213      79,129
  Time Deposits Greater than $100,000            12,309       6,343       3,945           0      22,597
  Short-term Borrowings                           2,100           0           0           0       2,100
  FHLB Advances                                       0          14          71       1,053       1,138
                                            ------------------------------------------------------------
    Total Interest Bearing Liabilities         $157,204     $43,936     $23,578      $1,266    $225,984
                                            ============================================================
Interest Rate Sensitivity GAP                  ($29,613)   ($22,313)    $80,002     $23,747     $51,823
Cumulative Interest Rate
  Sensitivity GAP                              ($29,613)   ($51,926)    $28,076     $51,823
Interest Rate Sensitivity GAP                     -0.81       -0.49        4.39       19.76
Cumulative Interest Rate
  Sensitivity GAP Ratio                           -0.81       -0.74       -1.12        1.23`

As  indicated  in Table 13,  the  short-term  (one year and  less)  cumulative  interest  rate  sensitivity  gap is
negative.  Accordingly,  if market  interest  rates  increase,  this negative gap position could have a short- term
negative impact on interest  margin.  Conversely,  if market  interest rates  decrease,  this negative gap position
could have a short-term  positive impact on interest margin.  However,  gap analysis is limited and may not provide
an accurate  indication  of the impact of general  interest  rate  movements on the net  interest  margin since the
re-pricing of various  categories of assets and  liabilities  is subject to the  Corporation's  needs,  competitive
pressures,  and the needs of the Corporation's  customers.  In addition,  various assets and liabilities  indicated
as re-pricing  within the same period may in fact  re-price at different  times within such period and at different
rate indices.  The limitations of gap described  above impacted  financial  performance in 2001. The  Corporation's
gap position  was  negative and a decline in market  interest  rates;  yet net  interest  income or margin  dollars
dropped.  This occurred  because  assets,  both variable and fixed through  maturity and refinance,  re-priced more
dramatically  than  liabilities.  The liabilities,  largely  deposits,  either lagged market  re-pricing due to the
maturity  dates on time deposits or were not re-priced by the same amount as assets due to  competitive  pressures.
Interest  bearing  checking and savings  deposits  are  generally a lower cost of funds  products  compared to time
deposits.  This lower level of interest rates creates a smaller  opportunity  for  re-pricing.  For example certain
asset products  re-priced  downward 4.75% with the downward  movement of national prime rates throughout 2001 while
most of  interest  bearing  checking  and  savings  were at rates  lower  than  4.75% at the  start of the year and
accordingly,  had a  much  lesser  level  of  re-pricing  opportunity.  The  Corporation  is  implementing  a  more
sophisticated  model to assist in monitoring  and measuring  interest rate  sensitivity  to changing  interest rate
environments.

49.

---

ACCOUNTING AND REPORTING DEVELOPMENTS

The Financial  Accounting  Standards Board (FASB) has issued Statement of Financial  Accounting Standard (SFAS) No.
133, (as amended),  "Accounting  for Derivative  Instruments  and Hedging  Activities."  The statement  requires an
entity to recognize all  derivatives  as either assets or  liabilities  in the statement of financial  position and
measure those  instruments at fair value. The statement is effective in 2001 for the  Corporation.  The adoption of
this  pronouncement  did not  have a  material  effect  on the  Corporation's  financial  position  or  results  of
operations.

In September 2000, the FASB issued SFAS No. 140,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishments  of  Liabilities"  ("SFAS No.  140"),  which  replaces SFAS No. 125  "Accounting  for Transfers and
Servicing of Financial  Assets and  Extinguishments  of  Liabilities"  ("SFAS No.  125"),  issued in June 1996.  It
revises the standards for accounting for  securitizations  and other  transfers of financial  assets and collateral
and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration.

SFAS No. 140 is effective  for  transfers  and servicing of financial  assets and  extinguishments  of  liabilities
occurring  after  March  31,  2001.  Implementation  of  SFAS  No.  140  did  not  have a  material  effect  on the
Corporation's financial position or results of operations.

SFAS No. 141 requires all business  combinations  within its scope to be accounted  for using the purchase  method,
rather than the  pooling-of-interest  method.  The provisions of this Statement apply to all business  combinations
initiated  after  June  30,  2001.  The  adoption  of  this  statement  did  not  have  a  material  effect  on the
Corporation's financial position or results of operations.

SFAS No. 142 addresses the accounting for such assets arising from prior and future  business  combinations in June
2001.  Upon the  adoption  of the  Statement,  goodwill  arising  from  business  combinations  will no  longer  be
amortized,  but rather  will be  assessed  regularly  for  impairment,  with any such  impairment  recognized  as a
reduction  of  earnings  in the  period  identified.  Other  identified  intangible  assets,  such as core  deposit
intangible  assets,  will  continue  to be  amortized  over their  estimated  useful  lives.  The  adoption  of the
statement did not impact the Corporation's consolidated financial statements, as it has no intangible assets.

FORWARD LOOKING STATEMENTS

This  discussion  and  analysis  of  financial  condition  and  results of  operations,  and other  sections of the
Financial  Statements,  contain forward looking  statements  that are based on management's  beliefs,  assumptions,
current expectations,  estimates and projections about the financial services industry,  the economy, and about the
Corporation itself. Words such as "anticipates,"  "believes,"  "estimates,"  "expects," "forecasts," "intends," "is
likely,"  "plans,"  "projects,"  variations  of such words and similar  expressions  are intended to identify  such
forward looking  statements.  These statements are not guarantees of future  performance and involve certain risks,
uncertainties and assumptions  ("Future  Factors"),  which are difficult to predict with regard to timing,  extent,
likelihood and degree of  occurrence.  Therefore,  actual results and outcomes may materially  differ from what may
be expressed or forecast in such forward-looking  statements.  The Corporation  undertakes no obligation to update,
amend or clarify forward looking statements as a result of new information, future events, or otherwise.

Future Factors that could cause a difference  between an ultimate  actual outcome and a preceding  forward  looking
statement include,  but are not limited to, changes in interest rate and interest rate  relationships,  demands for
products and services,  the degree of  competition  by  traditional  and  non-traditional  competitors,  changes in
banking  laws or  regulations,  changes  in tax laws,  change in  prices,  the  impact of  technological  advances,
government and regulatory policy changes,  the outcome of pending and future litigation and  contingencies,  trends
in customer behavior as well as their ability to repay loans, and the local economy.

50.

---

FENTURA BANCORP, INC. COMMON STOCK

Table 14 sets forth the high and low market  information  for each quarter of 1999 through 2001.  These  quotations
reflect  inter-dealer  prices,  without  retail  mark-up,  markdown,  or commission  and may not  represent  actual
transactions.  As of March 1, 2002,  there were 608  shareholders  of record,  not  including  participants  in the
Corporation's employee stock option program.
TABLE 14
Common Stock Data

`Market                              Dividends
                                       Information                             Paid
    Year            Quarter               High          Low                  Per Share
-------------------------------------------------------------------------------------
              First Quarter               $46.67      $40.83                  $0.190
         1999 Second Quarter               45.00       44.17                   0.190
              Third Quarter                47.19       37.50                   0.190
              Fourth Quarter               42.29       31.67                   0.360
                                                                         ------------
                                                                              $0.930


              First Quarter               $40.83      $29.27                  $0.210
         2000 Second Quarter               37.00       24.99                   0.210
              Third Quarter                30.00       24.63                   0.210
              Fourth Quarter               26.50       22.00                   0.340
                                                                         ------------
                                                                              $0.970


              First Quarter               $27.38      $25.13                  $0.220
         2001 Second Quarter               29.13       26.25                   0.220
              Third Quarter                27.90       25.00                   0.220
              Fourth Quarter               27.00       25.00                   0.350
                                                                         ------------
                                                                              $1.010`

Note:  Dividend per share figures have been adjusted to reflect a 20% stock dividend distributed
          on May 26, 2000.

51.

---

# Exhibit 21.1

# Subsidiaries of the Registrant

|Company                                                                                          | Ownership                                               | State of Incorporation             
|------------------------------------------------------------------------------------------------ | ------------------------------------------------------- | -----------------------------------
|                                                                                                 |                                                         |                                    
|The State Bank
Davison State Bank 
Community Bank Services, Inc. 
Fentura Mortgage Company, Inc. | 100%
100%
100% by The State Bank
100% by The State Bank | Michigan
Michigan
Michigan
Michigan

---

# EXHIBIT 23.1

# CONSENT OF
INDEPENDENT ACCOUNTANTS

We consent to the  incorporation  by reference in the Registration  Statement of Fentura Bancorp,  Inc. on
Form S-3 (File  No.333-75194) of our report dated January 25, 2002 on the 2001  Consolidated  Financial  Statements
of Fentura Bancorp, Inc., which report is included in the 2001 Annual Report on Form 10-K of Fentura Bancorp, Inc.

|                                      |                               | 
|------------------------------------- | ----------------------------- | 
|                                      | CROWE, CHIZEK AND COMPANY LLP | 
|Grand Rapids, Michigan
March 13, 2002 |                               |