Exhibit 13
 Rule 14a-3 Annual Report




---



##### 



FENTURA FINANCIAL, INC.
 FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
December 31, 2010 and 2009
 and
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    1CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS
    
    
    2CONSOLIDATED STATEMENTS OF INCOME
    
    
    3CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    
    
    4CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
    
    
    5CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    
    6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    
    7-44MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    45-65




---



##### 



-s- Crowe HorwathGrand Rapids, Michigan
March 9, 2011
    
    /s/ Crowe Horwath LLP




---



##### 



2010
    
    
    2009ASSETSCash and due from banks
    
    $
    11,592
    
    
    $
    15,490Federal funds sold
    
    
    21,900
    
    
    
    16,150Total cash and cash equivalents
    
    
    33,492
    
    
    
    31,640Securities available for sale, at fair value
    
    
    41,875
    
    
    
    33,939Securities held to maturity (fair value 2010 - $4,383; 2009 - $5,492)
    
    
    4,350
    
    
    
    5,455Total securities
    
    
    46,225
    
    
    
    39,394Loans held for sale
    
    
    850
    
    
    
    229Loans, net of allowance of 2010- $10,027; 2009- $8,589
    
    
    197,948
    
    
    
    233,461Bank premises and equipment
    
    
    10,335
    
    
    
    10,994Accrued interest receivable
    
    
    1,050
    
    
    
    1,289Bank owned life insurance
    
    
    5,800
    
    
    
    5,947Federal Home Loan Bank stock
    
    
    740
    
    
    
    806Other real estate owned
    
    
    2,742
    
    
    
    3,761Assets of discontinued operations
    
    
    122,968
    
    
    
    185,273Other assets
    
    
    2,078
    
    
    
    9,285Total Assets
    
    $
    424,228
    
    
    $
    522,079LIABILITIES AND STOCKHOLDERS EQUITYDeposits:Non-interest-bearing deposits
    
    $
    55,044
    
    
    $
    53,113Interest-bearing deposits
    
    
    220,933
    
    
    
    258,438Total deposits
    
    
    275,977
    
    
    
    311,551Short-term borrowings
    
    
    879
    
    
    
    164Federal Home Loan Bank advances
    
    
    954
    
    
    
    981Subordinated debentures
    
    
    14,000
    
    
    
    14,000Liabilities of discontinued operations
    
    
    113,321
    
    
    
    172,077Accrued taxes, interest and other liabilities
    
    
    3,042
    
    
    
    2,774Total liabilities
    
    
    408,173
    
    
    
    501,547Shareholders equityCommon stock  $0 par value, 5,000,000 shares authorized,
shares issued and outstanding 2,308,765  2010; 2,248,553  2009
    
    
    43,036
    
    
    
    42,913Retained deficit
    
    
    (27,042
    )
    
    
    (21,657
    )Accumulated other comprehensive income (loss)
    
    
    61
    
    
    
    (724
    )Total shareholders equity
    
    
    16,055
    
    
    
    20,532Total liabilities and shareholders equity
    
    $
    424,228
    
    
    $
    522,079
 See accompanying notes to consolidated financial statements.
 2




---



##### 



2010
    
    
    2009Interest income
    
    $
    13,874
    
    
    $
    16,239Loans, including feesSecurities:Taxable
    
    
    881
    
    
    
    1,173Tax-exempt
    
    
    295
    
    
    
    474Short-term investments
    
    
    27
    
    
    
    3Total interest income
    
    
    15,077
    
    
    
    17,889Interest expenseDeposits
    
    
    4,032
    
    
    
    6,230Other borrowings
    
    
    520
    
    
    
    695Total interest expense
    
    
    4,552
    
    
    
    6,925Net interest income
    
    
    10,525
    
    
    
    10,964Provision for loan losses
    
    
    6,934
    
    
    
    11,040Net interest income after provision for loan losses
    
    
    3,591
    
    
    
    (76
    )Non-interest incomeService charges on deposit accounts
    
    
    1,445
    
    
    
    1,726Gain on sale of mortgage loans
    
    
    701
    
    
    
    744Trust and investment services income
    
    
    915
    
    
    
    919Gain on sale of securities
    
    
    51
    
    
    
    0Other than temporary lossTotal impairment
    
    
    (359
    )
    
    
    (288
    )Loss recognized in other comprehensive income
    
    
    52
    
    
    
    0Net impairment loss recognized in earnings
    
    
    (307
    )
    
    
    (288
    )Loss on equity investment
    
    
    0
    
    
    
    (1,360
    )Other income and fees
    
    
    1,968
    
    
    
    1,649Total non-interest income
    
    
    4,773
    
    
    
    3,390Non-interest expenseSalaries and employee benefits
    
    
    6,387
    
    
    
    6,650Occupancy
    
    
    1,225
    
    
    
    1,326Furniture and equipment
    
    
    1,265
    
    
    
    1,339Loan and collection
    
    
    1,279
    
    
    
    2,559Advertising and promotional
    
    
    101
    
    
    
    121Telephone and communication services
    
    
    247
    
    
    
    251Other professional services
    
    
    294
    
    
    
    179Other general and administrative
    
    
    2,289
    
    
    
    2,286Total non-interest expense
    
    
    13,087
    
    
    
    14,711Income/(loss) from continuing operations before income tax
    
    
    (4,723
    )
    
    
    (11,397
    )Federal income tax expense/(benefit)
    
    
    (202
    )
    
    
    2,283Income/(loss) from continuing operations
    
    
    (4,521
    )
    
    
    (13,680
    )Net income/(loss) from discontinued operations, net of tax
    
    
    (864
    )
    
    
    (3,300
    )Net income (loss)
    
    $
    (5,385
    )
    
    $
    (16,980
    )Net income/(loss) per share from continuing operations:Basic and diluted
    
    $
    (1.99
    )
    
    $
    (6.20
    )Net income/(loss) per share from discontinued operations:Basic and diluted
    
    $
    (0.38
    )
    
    $
    (1.50
    )Net income/(loss) per shareBasic and diluted
    
    $
    (2.37
    )
    
    $
    (7.70
    )Cash dividends declared
    
    $
    0
    
    
    $
    0
 See accompanying notes to consolidated financial statements.




---



##### 



2010
    
    2009Net loss
    
    $
    (5,385
    )
    
    $
    (16,980
    )Other comprehensive income (loss), net of tax:Unrealized holding gains arising during period
    
    
    731
    
    
    
    1,622Impairment loss recognized in income
    
    
    307
    
    
    
    288Reclassification adjustments from losses realized in
net loss from discontinued operations
    
    
    202
    
    
    
    0Reclassification adjustment for gains realized in income
    
    
    (51
    )
    
    
    (12
    )Tax effect
    
    
    (404
    )
    
    
    (645
    )Other comprehensive income
    
    
    785
    
    
    
    1,253Comprehensive loss
    
    $
    (4,600
    )
    
    $
    (15,727
    )
 See accompanying notes to consolidated financial statements.




---



##### 



AccumulatedOther
    
    TotalCommon
    
    Retained
    
    Comprehensive
    
    ShareholdersStock
    
    Earnings
    
    Income (Loss)
    
    EquityBalance, January 1, 2009
    
    $
    42,778
    
    
    $
    (4,677
    )
    
    $
    (1,977
    )
    
    $
    36,124Net loss
    
    
    0
    
    
    
    (16,980
    )
    
    
    0
    
    
    
    (16,980
    )Issuance of shares under stock
purchase and dividend reinvestment
plans (62,788 shares)
    
    
    135
    
    
    
    0
    
    
    
    0
    
    
    
    135Other comprehensive loss (net of tax)
    
    
    0
    
    
    
    0
    
    
    
    1,253
    
    
    
    1,253Balance, December 31, 2009
    
    $
    42,913
    
    
    $
    (21,657
    )
    
    $
    (724
    )
    
    $
    20,532Net loss
    
    
    0
    
    
    
    (5,385
    )
    
    
    0
    
    
    
    (5,385
    )Issuance of shares under stock
purchase and dividend reinvestment
plans (60,212 shares)
    
    
    123
    
    
    
    0
    
    
    
    0
    
    
    
    123Other comprehensive income (net of tax)
    
    
    0
    
    
    
    0
    
    
    
    785
    
    
    
    785Balance, December 31, 2010
    
    $
    43,036
    
    
    $
    (27,042
    )
    
    $
    61
    
    
    $
    16,055
 See accompanying notes to consolidated financial statements.
 5




---



##### 



2010
    
    2009OPERATING ACTIVITIES:Net loss
    
    $
    (5,385
    )
    
    $
    (16,980
    )Adjustments to reconcile net loss to cash
Provided by Operating Activities:Depreciation, amortization and accretion
    
    
    613
    
    
    
    682Establishment of deferred tax asset valuation allowance
    
    
    0
    
    
    
    6,464Deferred income taxes
    
    
    (339
    )
    
    
    (785
    )Provision for loan losses
    
    
    6,934
    
    
    
    11,040Loans originated for sale
    
    
    (44,315
    )
    
    
    (58,580
    )Proceeds from the sale of loans
    
    
    44,395
    
    
    
    59,785Gain on sales of loans
    
    
    (701
    )
    
    
    (744
    )Gain on sale of securities
    
    
    (51
    )
    
    
    0(Gain) loss on sale of other real estate owned
    
    
    (363
    )
    
    
    28Write downs on other real estate owned
    
    
    342
    
    
    
    1,184Loss on equity investment
    
    
    0
    
    
    
    1,360Loss on security impairment
    
    
    307
    
    
    
    288Earnings from bank owned life insurance
    
    
    (150
    )
    
    
    (65
    )Net (increase) decrease in interest receivable & other assets
    
    
    7,381
    
    
    
    (7,519
    )Net increase (decrease) in interest payable & other liabilities
    
    
    268
    
    
    
    1,004Net change in discontinued operations operating activities
    
    
    2,201
    
    
    
    4,428Total Adjustments
    
    
    16,522
    
    
    
    18,570Net cash provided by (used in) operating activities
    
    
    11,137
    
    
    
    1,590Cash Flows From Investing Activities:Proceeds from maturities of securities  HTM
    
    
    725
    
    
    
    1,303Proceeds from maturities of securities  AFS
    
    
    10,301
    
    
    
    9,746Proceeds from calls of securities  HTM
    
    
    380
    
    
    
    0Proceeds from calls of securities  AFS
    
    
    4,700
    
    
    
    2,500Proceeds from sales of securities  AFS
    
    
    8,677
    
    
    
    0Purchases of securities  AFS
    
    
    (30,515
    )
    
    
    (8,340
    )Proceeds from sales of equity securities
    
    
    6
    
    
    
    9Net decrease (increase) in loans
    
    
    26,299
    
    
    
    34,806Proceeds from FHLB stock repurchase
    
    
    66
    
    
    
    0Proceeds from bank owned life insurance
    
    
    297
    
    
    
    203Sales of other real estate owned
    
    
    3,320
    
    
    
    1,380Acquisition of premises and equipment, net
    
    
    (126
    )
    
    
    (130
    )Net change in discontinued operations investing activities
    
    
    21,441
    
    
    
    23,230Net cash provided by (used in) investing activities
    
    
    45,571
    
    
    
    64,707Cash Flows From Financing Activities:Net decrease in deposits
    
    
    (35,574
    )
    
    
    (20,441
    )Net increase (decrease) in short-term borrowings
    
    
    715
    
    
    
    (1,336
    )Proceeds from/(repayment) of notes payable
    
    
    0
    
    
    
    (1,000
    )Repayments of advances from FHLB
    
    
    (27
    )
    
    
    (26
    )Net proceeds from stock issuance and repurchase
    
    
    123
    
    
    
    135Cash dividends
    
    
    0
    
    
    
    0Net change in discontinued operations financing activities
    
    
    (24,790
    )
    
    
    (19,936
    )Net cash provided by (used in) financing activities
    
    
    (59,553
    )
    
    
    (42,604
    )Net change in cash and cash equivalents
    
    
    (2,845
    )
    
    
    23,693Cash and cash equivalents-Beginning
    
    $
    44,646
    
    
    $
    20,953Cash and cash equivalents at year end
    
    
    41,801
    
    
    
    44,646Less cash and cash equivalents of discontinued operations
    
    
    8,309
    
    
    
    13,006Cash and cash equivalents of continuing operations at year end
    
    $
    33,492
    
    
    $
    31,640Cash paid for (received from):Interest
    
    $
    4,147
    
    
    $
    7,073Income taxes
    
    $
    (361
    )
    
    $
    (519
    )Non-cash disclosures:Transfers from loans to other real estate
    
    $
    2,459
    
    
    $
    4,255Loans provided for sales of other real estate owned
    
    $
    179
    
    
    $
    0
 See accompanying notes to consolidated financial statements.




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Nature of Operations and Principles of Consolidation
    Use of Estimates
 7




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Cash Flows
 Securities
     Loans
  8




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Allowance for Loan Losses
   Other Real Estate Owned and Foreclosed Assets
 9




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Premises and Equipment
 Federal Home Loan Bank (FHLB) stock
 Long-term Assets
 Bank Owned Life Insurance
 Stock Based Compensation
 Income Taxes
   Loan Commitments and Financial Instruments
 10




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Earnings (loss) Per Common Share
 Comprehensive Income
 Loss Contingencies
 Restrictions on Cash
 Dividend Restrictions
 Fair Value of Financial Instruments
 Operating Segments :
 Reclassifications
 New Accounting Pronouncements:
 11




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    NOTE 2  EARNINGS PER SHARE
  (000s omitted except share and per share data)
    
    2010
    
    
    2009BasicNet income (loss)
    
    $
    (5,385
    )
    
    $
    (16,980
    )Weighted average common shares outstanding
    
    
    2,272,065
    
    
    
    2,205,419Basic earnings (loss) per common share
    
    $
    (2.37
    )
    
    $
    (7.70
    )DilutedNet income (loss)
    
    $
    (5,385
    )
    
    $
    (16,980
    )Weighted average common shares outstanding
for basic earnings per common share
    
    
    2,272,065
    
    
    
    2,205,419Add: Dilutive effects of assumed exercises of
stock options
    
    
    0
    
    
    
    0Average shares and dilutive potential common shares
    
    
    2,272,065
    
    
    
    2,205,419Diluted earnings (loss) per common share
    
    $
    (2.37
    )
    
    $
    (7.70
    )
 12




---



##### 



NOTE 2  EARNINGS PER SHARE
  (000s omitted except share and per share data)
    
    2010
    
    
    2009BasicNet income (loss) of continuing operations
    
    $
    (4,521
    )
    
    $
    (13,680
    )Weighted average common shares outstanding
    
    
    2,272,065
    
    
    
    2,205,419Basic earnings (loss) per common share
from continuing operations
    
    $
    (1.99
    )
    
    $
    (6.20
    )DilutedNet income (loss) of continuing operations
    
    $
    (4,521
    )
    
    $
    (13,680
    )Weighted average common shares outstanding
for basic earnings per common share
    
    
    2,272,065
    
    
    
    2,205,419Add: Dilutive effects of assumed exercises of
stock options
    
    
    0
    
    
    
    0Average shares and dilutive potential common shares
    
    
    2,272,065
    
    
    
    2,205,419Diluted earnings (loss) per common
share from continuing operations
    
    $
    (1.99
    )
    
    $
    (6.20
    )
  NOTE 3  SECURITIES
  Available for Sale
    
    Amortized
    
    
    Gross Unrealized
    
    
    Gross Unrealized(000s omitted)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value2010U.S. Government & federal agency
    
    $
    4,005
    
    
    $
    6
    
    
    $
    (11
    )
    
    $
    4,000Mortgage-backed residential
    
    
    7,342
    
    
    
    126
    
    
    
    (36
    )
    
    
    7,432Collateralized mortgage obligations-agencies
    
    
    24,758
    
    
    
    258
    
    
    
    (114
    )
    
    
    24,902Collateralized mortgage obligations-private label
    
    
    4,215
    
    
    
    0
    
    
    
    (344
    )
    
    
    3,871Equity securities
    
    
    1,655
    
    
    
    49
    
    
    
    (34
    )
    
    
    1,670$
    41,975
    
    
    $
    439
    
    
    $
    (539
    )
    
    $
    41,8752009U.S. Government & federal agency
    
    $
    5,542
    
    
    $
    38
    
    
    $
    (67
    )
    
    $
    5,513State and municipal
    
    
    5,788
    
    
    
    81
    
    
    
    (41
    )
    
    
    5,828Mortgage-backed residential
    
    
    10,560
    
    
    
    242
    
    
    
    0
    
    
    
    10,802Collateralized mortgage obligations-agencies
    
    
    5,272
    
    
    
    123
    
    
    
    0
    
    
    
    5,395Collateralized mortgage obligations-private label
    
    
    5,750
    
    
    
    0
    
    
    
    (878
    )
    
    
    4,872Equity securities
    
    
    1,971
    
    
    
    21
    
    
    
    (463
    )
    
    
    1,529$
    34,883
    
    
    $
    505
    
    
    $
    (1,449
    )
    
    $
    33,939
 13




---



##### 



NOTE 3  SECURITIES
 Gross
    
    
    GrossHeld to Maturity
    
    
    
    
    
    Unrecognized
    
    
    Unrecognized(000s omitted)
    
    Amortized Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value2010State and municipal
    
    $
    4,350
    
    
    $
    41
    
    
    $
    (8
    )
    
    $
    4,383$
    4,350
    
    
    $
    41
    
    
    $
    (8
    )
    
    $
    4,3832009State and municipal
    
    $
    5,455
    
    
    $
    55
    
    
    $
    (18
    )
    
    $
    5,492$
    5,455
    
    
    $
    55
    
    
    $
    (18
    )
    
    $
    5,492
   (000s omitted)
    
    2010
    
    2009Proceeds
    
    $
    8,683
    
    
    $
    9Gross gains
    
    
    215
    
    
    
    0Gross losses
    
    
    (164
    )
    
    
    0
  Available for Sale
    
    
    Held to MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair(000s omitted)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    4,005
    
    
    $
    4,000
    
    
    $
    1,146
    
    
    $
    1,157Due from one to five years
    
    
    0
    
    
    
    0
    
    
    
    1,957
    
    
    
    1,969Due from five to ten years
    
    
    0
    
    
    
    0
    
    
    
    879
    
    
    
    892Due after ten years
    
    
    0
    
    
    
    0
    
    
    
    368
    
    
    
    365Mortgage-backed residential
    
    
    7,342
    
    
    
    7,432
    
    
    
    0
    
    
    
    0Collateralized mortgage obligations-agencies
    
    
    24,758
    
    
    
    24,902
    
    
    
    0
    
    
    
    0Collateralized mortgage obligations-private
label
    
    
    4,215
    
    
    
    3,871
    
    
    
    0
    
    
    
    0Equity securities
    
    
    1,655
    
    
    
    1,670
    
    
    
    0
    
    
    
    0$
    41,975
    
    
    $
    41,875
    
    
    $
    4,350
    
    
    $
    4,383
   14




---



##### 



NOTE 3  SECURITIES
  2010(000s omitted)
    
    Less than 12 months
    
    
    12 months or more
    
    
    TotalDescription of
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedSecurities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS Govt & federal agencies
    
    $
    1,989
    
    
    $
    (11
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    1,989
    
    
    $
    (11
    )State & municipal
    
    
    365
    
    
    
    (3
    )
    
    
    245
    
    
    
    (5
    )
    
    
    610
    
    
    
    (8
    )Mortgage backed residential
    
    
    2,062
    
    
    
    (36
    )
    
    
    0
    
    
    
    0
    
    
    
    2,062
    
    
    
    (36
    )Collateralized Mortgage
Obligations-agencies
    
    
    6,085
    
    
    
    (114
    )
    
    
    0
    
    
    
    0
    
    
    
    6,085
    
    
    
    (114
    )Collateralized Mortgage
Obligations-private
label
    
    
    0
    
    
    
    0
    
    
    
    3,871
    
    
    
    (344
    )
    
    
    3,871
    
    
    
    (344
    )Equity securities
    
    
    186
    
    
    
    (14
    )
    
    
    439
    
    
    
    (20
    )
    
    
    625
    
    
    
    (34
    )Total temporarily impaired
    
    $
    10,687
    
    
    $
    (178
    )
    
    $
    4,555
    
    
    $
    (369
    )
    
    $
    15,242
    
    
    $
    (547
    )
 2009(000s omitted)
    
    Less than 12 months
    
    
    12 months or more
    
    
    TotalDescription of
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedSecurities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS Govt & federal agencies
    
    $
    3,475
    
    
    $
    (67
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    3,475
    
    
    $
    (67
    )State & municipal
    
    
    497
    
    
    
    (18
    )
    
    
    659
    
    
    
    (41
    )
    
    
    1,156
    
    
    
    (59
    )Collateralized Mortgage
Obligations-private
label
    
    
    
    
    
    
    
    
    
    
    4,872
    
    
    
    (878
    )
    
    
    4,872
    
    
    
    (878
    )Equity securities
    
    
    0
    
    
    
    0
    
    
    
    1,009
    
    
    
    (463
    )
    
    
    1,009
    
    
    
    (463
    )Total temporarily impaired
    
    $
    3,972
    
    
    $
    (85
    )
    
    $
    6,540
    
    
    $
    (1,382
    )
    
    $
    10,512
    
    
    $
    (1,467
    )
 Other-Than-Temporary-Impairment
   (000s omitted)
    
    2010
    
    2009Beginning balance, January 1,
    
    $
    288
    
    
    $
    0Additions for credit losses on securities for which no
previous other-than-temporary impairment was recognized
    
    
    298
    
    
    
    288Increases to credit losses on securities for which
other-than-temporary impairment was previously
recognized
    
    
    9
    
    
    
    0Reduction for previous credit losses realized on
securities sold during the period
    
    
    (88
    )
    
    
    0Ending balance, December 31,
    
    $
    507
    
    
    $
    288




---



##### 



NOTE 3  SECURITIES
   Collateralized Mortgage Obligations
    Equity Securities




---



##### 



NOTE 3  SECURITIES
    US Government and federal agencies and state and municipal
  NOTE 4  LOANS
  (000s omitted)
    
    2010
    
    
    2009Commercial
    
    $
    43,395
    
    
    $
    31,066Real estate  commercial
    
    
    106,784
    
    
    
    133,097Real estate  construction
    
    
    9,597
    
    
    
    21,904Real estate  residential
    
    
    19,046
    
    
    
    23,681Consumer
    
    
    29,153
    
    
    
    32,302207,975
    
    
    
    242,050Less allowance for loan losses
    
    
    10,027
    
    
    
    8,589$
    197,948
    
    
    $
    233,461
   (000s omitted)
    
    2010
    
    
    2009Beginning balance, January 1,
    
    $
    4,223
    
    
    $
    10,142New loans
    
    
    247
    
    
    
    0Repayments
    
    
    (339
    )
    
    
    (115
    )Change in related parties
    
    
    (1,033
    )
    
    
    (5,804
    )Ending balance, December 31,
    
    $
    3,098
    
    
    $
    4,223




---



##### 



NOTE 4  LOANS
  (000s omitted)
    
    2010
    
    
    2009Balance, beginning of year
    
    $
    8,589
    
    
    $
    7,328Provision for loan losses
    
    
    6,934
    
    
    
    11,040Loans charged off
    
    
    (6,417
    )
    
    
    (9,996
    )Loan recoveries
    
    
    921
    
    
    
    217Balance, end of year
    
    $
    10,027
    
    
    $
    8,589




---



##### 



NOTE 4  LOANS
  Commercial
    
    ResidentialReal
    
    Real
    
    
    
    
    
    Home(000s omitted)
    
    Commercial
    
    Estate
    
    Estate
    
    Installment Loans
    
    Equity
    
    Unallocated
    
    TotalAllowance for loan losses:Ending allowance balance attributable to loans:Individually evaluated for impairment
    
    $
    184
    
    
    $
    5,962
    
    
    $
    95
    
    
    $
    69
    
    
    $
    160
    
    
    $
    18
    
    
    $
    6,488Collectively evaluated for impairment
    
    
    685
    
    
    
    1,980
    
    
    
    316
    
    
    
    164
    
    
    
    348
    
    
    
    46
    
    
    
    3,539Total ending allowance balance
    
    $
    869
    
    
    $
    7,942
    
    
    $
    411
    
    
    $
    233
    
    
    $
    508
    
    
    $
    64
    
    
    $
    10,027Loans:Loans individually evaluated for impairment
    
    $
    1,183
    
    
    $
    25,602
    
    
    $
    1,069
    
    
    $
    228
    
    
    $
    357
    
    
    $
    0
    
    
    $
    28,439Loans collectively evaluated for impairment
    
    
    42,212
    
    
    
    90,779
    
    
    
    17,977
    
    
    
    7,798
    
    
    
    20,770
    
    
    
    0
    
    
    
    179,536Total ending loans balance
    
    $
    43,395
    
    
    $
    116,381
    
    
    $
    19,046
    
    
    $
    8,026
    
    
    $
    21,127
    
    
    $
    0
    
    
    $
    207,975Accrued interest receivable
    
    
    357
    
    
    
    429
    
    
    
    76
    
    
    
    55
    
    
    
    58
    
    
    
    0
    
    
    
    975Total recorded investment in loans
    
    $
    43,752
    
    
    $
    116,810
    
    
    $
    19,122
    
    
    $
    8,081
    
    
    $
    21,185
    
    
    $
    0
    
    
    $
    208,950




---



##### 



NOTE 4  LOANS
  (000s omitted)
    
    2010
    
    
    2009Year end loans not requiring allocation
    
    $
    5,407
    
    
    $
    7,937Year end loans requiring allocation
    
    
    23,032
    
    
    
    19,947$
    28,439
    
    
    $
    27,884Amount of the allowance for loan losses allocated
    
    $
    6,488
    
    
    $
    5,248
 2010
    
    2009Average of individually impaired loans during the year
    
    $
    27,612
    
    
    $
    25,129Cash basis interest income recognized during
impairment
    
    
    1,262
    
    
    
    1,057
  Allowancefor LoanUnpaid Principal
    
    Recorded
    
    LossesBalance
    
    Investment
    
    AllocatedWith no related allowances recorded:Commercial
    
    $
    490
    
    
    $
    490
    
    
    $
    0Commercial Real EstateConstruction
    
    
    149
    
    
    
    149
    
    
    
    0Other
    
    
    4,034
    
    
    
    4,036
    
    
    
    0Residential real estate
    
    
    544
    
    
    
    544
    
    
    
    0ConsumerInstallment Loans
    
    
    116
    
    
    
    116
    
    
    
    0Home Equity
    
    
    74
    
    
    
    75
    
    
    
    0With an allowance recorded:Commercial
    
    
    693
    
    
    
    696
    
    
    
    184Commercial real estate:Construction
    
    
    348
    
    
    
    348
    
    
    
    101Other
    
    
    21,071
    
    
    
    21,161
    
    
    
    5,879Residential real estate
    
    
    525
    
    
    
    529
    
    
    
    95ConsumerInstallment loans
    
    
    112
    
    
    
    112
    
    
    
    69Home equity
    
    
    283
    
    
    
    284
    
    
    
    160Total
    
    $
    28,439
    
    
    $
    28,540
    
    
    $
    6,488
 20




---



##### 



NOTE 4  LOANS
  (000s omitted)
    
    2010
    
    2009Loans past due over 90 days still on accrual
    
    $
    133
    
    
    $
    319Renegotiated loans
    
    
    3,654
    
    
    
    1,454Non-accrual loans
    
    
    12,496
    
    
    
    11,429
   Loans Past DueOver 90 Days Still(000s omitted)
    
    Nonaccrual
    
    Accruing (1)Commercial
    
    $
    1,847
    
    
    $
    0Commercial real estateConstruction
    
    
    5,234
    
    
    
    0Other
    
    
    4,799
    
    
    
    0ConsumerInstallment loans
    
    
    121
    
    
    
    0Residential real estate
    
    
    495
    
    
    
    135Total
    
    $
    12,496
    
    
    $
    135
 
 (1)
    
    -Includes accrued interest receivable of $2  30-59 Days Past
    
    60-89 Days Past
    
    Greater than 90
    
    Total Past(000s omitted)
    
    Due
    
    Due
    
    Days Past Due (1)
    
    DueCommercial
    
    $
    26
    
    
    $
    235
    
    
    $
    1,209
    
    
    $
    1,470Commercial real estate:Construction
    
    
    0
    
    
    
    141
    
    
    
    4,748
    
    
    
    4,889Other
    
    
    1,186
    
    
    
    11
    
    
    
    4,133
    
    
    
    5,330Consumer:Installment loans
    
    
    46
    
    
    
    4
    
    
    
    96
    
    
    
    146Home Equity
    
    
    118
    
    
    
    5
    
    
    
    0
    
    
    
    123Residential real estateTraditional
    
    
    156
    
    
    
    0
    
    
    
    630
    
    
    
    786Total
    
    $
    1,532
    
    
    $
    396
    
    
    $
    10,816
    
    
    $
    12,744
 
 (1)
    
    -Includes accrued interest receivable of $2 21




---



##### 



NOTE 4  LOANS
 Troubled Debt Restructurings:
  Loans to be acquired from discontinued operations:
   Credit Quality Indicators:
  Watch.Loans classified as watch have a potential weakness that deserves managements
close attention. If left uncorrected, these potential weaknesses may result in
deterioration of the repayment prospects for the loan or of the institutions credit
position at some future date.
 Substandard.Loans classified as substandard are inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so
classified have a well-defined weakness or weaknesses that jeopardize the liquidation of
the debt. They are characterized by the distinct possibility that the institution will
sustain some loss if the deficiencies are not corrected.
 Doubtful.Loans classified as doubtful have all the weaknesses inherent in those classified
as substandard, with the added characteristic that the weaknesses make collection nor
liquidation in full, on the basis of currently existing facts, conditions, and values,
highly questionable and improbable. The Corporation does not classify loans as doubtful.
Loans that approach this status are charged-off.
 22




---



##### 



NOTE 4  LOANS
  (000s omitted)
    
    Prime
    
    Pass
    
    Watch
    
    Substandard
    
    TotalCommercial
    
    $
    3,174
    
    
    $
    33,871
    
    
    $
    3,530
    
    
    $
    3,177
    
    
    $
    43,752Commercial real estate:Construction
    
    
    0
    
    
    
    755
    
    
    
    1,414
    
    
    
    6,979
    
    
    
    9,148Other
    
    
    0
    
    
    
    81,739
    
    
    
    9,863
    
    
    
    16,060
    
    
    
    107,662Total
    
    $
    3,174
    
    
    $
    116,365
    
    
    $
    14,807
    
    
    $
    26,216
    
    
    $
    160,562
  Consumer
    
    Residential(000s omitted)
    
    Home Equity
    
    Installment
    
    Traditional
    
    TotalPerforming
    
    $
    21,128
    
    
    $
    7,553
    
    
    $
    18,053
    
    
    $
    46,734Non-performing
    
    
    57
    
    
    
    528
    
    
    
    1,069
    
    
    
    1,654Total
    
    $
    21,185
    
    
    $
    8,081
    
    
    $
    19,122
    
    
    $
    48,388
 NOTE 5  OTHER REAL ESTATE OWNED
  (000s omitted)
    
    2010
    
    2009Beginning balance
    
    $
    3,761
    
    
    $
    2,099Transfers into other real estate
    
    
    2,459
    
    
    
    4,255Sales of other real estate owned
    
    
    (3,136
    )
    
    
    (1,409
    )Write downs of other real estate owned
    
    
    (342
    )
    
    
    (1,184
    )Ending balance
    
    $
    2,742
    
    
    $
    3,761
   23




---



##### 



NOTE 5  OTHER REAL ESTATE OWNED
  (000s omitted)
    
    2010
    
    2009Beginning balance
    
    $
    4,206
    
    
    $
    3,885Transfers into other real estate
    
    
    1,714
    
    
    
    1,294Sales of other real estate owned
    
    
    (2,003
    )
    
    
    (746
    )Write downs of other real estate owned
    
    
    (63
    )
    
    
    (227
    )Ending balance
    
    $
    3,854
    
    
    $
    4,206
 NOTE 6  PREMISES AND EQUIPMENT, NET
  (000s omitted)
    
    2010
    
    2009Land and land improvements
    
    $
    2,305
    
    
    $
    2,305Building and building improvements
    
    
    11,421
    
    
    
    11,385Furniture and equipment
    
    
    5.802
    
    
    
    5,979Construction in progress
    
    
    0
    
    
    
    819,528
    
    
    
    19,677Less accumulated depreciation
    
    
    9,193
    
    
    
    8,683$
    10,335
    
    
    $
    10,994
   2011
    
    $
    712012
    
    
    522013
    
    
    522014
    
    
    522015
    
    
    26$
    253
 NOTE 7  DEPOSITS
  (000s omitted)
    
    2010
    
    
    2009Noninterest-bearing:Demand
    
    $
    55,044
    
    
    $
    53,113Interest-bearing:Savings
    
    
    64,133
    
    
    
    60,663Money market demand
    
    
    52,723
    
    
    
    57,123Time, $100,000 and over
    
    
    45,296
    
    
    
    71,419Time, $100,000 and under
    
    
    58,781
    
    
    
    69,233$
    275,977
    
    
    $
    311,551
 24




---



##### 



NOTE 7  DEPOSITS
  (000s omitted)
    
    2010
    
    
    2009In one year
    
    $
    50,519
    
    
    $
    79,103In two years
    
    
    36,361
    
    
    
    28,404In three years
    
    
    9,500
    
    
    
    22,600In four years
    
    
    4,839
    
    
    
    5,525In five years
    
    
    2,770
    
    
    
    4,895Thereafter
    
    
    88
    
    
    
    125$
    104,077
    
    
    $
    140,652
    NOTE 8  BORROWINGS
 Short-Term Borrowings
 Federal Home Loan Bank Advance
  (000s omitted)
    
    AdvancePrincipal Terms
    
    Amount
    
    
    Maturity DateDecember 31, 2010Single maturity fixed rate advance
with rate of 7.34%
    
    $
    954
    
    
    May 2016December 31, 2009Single Maturity fixed rate advance,
with rate of 7.34%
    
    $
    981
    
    
    May 2016
  25




---



##### 



NOTE 8  BORROWINGS
  2011
    
    
    302012
    
    
    332013
    
    
    352014
    
    
    392015
    
    
    42Thereafter
    
    
    775$
    954
 Subordinated Debenture and Trust Preferred Securities
     26




---



##### 



NOTE 9  INCOME TAXES
  (000s omitted)
    
    2010
    
    
    2009Current expense (benefit) of continuing operations
    
    $
    137
    
    
    $
    (3,396
    )Deferred expense (benefit) of continuing operations
    
    
    (339
    )
    
    
    (785
    )Establishment of valuation allowance
    
    
    0
    
    
    
    6,464Net tax from continuing operations
    
    
    (202
    )
    
    
    2,283Net tax expense (benefit) of discontinued operations
    
    
    0
    
    
    
    (1,564
    )$
    (202
    )
    
    $
    719
  (000s omitted)
    
    2010
    
    
    2009Income tax at statutory rate
    
    $
    (1,431
    )
    
    $
    (3,876
    )Valuation allowance
    
    
    1,251
    
    
    
    6,598Tax exempt income
    
    
    (124
    )
    
    
    (181
    )Other
    
    
    102
    
    
    
    (258
    )$
    (202
    )
    
    $
    2,283
  (000s omitted)
    
    2010
    
    
    2009Deferred tax assetsAllowance for loan losses
    
    $
    4,614
    
    
    $
    3,877Alternative minimum tax credit
    
    
    563
    
    
    
    622Unrealized loss on securities available for sale
    
    
    0
    
    
    
    372Compensation
    
    
    443
    
    
    
    415Net operating loss
    
    
    1,216
    
    
    
    0Non-accrual interest
    
    
    248
    
    
    
    173Capital loss
    
    
    1,393
    
    
    
    1,390ORE write downs
    
    
    556
    
    
    
    418Other
    
    
    256
    
    
    
    4089,289
    
    
    
    7,675Deferred tax liabilitiesDepreciation
    
    
    (512
    )
    
    
    (578
    )Purchase accounting adjustments
    
    
    (220
    )
    
    
    (253
    )Unrealized gain on securities available for sale
    
    
    (31
    )
    
    
    0Other
    
    
    (83
    )
    
    
    (93
    )(846
    )
    
    
    (924
    )Valuation allowance
    
    
    (8,443
    )
    
    
    (6,751
    )$
    0
    
    
    $
    0
 27




---



##### 



NOTE 9  INCOME TAXES
    NOTE 10  BENEFIT PLANS
    28




---



##### 



NOTE 11  STOCK PURCHASE AND OPTION PLANS
 Director and Employee Plans
    Dividend Investment Plan
    2010
    
    2009Automatic dividend reinvestment plan
    
    
    0
    
    
    
    0Director stock purchase & retainer stock
    
    
    54,090
    
    
    
    59,360Stock options
    
    
    0
    
    
    
    0Other issuance of stock
    
    
    6,122
    
    
    
    3,42860,212
    
    
    
    62,788
 29




---



##### 



NOTE 11  STOCK PURCHASE AND OPTION PLANS
 Stock Option Plans
    :
 WeightedAverageNumber
    
    
    Weighted
    
    
    Remaining
    
    
    Aggregateof
    
    
    Average
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Life
    
    
    ValueOptions outstanding at January 1, 2010
    
    
    20,297
    
    
    $
    29.55Options forfeited 2010
    
    
    (1,425
    )
    
    
    32.64Options outstanding at December 31, 2010
    
    
    18,872
    
    
    $
    29.32
    
    
    
    2.59
    
    
    $
    0Exercisable at December 31, 2010
    
    
    18,872
    
    
    $
    29.32
    
    
    
    2.59
    
    
    $
    0
  30




---



##### 



NOTE 12  FAIR VALUE
      Impaired Loans:
 Other Real Estate Owned:
 31




---



##### 



NOTE 12  FAIR VALUE
 Assets Measured on a Recurring Basis
  Fair Value Measurements UsingQuoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(000s omitted)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)December 31, 2010Available for sale securitiesUS Government and agency
    
    $
    4,000
    
    
    $
    0
    
    
    $
    4,000
    
    
    $
    0Mortgage-backed residential
    
    
    7,432
    
    
    
    0
    
    
    
    7,432
    
    
    
    0Collateralized mortgage
obligations-agency
    
    
    24,902
    
    
    
    0
    
    
    
    24,902
    
    
    
    0Collateralized mortgage
obligations-private label
    
    
    3,871
    
    
    
    0
    
    
    
    3,871
    
    
    
    0Equity securities
    
    
    1,670
    
    
    
    0
    
    
    
    523
    
    
    
    1,147$
    41,875
    
    
    $
    0
    
    
    $
    40,728
    
    
    $
    1,147
 Fair Value Measurements UsingQuoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(000s omitted)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)December 31, 2009Available for sale securitiesUS Government and agency
    
    $
    5,513
    
    
    $
    0
    
    
    $
    5,513
    
    
    $
    0State and municipal
    
    
    5,828
    
    
    
    0
    
    
    
    5,828
    
    
    
    0Mortgage-backed residential
    
    
    10,802
    
    
    
    0
    
    
    
    10,802
    
    
    
    0Collateralized mortgage
obligations-agency
    
    
    5,395
    
    
    
    0
    
    
    
    5,395
    
    
    
    0Collateralized mortgage
obligations-private label
    
    
    4,872
    
    
    
    0
    
    
    
    4,872
    
    
    
    0Equity securities
    
    
    1,529
    
    
    
    17
    
    
    
    1,512
    
    
    
    0$
    33,939
    
    
    $
    17
    
    
    $
    33,922
    
    
    $
    0
   32




---



##### 



NOTE 12  FAIR VALUE
  Equity Securities(000s omitted)
    
    2010
    
    
    2009Beginning balance, Jan. 1,
    
    $
    0
    
    
    $
    1,229Total gains or losses (realized / unrealized)Included in earnings
    
    
    0
    
    
    
    7Loss on security impairment
    
    
    (298
    )
    
    
    (208
    )Included in other comprehensive income
    
    
    0
    
    
    
    357Purchases, issuances and settlementsTransfers in and / or out of Level 3
    
    
    1,445
    
    
    
    (1,385
    )Ending balance, December 31,
    
    $
    1,147
    
    
    $
    0
 Assets Measured on a Non-Recurring Basis
  Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(000s omitted)
    
    Total
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)At December 31, 2010Impaired loansCommercial
    
    $
    599
    
    
    $
    0
    
    
    $
    0
    
    
    $
    599Commercial real estate
    
    
    7,066
    
    
    
    0
    
    
    
    0
    
    
    
    7,066Residential real estate
    
    
    716
    
    
    
    0
    
    
    
    0
    
    
    
    716Consumer
    
    
    355
    
    
    
    0
    
    
    
    0
    
    
    
    355Total impaired loans
    
    $
    8,736
    
    
    $
    0
    
    
    $
    0
    
    
    $
    8,736Other real estate ownedCommercial real estate
    
    $
    235
    
    
    $
    0
    
    
    $
    0
    
    
    $
    235Residential real estate
    
    
    60
    
    
    
    0
    
    
    
    0
    
    
    
    60Total other real estate owned
    
    $
    295
    
    
    
    0
    
    
    
    0
    
    
    $
    295At December 31, 2009Impaired loans
    
    $
    14,700
    
    
    $
    0
    
    
    $
    0
    
    
    $
    14,700Other real estate owned
    
    
    470
    
    
    
    0
    
    
    
    0
    
    
    
    470
 33




---



##### 



NOTE 12  FAIR VALUE
     2010
    
    
    2009Carrying
    
    
    
    
    
    
    Carrying(000s omitted)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssets:Cash and cash equivalents
    
    $
    33,492
    
    
    $
    33,492
    
    
    $
    31,640
    
    
    $
    31,640Securities  held to maturity
    
    
    4,350
    
    
    
    4,383
    
    
    
    5,455
    
    
    
    5,492FHLB stock
    
    
    740
    
    
    
    n/a
    
    
    
    806
    
    
    
    n/aLoans held for sale
    
    
    850
    
    
    
    850
    
    
    
    229
    
    
    
    229Loans (including impaired loans)
    
    
    197,948
    
    
    
    194,925
    
    
    
    233,461
    
    
    
    258,506Accrued interest receivable
    
    
    1,050
    
    
    
    1,050
    
    
    
    1,289
    
    
    
    1,289Liabilities:Deposits
    
    $
    275,977
    
    
    $
    272,223
    
    
    $
    311,551
    
    
    $
    297,608Short-term borrowings
    
    
    879
    
    
    
    879
    
    
    
    164
    
    
    
    164FHLB advances
    
    
    954
    
    
    
    1,369
    
    
    
    981
    
    
    
    1,257Subordinated debentures
    
    
    14,000
    
    
    
    12,613
    
    
    
    14,000
    
    
    
    12,656Accrued interest payable
    
    
    1,166
    
    
    
    1,166
    
    
    
    758
    
    
    
    758
  Cash and cash equivalents
  Securities
  34




---



##### 



NOTE 12  FAIR VALUE
 FHLB Stock
  Loans held for sale
  Loans
  Off-balance-sheet instruments
  Deposit liabilities
  Short-term borrowings
  FHLB advances
  Subordinated Debentures
  Limitations
  35




---



##### 



NOTE
13  DISCONTINUED OPERATIONS
  DAVISON STATE BANK
CONDENSED BALANCE SHEET OF DISCONTINUED OPERATIONS
 Dec 31,(000s omitted)
    
    2009ASSETSCash and cash equivalents
    
    $
    2,537Securities  available for sale
    
    
    7,082Securities  held to maturity
    
    
    405Loans, net of allowance ($678)
    
    
    24,396Other assets
    
    
    3,499Total assets
    
    $
    37,919LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    9,012Interest bearing
    
    
    26,265Total deposits
    
    
    35,277Accrued taxes, interest and other liabilities
    
    
    (60
    )Shareholders equity
    
    
    2,702Total liabilities and shareholders equity
    
    $
    37,919
  36




---



##### 



NOTE 13
 DISCONTINUED OPERATIONS
  WEST MICHIGAN COMMUNITY BANK
CONDENSED BALANCE SHEET OF DISCONTINUED OPERATIONS
 Dec 31,
    
    Dec 31,(000s omitted)
    
    2010
    
    2009ASSETSCash and cash equivalents
    
    $
    8,309
    
    
    $
    10,469Securities  available for sale
    
    
    15,080
    
    
    
    9,669Loans, net of allowance ($3,543-2010, $2,137-2009)
    
    
    86,353
    
    
    
    111,844Other assets
    
    
    13,226
    
    
    
    15,372Total assets
    
    $
    122,968
    
    
    $
    147,354LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    13,751
    
    
    $
    11,739Interest bearing
    
    
    93,546
    
    
    
    117,804Total deposits
    
    
    107,297
    
    
    
    129,543Federal Home Loan Bank advances
    
    
    5,000
    
    
    
    7,000Accrued taxes, interest and other liabilities
    
    
    1,024
    
    
    
    317Shareholders equity
    
    
    9,647
    
    
    
    10,494Total liabilities and shareholders equity
    
    $
    122,968
    
    
    $
    147,354
 TOTAL DISCONTINUED OPERATIONS
CONDENSED BALANCE SHEET OF DISCONTINUED OPERATIONS
 Dec 31,
    
    Dec 31,(000s omitted)
    
    2010
    
    2009ASSETSCash and cash equivalents
    
    $
    8,309
    
    
    $
    13,006Securities  available for sale
    
    
    15,080
    
    
    
    16,751Securities  held to maturity
    
    
    0
    
    
    
    405Loans, net of allowance ($3,543-2010, $2,815-2009)
    
    
    86,353
    
    
    
    136,240Other assets
    
    
    13,226
    
    
    
    18,871Total assets
    
    $
    122,968
    
    
    $
    185,273LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    13,751
    
    
    $
    20,751Interest bearing
    
    
    93,546
    
    
    
    144,069Total deposits
    
    
    107,297
    
    
    
    164,820Federal Home Loan Bank advances
    
    
    5,000
    
    
    
    7,000Accrued taxes, interest and other liabilities
    
    
    1,024
    
    
    
    257Shareholders equity
    
    
    9,647
    
    
    
    13,196Total liabilities and shareholders equity
    
    $
    122,968
    
    
    $
    185,273
 37




---



##### 



NOTE
13  DISCONTINUED OPERATIONS
  DAVISON STATE BANK
CONDENSED STATEMENT OF INCOME OF DISCONTINUED OPERATIONS
 Years EndedDecember 31(000s omitted)
    
    2010
    
    2009Interest income
    
    $
    607
    
    
    $
    2,023Interest expense
    
    
    116
    
    
    
    642Net interest income
    
    
    491
    
    
    
    1,381Provision for loan losses
    
    
    (5
    )
    
    
    505Net interest income after provision for loan losses
    
    
    496
    
    
    
    876Non-interest income
    
    
    178
    
    
    
    563Non-interest expense
    
    
    121
    
    
    
    2,700Income (loss) before federal income tax
    
    
    553
    
    
    
    (1,261
    )Federal income tax expense/(benefit)
    
    
    181
    
    
    
    275Net income (loss)
    
    $
    372
    
    
    $
    (986
    )
 WEST MICHIGAN COMMUNITY BANK
CONDENSED STATEMENT OF INCOME OF DISCONTINUED OPERATIONS
 Years EndedDecember 31(000s omitted)
    
    2010
    
    2009Interest income
    
    $
    6,865
    
    
    $
    8,260Interest expense
    
    
    2,349
    
    
    
    3,661Net interest income
    
    
    4,516
    
    
    
    4,599Provision for loan losses
    
    
    1,955
    
    
    
    3,683Net interest income after provision for loan losses
    
    
    2,561
    
    
    
    916Non-interest income
    
    
    1,007
    
    
    
    1,266Non-interest expense
    
    
    4,985
    
    
    
    5,785Income (loss) before federal income tax
    
    
    (1,417
    )
    
    
    (3,603
    )Federal income tax expense (benefit)
    
    
    (181
    )
    
    
    (1,289
    )Net income (loss)
    
    $
    (1,236
    )
    
    $
    (2,314
    )
 38




---



##### 



NOTE 13
 DISCONTINUED OPERATIONS
 TOTAL DISCONTINUED OPERATIONS
CONDENSED STATEMENT OF INCOME OF DISCONTINUED OPERATIONS
 Years EndedDecember 31(000s omitted)
    
    2010
    
    2009Interest income
    
    $
    7,472
    
    
    $
    10,283Interest expense
    
    
    2,465
    
    
    
    4,303Net interest income
    
    
    5,007
    
    
    
    5,980Provision for loan losses
    
    
    1,950
    
    
    
    4,188Net interest income after provision for loan losses
    
    
    3,057
    
    
    
    1,792Non-interest income
    
    
    1,185
    
    
    
    1,829Non-interest expense
    
    
    5,106
    
    
    
    8,485Income (loss) before federal income tax
    
    
    (864
    )
    
    
    (4,864
    )Federal income tax expense (benefit)
    
    
    0
    
    
    
    (1,564
    )Net income (loss)
    
    $
    (864
    )
    
    $
    (3,300
    )
 NOTE 14  REGULATORY MATTERS
    39




---



##### 



NOTE 14  REGULATORY MATTERS
      40




---



##### 



NOTE 14  REGULATORY MATTERS
 For Capital
    
    RegulatoryAdequacy
    
    AgreementActual
    
    Purposes
    
    Requirements(000s omitted)
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2010Total Capital
(to Risk Weighted Assets)Consolidated
    
    $
    25,443
    
    
    
    7.8
    %
    
    $
    26,073
    
    
    
    8.0
    %
    
    NA
    
    
    NAThe State Bank
    
    
    22,670
    
    
    
    10.0
    
    
    
    18,152
    
    
    
    8.0
    
    
    $
    27,228
    
    
    
    12.0
    %West Michigan Community
Bank
    
    
    10,722
    
    
    
    11.0
    
    
    
    7,794
    
    
    
    8.0
    
    
    NA
    
    
    NATier 1 Capital
(to Risk Weighted Assets)Consolidated
    
    
    21,261
    
    
    
    6.5
    
    
    
    13,036
    
    
    
    4.0
    
    
    NA
    
    
    NAThe State Bank
    
    
    19,735
    
    
    
    8.7
    
    
    
    9,076
    
    
    
    4.0
    
    
    NA
    
    
    NAWest Michigan Community
Bank
    
    
    9,475
    
    
    
    9.7
    
    
    
    3,897
    
    
    
    4.0
    
    
    NA
    
    
    NATier 1 Capital
(to Average Assets)Consolidated
    
    
    21,261
    
    
    
    4.9
    
    
    
    17,330
    
    
    
    4.0
    
    
    NA
    
    
    NAThe State Bank
    
    
    19,735
    
    
    
    6.5
    
    
    
    12,204
    
    
    
    4.0
    
    
    
    24,408
    
    
    
    8.0West Michigan Community
Bank
    
    
    9,475
    
    
    
    7.5
    
    
    
    5,025
    
    
    
    4.0
    
    
    
    10,050
    
    
    
    8.0
 41




---



##### 



NOTE 14  REGULATORY MATTERS
 For Capital
    
    RegulatoryAdequacy
    
    AgreementActual
    
    Purposes
    
    Requirements(000s omitted)
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2009Total Capital
(to Risk Weighted Assets)Consolidated
    
    $
    33,661
    
    
    
    7.8
    %
    
    $
    34,636
    
    
    
    8.0
    %
    
    NA
    
    
    NAThe State Bank
    
    
    24,334
    
    
    
    8.9
    
    
    
    21,961
    
    
    
    8.0
    
    
    $
    32,810
    
    
    
    12.0%
    (1)Davison State Bank
    
    
    3,328
    
    
    
    9.9
    
    
    
    2,692
    
    
    
    8.0
    
    
    NA
    
    
    NAWest Michigan Community
Bank
    
    
    11,841
    
    
    
    9.4
    
    
    
    10,063
    
    
    
    8.0
    
    
    NA
    
    
    NATier 1 Capital
(to Risk Weighted Assets)Consolidated
    
    
    28,164
    
    
    
    6.5
    
    
    
    17,318
    
    
    
    4.0
    
    
    NA
    
    
    NAThe State Bank
    
    
    20,830
    
    
    
    7.6
    
    
    
    10,981
    
    
    
    4.0
    
    
    NA
    
    
    NADavison State Bank
    
    
    2,904
    
    
    
    8.6
    
    
    
    1,346
    
    
    
    4.0
    
    
    NA
    
    
    NAWest Michigan Community
Bank
    
    
    10,262
    
    
    
    8.2
    
    
    
    5,031
    
    
    
    4.0
    
    
    NA
    
    
    NATier 1 Capital
(to Average Assets)Consolidated
    
    
    28,164
    
    
    
    5.0
    
    
    
    22,491
    
    
    
    4.0
    
    
    NA
    
    
    NAThe State Bank
    
    
    20,830
    
    
    
    6.2
    
    
    
    13,535
    
    
    
    4.0
    
    
    
    27,069
    
    
    
    8.0Davison State Bank
    
    
    2,904
    
    
    
    7.2
    
    
    
    1,620
    
    
    
    4.0
    
    
    
    3,240
    
    
    
    8.0West Michigan Community
Bank
    
    
    10,262
    
    
    
    6.9
    
    
    
    5,923
    
    
    
    4.0
    
    
    
    11,845
    
    
    
    8.0
 
 (1)
    
    Effective April 10, 2010
    42




---



##### 



NOTE 15  LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES
 Off-balance-sheet risk
   (000s omitted)
    
    2010
    
    2009Commitments to make loans (at market rates)
    
    $
    8,403
    
    
    $
    2,847Unused lines of credit and letters of credit
    
    
    29,746
    
    
    
    34,213
  NOTE 16  PARENT ONLY CONDENSED FINANCIAL INFORMATION
  
 2010
    
    2009ASSETSCash and cash equivalents
    
    $
    863
    
    
    $
    319Securities available for sale, at fair value
    
    
    1,148
    
    
    
    1,009Other assets
    
    
    188
    
    
    
    448Investment in subsidiaries
    
    
    29,317
    
    
    
    33,001Total Assets
    
    $
    31,516
    
    
    $
    34,777LIABILITIES AND SHAREHOLDERS EQUITYOther liabilities
    
    $
    1,461
    
    
    $
    245Subordinated debt
    
    
    14,000
    
    
    
    14,000Shareholders equity
    
    
    16,055
    
    
    
    20,532Total liabilities and shareholders equity
    
    $
    31,516
    
    
    $
    34,777
 43




---



##### 



NOTE 16  PARENT ONLY CONDENSED FINANCIAL INFORMATION
 
 2010
    
    2009Loss on equity investment
    
    $
    0
    
    
    $
    (1,360
    )Other income
    
    
    704
    
    
    
    0Dividends from subsidiaries
    
    
    0
    
    
    
    750Interest expense
    
    
    (450
    )
    
    
    (620
    )Operating expenses
    
    
    (727
    )
    
    
    (1,408
    )Equity in undistributed net loss of subsidiaries
    
    
    (3,780
    )
    
    
    (15,069
    )Net loss before income taxes
    
    
    (4,253
    )
    
    
    (17,707
    )Federal income tax expense (benefit)
    
    
    1,132
    
    
    
    (727
    )Net loss
    
    $
    (5,385
    )
    
    $
    (16,980
    )
 
 2010
    
    2009Cash flows from operating activitiesNet income (loss)
    
    $
    (5,385
    )
    
    $
    (16,980
    )Change in other assets
    
    
    938
    
    
    
    (86
    )Change in other liabilities
    
    
    45
    
    
    
    81Equity in undistributed net loss of subsidiaries
    
    
    3,780
    
    
    
    15,069Loss on security impairment
    
    
    203
    
    
    
    908Net loss of equity investment
    
    
    0
    
    
    
    1,360Net cash from (used in) operating activities
    
    
    (419
    )
    
    
    352Cash flows provided by investing activitiesSale of equity security
    
    
    0
    
    
    
    383Proceeds from sale of subsidiary
    
    
    2,800
    
    
    
    0Loss on sale of subsidiary
    
    
    (59
    )
    
    
    0Investment in subsidiary
    
    
    (1,900
    )
    
    
    (365
    )Net cash from (used in) investing activities
    
    
    841
    
    
    
    18Cash flows used in financing activitiesIssuance of subordinated debt
    
    
    0
    
    
    
    0Net short-term borrowings
    
    
    0
    
    
    
    (1,000
    )Dividends paid
    
    
    0
    
    
    
    0Stock repurchase
    
    
    0
    
    
    
    0Proceeds from stock issuance
    
    
    122
    
    
    
    135Net cash from (used in) financing activities
    
    
    122
    
    
    
    (865
    )Change in cash and cash equivalents
    
    
    544
    
    
    
    (495
    )Cash and cash equivalents at beginning of year
    
    
    319
    
    
    
    814Cash and cash equivalents at end of year
    
    $
    863
    
    
    $
    319
 44




---



##### 



Managements Discussion and Analysis of Financial Condition and Results of Operations
  TABLE 1 Selected Financial Data
 000s omitted except per share data and ratios
    
    2010
    
    2009
    
    2008
    
    2007
    
    2006Summary of Consolidated Statements of Income:Interest income
    
    $
    15,077
    
    
    $
    17,889
    
    
    $
    20,627
    
    
    $
    24,716
    
    
    $
    24,712Interest expense
    
    
    4,552
    
    
    
    6,925
    
    
    
    9,307
    
    
    
    11,382
    
    
    
    10,274Net interest income
    
    
    10,525
    
    
    
    10,964
    
    
    
    11,320
    
    
    
    13,334
    
    
    
    14,438Provision for loan losses
    
    
    6,934
    
    
    
    11,040
    
    
    
    5,610
    
    
    
    5,395
    
    
    
    720Net interest income after provision
    
    
    3,591
    
    
    
    (76
    )
    
    
    5,710
    
    
    
    7,939
    
    
    
    13,718Total other operating income
    
    
    4,773
    
    
    
    3,390
    
    
    
    3,060
    
    
    
    5,308
    
    
    
    5,482Total other operating expense
    
    
    13,087
    
    
    
    14,711
    
    
    
    14,455
    
    
    
    13,854
    
    
    
    14,622Income (loss) before income taxes
    
    
    (4,723
    )
    
    
    (11,397
    )
    
    
    (5,685
    )
    
    
    (607
    )
    
    
    4,578Federal income taxes (benefit)
    
    
    (202
    )
    
    
    2,283
    
    
    
    (2,149
    )
    
    
    (435
    )
    
    
    1,427Income (loss) from continuing operations
    
    
    (4,521
    )
    
    
    (13,680
    )
    
    
    (3,536
    )
    
    
    (172
    )
    
    
    3,151Discontinued operations, net of tax
    
    
    (864
    )
    
    
    (3,300
    )
    
    
    (8,629
    )
    
    
    (295
    )
    
    
    2,157Net income (loss)
    
    $
    (5,385
    )
    
    $
    (16,980
    )
    
    $
    (12,165
    )
    
    $
    (467
    )
    
    $
    5,308Earnings per share  basic*
    
    $
    (2.37
    )
    
    $
    (7.70
    )
    
    $
    (5.60
    )
    
    $
    (0.22
    )
    
    $
    2.48Earnings per share  diluted*
    
    $
    (2.37
    )
    
    $
    (7.70
    )
    
    $
    (5.60
    )
    
    $
    (0.22
    )
    
    $
    2.47Summary of Consolidated Balance Sheets:Assets
    
    $
    424,228
    
    
    $
    522,079
    
    
    $
    578,604
    
    
    $
    628,019
    
    
    $
    622,298Securities, including FHLB stock
    
    
    46,965
    
    
    
    40,200
    
    
    
    44,999
    
    
    
    59,682
    
    
    
    83,060Loans, including loans held for sale
    
    
    198,798
    
    
    
    233,690
    
    
    
    284,252
    
    
    
    293,873
    
    
    
    283,441Assets of discontinued operations
    
    
    122,968
    
    
    
    185,273
    
    
    
    208,737
    
    
    
    225,405
    
    
    
    221,343Deposits
    
    
    275,977
    
    
    
    311,551
    
    
    
    331,992
    
    
    
    354,303
    
    
    
    345,576Borrowings
    
    
    15,833
    
    
    
    15,145
    
    
    
    17,507
    
    
    
    20,679
    
    
    
    26,552Liabilities of discontinued operations
    
    
    113,321
    
    
    
    172,077
    
    
    
    191,116
    
    
    
    199,757
    
    
    
    194,322Shareholders equity
    
    
    16,055
    
    
    
    20,532
    
    
    
    36,124
    
    
    
    49,496
    
    
    
    51,318Other Financial and Statistical Data:Tier 1 capital to risk weighted assets
    
    
    6.50
    %
    
    
    6.50
    %
    
    
    10.20
    %
    
    
    10.40
    %
    
    
    11.30
    %Total capital to risk weighted assets
    
    
    7.80
    %
    
    
    7.80
    %
    
    
    11.40
    %
    
    
    11.60
    %
    
    
    12.50
    %Tier 1 capital to average assets
    
    
    4.90
    %
    
    
    5.00
    %
    
    
    8.80
    %
    
    
    9.00
    %
    
    
    8.60
    %Total cash dividends
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    2,163
    
    
    $
    2,069Book value per share*
    
    $
    6.95
    
    
    $
    9.13
    
    
    $
    16.53
    
    
    $
    22.88
    
    
    $
    24.08Cash dividends paid per share*
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    1.00
    
    
    $
    0.94Period end market price per share*
    
    $
    1.75
    
    
    $
    1.36
    
    
    $
    6.75
    
    
    $
    22.00
    
    
    $
    32.55Dividend pay-out ratio
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    -463.17
    %
    
    
    38.98
    %Return on average shareholders equity
    
    
    -28.52
    %
    
    
    -61.18
    %
    
    
    -25.13
    %
    
    
    -0.89
    %
    
    
    10.82
    %Return on average assets
    
    
    -1.15
    %
    
    
    -3.02
    %
    
    
    -2.03
    %
    
    
    -0.08
    %
    
    
    0.85
    %Net interest margin
    
    
    3.72
    %
    
    
    3.50
    %
    
    
    3.33
    %
    
    
    3.66
    %
    
    
    4.11
    %Total equity to assets at period end
    
    
    3.78
    %
    
    
    3.93
    %
    
    
    6.24
    %
    
    
    7.88
    %
    
    
    8.25
    %
 
 *
    
    Per Share data calculated using average shares outstanding in each period. Per share amounts and average shares outstanding have been
adjusted to reflect a 10% stock dividend paid on August 4, 2006.
 45




---



##### 



RESULTS OF OPERATIONS
     NET INTEREST INCOME
    46




---



##### 



Table 2
 
 INCREASE /(DECREASE)DUE TO2010
    
    
    2009YIELD/
    
    
    
    
    
    
    
    
    
    
    YIELD/(000s omitted)
    
    VOL
    
    RATE
    
    TOTAL
    
    
    VOL
    
    RATE
    
    TOTALTaxable securities
    
    $
    10
    
    
    $
    (302
    )
    
    $
    (292
    )
    
    
    $
    (216
    )
    
    $
    (86
    )
    
    $
    (302
    )Tax-exempt securities (1)
    
    
    (284
    )
    
    
    13
    
    
    
    (271
    )
    
    
    
    (51
    )
    
    
    51
    
    
    
    0Federal funds sold
    
    
    18
    
    
    
    6
    
    
    
    24
    
    
    
    
    14
    
    
    
    (135
    )
    
    
    (121
    )Total loans (1)
    
    
    (2,757
    )
    
    
    407
    
    
    
    (2,350
    )
    
    
    
    (1,210
    )
    
    
    (1,119
    )
    
    
    (2,329
    )Loans held for sale
    
    
    (19
    )
    
    
    (3
    )
    
    
    (22
    )
    
    
    
    32
    
    
    
    (9
    )
    
    
    23Total earning assets
    
    
    (3,032
    )
    
    
    121
    
    
    
    (2,911
    )
    
    
    
    (1,431
    )
    
    
    (1,298
    )
    
    
    (2,729
    )Interest bearing demand deposits
    
    
    (13
    )
    
    
    (154
    )
    
    
    (167
    )
    
    
    
    4
    
    
    
    (255
    )
    
    
    (251
    )Savings deposits
    
    
    (5
    )
    
    
    (166
    )
    
    
    (171
    )
    
    
    
    (6
    )
    
    
    (340
    )
    
    
    (346
    )Time CDs $100,000 and over
    
    
    (751
    )
    
    
    (150
    )
    
    
    (901
    )
    
    
    
    (216
    )
    
    
    (421
    )
    
    
    (637
    )Other time deposits
    
    
    (410
    )
    
    
    (549
    )
    
    
    (959
    )
    
    
    
    (9
    )
    
    
    (671
    )
    
    
    (680
    )Other borrowings
    
    
    (25
    )
    
    
    (150
    )
    
    
    (175
    )
    
    
    
    (244
    )
    
    
    (224
    )
    
    
    (468
    )Total interest bearing liabilities
    
    
    (1,204
    )
    
    
    (1,169
    )
    
    
    (2,373
    )
    
    
    
    (471
    )
    
    
    (1,911
    )
    
    
    (2,382
    )Net Interest Income
    
    $
    (1,828
    )
    
    $
    1,290
    
    
    $
    (538
    )
    
    
    $
    (960
    )
    
    $
    613
    
    
    $
    (347
    )
 
 (1)
    
    Presented on a fully taxable equivalent basis using a federal income tax rate of
34%. 47




---



##### 



TABLE 3
(000s omitted)
    
    
    
    Summary of Net Interest Income
Years Ended December 31,
 2010
    
    2009
    
    2008INC/
    
    
    
    
    
    
    
    
    
    
    INC/
    
    
    
    
    
    
    AVG
    
    
    INC/ASSETS
    
    AVG BAL
    
    
    EXP
    
    
    YIELD
    
    
    AVG BAL
    
    
    EXP
    
    
    YIELD
    
    
    BAL
    
    
    EXP
    
    
    YIELDSecurities:U.S. Treasury and Government Agencies
    
    $
    29,135
    
    
    $
    849
    
    
    
    2.91
    %
    
    $
    28,346
    
    
    $
    1,126
    
    
    
    3.97
    %
    
    $
    32,773
    
    
    $
    1,422
    
    
    
    4.34
    %State and Political (1)
    
    
    7,310
    
    
    
    447
    
    
    
    6.11
    %
    
    
    11,961
    
    
    
    718
    
    
    
    6.00
    %
    
    
    12,846
    
    
    
    718
    
    
    
    5.59
    %Other
    
    
    1,846
    
    
    
    32
    
    
    
    1.73
    %
    
    
    3,067
    
    
    
    47
    
    
    
    1.53
    %
    
    
    6,123
    
    
    
    53
    
    
    
    0.87
    %Total Securities
    
    
    38,291
    
    
    
    1,328
    
    
    
    3.47
    %
    
    
    43,374
    
    
    
    1,891
    
    
    
    4.36
    %
    
    
    51,742
    
    
    
    2,193
    
    
    
    4.24
    %Fed Funds Sold
    
    
    22,550
    
    
    
    27
    
    
    
    0.12
    %
    
    
    5,089
    
    
    
    3
    
    
    
    0.06
    %
    
    
    4,508
    
    
    
    124
    
    
    
    2.75
    %Loans:Commercial
    
    
    172,488
    
    
    
    10,671
    
    
    
    6.19
    %
    
    
    206,691
    
    
    
    12,379
    
    
    
    5.99
    %
    
    
    221,631
    
    
    
    14,041
    
    
    
    6.34
    %Tax Free (1)
    
    
    2,228
    
    
    
    144
    
    
    
    6.46
    %
    
    
    2,616
    
    
    
    167
    
    
    
    6.38
    %
    
    
    2,093
    
    
    
    139
    
    
    
    6.64
    %Real Estate-Mortgage
    
    
    21,491
    
    
    
    1,315
    
    
    
    6.12
    %
    
    
    28,268
    
    
    
    1,723
    
    
    
    6.10
    %
    
    
    30,583
    
    
    
    1,950
    
    
    
    6.38
    %Consumer
    
    
    30,654
    
    
    
    1,745
    
    
    
    5.69
    %
    
    
    34,382
    
    
    
    1,956
    
    
    
    5.69
    %
    
    
    37,350
    
    
    
    2,424
    
    
    
    6.49
    %Total loans
    
    
    226,861
    
    
    
    13,875
    
    
    
    6.12
    %
    
    
    271,957
    
    
    
    16,225
    
    
    
    5.97
    %
    
    
    291,657
    
    
    
    18,554
    
    
    
    6.36
    %Allowance for Loan Loss
    
    
    (10,104
    )
    
    
    
    
    
    
    
    
    
    
    (8,883
    )
    
    
    
    
    
    
    
    
    
    
    (6,098
    )Net Loans
    
    
    216,757
    
    
    
    13,875
    
    
    
    6.40
    %
    
    
    263,074
    
    
    
    16,225
    
    
    
    6.17
    %
    
    
    285,559
    
    
    
    18,554
    
    
    
    6.50
    %Loans Held for Sale
    
    
    986
    
    
    
    48
    
    
    
    4.87
    %
    
    
    1,373
    
    
    
    70
    
    
    
    5.10
    %
    
    
    769
    
    
    
    47
    
    
    
    6.11
    %TOTAL EARNING ASSETS
    
    
    288,688
    
    
    
    15,278
    
    
    
    5.29
    %
    
    
    321,793
    
    
    
    18,189
    
    
    
    5.65
    %
    
    
    348,676
    
    
    
    20,918
    
    
    
    6.00
    %Cash Due from Banks
    
    
    13,361
    
    
    
    
    
    
    
    
    
    
    
    20,255
    
    
    
    
    
    
    
    
    
    
    
    9,823Assets of discontinued operations
    
    
    150,441
    
    
    
    
    
    
    
    
    
    
    
    201,534
    
    
    
    
    
    
    
    
    
    
    
    220,573All Other Assets
    
    
    27,753
    
    
    
    
    
    
    
    
    
    
    
    27,426
    
    
    
    
    
    
    
    
    
    
    
    27,681TOTAL ASSETS
    
    $
    470,139
    
    
    
    
    
    
    
    
    
    
    $
    562,125
    
    
    
    
    
    
    
    
    
    
    $
    600,655LIABILITIES & SHAREHOLDERS EQUITY:Deposits:Interest bearing  DDA
    
    $
    48,988
    
    
    $
    94
    
    
    
    0.19
    %
    
    $
    51,657
    
    
    $
    261
    
    
    
    0.51
    %
    
    $
    51,234
    
    
    $
    512
    
    
    
    1.00
    %Savings Deposits
    
    
    64,562
    
    
    
    77
    
    
    
    0.12
    %
    
    
    66,056
    
    
    
    248
    
    
    
    0.38
    %
    
    
    66,778
    
    
    
    594
    
    
    
    0.89
    %Time CDs $100,000 and Over
    
    
    60,770
    
    
    
    2,436
    
    
    
    3.97
    %
    
    
    80,055
    
    
    
    3,337
    
    
    
    4.17
    %
    
    
    84,834
    
    
    
    3,974
    
    
    
    4.68
    %Other Time CDs
    
    
    63,392
    
    
    
    1,425
    
    
    
    2.27
    %
    
    
    77,943
    
    
    
    2,384
    
    
    
    3.06
    %
    
    
    78,165
    
    
    
    3,064
    
    
    
    3.92
    %Total Interest Bearing Deposits
    
    
    237,712
    
    
    
    4,032
    
    
    
    1.70
    %
    
    
    275,711
    
    
    
    6,230
    
    
    
    2.26
    %
    
    
    281,011
    
    
    
    8,144
    
    
    
    2.90
    %Other Borrowings
    
    
    15,332
    
    
    
    520
    
    
    
    3.39
    %
    
    
    15,916
    
    
    
    695
    
    
    
    4.37
    %
    
    
    20,844
    
    
    
    1,163
    
    
    
    5.58
    %INTEREST BEARING LIABILITIES
    
    
    253,044
    
    
    
    4,552
    
    
    
    1.80
    %
    
    
    291,627
    
    
    
    6,925
    
    
    
    2.37
    %
    
    
    301,855
    
    
    
    9,307
    
    
    
    3.08
    %Non-interest bearing  DDA
    
    
    55,286
    
    
    
    
    
    
    
    
    
    
    
    53,941
    
    
    
    
    
    
    
    
    
    
    
    53,043Liabilities of discontinued
operations
    
    
    139,647
    
    
    
    
    
    
    
    
    
    
    
    186,063
    
    
    
    
    
    
    
    
    
    
    
    194,752All Other Liabilities
    
    
    3,281
    
    
    
    
    
    
    
    
    
    
    
    2,741
    
    
    
    
    
    
    
    
    
    
    
    2,601Shareholders Equity
    
    
    18,881
    
    
    
    
    
    
    
    
    
    
    
    27,753
    
    
    
    
    
    
    
    
    
    
    
    48,404TOTAL LIABILITIES and S/H EQUITY
    
    $
    470,139
    
    
    
    
    
    
    
    
    
    
    $
    562,125
    
    
    
    
    
    
    
    
    
    
    $
    600,655Net Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.48
    %
    
    
    
    
    
    
    
    
    
    
    3.28
    %
    
    
    
    
    
    
    
    
    
    
    2.92
    %Impact of Non-Interest Bearing
Funds on Margin
    
    
    
    
    
    
    
    
    
    
    0.24
    %
    
    
    
    
    
    
    
    
    
    
    0.22
    %
    
    
    
    
    
    
    
    
    
    
    0.41
    %Net Interest Income/Margin
    
    
    
    
    
    $
    10,726
    
    
    
    3.72
    %
    
    
    
    
    
    $
    11,264
    
    
    
    3.50
    %
    
    
    
    
    
    $
    11,611
    
    
    
    3.33
    %
 
 (1)
    
     Presented on a fully taxable equivalent basis using a federal income tax rate of 34%. 48




---



##### 



ALLOWANCE AND PROVISION FOR LOAN LOSSES
      49




---



##### 



TABLE 4
 Analysis of the Allowance for Loan Losses
 Years Ended December 31,(000s omitted)
    
    2010
    
    2009
    
    2008
    
    2007
    
    2006Balance Beginning of Period
    
    $
    8,589
    
    
    $
    7,328
    
    
    $
    4,882
    
    
    $
    4,088
    
    
    $
    3,916Charge-offs:Commercial, Financial andAgricultural
    
    
    (5,618
    )
    
    
    (8,424
    )
    
    
    (2,994
    )
    
    
    (4,032
    )
    
    
    (419
    )Real Estate-Mortgage
    
    
    (264
    )
    
    
    (683
    )
    
    
    (203
    )
    
    
    (177
    )
    
    
    0Installment Loans to Individuals
    
    
    (535
    )
    
    
    (889
    )
    
    
    (366
    )
    
    
    (588
    )
    
    
    (221
    )Total Charge-offs
    
    
    (6,417
    )
    
    
    (9,996
    )
    
    
    (3,563
    )
    
    
    (4,797
    )
    
    
    (640
    )Recoveries:Commercial and Financial
    
    
    812
    
    
    
    152
    
    
    
    222
    
    
    
    140
    
    
    
    31Real Estate-Mortgage
    
    
    41
    
    
    
    4
    
    
    
    23
    
    
    
    0
    
    
    
    0Installment Loans to Individuals
    
    
    68
    
    
    
    61
    
    
    
    154
    
    
    
    56
    
    
    
    61Total Recoveries
    
    
    921
    
    
    
    217
    
    
    
    399
    
    
    
    196
    
    
    
    92Net Charge-offs
    
    
    (5,496
    )
    
    
    (9,779
    )
    
    
    (3,164
    )
    
    
    (4,601
    )
    
    
    (548
    )Provision for loan losses
    
    
    6,934
    
    
    
    11,040
    
    
    
    5,610
    
    
    
    5,395
    
    
    
    720Balance at End of Period
    
    $
    10,027
    
    
    $
    8,589
    
    
    $
    7,328
    
    
    $
    4,882
    
    
    $
    4,088Ratio of Net Charge-Offs During the Period
    
    
    2.64
    %
    
    
    4.04
    %
    
    
    1.13
    %
    
    
    1.54
    %
    
    
    0.19
    %
 NON-INTEREST INCOME
       50




---



##### 



NON-INTEREST
EXPENSE
         51




---



##### 



FINANCIAL CONDITION
   SECURITIES PORTFOLIO
     52




---



##### 



TABLE 5
 Analysis and Maturities of Securities
 Amortized
    
    Fair(000s omitted)
    
    Cost
    
    Value
    
    Yield (1)AVAILABLE FOR SALEU.S. AgenciesOne year or less
    
    $
    0
    
    
    $
    0
    
    
    
    0.00
    %Over one through five years
    
    
    0
    
    
    
    0
    
    
    
    0.00
    %Over five through ten years
    
    
    4,005
    
    
    
    4,000
    
    
    
    2.38
    %Over ten years
    
    
    0
    
    
    
    0
    
    
    
    0.00
    %Total
    
    
    4,005
    
    
    
    4,000Mortgage-BackedOne year or less
    
    $
    0
    
    
    $
    0
    
    
    
    0.00
    %Over one through five years
    
    
    0
    
    
    
    0
    
    
    
    0.00
    %Over five through ten years
    
    
    0
    
    
    
    0
    
    
    
    0.00
    %Over ten years
    
    
    36,315
    
    
    
    36,205
    
    
    
    3.61
    %Total
    
    
    36,315
    
    
    
    36,205Equity Securities
    
    $
    1,655
    
    
    $
    1,670HELD TO MATURITYState and PoliticalOne year or less
    
    $
    1,146
    
    
    $
    1,157
    
    
    
    4.28
    %Over one through five years
    
    
    1,957
    
    
    
    1,970
    
    
    
    4.17
    %Over five through ten years
    
    
    879
    
    
    
    892
    
    
    
    4.17
    %Over ten years
    
    
    368
    
    
    
    364
    
    
    
    4.25
    %Total
    
    
    4,350
    
    
    
    4,383Total Securities
    
    $
    46,325
    
    
    $
    46,258
 
 (1)
    
    Tax equivalent yield LOAN PORTFOLIO
   53




---



##### 



TABLE 6
 Loan Portfolio
 December 31,(000s omitted)
    
    2010
    
    2009
    
    2008
    
    2007
    
    2006Commercial
    
    $
    150,179
    
    
    $
    164,163
    
    
    $
    175,593
    
    
    $
    193,647
    
    
    $
    168,276Real estate  construction
    
    
    9,597
    
    
    
    21,904
    
    
    
    37,358
    
    
    
    35,479
    
    
    
    46,880Real estate  residential
    
    
    19,046
    
    
    
    23,681
    
    
    
    31,508
    
    
    
    31,142
    
    
    
    29,234Consumer
    
    
    29,153
    
    
    
    32,302
    
    
    
    35,519
    
    
    
    37,695
    
    
    
    40,913Total
    
    $
    207,975
    
    
    $
    242,050
    
    
    $
    279,978
    
    
    $
    297,963
    
    
    $
    285,303
  TABLE 7
 Maturities of the Loan Portfolio by Loan Type
 Within
    
    One-
    
    After(000s omitted)
    
    One
    
    Five
    
    FiveDecember 31, 2010
    
    Year
    
    Years
    
    Years
    
    TotalCommercial
    
    $
    74,388
    
    
    $
    67,313
    
    
    $
    8,478
    
    
    $
    150,179Real estate  construction
    
    
    9,079
    
    
    
    344
    
    
    
    174
    
    
    
    9,597Real estate  residential
    
    
    694
    
    
    
    3,151
    
    
    
    15,201
    
    
    
    19,046Consumer
    
    
    4,800
    
    
    
    18,491
    
    
    
    5,862
    
    
    
    29,153$
    88,961
    
    
    $
    89,299
    
    
    $
    29,715
    
    
    $
    207,975
 TABLE 8
 Maturities of the Loan Portfolio by Rate Categories
 Within
    
    One-
    
    After(000s omitted)
    
    One
    
    Five
    
    FiveDecember 31, 2010
    
    Year
    
    Years
    
    Years
    
    TotalLoans:Fixed Rate
    
    $
    61,868
    
    
    $
    73,698
    
    
    $
    19,652
    
    
    $
    155,218Variable Rate
    
    
    27,093
    
    
    
    15,601
    
    
    
    10,063
    
    
    
    52,757$
    88,961
    
    
    $
    89,299
    
    
    $
    29,715
    
    
    $
    207,975
 54




---



##### 



NON-PERFORMING ASSETS
    55




---



##### 



TABLE 9
 Non-Performing Assets and Past Due Loans
 December 31,(000s omitted)
    
    2010
    
    2009
    
    2008
    
    2007
    
    2006Non-Performing Loans:Loans Past Due 90 Days or More & Still
Accruing
    
    $
    133
    
    
    $
    319
    
    
    $
    656
    
    
    $
    54
    
    
    $
    348Non-Accrual Loans
    
    
    12,496
    
    
    
    11,429
    
    
    
    20,272
    
    
    
    9,662
    
    
    
    1,094Renegotiated Loans
    
    
    3,654
    
    
    
    1,464
    
    
    
    942
    
    
    
    431
    
    
    
    437Total Non-Performing Loans
    
    
    16,283
    
    
    
    13,212
    
    
    
    21,870
    
    
    
    10,147
    
    
    
    1,879Other Non-Performing Assets:Other Real Estate
    
    
    2,742
    
    
    
    3,761
    
    
    
    2,098
    
    
    
    128
    
    
    
    0Other Real Estate Owned in Redemption
    
    
    828
    
    
    
    2,733
    
    
    
    73
    
    
    
    1,460
    
    
    
    0Other Non-Performing Assets
    
    
    0
    
    
    
    0
    
    
    
    25
    
    
    
    49
    
    
    
    18Total Other Non-Performing Assets
    
    
    3,570
    
    
    
    6,494
    
    
    
    2,196
    
    
    
    1,637
    
    
    
    18Total Non-Performing Assets
    
    $
    19,853
    
    
    $
    19,706
    
    
    $
    24,066
    
    
    $
    11,784
    
    
    $
    1,897Non-Performing Loans as a % of
Total Loans
    
    
    7.83
    %
    
    
    5.46
    %
    
    
    7.52
    %
    
    
    3.41
    %
    
    
    0.45
    %Non-Performing Assets as a % of
Total Loans and Other Real Estate
    
    
    9.42
    %
    
    
    8.02
    %
    
    
    8.21
    %
    
    
    3.95
    %
    
    
    0.45
    %Allowance for Loan Losses as a % of
Non-Performing Loans
    
    
    61.58
    %
    
    
    65.01
    %
    
    
    33.51
    %
    
    
    48.11
    %
    
    
    326.66
    %Accruing Loans Past Due 90 Days or
More to Total Loans
    
    
    0.06
    %
    
    
    0.13
    %
    
    
    0.23
    %
    
    
    0.02
    %
    
    
    0.08
    %Non-performing Assets as a % of
Total Assets
    
    
    4.68
    %
    
    
    3.77
    %
    
    
    4.16
    %
    
    
    1.87
    %
    
    
    0.30
    %
  TABLE 10
 Allocation of the Allowance for Loan Losses
 December 31,
    
    2010
    
    2009
    
    2008
    
    2007
    
    2006(000s omitted)
    
    Amount
    
    Loan %
    
    Amount
    
    Loan %
    
    Amount
    
    Loan %
    
    Amount
    
    Loan %
    
    Amount
    
    Loan %Commercial and
construction
    
    $
    8,830
    
    
    
    76.82
    %
    
    $
    7,440
    
    
    
    76.87
    %
    
    $
    6,343
    
    
    
    76.06
    %
    
    $
    4,159
    
    
    
    76.90
    %
    
    $
    3,292
    
    
    
    75.33
    %Real estate mortgage
    
    
    413
    
    
    
    9.16
    %
    
    
    521
    
    
    
    9.78
    %
    
    
    231
    
    
    
    11.25
    %
    
    
    208
    
    
    
    10.45
    %
    
    
    239
    
    
    
    10.28
    %Consumer
    
    
    738
    
    
    
    14.02
    %
    
    
    622
    
    
    
    13.35
    %
    
    
    747
    
    
    
    12.69
    %
    
    
    513
    
    
    
    12.65
    %
    
    
    545
    
    
    
    14.39
    %Unallocated
    
    
    46
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    11Total
    
    $
    10,027
    
    
    
    100.00
    %
    
    $
    8,588
    
    
    
    100.00
    %
    
    $
    7,328
    
    
    
    100.00
    %
    
    $
    4,881
    
    
    
    100.00
    %
    
    $
    4,087
    
    
    
    100.00
    %
  56




---



##### 



DEPOSITS
TABLE 11
Average Deposits
  2010
    
    2009
    
    2008
    
    2007
    
    2006Average
    
    Average
    
    Average
    
    Average
    
    Average(000s omitted)
    
    Balance
    
    Rate
    
    Balance
    
    Rate
    
    Balance
    
    Rate
    
    Balance
    
    Rate
    
    Balance
    
    RateNon-int. bearing demand
    
    $
    55,286
    
    
    
    
    
    
    $
    53,941
    
    
    
    
    
    
    $
    53,043
    
    
    
    
    
    
    $
    55,618
    
    
    
    
    
    
    $
    55,664Interest-bearing demand
    
    
    48,988
    
    
    
    0.19
    %
    
    
    51,657
    
    
    
    0.50
    %
    
    
    51,234
    
    
    
    1.00
    %
    
    
    56,993
    
    
    
    1.69
    %
    
    
    62,060
    
    
    
    1.78
    %Savings
    
    
    64,563
    
    
    
    0.12
    %
    
    
    66,056
    
    
    
    0.37
    %
    
    
    66,778
    
    
    
    0.89
    %
    
    
    70,093
    
    
    
    1.35
    %
    
    
    79,208
    
    
    
    1.30
    %Time
    
    
    124,162
    
    
    
    3.11
    %
    
    
    157,998
    
    
    
    3.62
    %
    
    
    162,999
    
    
    
    4.32
    %
    
    
    165,495
    
    
    
    4.73
    %
    
    
    146,641
    
    
    
    4.34
    %Total
    
    $
    292,998
    
    
    
    1.70
    %
    
    $
    329,652
    
    
    
    2.26
    %
    
    $
    334,054
    
    
    
    2.90
    %
    
    $
    348,199
    
    
    
    3.33
    %
    
    $
    343,573
    
    
    
    2.95
    %
    57




---



##### 



TABLE 12
Maturity of Time Certificates of Deposit of $100,000 or More
 December 31,(000s omitted)
    
    2010
    
    2009Three months or less
    
    $
    4,638
    
    
    $
    7,552Over three through six months
    
    
    7,612
    
    
    
    11,396Over six through twelve months
    
    
    11,012
    
    
    
    17,227Over twelve months
    
    
    22,034
    
    
    
    35,244Total
    
    $
    45,296
    
    
    $
    71,419
 FEDERAL
INCOME TAXES
   LIQUIDITY
AND INTEREST RATE RISK MANAGEMENT
   58




---



##### 



Table 13Less than 1
    
    
    
    
    
    
    
    
    
    
    More than(000s omitted)
    
    Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsTime Deposits
    
    $
    104,077
    
    
    $
    50,519
    
    
    $
    45,861
    
    
    $
    7,609
    
    
    $
    88Short-term borrowings
    
    
    879
    
    
    
    879
    
    
    
    0
    
    
    
    0
    
    
    
    0FHLB advances
    
    
    954
    
    
    
    30
    
    
    
    68
    
    
    
    81
    
    
    
    775Subordinated debt
    
    
    14,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    14,000Operating leases
    
    
    253
    
    
    
    71
    
    
    
    104
    
    
    
    78
    
    
    
    0Total
    
    $
    120,163
    
    
    $
    51,499
    
    
    $
    46,033
    
    
    $
    7,768
    
    
    $
    14,863
 59




---



##### 



CAPITAL
RESOURCES
     REGULATORY
ORDERS
      60




---



##### 



CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
       61




---



##### 



OFF-BALANCE-SHEET
ITEMS
  QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   62




---



##### 



TABLE 14
 Rate Sensitivity of Financial Instruments
 Fair(000s omitted)
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
   2015
    
    
    Thereafter
    
    
    Total
    
    
    ValueRate Sensitive Assets:Fixed interest rate loans
    
    $
    63,427
    
    
    $
    34,089
    
    
    $
    27,962
    
    
    $
    6,668
    
    
    $
    4,977
    
    
    $
    18,801
    
    
    $
    155,924
    
    
    $
    144,532Average interest rate
    
    
    5.76
    %
    
    
    6.75
    %
    
    
    6.64
    %
    
    
    6.82
    %
    
    
    7.32
    %
    
    
    6.55
    %
    
    
    6.47
    %Variable interest rate loans
    
    $
    27,236
    
    
    $
    3,767
    
    
    $
    4,647
    
    
    $
    4,793
    
    
    $
    2,394
    
    
    $
    10,063
    
    
    $
    52,900
    
    
    $
    51,244Average interest rate
    
    
    4.94
    %
    
    
    4.28
    %
    
    
    4.46
    %
    
    
    4.78
    %
    
    
    5.20
    %
    
    
    5.05
    %
    
    
    4.90
    %Fixed interest rate securities
    
    $
    8,669
    
    
    $
    2,170
    
    
    $
    2,228
    
    
    $
    2,554
    
    
    $
    1,690
    
    
    $
    18,003
    
    
    $
    35,314
    
    
    $
    35,346Average interest rate
    
    
    2.79
    %
    
    
    2.90
    %
    
    
    2.91
    %
    
    
    2.88
    %
    
    
    2.59
    %
    
    
    3.20
    %
    
    
    3.00
    %Variable Interest rate securities
    
    $
    11,781
    
    
    $
    230
    
    
    $
    244
    
    
    $
    258
    
    
    $
    250
    
    
    $
    8,049
    
    
    $
    20,812
    
    
    $
    10,912Average interest rate
    
    
    0.10
    %
    
    
    5.50
    %
    
    
    5.60
    %
    
    
    5.60
    %
    
    
    6.20
    %
    
    
    4.58
    %
    
    
    2.09
    %FHLB Stock
    
    $
    740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    740
    
    
    $
    740Average interest rate
    
    
    5.00
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.00
    %Other interest bearing assets
    
    $
    21,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    21,900
    
    
    $
    21,900Average interest rate
    
    
    0.10
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.10
    %Total rate sensitive assets
    
    $
    133,753
    
    
    $
    40,256
    
    
    $
    35,081
    
    
    $
    14,273
    
    
    $
    9,311
    
    
    $
    54,916
    
    
    $
    287,590
    
    
    $
    264,674Rate Sensitive Liabilities:Interest-bearing checking
    
    $
    51,623
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    51,623
    
    
    $
    51,623Average interest rate
    
    
    0.17
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.17
    %Savings
    
    $
    64,133
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    64,133
    
    
    $
    64,133Average interest rate
    
    
    0.10
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.10
    %Time
    
    $
    50,519
    
    
    $
    36,361
    
    
    $
    9,500
    
    
    $
    4,839
    
    
    $
    2,770
    
    
    $
    86
    
    
    $
    104,075
    
    
    $
    102,640Average interest rate
    
    
    2.36
    %
    
    
    3.07
    %
    
    
    2.93
    %
    
    
    2.64
    %
    
    
    2.06
    %
    
    
    1.80
    %
    
    
    2.76
    %Short term borrowings
    
    $
    879
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    879
    
    
    $
    879Average interest rate
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.00
    %FHLB advances
    
    $
    30
    
    
    $
    33
    
    
    $
    35
    
    
    $
    39
    
    
    $
    42
    
    
    $
    775
    
    
    $
    954
    
    
    $
    1,369Average interest rate
    
    
    7.34
    %
    
    
    7.34
    %
    
    
    7.34
    %
    
    
    7.34
    %
    
    
    7.34
    %
    
    
    7.34
    %
    
    
    7.34
    %Subordinated debt
    

    $
    14,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,000
    
    
    $
    12,613Average interest rate
    
    
    3.09
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3.09


    %Total rate sensitive liabilities
    
    $
    181,184
    
    
    $
    36,394
    
    
    $
    9,535
    
    
    $
    4,878
    
    
    $
    2,812
    
    
    $
    861
    
    
    $
    235,664
    
    
    $
    233,257
 INTEREST RATE SENSITIVITY MANAGEMENT
    63




---



##### 



TABLE 15
 Gap AnalysisDecember 31, 2010Within
    
    
    Three
    
    
    One to
    
    
    AfterThree
    
    
    Months-
    
    
    Five
    
    
    Five(000s omitted)
    
    Months
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    TotalFederal Funds sold
    
    $
    21,900
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    21,900Securities
    
    
    6,132
    
    
    
    4,417
    
    
    
    9,622
    
    
    
    26,054
    
    
    
    46,225Loans
    
    
    50,048
    
    
    
    38,914
    
    
    
    89,299
    
    
    
    29,714
    
    
    
    207,975Loans Held for Sale
    
    
    850
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    850FHLB Stock
    
    
    740
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    740Total Earning Assets
    
    $
    79,670
    
    
    $
    43,331
    
    
    $
    98,921
    
    
    $
    55,768
    
    
    $
    277,690Interest Bearing Liabilities:Interest Bearing Demand Deposits
    
    $
    52,723
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    52,723Savings Deposits
    
    
    64,133
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    64,133Time Deposits Less than $100,000
    
    
    10,576
    
    
    
    16,681
    
    
    
    31,435
    
    
    
    89
    
    
    
    58,781Time Deposits Greater than $100,000
    
    
    4,638
    
    
    
    18,624
    
    
    
    22,034
    
    
    
    0
    
    
    
    45,296Short-term Borrowings
    
    
    879
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    879FHLB Advances
    
    
    0
    
    
    
    30
    
    
    
    149
    
    
    
    775
    
    
    
    954Subordinated Debt
    
    
    14,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    14,000Total Interest Bearing Liabilities
    
    $
    146,949
    
    
    $
    35,335
    
    
    $
    53,618
    
    
    $
    864
    
    
    $
    236,766Interest Rate Sensitivity GAP
    
    
    ($67,279
    )
    
    $
    7,996
    
    
    $
    45,303
    
    
    $
    54,904
    
    
    $
    40,924Cumulative Interest Rate
Sensitivity GAP
    
    
    ($67,279
    )
    
    
    ($59,283
    )
    
    
    ($13,980
    )
    
    $
    40,924Interest Rate Sensitivity GAP
    
    
    0.54
    
    
    
    1.23
    
    
    
    1.84
    
    
    
    64.55Cumulative Interest Rate
Sensitivity GAP Ratio
    
    
    0.54
    
    
    
    0.67
    
    
    
    0.94
    
    
    
    1.17
  64




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##### 



FORWARD LOOKING STATEMENTS
   FENTURA FINANCIAL, INC. COMMON STOCK
  TABLE 16
 Common Stock Data
 Market
    
    DividendsInformation
    
    PaidYears
    
    Quarter
    
    High
    
    Low
    
    Per Share (1)2009
    
    
    First Quarter
    
    $
    7.50
    
    
    $
    2.50
    
    
    $
    0.000Second Quarter
    
    
    6.00
    
    
    
    4.25
    
    
    
    0.000Third Quarter
    
    
    5.00
    
    
    
    2.00
    
    
    
    0.000Fourth Quarter
    
    
    2.40
    
    
    
    0.90
    
    
    
    0.000$
    0.0002010
    
    
    First Quarter
    
    $
    1.75
    
    
    $
    1.10
    
    
    $
    0.000Second Quarter
    
    
    4.25
    
    
    
    3.20
    
    
    
    0.000Third Quarter
    
    
    3.00
    
    
    
    1.90
    
    
    
    0.000Fourth Quarter
    
    
    1.75
    
    
    
    1.45
    
    
    
    0.000$
    0.000
 
 (1)
    
    Refer to Note 1 to the Financial Statements Dividend Restrictions for a discussion of
limitations on the Corporations ability to pay dividends. 65




---



##### 



SHAREHOLDER RETURN PERFORMANCE GRAPH
   COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG FENTURA FINANCIAL, INC., NASDAQ MARKET INDEX,
AND MIDWEST QUADRANT PINK BANK INDEX
 
 Period EndingIndex
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08
    
    
    12/31/09
    
    
    12/31/10Fentura Financial, Inc.
    
    
    100.00
    
    
    
    112.60
    
    
    
    78.69
    
    
    
    24.42
    
    
    
    4.92
    
    
    
    6.33NASDAQ Composite
    
    
    100.00
    
    
    
    110.39
    
    
    
    122.15
    
    
    
    73.32
    
    
    
    106.57
    
    
    
    125.91SNL Midwest OTC-BB and Pink Banks
    
    
    100.00
    
    
    
    105.31
    
    
    
    102.80
    
    
    
    76.62
    
    
    
    65.37
    
    
    
    69.39Fentura Financial Peer Group*
    
    
    100.00
    
    
    
    103.50
    
    
    
    62.65
    
    
    
    32.31
    
    
    
    21.84
    
    
    
    21.51
  
 *
    
    Fentura Financial Peer Group consists of
Banks in Michigan (MI) 66




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##### 



William
H. Dery, MD
Director of the Midland Family Medicine Residency
Program at Mid-Michigan Medical Center
Midland, MI
    
    Forrest A. Shook, Chairman of the
Board
Chairman
NLB Corporation 
Wixom, MIThomas
P. McKenney 
Owner/President and Attorney 
McKenney and McKenney 
Holly, MI
    
    Jo Anne Shaw
President
The Coffee Beanery
Flushing, MIBrian
P. Petty 
President and Owner 
Fenton Glass Service, Inc. 
Fenton, MI
    
    Ronald K. Rybar 
President 
The Rybar Group
Fenton, MIDouglas
W. Rotman 
Partner 
Ferris, Busscher and Zwiers, P.C. 
Holland, MI
    
    James A. Wesseling 
Senior Partner and Attorney 
Wesseling and Brackmann, P.C.
Hudsonville, MIDonald
L. Grill 
President and Chief Executive Officer 
Fentura Financial, Inc. 
Fenton, MI
    
    Douglas J. Kelley
Senior Vice President and Chief Financial Officer 
Fentura Financial, Inc. 
Fenton, MIRonald
L. Justice 
President and Chief Operating Officer 
The State Bank
Fenton, MI
    
    Daniel J. Wollschlager 
Executive Vice President and Chief Lending Officer 
The State Bank 
Fenton, MI
 67