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

# FORM 10-K

|[ X ]                                   | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--------------------------------------- | ------------------------------------------------------------------------------
|For fiscal year ended December 31, 2002
|                                        |                                                                               
|[     ]                                 | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT               
|                                        | For the transition period from_______________ to ______________               

Commission file
number 0-23550

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

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

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

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

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

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

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

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Exchange Act Rule 12-b-2).
 Yes  No X.

State the aggregate market value
of the voting and nonvoting common equity held by nonaffiliates of the registrant computed
by reference to the price at which the common equity was sold, or the average bid and
asked prices of such common equity, as of the last business day of the registrants
most recently completed second quarter.

# Aggregate Market Value
as of June 30, 2002: $54,621,284.

State the number of shares
outstanding of each of issuers classes of common equity, as of the latest
practicable date. 1,713,430 shares of Common Stock as of March 1, 2003.

# DOCUMENTS INCORPORATED
BY REFERENCE

Portions of the Fentura Financial,
Inc. Proxy Statement for its annual meeting of shareholders to be held April 30, 2003 and
its Rule 14a-3 annual report are incorporated by reference into Parts II and III.

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Fentura Bancorp, Inc.
                                          2002 Annual Report on Form 10-K
                                                 Table Of Contents

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|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------
|PART I
    Item 1.    Description of Business
    Item 2.    Description of Property
    Item 3.    Legal Proceedings
    Item 4.    Submission of Matters to a Vote of Security Holders
    Additional Item - Executive Officers of Registrant
PART II
    Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters
    Item 6.    Selected Financial Data
    Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations
    Item 7a.   Quantitative and Qualitative Disclosures About Market Risk
    Item 8.    Financial Statements and Supplementary Data
    Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
    Item 10.   Directors and Executive Officers of the Registrant
    Item 11.   Executive Compensation
    Item 12.   Security Ownership of Certain Beneficial Owners and Management
    Item 13.   Certain Relationships and Related Transactions
    Item 14.   Controls and Procedures
    Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
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# PART I

# ITEM 1.    DESCRIPTION OF
BUSINESS

# The Company

Fentura Financial,
Inc. (the Company or Fentura) is a financial holding company
headquartered in Fenton, Michigan. As of December 31, 2002, Fentura owned two banks, see
The Banks below. All information in this Item 1 is as of December 31, 2002.
The Companys subsidiary banks operate nine community banking offices offering a full
range of banking services principally to individuals, small business, and government
entities throughout mid-Michigan. At the close of business on December 31, 2002, the
Company had assets of $340 million, deposits of $296 million, and shareholders
equity of $40 million. Trust assets under management totaled $56 million.

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

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

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

# The Banks

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

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

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

TSB
is headquartered in the City of Fenton, Michigan, and considers its primary service area
to be portions of Genesee, Oakland, and Livingston counties in Michigan. As of December
31, 2002, TSB operated four offices and a operations center in the City of Fenton,
Michigan, one office in the City of Linden, Michigan, one office in the Village of Holly,
Michigan, and two offices in the Township of Grand Blanc, Michigan. Its main office is
located downtown Fenton.

DSB
is headquartered in the Township of Davison, Michigan, and considers its primary service
area to be portions of Genesee and Lapeer Counties. As of December 31, 2002, DSB operated
two offices in the Township of Davison, Michigan.

As
of December 31, 2002, TSB employed 105 full time personnel, including 36 officers, and an
additional 28 part time employees. TSB considers its employee relations to be excellent.

As
of December 31, 2002, DSB employed 10 full time personnel, including 3 officers, and an
additional 7 part time employees. DSB considers its employee relations to be excellent.

# Competition

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

# Supervision and
Regulation

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

# General

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

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

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

The
Companys common stock is registered under the Securities Exchange Act of 1934, as
amended (the Exchange Act). It is therefore subject to the information, proxy
solicitation, insider trading and other restrictions and requirements of the SEC under the
Exchange Act. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act provides for numerous changes to the reporting, accounting,
corporate governance and business practices of companies as well as financial and other
professionals who have involvement with the U.S. public markets. The SEC continues to
issue new and proposed rules implementing various provisions of the Sarbanes-Oxley Act.

# The Company

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

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

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

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

Financial
holding companies, such as the Company, may engage in various lending, advisory, insurance
and insurance underwriting, securities underwriting, dealing and market making, and
merchant banking activities (as well as those activities previously approved for bank
holding companies by the Federal Reserve Board) together with such other activities as may
be determined by the Federal Reserve Board (in coordination with other regulatory
authorities) to be financial in nature, incidental to any such financial activity, or
complementary to any such financial activity, and which do not pose a substantial risk to
the safety or soundness of depository institutions or the financial system generally.

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In
order to maintain the benefits and flexibility of being a financial holding company, each
of the Companys subsidiary depository institutions must continue to be
well-capitalized and well-managed under applicable regulatory
standards and each subsidiary depository institution must maintain at least a satisfactory
or above Community Reinvestment Act rating.

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

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

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

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

# The Banks

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

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

The
Federal Deposit Insurance Act (FDIA) requires the FDIC to establish assessment
rates at levels which will maintain the Deposit Insurance Fund at a mandated reserve ratio
of not less than 1.25% of estimated insured deposits. For several years, the BIF reserve
ratio has been at or above the mandated ratio and assessments have ranged from 0% of
deposits for institutions in the lowest risk category to .27% of deposits in the highest
risk category.

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

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

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

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

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

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

As
of December 31, 2002, each of the Banks ratios exceeded minimum requirements for the
well capitalized category.

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

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

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

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

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

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

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

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

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

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

# ITEM 2.     DESCRIPTION OF
PROPERTY

The
Companys executive offices are located at 175 North Leroy Street, Fenton, Michigan,
which is also the main office of The State Bank. The State Bank also has the following
branches in Fenton: a branch at 15095 Silver Parkway, a branch at 18005 Silver Parkway,
and a loan office at 101 North Leroy Street. The State Banks other branches are
located in Linden, Michigan, at 107 Main Street; Holly, Michigan, at 4043 Grange Hall
Road; Grand Blanc, Michigan at 7606 S Saginaw and at 8185 Holly Road. The State Bank has
an operations center at 3202 Owen Road in Fenton, Michigan. Davison State Bank is
headquartered in Davison, Michigan, at 625 S. State with one branch location at 8503
Davison Road. The Company owns all of its properties with the exception of the Holly, the
branch at 8503 Davison Road in Davison, the branch at 8185 Holly Road in Grand Blanc and
the branch at 18005 Silver Parkway facilities, which are leased from third parties.

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

# ITEM 3.     LEGAL PROCEEDINGS

From
time to time, the Company and its subsidiaries are parties to various legal proceedings
incident to their business. At December 31, 2002, there were no legal proceedings which
management anticipates would have a material adverse effect on the Company.

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

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

# ADDITIONAL ITEM 
EXECUTIVE OFFICERS OF REGISTRANT

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

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

| | Donald
L. Grill(age 54) was appointed as President and Chief Executive Officer of the
Company and of TSB in late 1996. From 1983 to 1996, Mr. Grill was employed by First of
America Bank Corporation and served as President and Chief Executive Officer of First of
America Bank  Frankenmuth.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Ronald
L. Justice (age 38) is the Chief Financial Officer and Secretary of the Company. Mr.
Justice was promoted to Senior Vice President and Chief Financial Officer of TSB in 1999
and prior to that served as Chief Financial Officer and Vice President since 1995. Prior
to that Mr. Justice held other positions with TSB.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Robert
E. Sewick (age 53) is Senior Vice President and Senior Loan Officer of TSB. Mr. Sewick
was appointed to that position in June of 1999. Mr. Sewick has 29 years of banking
experience, most recently as Senior Vice President/Regional Credit Officer of Huntington
National Bank for Western Michigan.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | John
A. Emmendorfer, Jr. (age 40) was appointed President and Chief Executive Officer of
Davison on February 24, 2000. Prior to that time Mr. Emmendorfer was an employee of TSB
from 1988 to 1999 and most recently served as TSBs Vice President and Director of
Commercial Lending.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# PART II

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

The market
and dividend information required by this item appears under the caption Fentura
Financial, Inc. Common Stock and Table 15 on page 50 under the title
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, of the Companys 2002 Rule 14a-3 annual report, and is incorporated
herein by reference.

The
holders of record information required by this item appears under the caption Stock
Ownership Information on page 4 of the Companys 2003 Notice of Annual Meeting
of Shareholders and Proxy Statement, and is incorporated herein by reference.

10

---

# ITEM 6.    SELECTED
FINANCIAL DATA

The
information required by this item appears under the title MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, appearing
in Table 1 on page 34 of the Companys 2002 Rule 14a-3 annual report, and is
incorporated herein by reference.

# ITEM 7.   
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF
OPERATIONS

The
information required by this item appears under the title MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, appearing
on pages 34 through 50 of the Companys 2002 Rule 14a-3 annual report, and is
incorporated herein by reference.

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

The
information required by this item appears under the headings Liquidity and Interest
Rate Risk Management on pages 46 and 47 and Quantitative and Qualitative
Disclosure About Market Risk on page 47 under the title MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS of the
Companys 2002 Rule 14a-3 annual report, and is incorporated herein by reference.

# ITEM 8.     FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

The
consolidated financial statements of the Company and Report of Crowe, Chizek and Company
LLP, Independent Auditors appear on pages 1 through 33 of the Financial Statements portion
of the Companys 2002 Rule 14a-3 annual report, and are incorporated herein by
reference.

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

None

# PART III

# ITEM 10.     DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT

The
Companys Executive officers are identified in Additional Item in Part I
of this Report on Form 10-K. The other information required by this item appears under the
captions 2003 Election of Directors, The Corporations Board of
Directors, Committees of the Corporation Board, and Compliance
with Section 16 Reporting on pages 3, 4, 5, 6, and 14, respectively, of the
Companys 2003 Notice of Annual Shareholders Meeting and Proxy Statement, and is
incorporated herein by reference.

The
Board of Directors of the Company has determined that Peggy L. Haw-Jury, a director and
member of the Audit Committee, qualifies as an Audit Committee financial
expert as defined in rules adopted by the Securities and Exchange Commission
pursuant to the Sarbanes-Oxley Act of 2002.

The
Board of Directors of the Company has adopted a Code of Ethics which details principles
and responsibilities governing ethical conduct for all Company directors and executive
officers.

# ITEM 11.     EXECUTIVE
COMPENSATION

The information
required by this item appears under the captions Executive Compensation,
Directors Compensation, Retirement and Change in Control
Arrangements and Shareholder Return Performance Graph on pages 6, 9, 10
and 11 and 13, respectively, of the Companys 2003 Notice of Annual Shareholders
Meeting and Proxy Statement, and is incorporated herein by reference.

11

---

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

The
information required by this item appears under the caption Stock Ownership of
Directors, Executive Officers and Certain Major Shareholders on page 4 of the
Companys 2003 Notice of Annual Shareholders Meeting and Proxy Statement, and is
incorporated herein by reference.

Securities
Authorized for Issuance Under Equity Compensation Plans. The Company had the following
equity compensation plans at December 31, 2002:

# EQUITY COMPENSATION
PLAN INFORMATION

`Number of securities
                                                                                            remaining available for
                                                                                             future issuance under
                                                                                              equity compensation
                                  Number of securities to         Weighted-average             plans (excluding
                                  be issued upon exercise         exercise price of         securities reflected in
                                  of outstanding options         outstanding options              column (1))
                                  ----------------------         -------------------              -----------
        Plan Category                       (1)                          (2)                          (3)
        -------------                       ---                          ---                          ---

Equity compensation
plans approved by
security holders                           22,770                       $26.21                       91,470
                                --------------------------------------------------------------------------------------

Equity compensation
plans not approved by
security holders                                0                            0                            0
                                --------------------------------------------------------------------------------------

Total                                      22,770                       $26.21                       91,470
                                --------------------------------------------------------------------------------------`

These
equity compensation plans are more fully described in Note 10 to the Consolidated
Financial Statements.

# ITEM 13.     CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

The
information required by this item appears under the caption Other Information 
Transactions with Certain Interested Persons on page 14 of the Companys 2003
Notice of Annual Shareholders Meeting and Proxy Statement, and is incorporated herein by
reference.

# ITEM 14.     CONTROLS AND
PROCEDURES

|(a) | Evaluation of Disclosure Controls and Procedures.
|--- | -------------------------------------------------

The
Companys Chief Executive Officer and Chief Financial Officer, after evaluating the
effectiveness of the Companys disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date within 90 days of the filing date
of this Form 10-K Annual Report (the Evaluation Date), have concluded that as
of the Evaluation Date, the Companys disclosure controls and procedures were
adequate and effective to ensure that material information relating to the Company would
be made known to them by others within the Company, particularly during the period in
which this Form 10-K Annual Report was being prepared.

12

---

|(b) | Changes in Internal
Controls.
|--- | -----------------------------

There
were no significant changes in the Companys internal controls or in other factors
that could significantly affect internal controls subsequent to the date of the most
recent evaluation, nor any significant deficiencies or material weaknesses in such
internal controls requiring corrective actions. As a result, no corrective actions were
taken.

ITEM 15.     EXHIBITS. FINANCIAL STATEMENT SCHEDULES,  AND REPORTS ON FORM 8-K

|(a) | 1.                                                                                                                                                                                                                                                                                                  | Financial Statements:
The following  consolidated  financial  statements of the Company and Report of Crowe, Chizek and
Company LLP, Independent Auditors are incorporated by reference under Item 8 "Financial
Statements and Supplementary Data" of this document:
     Consolidated Balance Sheets
     Consolidated Statements of Income
     Consolidated Statements of Comprehensive Income
     Consolidated Statements of Changes in Stockholders' Equity
     Consolidated Statements of Cash Flows
     Notes to the Consolidated Financial statements
     Report of Crowe Chizek LLP, Independent Auditors
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 2.                                                                                                                                                                                                                                                                                                  | Financial Statement Schedules
All schedules are omitted -- see Item 14(d) below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | 3.                                                                                                                                                                                                                                                                                                  | Exhibits:
The exhibits listed on the Exhibit Index following the signature page of
this report are filed herewith and are incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(b) | Report on Form 8-K
A form 8-K Report dated  December 5, 2002 was filed to report an  extraordinary  dividend  declaration  by
         the Registrant.                                                                                                                                             
|(c) | Exhibits:
The "Exhibit Index" follows the signature page of this report and is incorporated herein by reference.                                                                                                                                                                                   
|(d) | Financial Statement Schedules:
All financial  statement  schedules  normally  required by Article 9 of  Regulation  S-X are omitted since
         they are  either  not  applicable  or the  required  information  is shown in the  consolidated  financial
         statements or notes thereto.

13

---

# Signatures

In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, dated March 25, 2003.

| | Fentura Financial, Inc.
          (Registrant)
| | ----------------------------------------------
| | By                                            
| | By                                            

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

|Signature                                               |  | Capacity                               |  | Date          
|------------------------------------------------------- |  | -------------------------------------- |  | --------------
|/s/ Russell H. VanGilder, Jr.
Russell H. VanGilder, Jr. |  | Chairman of the Boardand Director      |  | March 25, 2003
|/s/ Forrest A. Shook
Forrest A. Shook                   |  | Vice Chairman of the Boardand Director |  | March 25, 2003
|/s/ Donald L. Grill
Donald L. Grill                     |  | Director                               |  | March 25, 2003
|/s/ Peggy L. Haw Jury
Peggy L. Haw Jury                 |  | Director                               |  | March 25, 2003
|/s/ J. David Karr
J. David Karr                         |  | Director                               |  | March 25, 2003
|/s/ Thomas P. McKenney
Thomas P. McKenney               |  | Director                               |  | March 25, 2003
|/s/ Brian P. Petty
Brian P. Petty                       |  | Director                               |  | March 25, 2003
|/s/ Ronald L. Justice
Ronald L. Justice                 |  | Chairman of the Board
and Director     |  | March 25, 2003

14

---

# CERTIFICATIONS

I, Donald L. Grill, certify that:

|1. | I have reviewed this annual report on Form 10-K of Fentura Financial, Inc.;
|-- | ---------------------------------------------------------------------------

|2. | Based on my knowledge, this annual report does not contain any untrue statement
               of material fact or omit to state a material fact necessary to make the
               statements made, in light of the circumstances under which such statements were
               made, not misleading with respect to the period covered by this report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
               included in this annual report, fairly present in all material respects the
               financial condition, results of operations and cash flows of the registrant as
               of, and for, the periods presented in this Annual Report;
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
               establishing and maintaining disclosure controls and procedures (as defined in
               Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | designed such disclosure controls and procedures to ensure that material
          information relating to the registrant, including its consolidated subsidiaries,
          is made known to us by others within those entities, particularly during the
          period in which this annual report is being prepared;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the registrants disclosure controls and
          procedures as of a date within 90 days prior to the filing date of this annual
          report (the Evaluation Date); and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | presented in this annual report our conclusions about the effectiveness of the
          disclosure controls and procedures based on our evaluation as of the Evaluation
          Date;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
               our most recent evaluation, to the registrants auditors and the audit
               committee of registrants board of directors (or persons performing the
               equivalent function):
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies in the design or operation of internal controls
          which could adversely affect the registrants ability to record, process,
          summarize and report financial data and have identified for the
          registrants auditors any material weaknesses in internal controls; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrants internal controls; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officers and I have indicated in this
               annual report whether or not there were significant changes in internal controls
               or in other factors that could significantly affect internal controls subsequent
               to the date of our most recent evaluation, including any corrective actions with
               regard to significant deficiencies and material weaknesses.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: March 25, 2003

| | /s/ Donald L. Grill
Donald L. Grill
Chief Executive Officer
| | -----------------------------------------------------------

15

---

I, Ronald L. Justice, certify that:

|1. | I have reviewed this annual report on Form 10-K of Fentura Financial, Inc.;
|-- | ---------------------------------------------------------------------------

|2. | Based on my knowledge, this annual report does not contain any untrue statement
               of material fact or omit to state a material fact necessary to make the
               statements made, in light of the circumstances under which such statements were
               made, not misleading with respect to the period covered by this report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
               included in this annual report, fairly present in all material respects the
               financial condition, results of operations and cash flows of the registrant as
               of, and for, the periods presented in this Annual Report;
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
               establishing and maintaining disclosure controls and procedures (as defined in
               Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | designed such disclosure controls and procedures to ensure that material
          information relating to the registrant, including its consolidated subsidiaries,
          is made known to us by others within those entities, particularly during the
          period in which this annual report is being prepared;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the registrants disclosure controls and
          procedures as of a date within 90 days prior to the filing date of this annual
          report (the Evaluation Date); and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | presented in this annual report our conclusions about the effectiveness of the
          disclosure controls and procedures based on our evaluation as of the Evaluation
          Date;
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
               our most recent evaluation, to the registrants auditors and the audit
               committee of registrants board of directors (or persons performing the
               equivalent function):
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies in the design or operation of internal controls
          which could adversely affect the registrants ability to record, process,
          summarize and report financial data and have identified for the
          registrants auditors any material weaknesses in internal controls; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrants internal controls; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | The registrants other certifying officers and I have indicated in this
               annual report whether or not there were significant changes in internal controls
               or in other factors that could significantly affect internal controls subsequent
               to the date of our most recent evaluation, including any corrective actions with
               regard to significant deficiencies and material weaknesses.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: March 25, 2003

| | /s/ Ronald L. Justice
Ronald L. Justice
Chief Financial Officer
| | ---------------------------------------------------------------

16

---

# FENTURA FINANCIAL, INC. 2002 Annual Report on
Form 10-K EXHIBIT INDEX

|Exhibit      No. | Exhibit                                                                                                                                                                                                                                          
|---------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                 |                                                                                                                                                                                                                                                  
|3(i)             | Articles  of  Incorporation  of  Fentura  Bancorp,  Inc.  (Incorporated  by  reference  to Form 10-SB
Registration Number 0-23550)                                                                                                               
|                 |                                                                                                                                                                                                                                                  
|3(ii)            | Bylaws of Fentura Bancorp, Inc. (Incorporated by reference to Form 10-SB Registration Number 0-23550)                                                                                                                                            
|                 |                                                                                                                                                                                                                                                  
|3(iii)           | Amendment to the Articles of  Incorporation of Fentura  Bancorp,  Inc.  (Incorporated by reference to
Form 10-K Filed March 20, 2001)                                                                                                            
|                 |                                                                                                                                                                                                                                                  
|3(iv)            | Amendment to the Articles of Incorporation of Fentura Financial,  Inc.  (Incorporated by reference to
                Exhibit 3 filed with Form 10-Q for the quarter ended March 31, 2002)                                                       
|                 |                                                                                                                                                                                                                                                  
|4(i)             | Amended and Restated Automatic Dividend  Reinvestment Plan (Incorporated by reference to Registration
Statement on Form S-3 - Registration No. 333-75194)                                                                                        
|                 |                                                                                                                                                                                                                                                  
|10.7             | Lease of Davison  Branch Bank Site between The State Bank and VG's Food Center,  Inc. dated April 27,
1993 (Incorporated by reference to Form 10-SB Registration Number 0-23550)                                                                 
|                 |                                                                                                                                                                                                                                                  
|10.10            | Lease of Fenton Silver  Parkway  Branch site between The State Bank and VG's Food Centers dated March
                26, 1996 (Incorporated by reference to Form 10Q-SB filed on May 2, 1996)                                                   
|                 |                                                                                                                                                                                                                                                  
|10.11            | Lease of Davison  (second)  Branch site between The State Bank and VG'S Food Centers  dated  November
                12, 1996 (Incorporated by reference to Form 10K-SB filed on March 20, 1997)                                                
|                 |                                                                                                                                                                                                                                                  
|10.12            | Directors Stock Purchase Plan (Incorporated by reference to Form 10K-SB filed on March 17, 1996)                                                                                                                                                 
|                 |                                                                                                                                                                                                                                                  
|10.13            | Non-Employee  Director Stock Option Plan (Incorporated by reference to Form 10K-SB filed on March 17,
                1996)                                                                                                                      
|                 |                                                                                                                                                                                                                                                  
|10.14            | Form of Non-Employee Director Stock Option Agreement  (Incorporated by reference to Form 10Q-SB filed
                on May 2, 1996)                                                                                                            
|                 |                                                                                                                                                                                                                                                  
|10.15            | Retainer Stock Plan for Directors (Incorporated by reference to Form 10K-SB filed on March 17, 1996)                                                                                                                                             
|                 |                                                                                                                                                                                                                                                  
|10.16            | Employee Stock Option Plan(Incorporated by reference to Form 10K-SB filed on March 17, 1996)                                                                                                                                                     
|                 |                                                                                                                                                                                                                                                  
|10.17            | Form of Employee  Stock  Option Plan  Agreement  (Incorporated  by  reference to Form 10K-SB filed on
                March 17, 1996)                                                                                                            
|                 |                                                                                                                                                                                                                                                  
|10.18            | Executive Stock Bonus Plan (Incorporated by reference to Form 10K-SB filed on March 17, 1996)                                                                                                                                                    
|                 |                                                                                                                                                                                                                                                  
|10.19            | Stock  Purchase  Plan between The State Bank and Donald E. Johnson,  Jr.,  Mary Alice J. Heaton,  and
                Linda J. LeMieux dated  November 17, 1996  (Incorporated  by reference to Form 10K-SB filed March 20,
                1997)

17

---

|Exhibit      No. | Exhibit                                                                                                                                                                                                                                                                                                                         
|---------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                 |                                                                                                                                                                                                                                                                                                                                 
|10.20            | Severance  Compensation  Agreement  between the  Registrant  and Donald L. Grill dated March 20, 1997
(Incorporated by reference to Form 10Q-SB filed May 12, 1997)                                                                                                                                                             
|                 |                                                                                                                                                                                                                                                                                                                                 
|13               | Rule 14a-3 Annual  Report to Security  Holders  (This  report,  except for those  portions  which are
                expressly  incorporated  by  reference  in this  filing,  is  furnished  for the  information  of the
                Securities and Exchange Commission and is not deemed filed as a part of this Report)
|                 |                                                                                                                                                                                                                                                                                                                                 
|14               | Code of Ethics for Directors and Executive Officers (Filed herewith)                                                                                                                                                                                                                                                            
|                 |                                                                                                                                                                                                                                                                                                                                 
|21.1             | Subsidiaries of the Registrant (Filed herewith)                                                                                                                                                                                                                                                                                 
|                 |                                                                                                                                                                                                                                                                                                                                 
|23.1             | Consent of Independent Accountants (Filed herewith)                                                                                                                                                                                                                                                                             
|                 |                                                                                                                                                                                                                                                                                                                                 
|23.2             | Consent of Independent Accountants (Filed herewith)                                                                                                                                                                                                                                                                             
|                 |                                                                                                                                                                                                                                                                                                                                 
|24               | Powers of Attorney.  Contained on the signature page of this report.                                                                                                                                                                                                                                                            
|                 |                                                                                                                                                                                                                                                                                                                                 
|99.1             | Certificate of Chief  Executive  Officer of Fentura  Financial,  Inc.  pursuant to 18 U.S.C.  Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                               
|                 |                                                                                                                                                                                                                                                                                                                                 
|99.2             | Certificate of Chief  Financial  Officer of Fentura  Financial,  Inc.  pursuant to 18 U.S.C.  Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                               

18

---

# Exhibit 13

# Rule 14a-3 annual
report

FENTURA FINANCIAL, INC.FINANCIAL STATEMENTS
AND REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS 
December 31, 2002, 2001
and 2000 
and 
MANAGEMENTS
DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



---

FENTURA FINANCIAL, INC.

CONTENTS

|                                                                                            |      
|------------------------------------------------------------------------------------------- | -----
|REPORT OF INDEPENDENT AUDITORS                                                              | 3    
|                                                                                            |      
|CONSOLIDATED FINANCIAL STATEMENTS                                                           |      
|                                                                                            |      
|CONSOLIDATED BALANCE SHEETS                                                                 | 5    
|                                                                                            |      
|CONSOLIDATED STATEMENTS OF INCOME                                                           | 6    
|                                                                                            |      
|CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                                             | 7    
|                                                                                            |      
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY                                  | 8    
|                                                                                            |      
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                       | 9    
|                                                                                            |      
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                  | 10-33
|                                                                                            |      
|MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
     CONDITIONS AND RESULTS OF OPERATIONS | 34-50



---

REPORT OF INDEPENDENT
AUDITORS

Board of Directors and
StockholdersFentura Financial, Inc.Fenton, Michigan

We have audited the accompanying
consolidated balance sheets of Fentura Financial, Inc. as of December 31, 2002 and
2001, and the related consolidated statements of income, statements of comprehensive
income, changes in stockholders equity and cash flows for the years then ended.
These financial statements are the responsibility of the Corporations management.
Our responsibility is to express an opinion on these financial statements based on our
audits. The consolidated statements of income and cash flows of the Corporation for the
period ended December 31, 2000 were audited by other auditors whose report dated January
26, 2001 expressed an unqualified opinion on those statements.

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

In our opinion, the 2002 and 2001
consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Fentura Financial, Inc. as of December 31, 2002
and 2001, and the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of America.

|                                        | Crowe, Chizek and Company LLP
|--------------------------------------- | -----------------------------
|Grand Rapids, Michigan
February 6, 2003 |                              

3.

---

# Report of Independent
Certified Public Accountants

Stockholders and Board of
DirectorsFentura Financial, Inc.

We have audited the accompanying
consolidated statements of income, comprehensive income, stockholders equity, and
cash flows for the year ended December 31, 2000 of Fentura Financial, Inc. (formerly
Fentura Bancorp, Inc.) These financial statements are the responsibility of the
Corporations management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
consolidated results of operations and cash flows of Fentura Financial, Inc. and for the
year ended December 31, 2000, in conformity with accounting principles generally
accepted in the United States of America.

/s/ Grant Thornton LLP

Southfield, MichiganJanuary
26, 2001

|                                                            
|------------------------------------------------------------
|See accompanying notes to consolidated financial statements.
|4.                                                          

---

|FENTURA FINANCIAL, INC. 
CONSOLIDATED BALANCE SHEETS 
December 31, 2002 and 2001 
(000s omitted except per share data)
|-----------------------------------------------------------------------------------------------------------------------

`2002            2001
                                                                                           ----            ----
ASSETS
     Cash and due from banks                                                          $     20,262     $     19,038
     Federal funds sold                                                                     10,300           22,800
                                                                                      ------------     ------------
         Total cash and cash equivalents                                                    30,562           41,838

     Securities available for sale, at fair value                                           48,981           25,792
     Securities held to maturity (fair value of $14,051 at
       December 31, 2002 and $13,508 at December 31, 2001)                                  13,722           13,375

     Loans held for sale                                                                     5,509            1,710
     Loans, net of allowance for loan losses of
       $3,184 and $3,125 in 2002 and 2001, respectively                                    221,037          211,005

     Bank premises and equipment                                                             9,754            8,532
     Accrued interest receivable                                                             1,595            1,445
     Bank owned life insurance                                                               6,234            2,510
     Federal Home Loan Bank stock                                                              822              822
     Other assets                                                                            2,267            2,061
                                                                                      ------------     ------------

                                                                                      $    340,483     $    309,090
                                                                                      ============     ============
LIABILITIES AND STOCKHOLDERS' EQUITY
     Deposits:
         Noninterest-bearing deposits                                                 $     44,875     $     42,524
         Interest-bearing deposits                                                         250,994          222,746
                                                                                      ------------     ------------
              Total deposits                                                               295,869          265,270

     Short-term borrowings                                                                   1,500            2,100
     Federal Home Loan Bank Advances                                                         1,124            1,138
     Accrued taxes, interest and other liabilities                                           2,062            2,149
                                                                                      ------------     ------------
         Total liabilities                                                                 300,555          270,657

Stockholders' equity
     Common stock - $0 par value 1,722,126
       shares issued - 2002; 1,735,496 - 2001                                               30,236           30,664
     Retained earnings                                                                       9,395            7,677
     Accumulated other comprehensive income                                                    297               92
                                                                                      ------------     ------------
                                                                                            39,928           38,433
                                                                                      ------------     ------------

                                                                                      $    340,483     $    309,090
                                                                                      ============     ============`

|                                                            
|------------------------------------------------------------
|See accompanying notes to consolidated financial statements.
|5.                                                          

---

|FENTURA FINANCIAL, INC. 
CONSOLIDATED STATEMENTS OF INCOME  
Years ended December 31, 2002, 2001 and 2000 
(000s omitted except per share data)
|------------------------------------------------------------------------------------------------------------------------------------------------

`2002              2001              2000
                                                                     ----              ----              ----
Interest income
     Loans, including fees                                     $       15,924     $       17,555    $        18,710
     Securities:
         Taxable                                                        1,046              2,426              3,350
         Tax-exempt                                                       644                660                624
     Short-term investments                                               338                926                643
                                                               --------------     --------------    ---------------
         Total interest income                                         17,952             21,567             23,327

Interest expense
     Deposits                                                           5,623              8,958              9,266
     Short-term borrowings                                                 16                 47                 86
     Federal Home Loan Bank Advances                                       83                 86                538
                                                               --------------     --------------    ---------------
         Total interest expense                                         5,722              9,091              9,890
                                                               --------------     --------------    ---------------

Net interest income                                                    12,230             12,476             13,437

Provision for loan losses                                                 426                751                584
                                                               --------------     --------------    ---------------

Net interest income after provision for loan losses                    11,804             11,725             12,853

Noninterest income
     Service charges on deposit accounts                                2,594              2,286              1,915
     Gain on sale of mortgages                                          1,009                659                179
     Mortgage servicing                                                     0                  0                631
     Trust income                                                         540                566                695
     Gain on sale of securities                                             0                674
     Other income and fees                                              1,251              1,178              1,108
                                                               --------------     --------------    ---------------
         Total noninterest income                                       5,394              5,363              4,528

Noninterest expense
     Salaries and employee benefits                                     6,454              5,988              5,801
     Occupancy                                                          1,061                886                784
     Furniture and equipment                                            1,563              1,411              1,552
     Office supplies                                                      305                300                311
     Loan and collection                                                  183                178                289
     Advertising and promotional                                          315                320                263
     Other professional services                                        1,100              1,144              1,000
     Other general and administrative                                   1,272              1,473              1,436
                                                               --------------     --------------    ---------------
         Total noninterest expense                                     12,253             11,700             11,436
                                                               --------------     --------------    ---------------

Net income before taxes                                                 4,945              5,388              5,945

Applicable income taxes                                                 1,479              1,611              1,729
                                                               --------------     --------------    ---------------

Net income                                                     $        3,466     $        3,777    $         4,216
                                                               ==============     ==============    ===============

Per share:
     Earnings - basic                                            $    2.00          $   2.18           $   2.46
     Earnings - diluted                                               2.00              2.18               2.45`

|                                                            
|------------------------------------------------------------
|See accompanying notes to consolidated financial statements.
|6.                                                          

---

|FENTURA FINANCIAL, INC. 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME  
Years ended December 31, 2002, 2001 and 2000 
(000s omitted except per share data)
|--------------------------------------------------------------------------------------------------------------------------------------------------------------

`2002            2001           2000
                                                                            ----            ----           ----
Net income                                                               $     3,466    $     3,777     $     4,216

Other comprehensive income:
     Unrealized holding gains on available
       for sale securities                                                       311          1,139           1,318
     Less: reclassification adjustment for gains and
       losses later recognized in income                                           0            674               0
                                                                         -----------    -----------     -----------
         Net unrealized gains                                                    311            465           1,318
     Tax effect on unrealized holding gains                                     (106)          (158)           (448)
                                                                         -----------    -----------     -----------
         Other comprehensive income, net of tax                                  205            307             870
                                                                         -----------    -----------     -----------

Comprehensive income                                                     $     3,671    $     4,084     $     5,086
                                                                         ===========    ===========     ===========`

|                                                            
|------------------------------------------------------------
|See accompanying notes to consolidated financial statements.
|7.                                                          

---

|FENTURA FINANCIAL, INC. 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY 
Years ended December 31, 2002, 2001 and 2000 
(000s omitted except per share data)
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Accumulated
                                                                                                                  Other             Total
                                                                              Common          Retained        Comprehensive     Stockholders'
                                                                               Stock          Earnings        Income (Loss)        Equity
                                                                               -----          --------        -------------        ------
Balance, January 1, 2000                                                   $    21,872       $    11,078        $   (1,085)      $   31,865
Net Income                                                                                         4,216                              4,216

Cash Dividends ($.97 per share)                                                      0            (1,659)                0           (1,659)

Issuance of shares under stock purchase plans                                      470                 0                 0              470

Stock repurchase                                                                    (1)               (7)                0               (8)

Stock dividend                                                                   7,980            (7,980)                0                0

Other comprehensive income (net of tax)                                              0                 0               870              870
                                                                           -----------       -----------        ----------       ----------
Balance, December 31, 2000                                                      30,321             5,648              (215)          35,754

Net Income                                                                           0             3,777                 0            3,777

Cash Dividends ($1.01 per share)                                                     0            (1,748)                0           (1,748)

Issuance of shares under stock purchase plans                                      343                 0                 0              343

Other comprehensive income (net of tax)                                              0                 0               307              307
                                                                           -----------       -----------        ----------       ----------
Balance, December 31, 2001                                                      30,664             7,677                92           38,433

Net Income                                                                           0             3,466                 0            3,466

Cash Dividends ($1.01 per share)                                                     0            (1,748)                0           (1,748)

Stock repurchase (23,259 shares)                                                  (719)                0                 0             (719)

Issuance of shares under stock purchase plans                                      291                 0                 0              291

Other comprehensive income (net of tax)                                              0                 0               205              205
                                                                           -----------       -----------        ----------       ----------
Balance, December 31, 2002                                                 $    30,236       $     9,395        $      297       $   39,928
                                                                           ===========       ===========        ==========       ==========`

|                                                            
|------------------------------------------------------------
|See accompanying notes to consolidated financial statements.
|8.                                                          

---

|FENTURA FINANCIAL, INC. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
Years ended December 31, 2002, 2001 and 2000 
(000s omitted except per share data)
|---------------------------------------------------------------------------------------------------------------------------------------------------

`2002            2001           2000
                                                                            ----            ----           ----
Cash flows from operating activities
     Net income                                                          $     3,466     $    3,777     $     4,216
     Adjustments to reconcile net income to
       net cash from operating activities
         Depreciation and amortization                                         1,599            968             941
         Deferred income taxes (benefit)                                         (88)          (170)           (100)
         Provision for loan losses                                               426            751             584
         Gain on sale of mortgage servicing rights                                 0              0            (467)
         Gain on sale of loans                                                (1,009)          (659)           (179)
         Loans originated for sale                                           (62,672)       (48,585)         (9,494)
         Proceeds from the sale of loans                                      59,882         47,721           9,501
         Gain on sales of securities                                               0           (674)              0
         Net change in accrued interest receivable
           and other assets                                                     (580)           440            (237)
         Net change in accrued interest payable and
           other liabilities                                                    (105)          (377)            915
                                                                         -----------     ----------     -----------
              Net cash from operating activities                                 919          3,192           5,680

Cash flows from investing activities
     Proceeds from maturities of securities - HTM                              5,233          4,054               0
     Proceeds from maturities of securities - AFS                              7,810          8,620           6,539
     Proceeds from calls of securities - HTM                                     325              0               0
     Proceeds from calls of securities - AFS                                  10,285         20,596               0
     Proceeds from sales of securities - AFS                                       0         27,274               0
     Purchases of securities - HTM                                            (5,925)        (4,235)              0
     Purchases of securities - AFS                                           (41,517)       (28,487)         (3,995)
     Originations of loans, net of principal repayments                      (10,458)       (19,580)         (4,390)
     Proceeds from sale of mortgage servicing rights                               0              0             887
     Purchase of bank owned life insurance                                    (3,500)             0               0
     Acquisition of premises and equipment                                    (2,257)        (2,921)         (1,336)
                                                                         -----------     ----------     -----------
         Net cash from investing activities                                  (40,004)         5,321          (2,295)

Cash flows from financing activities
     Net change in deposits                                                   30,599         16,614           1,605
     Net change in short-term borrowings                                        (600)        (2,580)          3,315
     Repayments on advances from Federal
       Home Loan Bank                                                            (14)           (13)            (13)
     Cash dividends paid                                                      (1,748)        (1,748)         (1,659)
     Net proceeds from stock issuance and purchases                             (428)           343             462
                                                                         -----------     ----------     -----------
         Net cash from financing activities                                   27,809         12,616           3,710
                                                                         -----------     ----------     -----------

Net increase in cash and cash equivalents                                     11,276         21,129           7,095

Cash and cash equivalents at beginning of year                                41,838         20,709          13,614
                                                                         -----------     ----------     -----------
Cash and cash equivalents at end of year                                 $    30,562     $   41,838     $    20,709
                                                                         ===========     ==========     ===========
Supplemental disclosure of cash flow information
     Cash paid during the year for
         Interest                                                        $     5,909     $    8,861     $     9,652
         Income taxes                                                          1,569          1,710           1,627`

|                                                            
|------------------------------------------------------------
|See accompanying notes to consolidated financial statements.
|9.                                                          

---

|FENTURA FINANCIAL, INC. 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2002 and 2001
|-----------------------------------------------------------------------------------------------

# NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

|           
|-----------
|(Continued)
|10.        

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

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

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

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

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

|           
|-----------
|(Continued)
|11.        

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Bank owned life insurance: The
Corporation has purchased life insurance policies on certain key executives. Bank owned
life insurance is recorded at its cash surrender value, or the amount that can be
realized.

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

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

`2002              2001             2000
                                                               ----              ----             ----
Net income
         As reported                                          $3,466            $3,777           $4,216
         Deduct:  Stock-based compensation
           expense determined under a fair value
           based system                                          (20)              (10)             (45)
                                                              ------            ------           ------
         Proforma                                              3,446             3,767            4,171

Basic net income per share
         As reported                                            2.00              2.18             2.46
         Proforma                                               1.99              2.18             2.44

Diluted net income per share
         As reported                                            2.00              2.18             2.45
         Proforma                                               1.99              2.17             2.43

Weighted average fair value of options granted
     during year                                              $ 6.67            $ 8.36           $19.00`

|           
|-----------
|(Continued)
|12.        

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Proforma net income includes
compensation cost for the Corporations stock option plan based on the fair value of
the grants as of the dates of the awards consistent with the method prescribed by SFAS
123. The fair value of each option grant is estimated using the Black-Scholes
option-pricing model. Assumptions used in the model for options granted during 2000 were
as follows: an expected life of 10 years, a dividend yield of 3%, a risk free return of
6.88% and expected volatility of 52%. Assumption used in the model for options granted
during 2001 were as follows: an expected life of 6 years, a dividend yield of 3.45%, a
risk free return of 5.09% and expected volatility of 40%. Assumptions used in the model
for options granted during 2002 were as follows: an expected life of 6 years, a dividend
yield of 3.8%, a risk free return of 4.62% and expected volatility of 31%.

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

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

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

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

Newly Issued But Not Yet Effective
Accounting Standards: New accounting standards on asset retirement obligations,
restructuring activities and exit costs, operating leases, and early extinguishment of
debt were issued in 2002. Management determined that when the new accounting standards are
adopted in 2003 they will not have a material impact on the Corporations financial
condition or results of operations.

|           
|-----------
|(Continued)
|13.        

---

NOTE 1  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Restrictions on Cash: Cash on
hand or on deposit with the Federal Reserve Bank of $4,750,000 and $3,500,000 was required
to meet regulatory reserve and clearing requirements at year-end 2002 and 2001
respectively. These balances do not earn interest.

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

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

Operating Segments: While the
Corporations chief decision-makers monitor the revenue streams of the various
Corporation products and services, operations are managed and financial performance is
evaluated on a Corporate-wide basis. Accordingly, all of the Corporations financial
service operations are considered by management to be aggregated in one reportable
operating segment.

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

|           
|-----------
|(Continued)
|14.        

---

# NOTE 2  EARNINGS
PER SHARE

The factors in the earnings per share
computation follow.

`2002              2001               2000
                                                                     ----              ----               ----
     Basic
         Net income                                            $    3,466,000     $    3,777,000    $     4,216,000
                                                               ==============     ==============    ===============
         Weighted average common shares
           outstanding                                              1,731,677          1,728,983          1,712,971
                                                               --------------     --------------    ---------------
         Basic earnings per common share                       $         2.00     $         2.18    $          2.46
                                                               ==============     ==============    ===============

     Diluted
         Net income                                            $    3,466,000     $    3,777,000    $     4,216,000
     Weighted average common shares outstanding
       for basic earnings per common share                          1,731,677          1,728,983          1,712,971
     Add:  Dilutive effects of assumed exercises of
       stock options                                                    4,566              3,456              4,486
                                                               --------------     --------------    ---------------
     Average shares and dilutive potential
       common shares                                                1,736,243          1,732,439          1,717,457
                                                               ==============     ==============    ===============
     Diluted earnings per common share                         $         2.00     $         2.18    $          2.45
                                                               ==============     ==============    ===============`

Stock options for 5,737, 6,841 and
10,176 shares of common stock were not considered in computing diluted earnings per common
share for 2002, 2001 and 2000 respectively, because they were antidilutive.

|           
|-----------
|(Continued)
|15.        

---

# NOTE 3  SECURITIES

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

# Available for Sale

`Gross           Gross
                                                             Fair        Unrealized      Unrealized
                                                             Value          Gains          Losses
                                                             -----          -----          ------
2002
----
     U.S. Government and federal agency                   $    29,027    $       144    $         0
     State and municipal                                        9,388            100            (33)
     Mortgage-backed                                            7,093            192              0
     Corporate                                                  3,078             47              0
     Equity securities                                            395              0              0
                                                          -----------    -----------    -----------

                                                          $    48,981    $       483    $       (33)
                                                          ===========    ===========    ===========
2001
----
     U.S. Government and federal agency                   $     8,818    $        56    $        (5)
     State and municipal                                        3,679              3            (34)
     Mortgage-backed                                            7,870             65            (10)
     Corporate                                                  5,425             64              0
                                                          -----------    -----------    -----------

                                                          $    25,792    $       188    $       (49)
                                                          ===========    ===========    ===========`

# Held to Maturity

`Gross            Gross
                                                           Amortized    Unrecognized    Unrecognized       Fair
                                                             Cost           Gains           Losses         Value
                                                             ----           -----           ------         -----
2002
----
     State and municipal                                  $    13,722    $       332     $       (3)    $    14,051
2001                                                      ===========    ===========     ===========    ===========
----
     State and municipal                                  $    13,375    $       174     $      (41)    $    13,508
                                                          ===========    ===========     ===========    ===========`

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

`2002            2001           2000
                                                                            ----            ----           ----

     Proceeds                                                            $         0    $    27,274    $          0
     Gross gains                                                                   0            674               0
     Gross losses                                                                  0              0               0`

|           
|-----------
|(Continued)
|16.        

---

NOTE 3  SECURITIES
(Continued)

| | Contractual
maturities of debt securities at year-end 2002 were as follows. Securities not due at a
single maturity date, primarily mortgage-backed securities, and equity securities are
shown separately (in thousands).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

`Held to Maturity                Available for Sale
                                                               ----------------                ------------------
                                                           Amortized        Fair                      Fair
                                                              Cost         Value                     Value
                                                              ----         -----                     -----

     Due in one year or less                              $     6,111    $     6,125              $     8,641
     Due from one to five years                                 3,547          3,720                   26,800
     Due from five to ten years                                 2,267          2,366                    2,377
     Due after ten years                                        1,797          1,840                    3,675
     Mortgage-backed securities                                     0              0                    7,093
     Equity securities                                              0              0                      395
                                                          -----------    -----------              -----------

                                                          $    13,722    $    14,051              $    48,981
                                                          ===========    ==========               ===========`

Securities
pledged at year-end 2002 and 2001 had a carrying amount of $2,065,000 and $2,123,000 and
were pledged to secure public deposits and repurchase agreements.

NOTE
4  LOANS

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

`2002            2001
                                                                                          ----            ----

     Commercial                                                                       $    129,562     $    118,894
     Real estate - construction                                                             27,032           25,434
     Real estate - mortgage                                                                 11,944           11,158
     Consumer                                                                               55,683           58,644
                                                                                      ------------     ------------
                                                                                           224,221          214,130
     Less allowance for loan losses                                                          3,184            3,125
                                                                                      ------------     ------------

                                                                                      $    221,037     $    211,005
                                                                                      ============     ============`

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

|           
|-----------
|(Continued)
|17.        

---

NOTE
4  LOANS  (Continued)

Certain directors and executive
officers of the Corporation, including their affiliates are loan customers of the Banks.
Such loans were made in ordinary course of business at the Banks normal credit terms
and interest rates, and do not represent more than a normal risk of collection. Total
loans to these persons at December 31, 2002 and 2001 amounted to $4,971,000 and $1,532,000
respectively. During 2002, $4,248,000 of new loans were made to these persons, repayments
totaled $312,000 and changes in composition resulted in a decline of $497,000.

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

`2002            2001           2000
                                                                            ----            ----           ----
     Balance, beginning of year                                          $     3,125    $     2,932     $     2,961
     Provision for loan losses                                                   426            751             584
                                                                         -----------    -----------     -----------
                                                                               3,551          3,683           3,545
     Loans charged off                                                          (846)          (713)           (806)
     Loan recoveries                                                             479            155             193
                                                                         -----------    -----------     -----------

     Balance, end of year                                                $     3,184    $     3,125     $     2,932
                                                                         ===========    ===========     ===========`

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

`2002           2001
                                                                                            ----           ----
     Principal amount not requiring allocation                                          $         0     $         0
     Principal amount requiring allocation                                                    2,403           2,880
                                                                                        -----------     -----------

                                                                                        $     2,403     $     2,880
                                                                                        ===========     ===========
     Amount of the allowance for loan loss
         allocated                                                                      $       479     $       819`

Loans for which the accrual of interest has been  discontinued  at December 31, 2002 and 2001  amounted to $512,000
and  $321,000,  respectively,  and are  included in the impaired  loans above.  Loans past due greater than 90 days
and still accruing interest amounted to $72,000 and $186,000 at December 31, 2002 and 2001.
Interest income recognized on impaired loans based on cash collections totaled  approximately  $72,000 and $142,000
for the years ended December 31, 2002 and 2001,  respectively.  The average  recorded  investment in impaired loans
was $2,642,000 and $2,597,000 during the years ended December 31, 2002 and 2001 respectively.

|           
|-----------
|(Continued)
|18.        

---

NOTE 5 - PREMISES AND EQUIPMENT, NET
Bank premises and equipment is comprised of the following at December 31 (in thousands):

`2002           2001
                                                                                 ----           ----

     Land and land improvements                                              $     1,375     $     1,305
     Building and building improvements                                            8,510           6,933
     Furniture and equipment                                                       8,425           8,159
     Construction in progress                                                        658             911
                                                                             -----------     -----------
                                                                                  18,968          17,308
     Less accumulated depreciation                                                 9,214           8,776
                                                                             -----------     -----------

                                                                             $     9,754     $     8,532
                                                                             ===========     ===========`

Depreciation expense was $1,035,000,
$936,000 and $984,000 for 2002, 2001 and 2000, respectively.

The Corporation leases property for
certain branches and ATM locations. Rent expense for 2002 was $133,000, for 2001 was
$133,000 and for 2000 was $130,000. Rent commitments under noncancelable operating leases
were as follows, before considering renewal options that generally are present.

`2003                                                       $   138,090
                  2004                                                           129,240
                  2005                                                           105,240
                  2006                                                            66,300
                  2007                                                            30,000
                  Thereafter                                                           0
                                                                             -----------

                                                                             $   468,870`

|           
|-----------
|(Continued)
|19.        

---

# NOTE 6  DEPOSITS

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

`2002            2001
                                                                                ----            ----
     Noninterest-bearing:
         Demand                                                            $     44,875     $     42,524
     Interest-bearing:
         Savings                                                                 91,972           80,090
         Money market demand                                                     51,194           40,930
         Time, $100,000 and over                                                 33,540           22,597
         Time, $100,000 and under                                                74,288           79,129
                                                                           -------------    ------------

                                                                           $    295,869     $    265,270
                                                                           =============    ============`

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

`2002            2001
                                                                                ----            ----
     In one year                                                           $     58,246     $     77,796
     In two years                                                                19,462           11,522
     In three years                                                              11,982            7,456
     In four years                                                                1,431            3,441
     In five years                                                               16,579            1,296
     Thereafter                                                                     128              215
                                                                           -------------    ------------

                                                                           $    107,828     $    101,726
                                                                           =============    ============`

Deposits from principal officers,
directors, and their affiliates at year-end December 31, 2002 and 2001 were $3,759,000 and
$1,564,000.

# NOTE 7  OTHER
BORROWINGS

Short-Term Borrowings

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

Federal Home Loan Bank
Advances

The Bank has the authority and
approval from the Federal Home Loan Bank (FHLB) to borrow up to $20 million collateralized
by 1-4 family mortgage loans, government and agency securities, and mortgage-backed
securities. The advances outstanding at December 31, 2002 and 2001 mature in 2016, cannot
be prepaid without penalty and bears interest at 7.34%. The amount of pledged assets are
$11,914,000 at December 31, 2002 and $18,867,000 at December 31, 2001.

|           
|-----------
|(Continued)
|20.        

---

# NOTE 8  INCOME
TAXES

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

`2002            2001           2000
                                                                ----            ----           ----

     Current expense                                         $     1,567    $     1,781     $     1,829
     Deferred (benefit) expense                                      (88)          (170)           (100)
                                                             -----------    -----------     -----------

                                                             $     1,479    $     1,611     $     1,729
                                                             ===========    ===========     ===========`

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

`2002            2001           2000
                                                                ----            ----           ----

     Income tax at statutory rate                            $     1,681    $     1,832     $     2,021
     Tax exempt interest                                            (253)          (179)           (203)
     Other                                                            51            (42)            (89)
                                                             -----------    -----------     -----------

                                                             $     1,479    $     1,611     $     1,729
                                                             ===========    ===========     ===========`

The net deferred tax asset recorded
includes the following amounts of deferred tax assets and liabilities (in thousands):

`2002           2001
                                                                                ----           ----
     Deferred tax assets
         Allowance for loan losses                                          $       931     $       852
         Compensation                                                               177             167
         Other                                                                       91              66
                                                                            -----------     -----------
                                                                                  1,199           1,085
     Deferred tax liabilities
         Accretion                                                                  (13)            (11)
         Unrealized gain on securities available for sale                          (153)            (47)
         Depreciation                                                              (123)            (99)
         Other                                                                      (28)            (28)
                                                                            -----------     -----------
                                                                                   (317)           (185)
                                                                            -----------     -----------

                                                                            $       882     $       900
                                                                            ===========     ===========`

A valuation allowance related to
deferred tax assets is required when it is considered more likely than not that all or
part of the benefit related to such assets will not be realized. Management has determined
that no valuation allowance is required at December 31, 2002 or 2001.

|           
|-----------
|(Continued)
|21.        

---

# NOTE 9  BENEFIT
PLANS

The Corporation has a noncontributory
discretionary employee stock ownership plan (Plan) covering substantially all of its
employees. It is a requirement of the plan to invest principally in the Corporations
common stock. The contribution to the Plan in 2002, 2001 and 2000 was $88,000, $100,000
and $120,000, respectively.

The Corporation has also established
a 401(k) Plan in which 50% of the employees contribution can be matched with a
discretionary contribution by the Corporation up to a maximum of 6% of gross wages. The
contribution to the 401(k) Plan for 2002, 2001 and 2000 was $100,000, $84,000 and $79,000,
respectively.

# NOTE 10  STOCK
PURCHASE AND OPTION PLANS

Director and Employee
Plans

On December 26, 2001, the Corporation
approved a plan to repurchase up to 50,000 shares of its common stock. The timing of the
purchases and the actual number of shares purchased have been in market conditions. Shares
have been repurchased from time to time in the open market or in privately negotiated
transactions. Shares repurchased will be available for future issuance in the discretion
of the Corporations Board of Directors. The Corporation repurchased 23,259 shares in
2002.

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

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

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

|           
|-----------
|(Continued)
|22.        

---

# NOTE 10  STOCK
PURCHASE AND OPTION PLANS (Continued)

Dividend Investment Plan

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

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

Stock Option Plans

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

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

|           
|-----------
|(Continued)
|23.        

---

NOTE 10  STOCK
PURCHASE AND OPTION PLANS (Continued)

The following summarizes shares
issued under the various plans:

`2002            2001           2000
                                                                 ----            ----           ----

     Automatic dividend reinvestment plan                           8,032         10,407          12,607
     Director stock purchase & retainer stock                         516              0           1,018
     Other issuance of stock                                        1,341          2,781           1,912
                                                                ---------      ---------       ---------

                                                                    9,889         13,188          15,537
                                                                =========      =========       =========`

The following table summarizes stock
option activity:

`Number of        Weighted
                                                                             Options       Average Price
                                                                             -------       -------------

     Options outstanding at January 1, 2000                                     17,904       $  24.77
     Options granted 2000                                                        1,767          39.58
                                                                              --------
     Options outstanding at December 31, 2000                                   19,671          26.09
     Options granted 2001                                                        3,244          25.13
     Options forfeited 2001                                                       (332)         30.80
                                                                              --------
     Options outstanding at December 31, 2001                                   22,583          25.89
     Options granted 2002                                                        2,947          26.50
     Options forfeited 2002                                                     (2,760)         29.36
                                                                              --------

     Options outstanding at December 31, 2002                                   22,770       $  26.21
                                                                              ========`

|           
|-----------
|(Continued)
|24.        

---

NOTE 10  STOCK
PURCHASE AND OPTION PLANS (Continued)

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

`Weighted
                                                                          Average       Weighted
                                                          Number         Remaining       Average          Number
   Range of Exercise Price                              Outstanding        Life           Price         Exercisable
   -----------------------                              -----------        ----           -----         -----------

2002
----
     $15.00 - $20.00                                         6,624         3.79        $   17.44              6,624
     $20.00 - $30.00                                        10,409         7.30            24.78              4,416
     $30.00 - $40.00                                         5,497         7.02            37.59              3,864
     $40.00 - $50.00                                           240         6.50            45.00                240
                                                         ---------                                        ---------

     Outstanding at end of year                             22,770                                           15,144
                                                         =========                                        =========

Weighted average exercised price of
   exercisable at the end of the year                                                  $   25.16
                                                                                       =========

2001
----
     $15.00 - $20.00                                         7,728         4.75        $   17.35              7,728
     $20.00 - $30.00                                         8,014         7.31            23.94              4,968
     $30.00 - $40.00                                         6,601         8.00            37.45
     $40.00 - $50.00                                           240         7.51            45.00
                                                         ---------                                        ---------

     Outstanding at end of year                             22,583                                           12,696
                                                         =========                                        =========

2000
----
     Outstanding at end of year                             19,671                                            3,864
                                                         =========                                        =========`

|           
|-----------
|(Continued)
|25.        

---

# NOTE 11 
REGULATORY MATTERS

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

Quantitative measures established by
regulation to ensure capital adequacy require the Corporation and the Banks to maintain
minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as
defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital
(as defined) to average assets (as defined). Management believes, as of December 31, 2002,
that the Corporation and the Banks meet all capital adequacy requirements to which they
are subject. As of December 31, 2002 and 2001, the most recent notifications from Federal
Deposit Insurance Corporation categorized the Corporation and the Banks as well
capitalized under the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Corporation and the Banks must maintain minimum total risk-based,
Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. There are no
conditions or events since the notifications that management believes have changed the
Banks category.

`To Be Well
                                                                         For Capital            Capitalized Under
                                                                          Adequacy              Prompt Corrective
                                                  Actual                   Purposes             Action Provisions
                                            Amount      Ratio         Amount      Ratio         Amount      Ratio
As of December 31, 2002                     ------      -----         ------      -----         ------      -----
-----------------------
Total Capital
  (to Risk Weighted Assets)
     Consolidated                       $    42,815     15.2%     $    22,538      8.0%      $    28,173    10.0%
     The State Bank                          27,663     11.2           19,680      8.0            24,600    10.0
     Davison State Bank                       4,347     13.3            2,619      8.0             3,274    10.0

Tier 1 Capital
  (to Risk Weighted Assets)
     Consolidated                            39,631     14.1           11,269      4.0            16,904     6.0
     The State Bank                          24,862     10.1            9,840      4.0            14,760     6.0
     Davison State Bank                       3,964     12.1            1,310      4.0             1,965     6.0`

|           
|-----------
|(Continued)
|26.        

---

NOTE 11 
REGULATORY MATTERS (Continued)

`Tier 1 Capital (to Average Assets)
     Consolidated                            39,631     12.6           12,607      4.0            15,758     5.0
     The State Bank                          24,862      8.9           11,161      4.0            13,952     5.0
     Davison State Bank                       3,964      9.9            1,606      4.0             2,008     5.0


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

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

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

# NOTE 12  FINANCIAL
INSTRUMENTS

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

`2 0 0 2                       2 0 0 1
                                                                    -------                       -------
                                                           Carrying         Fair          Carrying         Fair
                                                            Amount          Value          Amount          Value
                                                            ------          -----          ------          -----
     Assets:
         Cash and cash equivalents                        $    30,562    $    30,562    $    41,838     $    41,838
         Securities - available for sale                       48,981         48,981         25,792          25,792
         Securities - held to maturity                         13,722         14,051         13,375          13,508
         FHLB stock                                               822            822            822             822
         Loans held for sale                                    5,509          5,565          1,710           1,729
         Loans                                                221,037        229,739        211,005         213,913
         Accrued interest receivable                            1,595          1,595          1,445           1,445`

|           
|-----------
|(Continued)
|27.        

---

NOTE 12  FINANCIAL
INSTRUMENTS (Continued)

`Liabilities:
         Deposits                                             295,869        297,219        265,270         268,384
         Short-term borrowings                                  1,500          1,500          2,100           2,100
         FHLB advances                                          1,124          1,305          1,138           1,132
         Accrued interest payable                                 551            551            738             738`

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

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

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

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

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

Off-balance-sheet instrumentsThe Corporations
off-balance-sheet instruments approximate their fair values.

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

|           
|-----------
|(Continued)
|28.        

---

NOTE 12  FINANCIAL
INSTRUMENTS (Continued)

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

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

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

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

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

`2002           2001
                                                                                 ----           ----

     Commitments to make loans (at market rates)                             $    26,528     $    21,096
     Unused lines of credit and letters of credit                                 52,795          41,359`

Commitments to make loans are
generally made for periods of 90 days or less. At December 31, 2002, $4,205,000 of
the outstanding loan commitments had fixed interest rates ranging from 4.9% to 8.0% and
maturities ranging from one year to five years.

|           
|-----------
|(Continued)
|29.        

---

# NOTE 13  PARENT
ONLY CONDENSED FINANCIAL INFORMATION

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

CONDENSED BALANCE SHEETS December 31 (in
thousands)

`2002           2001
                                                                                            ----           ----
     ASSETS
         Cash and cash equivalents                                                      $     7,780     $     3,200
         Securities available for sale, at market                                             2,964               0
         Other assets                                                                            63              27
         Investment in subsidiaries                                                          29,121          35,206
                                                                                        -----------     -----------

                                                                                        $    39,928     $    38,433
                                                                                        ===========     ===========

     STOCKHOLDERS' EQUITY
         Common stock                                                                   $    30,236     $    30,664
         Retained earnings                                                                    9,395           7,677
         Accumulated other comprehensive income (loss)                                          297              92
                                                                                        -----------     -----------

                                                                                        $    39,928     $    38,433
                                                                                        ===========     ===========`

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

`2002            2001           2000
                                                                            ----            ----           ----

     Interest on securities                                              $        37    $         0     $         0
     Gain on sale of securities                                                    0             26               0
     Dividends from subsidiaries                                              10,799          1,769           1,659
     Operating expenses                                                          (98)          (133)            (69)
     Equity in undistributed income of subsidiaries                           (7,289)         2,088           2,626
                                                                         -----------    -----------     -----------
     Income before income taxes                                                3,449          3,750           4,216
     Federal income tax expense (benefit)                                        (17)           (27)              0
                                                                         -----------    -----------     -----------

     Net income                                                          $     3,466    $     3,777     $     4,216
                                                                         -----------    -----------     -----------`

|           
|-----------
|(Continued)
|30.        

---

NOTE 13 - PARENT ONLY CONDENSED FINANCIAL INFORMATION (Continued)

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

`2002            2001           2000
                                                                            ----            ----           ----
     Cash flows from operating activities
         Net income                                                      $     3,466    $     3,777     $     4,216
         Gain on sale of securities                                                0            (26)              0
         Amortization                                                             21              0               0
         Change in other assets                                                  (37)            (1)              0
         Equity in undistributed income of subsidiary                          7,289         (2,088)         (2,626)
                                                                         -----------    -----------     -----------
              Net cash provided by operating activities                       10,739          1,662           1,590

     Cash flows provided by investing activities
         Sale of equity securities                                                 0            491               0
         Purchase of equity securities                                          (395)             0               0
         Sales and maturities of securities - AFS                              3,524              0               0
         Purchases of securities - AFS                                        (6,112)             0               0
         (Increase) decrease in land held in investment                            0              0             414
         Investment in subsidiary                                             (1,000)             0               0
                                                                         -----------    -----------     -----------
              Net cash provided by investing activities                       (3,983)           491             414

     Cash flows used in financing activities
         Dividends paid                                                       (1,748)        (1,748)         (1,659)
         Stock repurchase                                                       (719)             0               0
         Proceeds from stock issuance                                            291            343             462
                                                                         -----------    -----------     -----------
              Net cash used in financing activities                           (2,176)        (1,405)         (1,197)
                                                                         -----------    -----------     -----------

     Increase (decrease) in cash and cash equivalents                          4,580            748             807

     Cash and cash equivalents at beginning of year                            3,200          2,452           1,645
                                                                         -----------    -----------     -----------

     Cash and cash equivalents at end of year                            $     7,780    $     3,200     $     2,452
                                                                         ===========    ===========     ===========`

|           
|-----------
|(Continued)
|31.        

---

# NOTE 14  SUMMARY
OF QUARTERLY FINANCIAL DATA  UNAUDITED

The unaudited quarterly results of
operations for 2002, 2001 and 2000 are as follows (in thousands except per share data):

`First         Second           Third         Fourth
                                                            Quarter        Quarter         Quarter        Quarter
                                                            -------        -------         -------        -------
2002
----
     Interest income                                      $     4,416    $     4,450    $     4,554     $     4,532
     Interest expense                                           1,559          1,376          1,400           1,387
     Provision for loan losses                                     33             69            107             217
     Noninterest income                                         1,056          1,161          1,389           1,788
     Noninterest expenses                                       3,034          3,080          3,102           3,037
     Income before income taxes                                   846          1,086          1,334           1,679
     Provision for income taxes                                   253            311            407             508
     Net income                                                   593            775            927           1,171

     Earnings per share
         Basic                                                    .34            .45            .53             .68
         Diluted                                                  .34            .45            .53             .68

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

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

|           
|-----------
|(Continued)
|32.        

---

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

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

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

|   
|---
|   
|33.

---

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

This section provides a narrative
discussion and analysis of the consolidated financial condition and results of operations
of Fentura Financial, Inc. (the Corporation), together with its subsidiaries, The State
Bank and Davison State Bank (the Banks), for the years ended December 31, 2002, 2001, and
2000. The supplemental financial data included throughout this discussion should be read
in conjunction with the primary financial statements presented on pages 2 through 30 of
this report. It provides a more detailed and comprehensive review of operating results and
financial position than could be obtained from a reading of the financial statements
alone.

`TABLE 1                                        Selected Financial Data
$ in thousands except per share data
  And ratios                                                    2002       2001       2000       1999       1998
-----------------------------------------------------------------------------------------------------------------
Summary of Consolidated Statements of Income:
Interest Income                                              $17,952    $21,567    $23,327    $21,214    $21,440
Interest Expense                                               5,722      9,091      9,890      8,013      8,648
                                                           ------------------------------------------------------
Net Interest Income                                           12,230     12,476     13,437     13,201     12,792
Provision for Loan Losses                                        426        751        584        545        724
                                                           ------------------------------------------------------
Net Interest Income after Provision                           11,804     11,725     12,853     12,656     12,068
Total Other Operating Income                                   5,394      5,363      4,528      4,262      4,028
Total Other Operating Expense                                 12,253     11,700     11,436     11,136     10,548
                                                           ------------------------------------------------------
Income Before Income Taxes                                     4,945      5,388      5,945      5,782      5,548
Provision for Income Taxes                                     1,479      1,611      1,729      1,782      1,728
                                                           ------------------------------------------------------
Net Income                                                    $3,466     $3,777     $4,216     $4,000     $3,820
                                                           ======================================================
Net Income Per Share - Basic                                   $2.00      $2.18      $2.46      $2.36      $2.28
Net Income Per Share - Diluted                                 $2.00      $2.18      $2.45      $2.35      $2.28

Summary of Consolidated Balance Sheets:
Assets                                                      $340,483   $309,090   $292,890   $283,621   $275,047
Securities, including FHLB stock                              63,525     39,989     66,704     67,886     77,956
Loans, including loans held for sale                         229,730    215,840    195,295    191,246    172,413
Deposits                                                     295,869    265,270    248,656    247,051    241,105
Stockholders' Equity                                          39,928     38,433     35,754     31,865     30,022

Other Financial and Statistical Data:
Tier 1 Capital to Risk Weighted Assets                        14.10%     15.01%     14.96%     13.01%     13.30%
Total Capital to Risk Weighted Assets                         15.20%     16.23%     16.21%     14.26%     14.55%
Tier 1 Capital to Average Assets                              12.60%     12.50%     12.15%     11.15%     10.60%
Total Cash Dividends                                          $1,748     $1,748     $1,659     $1,586     $1,464
Book Value Per Share                                          $23.19     $22.15     $20.76     $18.68     $17.77
Cash Dividends Paid Per Share                                  $1.01      $1.01      $0.97      $0.93      $0.88
Period End Market Price Per Share                             $34.75     $25.50     $25.13     $36.87     $41.67
Dividend Pay-out Ratio                                        50.43%     46.28%     39.35%     39.65%     38.32%
Return on Average Stockholders' Equity                         8.78%     10.01%     12.56%     12.66%     13.19%
Return on Average Assets                                       1.10%      1.23%      1.42%      1.46%      1.45%
Net Interest Margin                                            4.46%      4.53%      5.07%      5.32%      5.28%
Total Equity to Assets at Period End                          11.73%     12.43%     12.21%     11.24%     10.92%`

34.

---

RESULTS OF OPERATIONSThe Corporation achieved net income
of $3,466,000 for the year of 2002. Net Income for 2002 decreased $311,000 or 8.2%. Net
income decreased primarily due to interest rate drops during 2002. Contributing to the
2002 results was the increase in total noninterest income of $31,000 or 0.6%. Non-interest
expense increased by $553,000 or 4.7%. The Corporation anticipates that the interest rate
environment will remain steady or possibly increase in 2003, which should have a positive
impact on operations.

Standard performance indicators used
in the banking industry help management evaluate the Corporations performance. Two
of these performance indicators are return on average assets and return on average equity.
For 2002, 2001, and 2000 respectively, the Corporation posted a return on average assets
of 1.10%, 1.23%, and 1.42%. Return on average equity was 8.78% in 2002, 10.01% in 2001,
and 12.56% in 2000. Equity increased 3.9% in 2002, which will allow the Corporation to
continue its growth strategy. Total assets increased $31 million in 2002, $16 million in
2001, and $9 million in 2000. Basic earnings per share were $2.00 in 2002, $2.18 in 2001,
and $2.46 in 2000.

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

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

Table 2 summarizes the changes in net
interest income resulting from changes in volume and rates for the years ended December
31, 2002 and 2001. Net interest income (displayed with consideration of full tax
equivalency), average balance sheet amounts, and the corresponding yields for the last
three years are shown in Table 3. Tax equivalent interest income decreased by $220,000 in
2002, or 1.7% and by $979,000 or 7.1% in 2001. The primary factor contributing to the
decrease in net interest income was the eleven prime rate cuts during 2001, followed by
another cut in late 2002, which reduced interest income more than the reduction in
interest expense.

As indicated in Table 3, for the year
ended December 31, 2002, the Corporations net interest margin was 4.46% compared
with 4.53% and 5.07% for the same period in 2001 and 2000 respectively, and continues to
remain substantially above peer performance. The slight decrease in 2002 is due to lower
earning asset yields due to the cuts in the prime rate. The decrease in margin in 2001 is
attributable to a decrease in the Corporations earning assets yields due to the cuts
in the prime rate. Cost of funding decreased in response to decreases in treasury rates
and local competitors rates.

Average earning assets decreased 0.3%
in 2002. Average earning assets increased 4.0% in 2001, and 7.4% in 2000. Loans, the
highest yielding component of earning assets, represented 77.2% of earning assets in 2002,
compared to 71.1% in 2001 and 72.3% in 2000. Average interest bearing liabilities
increased 0.9% in 2002, 1.4% in 2001, and 7.0% in 2000. Non-interest bearing deposits
amounted to 15.5% of average earning assets in 2001 compared with 13.7% in 2001 and 13.1%
in 2000.

35.

---

`TABLE 2                             Changes in Net Interest Income
                                   Due to Changes in Average Volume
                                        and Interest Rates
                                      Years Ended December 31,

                                                   INCREASE (DECREASE)        INCREASE (DECREASE)
                                                          2002                       2001
                                                         DUE TO:                    DUE TO:
                                              --------------------------------------------------------
                                                          YIELD/                     YIELD/
(000's omitted)                                    VOL      RATE   TOTAL      VOL      RATE     TOTAL
------------------------------------------------------------------------------------------------------
TAXABLE SECURITIES                              ($903)    ($477) ($1,380)  ($625)    ($256)    ($881)
TAX-EXEMPT SECURITIES                              209     (269)     (60)       4      (36)      (32)
FEDERAL FUNDS SOLD                               (124)     (464)    (588)   1,022     (739)       283

TOTAL LOANS                                      1,172   (2,838)  (1,666)     420   (1,658)   (1,238)
LOANS HELD FOR SALE                                111       (6)      105      92       (2)        90
                                              --------------------------------------------------------

                         TOTAL EARNING ASSETS      465   (4,054)  (3,589)     913   (2,691)   (1,778)


INTEREST BEARING DEMAND DEPOSITS                   100     (286)    (186)    (68)      (74)     (142)
SAVINGS DEPOSITS                                   326   (1,048)    (722)     217     (632)     (415)
TIME CDs $100,000 AND OVER                       (467)     (305)    (772)    (11)     (237)     (248)
OTHER TIME DEPOSITS                              (454)   (1,201)  (1,655)     450        47       497
OTHER BORROWINGS                                   (9)      (25)     (34)   (478)      (13)     (491)
                                              --------------------------------------------------------

           TOTAL INTEREST BEARING LIABILITIES    (504)   (2,865) (3,369)      110     (909)     (799)
                                              --------------------------------------------------------

                          NET INTEREST INCOME     $969  ($1,189)  ($220)     $803  ($1,782)    ($979)
                                              ========================================================`

36.

---

`TABLE 3                                                   Summary of Net Interest Income
(000's omitted)                                              Years Ended December 31,

                                           2002                          2001                            2000

ASSETS                          AVG BAL   INC/EXP  YIELD      AVG BAL   INC/EXP  YIELD        AVG BAL   INC/EXP  YIELD
                                ---------------------------------------------------------------------------------------
 Securities:
   U.S. Treasury and
     Government Agencies          21,800      788   3.61%       38,674    2,253    5.83%        50,884    3,244   6.38%
   State and Political (1)        17,387      976   5.61%       14,471    1,036    7.16%        14,298    1,068   7.47%
   Other                           4,667      258   5.53%        3,472      173    4.98%         1,086       63   5.80%
                                --------------------------    ---------------------------     --------------------------
   Total Securities               43,854    2,022   4.61%       56,617    3,462    6.11%        66,268    4,375   6.60%
   Fed Funds Sold                 20,904      338   1.62%       24,129      926    3.84%         9,306      643   6.91%

 Loans:
   Commercial                    137,622    9,868   7.17%      122,712   10,557    8.60%       105,276   10,120   9.61%
   Tax Free (1)                    4,095      279   6.81%        1,021       73    7.12%           618       52   8.34%
   Real Estate-Mortgage           13,504    1,044   7.73%       12,857    1,162    9.85%        23,552    2,130   9.04%
   Consumer                       60,568    4,619   7.63%       65,635    5,684    8.66%        68,342    6,412   9.38%
                                --------------------------    ---------------------------     --------------------------
 Total loans                     215,789   15,810   7.33%      202,225   17,476    8.64%       197,788   16,881   9.46%
 Allowance for Loan Loss         (3,127)                       (3,050)                         (3,157)
 Net Loans                       212,662   15,810   7.43%      199,175   17,476    8.77%       194,631   18,714   9.61%
                                --------------------------    ---------------------------     --------------------------
Loans Held for Sale                3,294      209   6.34%        1,595      104    6.52%           184       14   7.61%
                                --------------------------    ---------------------------     --------------------------
 TOTAL EARNING ASSETS           $283,841  $18,379   6.47%     $284,566  $21,968    7.72%      $273,546  $23,746   8.68%
                                ----------------------------------------------------------------------------------------
 Cash Due from Banks              15,648                        11,466                          12,202
 All Other Assets                 18,807                        13,880                          13,390
                                ---------                     ---------                       ---------
TOTAL ASSETS                    $315,169                      $306,862                        $295,981
                                ---------                     ---------                       ---------

LIABILITIES & SHAREHOLDERS' EQUITY:
  Deposits:
   Interest bearing - DDA         42,637      405   0.95%       36,457      591    1.62%        40,199      733   1.82%
   Savings Deposits               85,746    1,174   1.37%       73,151    1,896    2.59%        66,890    2,311   3.45%
   Time CD's $100,000 and Over    24,305    1,022   4.20%       32,847    1,794    5.46%        33,025    2,042   6.18%
   Other Time CD's                75,114    3,022   4.02%       83,197    4,677    5.62%        75,124    4,180   5.56%
                                --------------------------    ---------------------------     --------------------------
 Total Interest Bearing
   Deposits                      227,802    5,623   2.47%      225,652    8,958    3.97%       215,238    9,266   4.31%
 Other Borrowings                  2,081       99   4.76%        2,240      133    5.94%         9,509      624   6.56%
                                --------------------------    ---------------------------     --------------------------
INTEREST BEARING LIABILITIES    $229,883   $5,722   2.49%     $227,892   $9,091    3.99%      $224,747   $9,890   4.40%
                                ----------------------------------------------------------------------------------------
 Non-interest bearing - DDA       43,908                        39,014                          35,711
 All Other Liabilities             1,885                         2,237                           1.958
 Shareholders Equity              39,493                        37,719                          33,565
                                ---------                     ---------                       ---------
TOTAL LIABILITIES and S/H
   EQUITY                       $315,169                      $306,862                        $295,981

                                ---------         --------    ---------         ---------     ---------         --------
Net Interest Rate Spread                            3.98%                          3.73%                          4.28%
Net Interest Income/Margin                $12,657   4.46%               $12,877    4.53%                $13,856   5.07%
                                         =================             ==================              =================`

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

37.

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ALLOWANCE AND PROVISION
FOR LOAN LOSSESThe allowance for loan losses
reflects managements judgment as to the level considered appropriate to absorb
probable incurred losses in the loan portfolio. The Corporations methodology in
determining the adequacy of the allowance includes a review of individual loans, size and
composition of the loan portfolio, historical loss experience, current economic
conditions, financial condition of borrowers, the level and composition of non-performing
loans, portfolio trends, estimated net charge-offs, and other pertinent factors. Although
reserves have been allocated to various portfolio segments, the allowance is general in
nature and is available for the portfolio in its entirety. At December 31, 2002, the
allowance for loan losses was $3,184,000 or 1.42% of total loans. This compares with
$3,125,000 or 1.46% at December 31, 2001 and $2,932,000, or 1.50%, at December 31, 2000.
The Corporation has lowered the allowance for loan losses as a percent of total loans
because of an improvement in overall asset quality.

The provision for loan losses was
$426,000 in 2002 and $751,000 and $584,000 in 2001 and 2000 respectively. The decrease in
the provision in 2002 reflects managements effort to maintain adequate reserves
commensurate with loan growth. In 2002, loans charged-off had a modest increase due to
some non-performing commercial loans. In 2001, loans charged-off decreased, due to a
non-repetitive, substantial charge-off on non-performing commercial loans in 2000 and an
increase in loans charged-off in the indirect loan portfolio in 2000. This increased
charge-off level resulted in an increase in provision for loan losses in 2001.

Table 4 summarizes loan losses and
recoveries from 1998 through 2002. During 2002 the Corporation experienced net charge-offs
of $367,000, compared with net charge-offs of $558,000 and $613,000 in 2001 and 2000,
respectively. The net charge-off ratio is the net of charge-off loans minus the recoveries
from loans divided by gross loans. Accordingly, the net charge-off ratio for 2002 was .16%
compared to .28% and .31% at the end of 2001 and 2000, respectively. The net charge-off
ratio decreased due to an increase in commercial recoveries in 2002. The net charge-off
ratio decreased slightly due to fewer charge-offs from the commercial and consumer
portfolios in 2001. The net charge-off ratio increased in 2000 primarily due to a write
down on a non-performing commercial loan.

The Corporation maintains formal
policies and procedures to control and monitor credit risk. Management believes the
allowance for loan losses is adequate to meet normal credit risks in the loan portfolio.
The Corporations loan portfolio has no significant concentrations in any one
industry or any exposure in foreign loans. The Corporation has not extended credit to
finance highly leveraged transactions nor does it intend to do so in the future.
Employment levels and other economic conditions in the Corporations local markets
may have a significant impact on the level of credit losses. Management continues to
identify and devote attention to credits that may not be performing as agreed. Because of
these factors and the uncertainty of economic conditions, management expects to maintain
the current level of the allowance for loan losses as a percentage of gross loans in 2003.
Non-performing loans are discussed further in the section titled Non-Performing
Assets.

`TABLE 4
Analysis of the Allowance for Loan Losses               Years Ended December 31,
(000's omitted)                                2002     2001       2000      1999      1998
--------------------------------------------------------------------------------------------
Balance Beginning of Period                  $3,125   $2,932     $2,961    $2,955    $2,955
                                          --------------------------------------------------
Charge-offs:
    Commercial, Financial and
      Agricultural                            (329)    (226)      (284)      (72)     (454)
    Real Estate-Construction                      0        0          0         0         0
    Real Estate-Mortgage                        (7)        0          0       (2)      (77)
    Installment Loans to Individuals          (510)    (487)      (522)     (377)     (537)
                                          --------------------------------------------------
      Total Charge-offs                       (846)    (713)      (806)     (451)   (1,068)
                                          --------------------------------------------------
Recoveries:
    Commercial, Financial and
      Agricultural                              344       28        107        13        43
    Real Estate-Construction                      0        0          0         0         0
    Real Estate-Mortgage                          0        0          0         0        37
    Installment Loans to Individuals            135      125         86        71        92
                                          --------------------------------------------------
Total Recoveries                                479      155        193        84       172
                                          --------------------------------------------------
Net Charge-offs                               (367)    (558)      (613)     (367)     (896)
                                          --------------------------------------------------
Provision                                       426      751        584       545       724
                                          --------------------------------------------------
Balance at End of Period                     $3,184   $3,125     $2,932    $2,961    $2,783
                                          ==================================================
Ratio of Net Charge-Offs During the Period    0.16%    0.28%      0.31%     0.19%     0.55%`

38.

---

NON-INTEREST INCOMENon-interest income was $5,394,000 in
2002, $5,363,000 and $4,528,000 in 2001 and 2000 respectively. These amounts represent an
increase of 0.6% in 2002 compared to 2001 and an increase of 18.4% comparing 2001 to 2000.

The most significant category of
non-interest income is service charges on deposit accounts. These fees were $2,594,000 in
2002, compared to $2,286,000 and $1,915,000 in 2001 and 2000 respectively. This is an
increase of $308,000 or 13.5% in 2002 and a increase of $371,000 or 19.4% in 2001. In
2002, the increase was due to a new overdraft privilege product and an increase in
business deposit account service charges. The increase in 2001 was due to higher overdraft
charges and deposit account service charges being higher due to deposit growth. The
decrease in 2000 is attributable to higher individual checking and saving account balances
offsetting service charges.

Gains on the sale of mortgage loans
originated by the Banks and sold in the secondary market were $1,009,000 in 2002, $659,000
in 2001, and $179,000 in 2000. The 53.1% increase in 2002 is due to the increase in
mortgage loan production because of the lowest interest rates in thirty years. The 268.2%
increase in 2001 is due to the increase in mortgage loan production caused by an increase
in new home purchases and refinancing activity due to low mortgage interest rates. The
Corporation sells the majority of the mortgage loans originated in the secondary market on
a servicing released basis; thus the Corporation did not receive mortgage-servicing fees
in 2002 or 2001.

Trust income decreased $26,000 in
2002 to $540,000 compared to $566,000 in 2001 and $695,000 in 2000. The 4.6% decrease in
2002 is due to portfolio turnover and the decline in market value of these assets. The
decrease in 2001 was due to drop in assets under management and market value of these
assets.

In 2002, the Corporation did not
recognize a gain on security transactions compared to $674,000 gain on security
transactions in 2001, and no gains in 2000. In 2001, these gains were a result of several
transactions wherein the Corporation sold investment securities and reinvested in issues,
which will provide greater total income potential.

Other income and fees includes income
from the sale of checks, safe deposit box rent, merchant account income, ATM income, and
other miscellaneous income items. Other income and fees were $1,251,000 in 2002 compared
to $1,178,000 and $1,108,000 in 2001 and 2000 respectively. The increase in 2002 is due to
an increase cash surrender value of bank owned life insurance. The increase in 2001 is due
to an increase in income from the sale of official checks.

39.

---

NON-INTEREST EXPENSETotal non-interest expense was
$12,253,000 in 2002 compared to $11,700,000 in 2001 and $11,436,000 in 2000. This is an
increase of 4.7% in 2002 and 2.3% in 2001.

Salaries and employee benefits, the
Corporations largest operating expense category, were $6,454,000 in 2002, compared
with $5,988,000 in 2001, and $5,801,000 in 2000. Increased costs are a result of annual
salary increases, increases in health care expenses and staff additions in connection with
a new branch office in Grand Blanc.

In 2002, equipment expenses were
$1,563,000 compared to $1,411,000 in 2001 and $1,552,000 in 2000, an increase of 10.8% in
2002 and a decrease of 9.1% in 2001. The increase is attributable to equipment maintenance
costs increasing due to more equipment to cover and increase in equipment depreciation.
Equipment maintenance expense decreased due to better-negotiated contracts in 2001.

Occupancy expenses associated with
the Corporations facilities were $1,061,000 in 2002 compared to $886,000 in 2001 and
$784,000 in 2000. In 2002, this was an increase of 19.8% and in 2001 an increase of 13.0%.
The increase in 2002 is due to the expenses associated with the opening of the new Silver
Parkway office and the opening of the second Grand Blanc office of The State Bank. The
increase in 2001 is due to the opening of the new main office of Davison State Bank and
the new Grand Blanc office of The State Bank.

Office supplies were $305,000 in 2002
compared to $300,000 in 2001 and $ 311,000 in 2000. In 2002, this was an increase of 1.7%
and in 2001 a decrease of 3.5 %. The slight increase in 2002 is attributable to a modest
increase in purchases of various normal office supplies. The decrease in 2001 was due to
the reduction of office supplies expenses from 2000 where expenses were higher for the
initial supplies for the new Davison State Bank.

Loan and collection expenses were
$183,000 in 2002 compared to $178,000 in 2001, and $289,000 in 2000. The slight increase
in 2002 of 2.8% was due to the increase in filing and recording fees due to the growth in
the loan portfolio. The decrease in 2001 of $111,000 or 38.4% was due to the decrease in
dealer service fees paid in connection with indirect auto lending.

Advertising expenses were $315,000 in
2002 compared to $320,000 in 2001, and $263,000 in 2000. The slight decrease in 2002 of
$5,000 or 1.6% was due to a reduction in other promotional materials. The increase of
$57,000 or 21.7% in 2001was due to the promotion of the new Davison State Bank and the
promotion of the new Grand Blanc office of The State Bank.

The makeup of other professional fees
includes audit fees, consulting fees, legal fees, and various other professional services.
Other professional services were $1,100,000 in 2002 compared to $1,144,000 in 2001, and
$1,000,000 in 2000. The decrease in 2002 of $44,000 or 3.8% was due to lower consulting
fees. The increase of $144,000 or 14.4% in 2001 was attributable to the costs of
researching a potential stock offering for Davison State Bank and increases in audit and
legal fees for both banks.

Other general and administrative
expenses were $1,272,000 in 2002 compared to $1,473,000 in 2001, and $1,436,000 in 2000.
The decreases in these expenses were due to lower other losses from charged off accounts
and lower correspondent bank charges in 2002. These expenses were higher in 2001 because
of an increase in other losses from charged off accounts and increases in check processing
costs.

40.

---

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

The Corporations total assets
averaged $315 million for 2002 exceeding 2001s average of $307 million by $8 million
or 2.6%. Average loans comprised 68.5% of total average assets during 2002 compared to
65.9% in 2001. Loans grew $13.6 million on average with commercial loans leading the
advance by $14.9 million or 12.2%. The ratio of average non-interest bearing deposits to
total deposits was 16.2% in 2002 compared to 14.7% during 2001. Interest bearing deposits
comprised 99.1% of total average interest bearing liabilities during 2002, increased from
99.0% during 2001. The Corporations year end total assets were $340 million for 2002
up from $309 million in 2001. The increase was due to the higher loan demand and an
increase in securities funded by deposit growth in 2002.

SECURITIES PORTFOLIOSecurities totaled $62,703,000 at
December 31, 2002 compared to $39,167,000 at December 31, 2001. This was an increase of
$23,536,000 or 60.1%. The increase in 2002 resulted principally from the purchasing new
securities to replace the securities sold in December 2001 and purchasing of new
securities throughout the year. At December 31, 2002 these securities comprised 21.4% of
earning assets, up from 14.1% at December 31, 2001. The Corporation considers all of its
securities as available for sale except for Michigan tax-exempt securities, which are
classified as held to maturity. Increases in loan balances from new loan growth in excess
of the amount of deposit growth, coupled with the increase in securities in 2002 accounts
for the decrease in federal funds sold. Fed funds sold were $10,300,000 at December 31,
2002 compared with $22,800,000 at December 31, 2001.

The Corporations present
policies with respect to the classification of securities are discussed in Note 1 to the
Consolidated Financial Statements. As of December 31, 2002, the estimated aggregate fair
value of the Corporations securities portfolio was $779,000 above amortized cost. At
December 31, 2002 gross unrealized gains were $816,000 and gross unrealized losses were
$36,000. A summary of estimated fair values and unrealized gains and losses for the major
components of the securities portfolio is provided in Note 3 to the Consolidated Financial
Statements. Yields on municipal securities presented in Table 5 below have not been tax
effected.

`TABLE 5
Analysis and Maturities of Securities
                                 Amortized      Fair
(000's omitted)                    Cost         Value       Yield
----------------------------------------------------------------------
AVAILABLE FOR SALE

U.S. Agencies
  One year or less                    $4,018       $4,085       3.65%
  Over one through five years         22,761       22,836       2.24%
  Over five through ten years          2,104        2,106       2.53%
  Over ten years                           0            0       0.00%
                               ---------------------------
    Total                             28,883       29,027

Mortgage-Backed
  One year or less                        $0           $0       0.00%
  Over one through five years              0            0       0.00%
  Over five through ten years            603          630       4.41%
  Over ten years                       6,298        6,463       4.41%
                               ---------------------------
    Total                              6,901        7,093`

41.

---

`State and Political
  One year or less                    $2,529       $2,532       1.95%
  Over one through five years          2,887        2,911       2.08%
  Over five through ten years            265          271       2.70%
  Over ten years                       3,640        3,674       2.70%
                               ---------------------------
    Total                              9,321        9,388

Corporate Bonds
  One year or less                    $2,014       $2,025       3.63%
  Over one through five years          1,017        1,053       5.80%
  Over five through ten years              0            0       0.00%
  Over ten years                           0            0       0.00%
                               ---------------------------
    Total                              3,031        3,078

Equity Securities                       $395         $395

HELD TO MATURITY

State and Political
  One year or less                    $6,111       $6,125       2.17%
  Over one through five years          3,547        3,720       4.15%
  Over five through ten years          2,267        2,366       4.74%
  Over ten years                       1,797        1,840       4.93%
                               ---------------------------
    Total                             13,722       14,051

Total Securities                     $62,253      $63,032`

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

Total loans increased $10,085,000 at
December 31, 2002, with total loans comprising 75.6% of earning assets as compared to
76.5% of December 31, 2001 earning assets. Local economic conditions remained reasonably
steady throughout 2002. The steadiness of the local economy supported continued commercial
business growth including commercial development. Accordingly, the Corporation experienced
strong demand for commercial loans. In 2002, commercial loans increased approximately
$10,668,000 to $129,562,000 or 9.0%. Additionally, real estate construction and
development loans increased $1,598,000 or 6.3% to $27,032,000 at December 31, 2002.
Consumer loans decreased in 2002 approximately $2,908,000 due to decrease in indirect
loans. In 2001, real estate construction and development loans increased $7,963,000 or 46%
to $25,434,000 at December 31, 2001. Consumer loans decreased modestly in 2001.

Management expects the local economy
to support continued growth and development in 2003 and will aggressively seek out new
loan opportunities while continuing to maintain sound credit quality.

42.

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`TABLE 6
Loan Portfolio
December 31,
(000's omitted)                      2002          2001         2000          1999          1998
-----------------------------------------------------------------------------------------------------
Commercial                            $129,562     $118,894      $101,925       $92,896      $78,832
Real estate - construction              27,032       25,434        17,471        12,481        9,010
Real estate - mortgage                  11,944       11,158        10,514        21,409       11,641
Consumer                                55,683       58,644        65,198        64,280       62,423
                                 --------------------------------------------------------------------
  Total                               $224,221     $214,130      $195,108      $191,066     $161,906
                                 ====================================================================`

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

`TABLE 7
Maturities of the Loan Portfolio by Loan Type

December 31, 2002                         Within       One-        After
(000's omitted)                            One         Five         Five
                                           Year        Years       Years         Total
                                           ----        -----       -----         -----
Commercial                             $ 38,206    $  77,795    $ 13,561     $ 129,562
Real estate - construction               21,036        5,996           0        27,032
Real estate - mortgage                    3,304        3,676       4,964        11,944
Consumer                                  8,294       28,872      18,517        55,683
                                       --------    ---------    --------     ---------
                                       $ 70,840    $ 116,339    $ 37,042     $ 224,221
                                       ========    =========    ========     =========

TABLE 8
Maturities of the Loan Portfolio by Rate Categories

December 31, 2002                         Within       One-        After
(000's omitted)                            One         Five         Five
                                           Year        Years       Years         Total
                                           ----        -----       -----         -----
Loans:
    Fixed Rate                         $ 27,924    $  78,693    $ 19,070     $ 125,687
    Variable Rate                        42,916       37,646      17,972        98,534
                                       --------    ---------    --------     ---------
                                       $ 70,840    $ 116,339    $ 37,042     $ 224,221
                                       ========    =========    ========     =========`

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

The Corporation closely monitors its
construction and commercial mortgage loan portfolios. Construction loans at December 31,
2002, which comprised 12.1% of total loans, totaled $27,032,000 as compared to $25,434,000
and $17,471,000 at the end of 2001 and 2000 respectively.

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

43.

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NON-PERFORMING ASSETSNon-performing assets include loans
on which interest accruals have ceased, loans which have been re-negotiated, real estate
acquired through foreclosure, and loans past due 90 days or more and still accruing. Table
9 represents the levels of these assets at December 31, 1998 through 2002.

Total non-performing assets increased
slightly at December 31, 2002 compared to 2001 due to an increase in non-accrual loans and
an increase in other real estate owned and other non-performing assets. The improvement in
total non-performing assets at December 31, 2001 compared to 2000 is attributable to
reduction in non-accrual and past due loans accruing over 90 days. This is due to the
improvement in loan quality over the past few years.

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

`TABLE 9
Non-Performing Assets and Past Due Loans  (000's omitted)
                                                                  December 31,
                                             2002         2001         2000           1999      1998
                                         ----------------------------------------------------------------
Non-Performing Loans:
  Loans Past Due 90 Days or More & Still
    Accruing                                      $72         $186         $489        $240         $168
  Non-Accrual Loans                               512          321          731         859        1,102
  Renegotiated Loans                                0            0            0           6            7
                                         ----------------------------------------------------------------
    Total Non-Performing Loans                    584          507        1,220       1,105        1,277
                                         ----------------------------------------------------------------
Other Non-Performing Assets:
  Other Real Estate                               110            0            0         288          172
  Other Real Estate Owned in Redemption           164            0            0         179           96
  Other Non-Performing  Assets                     92           10          159          56           39
                                         ----------------------------------------------------------------
    Total Other Non-Performing Assets             366           10          159         523          307
                                         ----------------------------------------------------------------
Total Non-Performing Assets                      $950         $517       $1,379      $1,628       $1,584
                                         ================================================================
Non-Performing Loans as a % of
  Total Loans                                   0.26%        0.24%        0.63%       0.58%        0.79%
Non-Performing Assets as a % of
  Total Loans and Other Real Estate             0.42%        0.25%        0.71%       0.85%        0.98%
Allowance for Loan Losses as a % of
  Non-Performing Loans                        545.21%      616.37%      240.33%     267.96%      217.93%
Accruing Loans Past Due 90 Days or
  More to Total Loans                           0.03%        0.09%        0.25%       0.13%        0.10%
Non-performing Assets as a % of
  Total Assets                                  0.28%        0.17%        0.47%       0.57%        0.58%`

Table 10 reflects the allocation of
the allowance for loan losses and is based upon ranges of estimates and is not intended to
imply either limitations on the usage of the allowance or precision of the specific
amounts. The Corporation does not view the allowance for loan losses as being divisible
among the various categories of loans. The entire allowance is available to absorb any
future losses without regard to the category or categories in which the charged-off loans
are classified. Table 10 also reflects the percentage ratio of outstanding loans by
category to total loans at the end of the respective year.

44.

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`TABLE 10
Allocation of the Allowance for Loan Losses
                              2002               2001            2000              1999             1998
December 31,                        Loan             Loan              Loan             Loan              Loan
(000's omitted)           Amount     %      Amount     %     Amount     %      Amount     %     Amount     %
-----------------------------------------------------------------------------------------------------------------
Commercial and             $2,222   69.84%   $2,121  67.40%   $1,645   58.69%   $1,682  53.19%   $1,270   51.69%
construction
Real estate mortgage           65    5.33%       60   5.21%       94    7.89%      144  13.17%      130    9.76%
Consumer                      897   24.83%      819  27.39%      890   33.42%      963  33.64%      983   38.49%
Unallocated                     0               125              303               172              400
-----------------------------------------------------------------------------------------------------------------
  Total                    $3,184  100.00%   $3,125 100.00%   $2,932  100.00%   $2,961 100.00%   $2,783  100.00%
                         ========================================================================================`

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

Certain of the Corporations
non-performing loans included in Table 9 are considered impaired. The Corporation measures
impairment on all large balance non-accrual commercial loans. Certain large balance
accruing loans rated substandard or worse are also measured for impairment. Impairment
losses are adequately covered by the provision for loan losses. The policy does not apply
to large groups of smaller balance homogeneous loans that are collectively evaluated for
impairment. Loans collectively evaluated for impairment include certain smaller balance
commercial loans, consumer loans, residential real estate loans, and credit card loans,
and are not included in the impaired loan data in the following paragraphs.

At December 31, 2002, loans
considered to be impaired totaled $2,403,000. All amounts included within impaired loans
required specific allowance. The average recorded investment in impaired loans was
$2,642,000 in 2002. The interest income recognized on impaired loans based on cash
collections totaled $72,000 during 2002.

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

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

`DEPOSITS
--------
TABLE 11
Average Deposits
Years Ended December 31,      2002             2001              2000              1999              1998
                        Average  Average  Average Average  Average  Average  Average  Average  Average  Average
(000's omitted)         Balance    Rate   Balance   Rate   Balance    Rate   Balance   Rate    Balance    Rate
-----------------------------------------------------------------------------------------------------------------
Non-int. bearing demand  $43,908          $39,014           $35,711           $29,912           $27,202
Interest-bearing demand   42,637    0.95%  36,457    1.62%   40,199    1.82%   41,996   1.70%    35,982    2.12%
Savings                   85,746    1.37%  73,151    2.59%   66,890    3.45%   66,141   2.94%    62,172    2.88%
Time                      99,419    4.07% 116,044    5.58%  108,149    5.75%  100,053   5.23%   104,529    5.68%
                        -----------------------------------------------------------------------------------------
  Total                 $271,710    2.07% $264,666   3.38% $250,949    3.69% $238,102   3.31%  $229,885    3.69%
                        =========================================================================================`

45.

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The Corporations average
deposit balances and rates for the past five years are summarized in Table 11. Total
average deposits were 2.7% higher in 2002 as compared to 2001. Deposit growth was derived
primarily from increases in non-interest bearing demand, and savings deposits.
Interest-bearing demand deposits comprised 15.7% of total deposits while savings deposits
comprised 31.6% of total deposits.

As of December 31, 2002 certificates
of deposit of $100,000 or more accounted for approximately 11.3% of total deposits
compared to 8.5% at December 31, 2001. The maturities of these deposits are summarized in
Table 12.

`TABLE 12
Maturity of Time Certificates of Deposit of $100,000 or More

                               December 31, December 31,
(000's omitted)                    2002         2001
----------------------------------------------------------
Three months or less                  $9,701      $12,309
Over three through six months          3,110        4,004
Over six through twelve months         7,532        1,768
Over twelve months                    13,197        4,516
                               ---------------------------
  Total                              $33,540      $22,597
                               ===========================`

FEDERAL INCOME TAXESThe Corporations effective tax
rate was 29.9% for 2002, 29.9% for 2001 and 29.1% for 2000. The principal difference
between the effective tax rates and the statutory tax rate of 34% is the
Corporations investment in securities and loans, which provide income exempt from
federal income tax. Additional information relating to federal income taxes is included in
Note 8 to the Consolidated Financial Statements.

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

Liquidity maintenance, together with
a solid capital base and strong earnings performance are key objectives of the
Corporation. The Corporations liquidity is derived from a strong deposit base
comprised of individual and business deposits. Deposit accounts of customers in the mature
market represent a substantial portion of deposits of individuals. The Corporations
deposit base plus other funding sources (federal funds purchased, other liabilities and
shareholders equity) provided primarily all funding needs in 2002, 2001, and 2000.
While these sources of funds are expected to continue to be available to provide funds in
the future, the mix and availability of funds will depend upon future economic and market
conditions. The Corporation does not foresee any difficulty in meeting its funding
requirements.

Primary liquidity is provided through
short-term investments or borrowings (including federal funds sold and purchased), while
the security portfolio provides secondary liquidity along with FHLB advances. As of
December 31, 2002 federal funds sold represented 3.0% of total assets, compared to 7.4% at
the end of 2001. The Corporation regularly monitors liquidity to ensure adequate cash
flows to cover unanticipated reductions in the availability of funding sources.

46.

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

The Corporation had cash flows from
financing activities resulting primarily from the inflow of savings deposits and
short-term borrowings. In 2002, these deposits increased $30,599,000 and these borrowings
decreased $600,000. Cash used by investing activities was $40,004,000 in 2002 compared to
cash provided of $5,321,000 in 2001. The change in investing activities is due to the
purchasing of securities in 2002 compared to sales and calls of securities in 2001.

CAPITAL RESOURCESManagement closely monitors capital
levels to provide for current and future business needs and to comply with regulatory
requirements. Regulations prescribed under the Federal Deposit Insurance Corporation
Improvement Act of 1991 have defined well capitalized institutions as those
having total risk-based ratios, tier 1 risk-based capital ratios and tier 1 leverage
ratios of at least 10%, 6%, and 5% respectively. At December 31, 2002, the Corporation was
well in excess of the minimum capital and leverage requirements necessary to be considered
a well capitalized banking company as defined by federal law.

Total shareholders equity rose
3.9% to $39,928,000 at December 31, 2002, compared with $38,433,000 at December 31, 2001.
The Corporations equity to asset ratio was 11.7% at December 31, 2002, compared to
12.4% at December 31, 2001. The increase in the amount of capital was obtained through
retained earnings. In 2002, the Corporation paid the same dividend as in 2001 at $1.01 per
share.

At December 31, 2002, the
Corporations tier 1 and total risk-based capital ratios were 14.1% and 15.2%,
respectively, compared with 15.0% and 16.2% in 2001. The decrease in the risk-based
capital ratios is largely due to the increase in loan volume and the increase in the
security portfolio. The Corporations tier 1 leverage ratio was 12.6% at December 31,
2002 compared with 12.5% at December 31, 2001. This increase in the leverage ratio was due
to the increase in capital.

QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISKFentura Financial, Inc. faces market
risk to the extent that both earnings and the fair value of its financial instruments are
affected by changes in interest rates. The Corporation manages this risk with static GAP
analysis and has begun simulation modeling. Throughout 2002, the results of these
measurement techniques were within the Corporations policy guidelines. The
Corporation does not believe that there has been a material change in the nature of the
Corporations substantially influenced market risk exposures, including the
categories of market risk to which the Corporation is exposed and the particular markets
that present the primary risk of loss to the Corporation, or in how those exposures were
managed in 2002 compared to 2001.

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

The following table provides
information about the Corporations financial instruments that are sensitive to
changes in interest rates as of December 31, 2002. The table shows expected cash flows
from market sensitive instruments for each of the next five years and thereafter. The
expected maturity date values for loans and securities (at amortized cost) were calculated
without adjusting the instruments contractual maturity dates for expected
prepayments. Maturity date values for interest bearing core deposits were not based on
estimates of the period over which the deposits would be outstanding, but rather the
opportunity for re-pricing. The Corporation believes that re-pricing dates, as opposed to
expected maturity dates, may be more relevant in analyzing the value of such instruments
and are reported as such in the following table.

47.

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`TABLE 13
   Rate Sensitivity of Financial Instruments
   (000's omitted)                  2002      2003      2004     2005     2006   Thereafter   Total     Fair
                                                                                                        Value
   -------------------------------------------------------------------------------------------------------------
           Rate Sensitive Assets:
        Fixed interest rate loans   $27,924   $23,447  $22,125  $19,706  $13,415    $19,070  $125,687  $128,510
            Average interest rate     6.39%     7.43%    6.84%    5.35%    6.25%      4.82%
     Variable interest rate loans   $48,425   $10,987   $7,568   $7,708  $11,383    $17,972  $104,043  $106,794
            Average interest rate     5.89%     5.56%    5.60%    5.22%    5.01%      5.09%
   Fixed interest rate securities   $15,148    $2,784  $15,593   $4,906   $5,064    $11,104   $54,599   $54,928
            Average interest rate     3.35%     5.17%    4.24%    4.53%    6.97%      5.46%
Variable Interest rate securities                                         $2,000     $6,104    $8,104    $8,104
            Average interest rate                                          2.42%      5.69%
                       FHLB Stock      $822                                                      $822      $822
            Average interest rate     6.00%
    Other interest bearing assets   $10,300                                                   $10,300   $10,300
            Average interest rate     1.62%

      Rate Sensitive Liabilities:
        Interest-bearing checking   $51,194                                                   $51,194   $51,194
            Average interest rate     0.95%
                          Savings   $91,972                                                   $91,972   $91,972
            Average interest rate     2.37%
                             Time   $58,246   $19,462  $11,982   $1,431  $16,579       $128  $107,828  $109,178
            Average interest rate     2.77%     3.23%    4.53%    4.83%    4.67%      3.03%
            Short term borrowings    $1,500                                                    $1,500    $1,500
            Average interest rate     1.21%
                    FHLB advances       $16       $17      $18      $20      $21     $1,032    $1,124    $1,305
            Average interest rate     7.34%     7.34%    7.34%    7.34%    7.34%      7.34%`

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

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

Table 14 sets forth the distribution
of re-pricing of the Corporations earning assets and interest bearing liabilities as
of December 31, 2002, the interest rate sensitivity GAP, as defined above, the cumulative
interest rate sensitivity GAP, the interest rate sensitivity GAP ratio (i.e. interest rate
sensitive assets divided by interest rate sensitive liabilities) and the cumulative
sensitivity GAP ratio. The table also sets forth the time periods in which earning assets
and liabilities will mature or may re-price in accordance with their contractual terms.

48.

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`TABLE 14                                     Gap Analysis
                                          December 31, 2002
                                                      Within       Three      One to       After
                                                       Three     Months-        Five        Five
(000's Omitted)                                       Months    One Year       Years       Years       Total
-------------------------------------------------------------------------------------------------------------
  Interest Bearing Bank Deposits                          $0          $0          $0          $0          $0
  Federal Funds Sold                                  10,300           0           0           0      10,300
  Securities                                           4,124      13,245      30,347      14,987      62,703
  Loans                                              111,430      14,513      78,759      19,519     224,221
  Loans Held for Sale                                  5,509           0           0           0       5,509
  FHLB Stock                                             822           0           0           0         822
                                                 ------------------------------------------------------------
    Total Earning Assets                            $132,185     $27,758    $109,106     $34,506    $303,555
                                                 ============================================================
Interest Bearing Liabilities:
  Interest Bearing Demand Deposits                   $51,194          $0          $0          $0     $51,194
  Savings Deposits                                    91,972           0           0           0      91,972
  Time Deposits Less than $100,000                    11,126      26,777      36,257         128      74,288
  Time Deposits Greater than $100,000                  9,701      10,642      13,197           0      33,540
  Short-term Borrowings                                1,500           0           0           0       1,500
  FHLB Advances                                            0          16         776       1,032       1,124
                                                 ------------------------------------------------------------
    Total Interest Bearing Liabilities              $165,493     $37,435     $49,530      $1,160    $253,618
                                                 ============================================================
Interest Rate Sensitivity GAP                      ($33,308)    ($9,677)     $59,576     $33,346     $49,115
Cumulative Interest Rate
  Sensitivity GAP                                  ($33,308)   ($42,985)     $16,591     $49,937
Interest Rate Sensitivity GAP                          -0.80       -0.74        2.20       29.75
Cumulative Interest Rate
  Sensitivity GAP Ratio                                -0.80       -0.79       -1.07        1.20`

As indicated in Table 14, the
short-term (one year and less) cumulative interest rate sensitivity gap is negative.
Accordingly, if market interest rates increase, this negative gap position could have a
short- term negative impact on interest margin. Conversely, if market interest rates
decrease, this negative gap position could have a short-term positive impact on interest
margin. However, gap analysis is limited and may not provide an accurate indication of the
impact of general interest rate movements on the net interest margin since the re-pricing
of various categories of assets and liabilities is subject to the Corporations
needs, competitive pressures, and the needs of the Corporations customers. In
addition, various assets and liabilities indicated as re-pricing within the same period
may in fact re-price at different times within such period and at different rate indices.
The limitations of gap described above impacted financial performance in 2002. The
Corporations gap position was negative and there was a decline in market interest
rates; yet net interest income or margin dollars dropped. This occurred because assets,
both variable and fixed through maturity and refinance, re-priced more dramatically than
liabilities. The liabilities, largely deposits, either lagged market re-pricing due to the
maturity dates on time deposits or were not re-priced by the same amount as assets due to
competitive pressures. Interest bearing checking and savings deposits are generally lower
cost of funds products compared to time deposits. This lower level of interest rates
creates a smaller opportunity for re-pricing. For example certain asset products re-priced
downward 4.25% with the downward movement of national prime rates throughout 2002 while
most of interest bearing checking and savings were at rates lower than 1.00% at the start
of the year and accordingly, had a much lesser level of re-pricing opportunity. The
Corporation has implemented a more sophisticated model in 2002 to assist in monitoring and
measuring interest rate sensitivity to changing interest rate environments. The
Corporation will continue to make strides in managing interest rate sensitivity.

ACCOUNTING AND REPORTING
DEVELOPMENTSNew accounting standards on asset
retirement obligations, restructuring activities and exit costs, operating leases, and
early extinguishment of debt were issued in 2002. Management determined that when the new
accounting standards are adopted in 2003 they will not have a material impact on the
Companys financial condition or results of operations.

49.

---

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

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

FENTURA FINANCIAL, INC.
COMMON STOCKTable 15 sets forth the high and low
market information for each quarter of 2000 through 2002. These quotations reflect
inter-dealer prices, without retail mark-up, markdown, or commission and may not represent
actual transactions. As of March 1, 2003, there were 739 shareholders of record, not
including participants in the Corporations employee stock option program.

`TABLE 15
Common Stock Data
                                       Market                             Dividends
                                     Information                            Paid
    Year            Quarter             High          Low                 Per Share
-------------------------------------------------------------------------------------
              First Quarter               $40.83      $29.27                  $0.210
        2000  Second Quarter               37.00       24.99                   0.210
              Third Quarter                30.00       24.63                   0.210
              Fourth Quarter               26.50       22.00                   0.340
                                                                         ------------
                                                                              $0.970


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


              First Quarter               $28.75      $25.50                  $0.000
        2002  Second Quarter               34.00       27.00                   0.230
              Third Quarter                32.45       29.50                   0.230
              Fourth Quarter               34.75       31.25                   0.550
                                                                         ------------
                                                                              $1.010
Note:  Dividend per share figures have been adjusted to reflect a 20% stock dividend distributed
          on May 26, 2000.`

50.

---

# EXHIBIT 14

# FENTURA FINANCIAL, INC. CODE OF ETHICS FOR
DIRECTORS AND EXECUTIVE OFFICERS

In my role as a Director and/or
Executive Officer of Fentura Financial, Inc. (the Company), I certify to the
Company and the Audit Committee of the Board of Directors of the Company, that I will
adhere to and advocate the following principles and responsibilities governing my
professional and ethical conduct to the best of my knowledge and ability:

|1. | I will act with honesty and integrity, avoiding actual or apparent conflicts of
               interest in all personal and professional relationships.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | I will provide information that is accurate, complete, objective, relevant,
               timely and understandable.
|-- | ---------------------------------------------------------------------------------------------------------------------

|3. | I will comply with the rules and regulations of federal, state, and local
               governments, and other appropriate private and public regulatory agencies.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | I will act in good faith, responsibly, and with due care. I will not
               misrepresent material facts or allow my independent judgment to be subordinated
               or otherwise compromised.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | I will respect and maintain the confidentiality of information reviewed or
               acquired in carrying out my duties except when authorized or otherwise legally
               obligated to disclose.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. | I will share knowledge and maintain skills important and relevant to the needs
               of the Company.
|-- | -------------------------------------------------------------------------------------------------------------

|7. | I will proactively practice and promote ethical behavior as a professional in my
               role with the Company.
|-- | ----------------------------------------------------------------------------------------------------------------------

|8. | I will comply with and adhere to all of the Companys policies and
               practices, including those policies governing accounting and financial reporting
               practices and corporate governance.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9. | I will promptly disclose to an appropriate person or persons any material
               transaction or relationship that reasonably could be expected to give rise to a
               conflict of interest, and/or violations of this Code.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|___________________________
(Signature) | ___________________________
(Date)
|--------------------------------------- | ----------------------------------



---

# Exhibit 21.1 Subsidiaries of the
Registrant

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



---

# EXHIBIT 23.1

# CONSENT OF INDEPENDENT
ACCOUNTANTS

We
consent to the incorporation by reference in the Registration Statement of Fentura
Financial, Inc. on Form S-3D (File No.333-75194) of our report dated February 6, 2003 on
the 2002 Consolidated Financial Statements of Fentura Financial, Inc., which report is
included in the 2002 Annual Report on Form 10-K of Fentura Financial, Inc.

| | CROWE, CHIZEK AND COMPANY LLP
| | -----------------------------

Grand Rapids, MichiganMarch
21, 2003



---

# EXHIBIT 23.2

# CONSENT OF INDEPENDENT
ACCOUNTANTS

CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated
January 26, 2001, accompanying the consolidated financial statements in the Annual Report
of Fentura Financial, Inc. (formerly Fentura Bancorp, Inc.) on Form 10-K for the year
ended December 31, 2000. We hereby consent to the incorporation by reference of said
reports in the Registration Statements of Fentura Financial, Inc. on Form S-3 (File
No.333-75194).

/s/ Grant Thornton LLP

Southfield, MichiganMarch
21, 2003



---

# EXHIBIT 99-1

I, Donald L. Grill,  Chief Executive Officer of Fentura Financial,  Inc.,  certify,  pursuant to 18 U.S.C.  Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

| | (1)       
           the Annual Report on Form 10-K for the year ended December 31, 2002 which
          this statement accompanies fully complies with the requirements of Section 13(a)
          or 15(d) of the Securities Exchange Act of 1934, and
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2)       

           the information contained in the Annual Report on Form 10-K for the year ended
          December 31, 2002 fairly presents, in all material respects, the financial
          condition and results of operations of Fentura Financial, Inc.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: March 25, 2003

| | /s/ Donald L. Grill
Donald L. Grill
Chief Executive Officer
| | -----------------------------------------------------------



---

# EXHIBIT 99-2

I, Ronald L. Justice,  Chief Financial Officer of Fentura Financial,  Inc., certify,  pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

| | (1)       

           the Annual Report on Form 10-K for the year ended December 31, 2002 which this
          statement accompanies fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934, and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2)       

           the information contained in the Annual Report on Form 10-K for the year ended
          December 31, 2002 fairly presents, in all material respects, the financial
          condition and results of operations of Fentura Financial, Inc.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dated: March 25, 2003

| | /s/ Ronald L. Justice
Ronald L. Justice
Chief Financial Officer
| | ---------------------------------------------------------------