##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from  to
 Commission file number 000-23550
 Fentura Financial, Inc.
  Michigan
    
    38-2806518(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employee
Identification No.)
 175 N Leroy, P.O. Box 725, Fenton, Michigan 48430
 (810) 629-2263  (Registrants telephone number)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
(Do not check if a smaller
reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



Fentura Financial Inc.
Index to Form 10-Q
 PagePart I  Financial Information
    
    
    3Item 1  Consolidated Financial Statements (Unaudited)
    
    
    3-25Item 2  Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    26-36Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    36-38Item 4T  Controls and Procedures
    
    
    38Part II  Other Information
    
    
    39Item 1  Legal Proceedings
    
    
    39Item 1A  Risk Factors
    
    
    39Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3  Defaults Upon Senior Securities
    
    
    39Item 4 [Reserved]
    
    
    39Item 5  Other Information
    
    
    39Item 6  Exhibits
    
    
    39Signatures
    
    
    40Exhibit Index
    
    
    41EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS  FENTURA FINANCIAL, INC.  CONSOLIDATED BALANCE SHEETS  (000s omitted except share and per share data)
 March 31,2010
    
    
   Dec 31,(unaudited)
    
    
    2009ASSETSCash and due from banks
    
    $
    17,019
    
    
    $
    18,459Federal funds sold
    
    
    28,650
    
    
    
    23,650Total cash & cash equivalents
    
    
    45,669
    
    
    
    42,109Securities-available for sale
    
    
    42,113
    
    
    
    43,608Securities-held to maturity, (fair value of $5,493
at March 31, 2010 and $5,493 at December 31, 2009)
    
    
    5,453
    
    
    
    5,456Total securities
    
    
    47,566
    
    
    
    49,064Loans held for sale
    
    
    1,265
    
    
    
    831Loans:Commercial
    
    
    252,231
    
    
    
    252,764Real estate loans  construction
    
    
    20,129
    
    
    
    26,295Real estate loans  mortgage
    
    
    25,751
    
    
    
    28,058Consumer loans
    
    
    45,509
    
    
    
    48,313Total loans
    
    
    343,620
    
    
    
    355,430Less: Allowance for loan losses
    
    
    (12,338
    )
    
    
    (10,726
    )Net loans
    
    
    331,282
    
    
    
    344,704Bank owned life insurance
    
    
    7,267
    
    
    
    7,221Bank premises and equipment
    
    
    15,697
    
    
    
    15,914Federal Home Loan Bank stock
    
    
    1,900
    
    
    
    1,900Accrued interest receivable
    
    
    1,927
    
    
    
    1,813Acquisition intangibles
    
    
    126
    
    
    
    157Other real estate owned
    
    
    8,928
    
    
    
    7,967Assets of discontinued operations
    
    
    37,378
    
    
    
    37,919Other assets
    
    
    9,989
    
    
    
    12,480Total assets
    
    $
    508,994
    
    
    $
    522,079LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing deposits
    
    $
    65,886
    
    
    $
    64,530Interest bearing deposits
    
    
    362,903
    
    
    
    376,245Total deposits
    
    
    428,789
    
    
    
    440,775Short term borrowings
    
    
    67
    
    
    
    164Federal Home Loan Bank advances
    
    
    7,981
    
    
    
    7,981Subordinated debentures
    
    
    14,000
    
    
    
    14,000Liabilities of discontinued operations
    
    
    34,596
    
    
    
    35,217Accrued taxes, interest and other liabilities
    
    
    3,318
    
    
    
    3,410Total liabilities
    
    
    488,751
    
    
    
    501,547Shareholders equityCommon stock  no par value
2,267,135 shares issued (2,248,553 at December 31, 2009)
    
    
    42,945
    
    
    
    42,913Retained deficit
    
    
    (22,140
    )
    
    
    (21,657
    )Accumulated other comprehensive loss
    
    
    (562
    )
    
    
    (724
    )Total shareholders equity
    
    
    20,243
    
    
    
    20,532Total liabilities and shareholders equity
    
    $
    508,994
    
    
    $
    522,079
 See notes to consolidated financial statements
 3




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##### Table of Contents



FENTURA FINANCIAL, INC.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(000s omitted except per share data)
 Three Months EndedMarch 312010
    
    
    2009Interest incomeInterest and fees on loans
    
    $
    5,306
    
    
    $
    6,463Interest and dividends on securities:Taxable
    
    
    292
    
    
    
    420Tax-exempt
    
    
    124
    
    
    
    144Interest on federal funds sold
    
    
    5
    
    
    
    0Total interest income
    
    
    5,727
    
    
    
    7,027Interest expenseDeposits
    
    
    1,817
    
    
    
    2,613Borrowings
    
    
    197
    
    
    
    311Total interest expense
    
    
    2,014
    
    
    
    2,924Net interest income
    
    
    3,713
    
    
    
    4,103Provision for loan losses
    
    
    1,790
    
    
    
    1,655Net interest income after provision for loan losses
    
    
    1,923
    
    
    
    2,448Non-interest incomeService charges on deposit accounts
    
    
    474
    
    
    
    436Gain on sale of mortgage loans
    
    
    93
    
    
    
    235Trust and investment services income
    
    
    389
    
    
    
    364Loss on equity investment
    
    
    0
    
    
    
    (515
    )Other income and fees
    
    
    391
    
    
    
    620Total non-interest income
    
    
    1,347
    
    
    
    1,140Non-interest expenseSalaries and employee benefits
    
    
    2,114
    
    
    
    2,552Occupancy
    
    
    449
    
    
    
    503Furniture and equipment
    
    
    371
    
    
    
    424Loan and collection
    
    
    557
    
    
    
    385Advertising and promotional
    
    
    28
    
    
    
    41Other operating expenses
    
    
    1,048
    
    
    
    1,231Total non-interest expense
    
    
    4,567
    
    
    
    5,136Loss from continuing operations before income tax
    
    
    (1,297
    )
    
    
    (1,548
    )Federal income tax benefit
    
    
    (327
    )
    
    
    (396
    )Net loss from continuing operations
    
    $
    (970
    )
    
    $
    (1,152
    )Net income/(loss) from discontinued operations, net of tax
    
    
    487
    
    
    
    (507
    )Net loss
    
    $
    (483
    )
    
    $
    (1,659
    )Loss per share from continuing operationsBasic and diluted
    
    $
    (0.43
    )
    
    $
    (0.53
    )Income/(loss) per share from discontinued operationsBasic and diluted
    
    $
    0.22
    
    
    $
    (0.23
    )Net loss per shareBasic and diluted
    
    $
    (0.21
    )
    
    $
    (0.76
    )Cash Dividends declared
    
    $
    0.00
    
    
    $
    0.00
  4




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Fentura Financial, Inc.
Consolidated Statements of Changes in Shareholders Equity (Unaudited)
 Three Months EndedMarch 31,(000s omitted)
    
    2010
    
    
    2009Common StockBalance, beginning of period
    
    $
    42,913
    
    
    $
    42,778Issuance of shares underDirector
stock purchase plan & Dividend reinvestment program (18,582 and
8,296 shares)
    
    
    32
    
    
    
    36Balance, end of period
    
    
    42,945
    
    
    
    42,814Retained DeficitBalance, beginning of period
    
    
    (21,657
    )
    
    
    (4,677
    )Net loss
    
    
    (483
    )
    
    
    (1,659
    )Balance, end of period
    
    
    (22,140
    )
    
    
    (6,336
    )Accumulated Other Comprehensive LossBalance, beginning of period
    
    
    (724
    )
    
    
    (1,977
    )Change in unrealized loss on securities, net of tax
    
    
    162
    
    
    
    (648
    )Balance, end of period
    
    
    (562
    )
    
    
    (2,625
    )Total shareholders equity
    
    $
    20,243
    
    
    $
    33,853
  5




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Fentura Financial, Inc.
Consolidated Statements of Cash Flows (Unaudited)
 Three Months EndedMarch 31,(000s omitted)
    
    2010
    
    
    2009OPERATING ACTIVITIES:Net loss
    
    $
    (483
    )
    
    $
    (1,659
    )Adjustments to reconcile net loss to cashProvided by Operating Activities:Depreciation and amortization
    
    
    209
    
    
    
    361Provision for loan losses
    
    
    1,790
    
    
    
    1,655Loans originated for sale
    
    
    (6,392
    )
    
    
    (17,275
    )Proceeds from the sale of loans
    
    
    6,051
    
    
    
    13,358Gain on sales of loans
    
    
    (93
    )
    
    
    (235
    )Loss on sale of other real estate owned
    
    
    93
    
    
    
    57Loss on equity investment
    
    
    0
    
    
    
    515Earnings from bank owned life insurance
    
    
    (46
    )
    
    
    (45
    )Net (increase) decrease in interest receivable & other assets
    
    
    2,325
    
    
    
    (575
    )Net increase (decrease) in interest payable & other liabilities
    
    
    (92
    )
    
    
    690Net change in discontinued operations operating activities
    
    
    102
    
    
    
    447Total Adjustments
    
    
    3,947
    
    
    
    (1,047
    )Net cash provided by/(used in) operating activities
    
    
    3,464
    
    
    
    (2,706
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from maturities of securities  HTM
    
    
    0
    
    
    
    200Proceeds from maturities of securities  AFS
    
    
    2,809
    
    
    
    1,462Proceeds from calls of securities  AFS
    
    
    1,000
    
    
    
    2,000Purchases of securities  AFS
    
    
    (2,000
    )
    
    
    0Net decrease in loans
    
    
    10,284
    
    
    
    9,147Proceeds from bank owned life insurance
    
    
    0
    
    
    
    293Sales of other real estate owned
    
    
    294
    
    
    
    667Acquisition of premises and equipment, net
    
    
    (58
    )
    
    
    (53
    )Net change in discontinued operations investing activities
    
    
    548
    
    
    
    688Net cash provided by investing activities
    
    
    12,877
    
    
    
    14,404CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in deposits
    
    
    (11,986
    )
    
    
    5,528Net (decrease) in borrowings
    
    
    (97
    )
    
    
    (614
    )Repayment of notes payable
    
    
    0
    
    
    
    (250
    )Purchase of advances from FHLB
    
    
    0
    
    
    
    55,495Repayments of advances from FHLB
    
    
    0
    
    
    
    (58,195
    )Net proceeds from stock issuance and purchase
    
    
    32
    
    
    
    36Net change in discontinued operations financing activities
    
    
    (544
    )
    
    
    (1,055
    )Net cash provided by (used in) financing activities
    
    
    (12,595
    )
    
    
    945Net change in cash and cash equivalents
    
    $
    3,746
    
    
    $
    12,643Cash and cash equivalents  Beginning
    
    
    44,646
    
    
    
    20,953Cash and cash equivalents  Ending
    
    $
    48,392
    
    
    $
    33,596Less cash and cash equivalents of discontinued operations
    
    
    2,723
    
    
    
    6,953Cash and cash equivalents of continuing operations
    
    $
    45,669
    
    
    $
    26,643Cash paid for:Interest
    
    $
    1,891
    
    
    $
    3,123Income taxes
    
    $
    245
    
    
    $
    387Non-cash Disclosures:Transfers from loans to other real estate
    
    $
    1,348
    
    
    $
    1,238
  6




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Fentura Financial, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
 Three Months EndedMarch 31,(000s omitted)
    
    2010
    
    
    2009Net loss
    
    $
    (483
    )
    
    $
    (1,659
    )Other comprehensive income (loss), net of tax:Unrealized holding gains (losses) arising during period
    
    
    245
    
    
    
    (981
    )Tax effect
    
    
    (83
    )
    
    
    333Other comprehensive income (loss)
    
    
    162
    
    
    
    (648
    )Comprehensive loss
    
    $
    (321
    )
    
    $
    (2,307
    )
 Fentura Financial, Inc.
Notes to Consolidated Financial Statements (Unaudited)
 NOTE 1  BASIS OF PRESENTATION
     7




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NOTE 1  BASIS OF PRESENTATION (continued)
 Reclassifications
  Securities
     Allowance for Loan Losses
  8




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NOTE 1  BASIS OF PRESENTATION (continued)
  Other Real Estate Owned and Foreclosed Assets
 Income Taxes
    Dividend Restriction
  Stock Option Plans
   9




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##### Table of Contents



NOTE 1  BASIS OF PRESENTATION (continued)
    Number of
    
    
    WeightedOptions
    
    
    Average PriceOptions outstanding at December 31, 2009
    
    
    20,297
    
    
    $
    29.55Options granted 2010
    
    
    0
    
    
    $
    0.00Options forfeited 2010
    
    
    (3,542
    )
    
    $
    25.04Options outstanding and exercisable at
March 31, 2010
    
    
    16,755
    
    
    $
    30.51
 Going Concern
   NOTE 2  ADOPTION OF NEW ACCOUNTING STANDARDS
 New Accounting Pronouncements:
  10




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NOTE 2 ADOPTION OF NEW ACCOUNTING STANDARDS (continued)
   NOTE 3  SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrecognized
    
    
    Unrecognized(000s omitted)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable for SaleMarch 31, 2010U.S. Government & federal agency
    
    $
    7,526
    
    
    $
    32
    
    
    $
    (23
    )
    
    $
    7,535State and municipal
    
    
    7,029
    
    
    
    137
    
    
    
    (33
    )
    
    
    7,133Mortgage-backed residential
    
    
    11,795
    
    
    
    285
    
    
    
    0
    
    
    
    12,080Collateralized mortgage obligations
    
    
    14,384
    
    
    
    254
    
    
    
    (800
    )
    
    
    13,838Equity securities
    
    
    1,971
    
    
    
    42
    
    
    
    (486
    )
    
    
    1,527$
    42,705
    
    
    $
    750
    
    
    $
    (1,342
    )
    
    $
    42,113December 31, 2009U.S. Government & federal agency
    
    $
    6,543
    
    
    $
    38
    
    
    $
    (67
    )
    
    $
    6,514State and municipal
    
    
    7,034
    
    
    
    102
    
    
    
    (41
    )
    
    
    7,095Mortgage-backed residential
    
    
    13,482
    
    
    
    298
    
    
    
    0
    
    
    
    13,780Collateralized mortgage obligations
    
    
    15,369
    
    
    
    199
    
    
    
    (878
    )
    
    
    14,690Equity securities
    
    
    1,971
    
    
    
    21
    
    
    
    (463
    )
    
    
    1,529$
    44,399
    
    
    $
    658
    
    
    $
    (1,449
    )
    
    $
    43,608
 Gross
    
    
    GrossAmortized
    
    
    Unrecognized
    
    
    Unrecognized(000s omitted)
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueHeld to MaturityMarch 31, 2010State and municipal
    
    $
    5,452
    
    
    $
    48
    
    
    $
    (8
    )
    
    $
    5,492Mortgage-backed residential
    
    
    1
    
    
    
    0
    
    
    
    0
    
    
    
    1$
    5,453
    
    
    $
    48
    
    
    $
    (8
    )
    
    $
    5,493December 31, 2009State and municipal
    
    $
    5,455
    
    
    $
    55
    
    
    $
    (18
    )
    
    $
    5,492Mortgage-backed residential
    
    
    1
    
    
    
    0
    
    
    
    0
    
    
    
    1$
    5,456
    
    
    $
    55
    
    
    $
    (18
    )
    
    $
    5,493
 11




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NOTE 3  SECURITIES (continued)
  Available for SaleAmortized
    
    
    Fair(000s omitted)
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    9,606
    
    
    $
    9,599Due from one to five years
    
    
    1,388
    
    
    
    1,420Due from five to ten years
    
    
    3,561
    
    
    
    3,649Mortgage-backed securities
    
    
    11,795
    
    
    
    12,080Collateralized mortgage obligations
    
    
    14,384
    
    
    
    13,838Equity securities
    
    
    1,971
    
    
    
    1,527$
    42,705
    
    
    $
    42,113
 Held to MaturityAmortized
    
    
    Fair(000s omitted)
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    3,156
    
    
    $
    3,157Due from one to five years
    
    
    1,928
    
    
    
    1,965Due from five to ten years
    
    
    368
    
    
    
    370Due after ten years
    
    
    0
    
    
    
    0Mortgage-backed securities
    
    
    1
    
    
    
    1$
    5,453
    
    
    $
    5,493
    Less than 12 Months
    
    
    12 Months or More
    
    
    Total2010
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(000s omitted)
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS Government & federal
agency
    
    $
    2,483
    
    
    $
    (23
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    2,483
    
    
    $
    (23
    )State & municipal
    
    
    0
    
    
    
    0
    
    
    
    910
    
    
    
    (41
    )
    
    
    910
    
    
    
    (41
    )Collateralized mortgage
obligations
    
    
    0
    
    
    
    0
    
    
    
    4,698
    
    
    
    (800
    )
    
    
    4,698
    
    
    
    (800
    )Equity securities
    
    
    0
    
    
    
    0
    
    
    
    935
    
    
    
    (486
    )
    
    
    935
    
    
    
    (486
    )Total temporarily impaired
    
    $
    2,483
    
    
    $
    (23
    )
    
    $
    6,543
    
    
    $
    (1,327
    )
    
    $
    9,026
    
    
    $
    (1,350
    )
 12




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NOTE 3  SECURITIES (continued)
 Less than 12 Months
    
    
    12 Months or More
    
    
    Total2009
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized(000s omitted)
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    LossUS Government & federal
agency
    
    $
    3,475
    
    
    $
    (67
    )
    
    $
    0
    
    
    $
    0
    
    
    $
    3,475
    
    
    $
    (67
    )State & municipal
    
    
    497
    
    
    
    (18
    )
    
    
    659
    
    
    
    (41
    )
    
    
    1,156
    
    
    
    (59
    )Collateralized mortgage obligations
    
    
    0
    
    
    
    0
    
    
    
    4,872
    
    
    
    (878
    )
    
    
    4,872
    
    
    
    (878
    )Equity securities
    
    
    0
    
    
    
    0
    
    
    
    1,009
    
    
    
    (463
    )
    
    
    1,009
    
    
    
    (463
    )Total temporarily impaired
    
    $
    3,972
    
    
    $
    (85
    )
    
    $
    6,540
    
    
    $
    (1,382
    )
    
    $
    10,512
    
    
    $
    (1,467
    )
 Other-Than-Temporary-Impairment
    US Government and federal agency and State and municipal securities
  Collateralized Mortgage Obligations (CMOs)
  13




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NOTE 3  SECURITIES (continued)
  Equity securities
  NOTE 4  LOANS AND ALLOWANCE FOR LOAN LOSSES
  (000s omitted)
    
    March 31, 2010
    
    
    December 31, 2009Commercial
    
    $
    86,973
    
    
    $
    81,425Real estate  commercial
    
    
    165,258
    
    
    
    171,339Real estate  construction
    
    
    20,129
    
    
    
    26,295Real estate  mortgage
    
    
    25,751
    
    
    
    28,058Consumer
    
    
    45,509
    
    
    
    48,313343,620
    
    
    
    355,430Less allowance for loan losses
    
    
    12,338
    
    
    
    10,726$
    331,282
    
    
    $
    344,704
   (000s omitted)
    
    March 31, 2010
    
    
    March 31, 2009Balance, January 1,
    
    $
    10,726
    
    
    $
    10,455Provision for loan losses
    
    
    1,790
    
    
    
    1,655Loans charged off
    
    
    (783
    )
    
    
    (764
    )Loan recoveries
    
    
    605
    
    
    
    59Balance, end of period
    
    $
    12,338
    
    
    $
    11,405
 14




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##### Table of Contents



NOTE 4  LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
   (000s omitted)
    
    March 31, 2010
    
    
    December 31, 2009Period end loans not requiring allocation
    
    $
    15,652
    
    
    $
    15,874Period end loans requiring allocation
    
    
    20,484
    
    
    
    23,059$
    36,136
    
    
    $
    38,933Amount of the allowance for loan losses allocated
    
    $
    6,112
    
    
    $
    5,683
  (000s omitted)
    
    March 31, 2010
    
    
    December 31, 2009Loans past due over 90 days still on accrual
    
    $
    402
    
    
    $
    319Renegotiated loans
    
    
    2,409
    
    
    
    3,822Non-accrual loans
    
    
    19,657
    
    
    
    19,241
  NOTE 5 FAIR VALUE
      15




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##### Table of Contents



NOTE 5  FAIR VALUE (continued)
  Impaired Loans:
 Other Real Estate Owned:
 Assets Measured on a Recurring Basis
  Fair Value Measurements UsingSignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    Unobservablefor Identical
    
    
    Inputs
    
    
    Inputs(000s omitted)
    
    Total
    
    
    Assets (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)March 31, 2010Available for sale securitiesUS Government and federal agency
    
    $
    7,535
    
    
    $
    0
    
    
    $
    7,535
    
    
    $
    0State and municipal
    
    
    7,133
    
    
    
    0
    
    
    
    7,133
    
    
    
    0Mortgage-backed residential
    
    
    12,080
    
    
    
    0
    
    
    
    12,080
    
    
    
    0Collateralized mortgage obligations
    
    
    13,838
    
    
    
    0
    
    
    
    13,838
    
    
    
    0Equity securities
    
    
    1,527
    
    
    
    9
    
    
    
    1,518
    
    
    
    0$
    42,113
    
    
    $
    9
    
    
    $
    42,104
    
    
    $
    0
 Fair Value Measurements UsingSignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets
    
    
    Observable
    
    
    Unobservablefor Identical
    
    
    Inputs
    
    
    Inputs(000s omitted)
    
    Total
    
    
    Assets (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)December 31, 2009Available for sale securitiesUS Government and federal agency
    
    $
    6,514
    
    
    $
    0
    
    
    $
    6,514
    
    
    $
    0State and municipal
    
    
    7,095
    
    
    
    0
    
    
    
    7,095
    
    
    
    0Mortgage-backed residential
    
    
    13,780
    
    
    
    0
    
    
    
    13,780
    
    
    
    0Collateralized mortgage obligations
    
    
    14,690
    
    
    
    0
    
    
    
    14,690
    
    
    
    0Equity securities
    
    
    1,529
    
    
    
    18
    
    
    
    1,511
    
    
    
    0$
    43,608
    
    
    $
    18
    
    
    $
    43,590
    
    
    $
    0
 16




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##### Table of Contents



NOTE 5  FAIR VALUE (continued)
  Fair Value Measurements UsingSignificant Unobservable Inputs(Level 3)(000s omitted)
    
    Asset
    
    
    Liability
    
    
    TotalBeginning balance, Jan. 1, 2009
    
    $
    1,229
    
    
    $
    0
    
    
    $
    1,229Total gains or losses (realized / unrealized)Included in earningsLoss on security impairment
    
    
    0
    
    
    
    0
    
    
    
    0Included in other comprehensive income
    
    
    (239
    )
    
    
    0
    
    
    
    (239
    )Purchases, issuances, and settlementsTransfers in and / or out of Level 3
    
    
    0
    
    
    
    0
    
    
    
    0Ending balance, March 31, 2009
    
    $
    990
    
    
    $
    0
    
    
    $
    990
 Assets Measured on a Non-Recurring Basis
  Quoted Prices in
    
    Significant
    
    SignificantActive Markets for
    
    Other
    
    UnobservableIdentical Assets
    
    Observable
    
    Inputs(000s omitted)
    
    Total
    
    (Level 1)
    
    Inputs (Level 2)
    
    (Level 3)At March 31, 2010Impaired loans
    
    $
    14,372
    
    
    $
    0
    
    
    $
    0
    
    
    $
    14,372Other real estate owned
    
    
    411
    
    
    
    0
    
    
    
    0
    
    
    
    411At December 31, 2009Impaired loans
    
    $
    17,376
    
    
    $
    0
    
    
    $
    0
    
    
    $
    17,376Other real estate owned
    
    
    1,274
    
    
    
    0
    
    
    
    0
    
    
    
    1,274
    17




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##### Table of Contents



NOTE 5 FAIR VALUE (continued)
  March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    
    
    
    
    Carrying(000s omitted)
    
    Amount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueAssets:Cash and cash equivalents
    
    $
    45,669
    
    
    $
    45,669
    
    
    $
    42,109
    
    
    $
    42,109Securities  held to maturity
    
    
    5,453
    
    
    
    5,493
    
    
    
    5,456
    
    
    
    5,493FHLB stock
    
    
    1,900
    
    
    
    n/a
    
    
    
    1,900
    
    
    
    n/aLoans held for sale
    
    
    1,265
    
    
    
    1,265
    
    
    
    831
    
    
    
    831Loans (including impaired loans)
    
    
    331,282
    
    
    
    315,906
    
    
    
    344,704
    
    
    
    326,422Accrued interest receivable
    
    
    1,927
    
    
    
    1,927
    
    
    
    1,813
    
    
    
    1,813Liabilities:Deposits
    
    $
    428,789
    
    
    $
    363,997
    
    
    $
    440,775
    
    
    $
    441,827Short-term borrowings
    
    
    67
    
    
    
    67
    
    
    
    164
    
    
    
    164FHLB advances
    
    
    7,981
    
    
    
    8,422
    
    
    
    7,981
    
    
    
    8,488Subordinated debentures
    
    
    14,000
    
    
    
    12,613
    
    
    
    14,000
    
    
    
    12,656Accrued interest payable
    
    
    1,015
    
    
    
    1,015
    
    
    
    892
    
    
    
    892
  Cash and cash equivalents
  Securities
  FHLB Stock
  Loans held for sale
  Loans
  Off-balance-sheet instruments
  18




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##### Table of Contents



NOTE 5  FAIR VALUE (continued)
 Deposit liabilities
  Short-term borrowings
  FHLB advances
  Subordinated Debentures
  Limitations
  NOTE 6  INCOME TAXES
   19




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##### Table of Contents



NOTE 6  INCOME TAXES (continued)
  NOTE 7  EARNINGS PER COMMON SHARE
  Three Months EndedMarch 31,(000s omitted except share and per share data)
    
    2010
    
    
    2009BasicNet loss
    
    $
    (483
    )
    
    $
    (1,659
    )Weighted average common shares outstanding
    
    
    2,249,917
    
    
    
    2,187,084Basic loss per common share
    
    $
    (0.21
    )
    
    $
    (0.76
    )DilutedNet loss
    
    $
    (483
    )
    
    $
    (1,659
    )Weighted average common shares outstanding for
basic earnings per common share
    
    
    2,249,917
    
    
    
    2,187,084Add: Dilutive effects of assumed exercises of stock
Options
    
    
    0
    
    
    
    0Average shares and dilutive potential common shares
    
    
    2,249,917
    
    
    
    2,187,084Diluted loss per common share
    
    $
    (0.21
    )
    
    $
    (0.76
    )
  Three Months EndedMarch 31,(000s omitted except share and per share data)
    
    2010
    
    
    2009BasicNet loss from continuing operations
    
    $
    (970
    )
    
    $
    (1,152
    )Weighted average common shares outstanding
    
    
    2,249,917
    
    
    
    2,187,084Basic loss per common share
    
    $
    (0.43
    )
    
    $
    (0.53
    )DilutedNet loss from continuing operations
    
    $
    (970
    )
    
    $
    (1,152
    )Weighted average common shares outstanding for
basic earnings per common share
    
    
    2,249,917
    
    
    
    2,187,084Add: Dilutive effects of assumed exercises of stock
Options
    
    
    0
    
    
    
    0Average shares and dilutive potential common shares
    
    
    2,249,917
    
    
    
    2,187,084Diluted loss per common share
    
    $
    (0.43
    )
    
    $
    (0.53
    )
  NOTE 8  COMMITMENTS AND CONTINGENCIES
  20




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##### Table of Contents



NOTE 9 DISCONTINUED OPERATIONS
   DAVISON STATE BANK
CONDENSED BALANCE SHEET OF DISCONTINUED OPERATIONS
(Unaudited)
 March 31,
    
    
    Dec 31,2010
    
    
    2009ASSETSCash and cash equivalents
    
    $
    2,723
    
    
    $
    2,537Securities  available for sale
    
    
    7,093
    
    
    
    7,082Securities  held to maturity
    
    
    405
    
    
    
    405Loans, net of allowance ($642-2010, $679-2009)
    
    
    23,518
    
    
    
    24,396Other assets
    
    
    3,639
    
    
    
    3,499Total assets
    
    $
    37,378
    
    
    $
    37,919LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    9,156
    
    
    $
    9,012Interest bearing
    
    
    25,577
    
    
    
    26,265Total deposits
    
    
    34,733
    
    
    
    35,277Accrued taxes, interest and other liabilities
    
    
    (137
    )
    
    
    (60
    )Shareholders equity
    
    
    2,782
    
    
    
    2,702Total liabilities and shareholders Equity
    
    $
    37,378
    
    
    $
    37,919
 21




---



##### Table of Contents



NOTE 9 DISCONTINUED OPERATIONS (continued)
 DAVISON STATE BANK
CONDENSED STATEMENT OF INCOME OF DISCONTINUED OPERATIONS
(Unaudited)
 Three Months EndedMarch 312010
    
    2009Interest income
    
    $
    457
    
    
    $
    549Interest expense
    
    
    89
    
    
    
    188Net interest income
    
    
    368
    
    
    
    361Provision for loan losses
    
    
    (5
    )
    
    
    (1
    )Net interest income after provision for loan losses
    
    
    373
    
    
    
    362Non-interest income
    
    
    827
    
    
    
    122Non-interest expense
    
    
    470
    
    
    
    1,187Income/(loss) before federal income tax
    
    
    730
    
    
    
    (703
    )Federal income tax expense
    
    
    243
    
    
    
    196Net income/(loss)
    
    $
    487
    
    
    $
    (507
    )
 NOTE 10-REGULATORY MATTERS
     22




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##### Table of Contents



NOTE 10-REGULATORY MATTERS (continued)
       23




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##### Table of Contents



NOTE 10-REGULATORY MATTERS (continued)
 For Capital
    
    RegulatoryAdequacy
    
    AgreementActual
    
    Purposes
    
    Requirements(000s omitted)
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of March 31, 2010Total Capital
(to Risk Weighted Assets)Consolidated
    
    $
    33,013
    
    
    
    7.8
    %
    
    $
    33,683
    
    
    
    8.0
    %
    
    NA
    
    
    NAThe State Bank
    
    
    23,828
    
    
    
    9.0
    
    
    
    21,287
    
    
    
    8.0
    
    
    $
    31,931
    
    
    
    12.0
    %(1)Davison State Bank
    
    
    3,366
    
    
    
    10.2
    
    
    
    2,637
    
    
    
    8.0
    
    
    NA
    

    
    NAWest Michigan Community
Bank
    
    
    11,177
    
    
    
    9.2
    
    
    
    9,763
    
    
    
    8.0
    
    
    NA
    

    
    NATier 1 Capital

(to Risk Weighted Assets)Consolidated
    
    
    27,650
    
    
    
    6.6
    
    
    
    16,842
    
    
    
    4.0
    
    
    NA
    

    
    NAThe State Bank
    
    
    20,415
    
    
    
    7.7
    
    
    
    10,644
    
    
    
    4.0
    
    
    NA
    

    
    NADavison State Bank
    
    
    2,951
    
    
    
    9.0
    
    
    
    1,318
    
    
    
    4.0
    
    
    NA
    

    
    NAWest
Michigan Community Bank
    
    
    9,638
    
    
    
    7.9
    
    
    
    4,881
    
    
    
    4.0
    
    
    NA
    

    
    NATier 1 Capital
(to Average Assets)Consolidated
    
    
    27,650
    
    
    
    5.4
    
    
    
    20,548
    
    
    
    4.0
    
    
    NA
    

    
    NAThe State Bank
    
    
    20,415
    
    
    
    6.3
    
    
    
    12,926
    
    
    
    4.0
    
    
    
    25,852
    
    
    
    8.0Davison State Bank
    
    
    2,951
    
    
    
    7.9
    
    
    
    1,498
    
    
    
    4.0
    
    
    
    2,995
    
    
    
    8.0West Michigan Community
Bank
    
    
    9,638
    
    
    
    6.5
    
    
    
    5,934
    
    
    
    4.0
    
    
    
    11,868
    
    
    
    8.0
 For Capital
    
    
    RegulatoryAdequacy
    
    
    AgreementActual
    
    
    Purposes
    
    
    Requirements(000s omitted)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAs of December 31, 2009Total Capital

(to Risk Weighted Assets)Consolidated
    
    $
    33,661
    
    
    
    7.8
    %
    
    $
    34,636
    
    
    
    8.0
    %
    
    NA
    
    
    NAThe State Bank
    
    
    24,334
    
    
    
    8.9
    
    
    
    21,961
    
    
    
    8.0
    
    
    $
    32,810
    
    
    
    12.0
    %(1)Davison State Bank
    
    
    3,328
    
    
    
    9.9
    
    
    
    2,692
    
    
    
    8.0
    
    
    NA
    

    
    NAWest Michigan Community
Bank
    
    
    11,841
    
    
    
    9.4
    
    
    
    10,063
    
    
    
    8.0
    
    
    NA
    

    
    NATier 1 Capital

(to Risk Weighted Assets)Consolidated
    
    
    28,164
    
    
    
    6.5
    
    
    
    17,318
    
    
    
    4.0
    
    
    NA
    

    
    NAThe State Bank
    
    
    20,830
    
    
    
    7.6
    
    
    
    10,981
    
    
    
    4.0
    
    
    NA
    

    
    NADavison State Bank
    
    
    2,904
    
    
    
    8.6
    
    
    
    1,346
    
    
    
    4.0
    
    
    NA
    

    
    NAWest Michigan Community
Bank
    
    
    10,262
    
    
    
    8.2
    
    
    
    5,031
    
    
    
    4.0
    
    
    NA
    

    
    NATier 1 Capital

(to Average Assets)Consolidated
    
    
    28,164
    
    
    
    5.0
    
    
    
    22,491
    
    
    
    4.0
    
    
    NA
    

    
    NAThe State Bank
    
    
    20,830
    
    
    
    6.2
    
    
    
    13,535
    
    
    
    4.0
    
    
    
    27,069
    
    
    
    8.0Davison State Bank
    
    
    2,904
    
    
    
    7.2
    
    
    
    1,620
    
    
    
    4.0
    
    
    
    3,240
    
    
    
    8.0West Michigan Community
Bank
    
    
    10,262
    
    
    
    6.9
    
    
    
    5,923
    
    
    
    4.0
    
    
    
    11,845
    
    
    
    8.0
 
 (1)
    
    Effective April 10, 2010 24




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##### Table of Contents



NOTE 11-SUBSEQUENT EVENTS
   25




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##### Table of Contents



ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Results of Operations
    Net Interest Income
     26




---



##### Table of Contents



Table 1
 THREE MONTHS ENDEDMARCH 312010 COMPARED TO 2009INCREASE (DECREASE)DUE TOYIELD/(000s omitted)
    
    VOL
    
    
    RATE
    
    
    TOTALTaxable securities
    
    $
    (27
    )
    
    $
    (71
    )
    
    $
    (98
    )Tax-exempt securities
    
    
    (28
    )
    
    
    (4
    )
    
    
    (32
    )Other securities
    
    
    (2
    )
    
    
    (26
    )
    
    
    (28
    )Federal funds sold
    
    
    5
    
    
    
    0
    
    
    
    5Total loans
    
    
    (1,121
    )
    
    
    (22
    )
    
    
    (1,143
    )Loans held for sale
    
    
    (17
    )
    
    
    1
    
    
    
    (16
    )Total earning assets
    
    
    (1,190
    )
    
    
    (122
    )
    
    
    (1,312
    )Interest bearing demand deposits
    
    
    (16
    )
    
    
    (106
    )
    
    
    (122
    )Savings deposits
    
    
    0
    
    
    
    (75
    )
    
    
    (75
    )Time CDs $100,000 and over
    
    
    (224
    )
    
    
    (144
    )
    
    
    (368
    )Other time deposits
    
    
    (26
    )
    
    
    (207
    )
    
    
    (233
    )Other borrowings
    
    
    (71
    )
    
    
    (43
    )
    
    
    (114
    )Total interest bearing liabilities
    
    
    (337
    )
    
    
    (575
    )
    
    
    (912
    )Net Interest Income
    
    $
    (853
    )
    
    $
    453
    
    
    $
    (400
    )
    27




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##### Table of Contents



Table 2 Average Balance and Rates
 THREE MONTHS ENDED MARCH 31,2010
    
    
    2009AVERAGE
    
    
    INCOME/
    
    
    YIELD/
    
    
    AVERAGE
    
    
    INCOME/
    
    
    YIELD/(000s omitted)(Annualized)
    
    BALANCE
    
    
    EXPENSE
    
    
    RATE
    
    
    BALANCE
    
    
    EXPENSE
    
    
    RATEASSETSSecurities:U.S. Treasury and Government Agencies
    
    $
    33,685
    
    
    $
    279
    
    
    
    3.36
    %
    
    $
    36,469
    
    
    $
    377
    
    
    
    4.19
    %State and Political (1)
    
    
    12,548
    
    
    
    188
    
    
    
    6.07
    %
    
    
    14,409
    
    
    
    220
    
    
    
    6.18
    %Other
    
    
    3,424
    
    
    
    15
    
    
    
    1.78
    %
    
    
    3,638
    
    
    
    43
    
    
    
    4.79
    %Total Securities
    
    
    49,657
    
    
    
    482
    
    
    
    3.94
    %
    
    
    54,516
    
    
    
    640
    
    
    
    4.76
    %Fed Funds Sold
    
    
    25,632
    
    
    
    5
    
    
    
    0.08
    %
    
    
    0
    
    
    
    0
    
    
    
    0.00
    %Loans:Commercial
    
    
    274,649
    
    
    
    4,173
    
    
    
    6.16
    %
    
    
    333,313
    
    
    
    5,082
    
    
    
    6.18
    %Tax Free (1)
    
    
    2,384
    
    
    
    39
    
    
    
    6.70
    %
    
    
    2,752
    
    
    
    44
    
    
    
    6.48
    %Real Estate-Mortgage
    
    
    27,604
    
    
    
    422
    
    
    
    6.20
    %
    
    
    37,606
    
    
    
    591
    
    
    
    6.37
    %Consumer
    
    
    47,225
    
    
    
    675
    
    
    
    5.80
    %
    
    
    52,227
    
    
    
    735
    
    
    
    5.71
    %Total loans
    
    
    351,862
    
    
    
    5,309
    
    
    
    6.12
    %
    
    
    425,898
    
    
    
    6,452
    
    
    
    6.14
    %Allowance for Loan Losses
    
    
    (11,152
    )
    
    
    
    
    
    
    
    
    
    
    (10,421
    )Net Loans
    
    
    340,710
    
    
    
    5,309
    
    
    
    6.32
    %
    
    
    415,477
    
    
    
    6,452
    
    
    
    6.30
    %Loans Held for Sale
    
    
    711
    
    
    
    9
    
    
    
    5.13
    %
    
    
    2,089
    
    
    
    25
    
    
    
    4.85
    %TOTAL EARNING ASSETS CONTINUING OPERATIONS
    
    $
    427,862
    
    
    $
    5,805
    
    
    
    5.50
    %
    
    $
    482,503
    
    
    $
    7,117
    
    
    
    5.98
    %Cash Due from Banks
    
    
    15,247
    
    
    
    
    
    
    
    
    
    
    
    16,689Assets of discontinued operations
    
    
    37,216
    
    
    
    
    
    
    
    
    
    
    
    44,880All Other Assets
    
    
    44,657
    
    
    
    
    
    
    
    
    
    
    
    41,989TOTAL ASSETS
    
    $
    513,830
    
    
    
    
    
    
    
    
    
    
    $
    575,640LIABILITIES & SHAREHOLDERS EQUITY:Deposits:Interest bearing  DDA
    
    $
    82,953
    
    
    $
    94
    
    
    
    0.46
    %
    
    $
    89,959
    
    
    $
    216
    
    
    
    0.97
    %Savings Deposits
    
    
    69,658
    
    
    
    22
    
    
    
    0.13
    %
    
    
    69,370
    
    
    
    97
    
    
    
    0.57
    %Time CDs $100,000 and Over
    
    
    109,519
    
    
    
    1,046
    
    
    
    3.87
    %
    
    
    131,924
    
    
    
    1,414
    
    
    
    4.35
    %Other Time CDs
    
    
    106,344
    
    
    
    655
    
    
    
    2.50
    %
    
    
    109,694
    
    
    
    888
    
    
    
    3.28
    %Total Deposits
    
    
    368,474
    
    
    
    1,817
    
    
    
    2.00
    %
    
    
    400,947
    
    
    
    2,615
    
    
    
    2.65
    %Other Borrowings
    
    
    22,331
    
    
    
    197
    
    
    
    3.58
    %
    
    
    29,809
    
    
    
    311
    
    
    
    4.23
    %INTEREST BEARING LIABILITIES
    
    $
    390,805
    
    
    $
    2,014
    
    
    
    2.09
    %
    
    $
    430,756
    
    
    $
    2,926
    
    
    
    2.75
    %Non-Interest bearing  DDA
    
    
    64,376
    
    
    
    
    
    
    
    
    
    
    
    64,973Liabilities of discontinued operations
    
    
    34,462
    
    
    
    
    
    
    
    
    
    
    
    41,364All Other Liabilities
    
    
    3,437
    
    
    
    
    
    
    
    
    
    
    
    1,907Shareholders Equity
    
    
    20,750
    
    
    
    
    
    
    
    
    
    
    
    36,640TOTAL LIABILITIES & SHAREHOLDERS EQUITY
    
    $
    513,830
    
    
    
    
    
    
    
    
    
    
    $
    575,640Net Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    2.99
    %
    
    
    
    
    
    
    
    
    
    
    3.23
    %Net Interest Income /Margin
    
    
    
    
    
    $
    3,791
    
    
    
    3.59
    %
    
    
    
    
    
    $
    4,191
    
    
    
    3.52
    %
 
 (1)
    
    Presented on a fully taxable equivalent basis using a federal income tax rate of 34%. 28




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##### Table of Contents



Allowance and Provision For Loan Losses
     29




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##### Table of Contents



Table 3 Analysis of the Allowance for Loan Losses
 Three Months Ended March 31,(000s omitted)
    
    2010
    
    
    2009Balance at Beginning of Period
    
    $
    10,726
    
    
    $
    10,455Charge-Offs:Commercial, Financial and Agriculture
    
    
    (557
    )
    
    
    (627
    )Real Estate-Mortgage
    
    
    (95
    )
    
    
    (36
    )Installment Loans to Individuals
    
    
    (131
    )
    
    
    (101
    )Total Charge-Offs
    
    
    (783
    )
    
    
    (764
    )Recoveries:Commercial, Financial and Agriculture
    
    
    574
    
    
    
    35Real Estate-Mortgage
    
    
    13
    
    
    
    3Installment Loans to Individuals
    
    
    18
    
    
    
    21Total Recoveries
    
    
    605
    
    
    
    59Net Charge-Offs
    
    
    (178
    )
    
    
    (705
    )Provision
    
    
    1,790
    
    
    
    1,655Balance at End of Period
    
    $
    12,338
    
    
    $
    11,405Ratio of Net Charge-Offs to Gross Loans
    
    
    0.05
    %
    
    
    0.17
    %
 Non-Interest Income
      Non-Interest Expense
  30




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##### Table of Contents



Financial Condition
   31




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##### Table of Contents



Non-Performing Assets
   Table 4  Non-Performing Assets and Past Due Loans
 March 31,
    
    
    December 31,2010
    
    
    2009Non-Performing Loans:Loans Past Due 90 Days or More & Still Accruing
    
    $
    402
    
    
    $
    319Non-Accrual Loans
    
    
    17,754
    
    
    
    19,241Renegotiated Loans
    
    
    2,409
    
    
    
    3,822Total Non-Performing Loans
    
    
    20,565
    
    
    
    23,382Other Non-Performing Assets:Other Real Estate
    
    
    8,928
    
    
    
    7,967REO in Redemption
    
    
    3,694
    
    
    
    4,972Total Other Non-Performing Assets
    
    
    12,622
    
    
    
    12,939Total Non-Performing Assets
    
    $
    33,187
    
    
    $
    36,321Non-Performing Loans as a % of Total Loans
    
    
    5.96
    %
    
    
    6.56
    %Non-Performing Loans as a % of Total Loans and Other Real Estate
    
    
    5.81
    %
    
    
    6.42
    %Allowance for Loan Losses as a % of Non-Performing Loans
    
    
    60.00
    %
    
    
    45.87
    %Accruing Loans Past Due 90 Days or More to Total Loans
    
    
    0.12
    %
    
    
    0.09
    %Non-performing Assets as a % of Total Assets
    
    
    6.52
    %
    
    
    6.96
    %
  32




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##### Table of Contents



Liquidity and Interest Rate Risk Management
      33




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##### Table of Contents



Capital Resources
    Regulatory Orders
      34




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##### Table of Contents



Critical Accounting Policies and Estimates
       35




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##### Table of Contents



Off Balance Sheet Arrangements
   (000s omitted)
    
    March 31, 2010
    
    
    December 31, 2009Commitments to make loans (at market rates)
    
    $
    6,233
    
    
    $
    2,939Unused lines of credit and letters of credit
    
    
    50,894
    
    
    
    53,941
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    Interest Rate Sensitivity Management
  36




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##### Table of Contents



Table 5 GAP Analysis  March 31, 2010
 Within
    
    
    Three
    
    
    One to
    
    
    AfterThree
    
    
    Months to
    
    
    Five
    
    
    Five(000s omitted)
    
    Months
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    TotalEarning Assets:Federal Funds Sold
    
    $
    28,650
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    28,650Securities
    
    
    10,514
    
    
    
    10,157
    
    
    
    9,987
    
    
    
    16,908
    
    
    
    47,566Loans
    
    
    68,535
    
    
    
    64,880
    
    
    
    165,852
    
    
    
    44,353
    
    
    
    343,620Loans Held for Sale
    
    
    1,265
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,265FHLB Stock
    
    
    1,900
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,900Total Earning Assets
    
    $
    110,864
    
    
    $
    75,037
    
    
    $
    175,839
    
    
    $
    61,261
    
    
    $
    423,001Interest Bearing Liabilities:Interest Bearing Demand Deposits
    
    $
    81,532
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    81,532Savings Deposits
    
    
    71,133
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    71,133Time Deposits Less than $100,000
    
    
    28,326
    
    
    
    47,071
    
    
    
    29,187
    
    
    
    129
    
    
    
    104,713Time Deposits Greater than $100,000
    
    
    22,741
    
    
    
    35,970
    
    
    
    46,814
    
    
    
    0
    
    
    
    105,525Short term borrowings
    
    
    67
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    67Other Borrowings
    
    
    28
    
    
    
    7,000
    
    
    
    137
    
    
    
    816
    
    
    
    7,981Subordinated debentures
    
    
    14,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    14,000Total Interest Bearing Liabilities
    
    $
    217,827
    
    
    $
    90,041
    
    
    $
    76,138
    
    
    $
    945
    
    
    $
    384,951Interest Rate Sensitivity GAP
    (
    $
    106,963
    )
    (
    $

    15,004
    )
    
    $
    99,701
    
    
    $
    60,316
    
    
    $
    38,050Cumulative
Interest Rate Sensitivity GAP
    (
    $

    106,963
    )
    (
    $

    121,967
    )
    (
    $

    22,266
    )
    
    $
    38,050Interest Rate Sensitivity GAP
    
    
    0.51
    
    
    
    0.83
    
    
    
    2.31
    
    
    
    64.83Cumulative
Interest Rate Sensitivity GAP Ratio
    
    
    0.51
    
    
    
    0.60
    
    
    
    0.94
    
    
    
    1.10
  37




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##### Table of Contents



Forward Looking Statements
  
 ITEM 4T: CONTROLS AND PROCEDURES
 (a)
    
    Evaluation of Disclosure Controls and Procedures. The Corporations Chief Executive
Officer and Chief Financial Officer, after evaluating the effectiveness of the Corporations
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
as of the end of the period covered by this Form 10-Q Quarterly Report, have concluded that
the Corporations disclosure controls and procedures were adequate and effective to ensure
that material information relating to the Corporation would be made known to them by others
within the Corporation, particularly during the period in which this Form 10-Q was being
prepared.(b)
    
    Changes in Internal Controls. During the period covered by this report, there have
been no changes in the Corporations internal control over financial reporting that have
materially affected or are reasonably likely to materially affect the Corporations internal
control over financial reporting.
 38




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
 
 Item 1A. Risk Factors
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
 Item 3. Defaults Upon Senior Securities. 
 
 Item 4. [Reserved]
 
 Item 5. Other Information.
 
 Item 6. Exhibits.
 (a)
    
    Exhibits
 31.1
    
    Certificate of the President and Chief Executive Officer of
Fentura Financial, Inc. pursuant to 15 U.S.C. Section 7241, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certificate of the Chief Financial Officer of Fentura
Financial, Inc. pursuant to 15 U.S.C. Section 7241, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certificate of the 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 2002.32.2
    
    Certificate of the 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.
 39




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##### Table of Contents



Fentura Financial, Inc.Dated:  May 13, 2010

/s/ Donald L. GrillDonald L. GrillPresident & CEODated:  May 13, 2010

/s/ Douglas J. KelleyDouglas J. KelleyChief Financial Officer 40




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    Description31.1
    
    Certificate of the President and Chief Executive Officer of Fentura Financial, Inc. pursuant
to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certificate of the Chief Financial Officer of Fentura Financial, Inc. pursuant to 15 U.S.C.
Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certificate of the 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 2002.32.2
    
    Certificate of the 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.
 41