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, 2008
 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
    
    (IRS Employee Identification No.)incorporation or organization)
 175 N Leroy, P.O. Box 725, Fenton, Michigan 48430
 
 (810) 629-2263
 
 þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ
  Class  Common Stock
    
    Shares Outstanding  2,172,102




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##### 



Fentura Financial Inc.
Index to Form 10-Q
 PagePart I  Financial Information
    
    
    3Item 1  Consolidated Financial Statements (Unaudited)
    
    
    3-13Item 2  Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    13-23Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4T  Controls and Procedures
    
    
    26Part II  Other Information
    
    
    27Item 1  Legal Proceedings
    
    
    27Item 1A  Risk Factors
    
    
    27Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3  Defaults Upon Senior Securities
    
    
    27Item 4 Submission of Matters to a Vote of Security Holders
    
    
    27Item 5  Other Information
    
    
    27Item 6  Exhibits
    
    
    27Signatures
    
    
    28Exhibit Index
    
    
    29
 2




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##### 



PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 Fentura Financial, Inc.
Consolidated Balance Sheets
  March 31,
    
    
    Dec 31,2008
    
    
    2007(000s omitted except share data)
    
    (unaudited)ASSETSCash and due from banks
    
    $
    19,314
    
    
    $
    22,734Federal funds sold
    
    
    2,700
    
    
    
    7,300Total cash & cash equivalents
    
    
    22,014
    
    
    
    30,034Securities-available for sale
    
    
    62,394
    
    
    
    71,792Securities-held to maturity, (fair value of $8,715
at March 31, 2008 and $8,714 at December 31, 2007)
    
    
    8,682
    
    
    
    8,685Total securities
    
    
    71,076
    
    
    
    80,477Loans held for sale
    
    
    1,463
    
    
    
    1,655Loans:Commercial
    
    
    314,065
    
    
    
    313,642Real estate loans  construction
    
    
    60,709
    
    
    
    59,805Real estate loans  mortgage
    
    
    38,321
    
    
    
    39,817Consumer loans
    
    
    58,436
    
    
    
    58,139Total loans
    
    
    471,531
    
    
    
    471,403Less: Allowance for loan losses
    
    
    (9,389
    )
    
    
    (8,554
    )Net loans
    
    
    462,142
    
    
    
    462,849Bank Owned Life Insurance
    
    
    7,087
    
    
    
    7,042Bank premises and equipment
    
    
    19,568
    
    
    
    20,101Federal Home Loan Bank stock
    
    
    2,032
    
    
    
    2,032Accrued interest receivable
    
    
    2,487
    
    
    
    2,813Goodwill
    
    
    7,955
    
    
    
    7,955Acquisition intangibles
    
    
    419
    
    
    
    485Equity Investment
    
    
    2,921
    
    
    
    3,089Other assets
    
    
    10,548
    
    
    
    9,487Total Assets
    
    $
    609,712
    
    
    $
    628,019LIABILITIESDeposits:Non-interest bearing deposits
    
    $
    71,574
    
    
    $
    75,148Interest bearing deposits
    
    
    451,896
    
    
    
    468,355Total deposits
    
    
    523,470
    
    
    
    543,503Short term borrowings
    
    
    716
    
    
    
    649Federal Home Loan Bank Advances
    
    
    14,031
    
    
    
    11,030Repurchase Agreements
    
    
    5,000
    
    
    
    5,000Subordinated debentures
    
    
    14,000
    
    
    
    14,000Accrued taxes, interest and other liabilities
    
    
    3,118
    
    
    
    4,341Total liabilities
    
    
    560,335
    
    
    
    578,523SHAREHOLDERS EQUITYCommon stock  no par value
2,171,681 shares issued (2,163,385 at Dec. 31, 2007)
    
    
    42,649
    
    
    
    42,478Retained earnings
    
    
    6,860
    
    
    
    7,488Accumulated other comprehensive income (loss)
    
    
    (131
    )
    
    
    (470
    )Total shareholders equity
    
    
    49,378
    
    
    
    49,496Total Liabilities and Shareholders Equity
    
    $
    609,712
    
    
    $
    628,019
  3




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##### 



Fentura Financial, Inc.
Consolidated Statements of Income (Unaudited)
 Three Months EndedMarch 31(000s omitted except per share data)
    
    2008
    
    
    2007INTEREST INCOMEInterest and fees on loans
    
    $
    8,104
    
    
    $
    8,647Interest and dividends on securities:Taxable
    
    
    628
    
    
    
    917Tax-exempt
    
    
    117
    
    
    
    215Interest on federal funds sold
    
    
    98
    
    
    
    167Total interest income
    
    
    8,947
    
    
    
    9,946INTEREST EXPENSEDeposits
    
    
    4,027
    
    
    
    3,961Borrowings
    
    
    496
    
    
    
    585Total interest expense
    
    
    4,523
    
    
    
    4,546NET INTEREST INCOME
    
    
    4,424
    
    
    
    5,400Provision for loan losses
    
    
    1,081
    
    
    
    439Net interest income after
Provision for loan losses
    
    
    3,343
    
    
    
    4,961NON-INTEREST INCOMEService charges on deposit accounts
    
    
    774
    
    
    
    851Gain on sale of mortgage loans
    
    
    118
    
    
    
    84Trust and investment services income
    
    
    456
    
    
    
    507Other income and fees
    
    
    210
    
    
    
    423Total non-interest income
    
    
    1,558
    
    
    
    1,865NON-INTEREST EXPENSESalaries and employee benefits
    
    
    3,002
    
    
    
    3,247Occupancy
    
    
    551
    
    
    
    503Furniture and equipment
    
    
    494
    
    
    
    525Loan and collection
    
    
    166
    
    
    
    91Advertising and promotional
    
    
    104
    
    
    
    112Loss on security impairment
    
    
    574
    
    
    
    0Other operating expenses
    
    
    1,013
    
    
    
    1,018Total non-interest expense
    
    
    5,904
    
    
    
    5,496INCOME (LOSS) BEFORE TAXES
    
    
    (1,003
    )
    
    
    1,330Federal income taxes/(benefit)
    
    
    (375
    )
    
    
    382NET INCOME (LOSS)
    
    $
    (628
    )
    
    $
    948Per share:Net income (loss)  basic
    
    $
    (0.29
    )
    
    $
    0.44Net income (loss) diluted
    
    $
    (0.29
    )
    
    $
    0.44Cash Dividends declared
    
    $
    0.00
    
    
    $
    0.25
  4




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##### 



Fentura Financial, Inc.
Consolidated Statements of Changes in Shareholders Equity (Unaudited)
 Three Months EndedMarch 31,(000s omitted)
    
    2008
    
    
    2007COMMON STOCKBalance, beginning of period
    
    $
    42,478
    
    
    $
    42,158Issuance of shares underDirector stock purchase plan &
Dividend reinvestment program (8,296 and 8,950 shares)
    
    
    169
    
    
    
    287Stock options exercised (295 shares-2007)
    
    
    0
    
    
    
    7Stock compensation expense
    
    
    2
    
    
    
    23Balance, end of period
    
    
    42,649
    
    
    
    42,475RETAINED EARNINGSBalance, beginning of period
    
    
    7,488
    
    
    
    10,118Net income (loss)
    
    
    (628
    )
    
    
    948Cash dividends declared
    
    
    0
    
    
    
    (541
    )Balance, end of period
    
    
    6,860
    
    
    
    10,525ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)Balance, beginning of period
    
    
    (470
    )
    
    
    (958
    )Change in unrealized gain (loss)
on securities, net of tax
    
    
    339
    
    
    
    262Balance, end of period
    
    
    (131
    )
    
    
    (696
    )TOTAL SHAREHOLDERS EQUITY
    
    $
    49,378
    
    
    $
    52,304
  5




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##### 



Fentura Financial, Inc.
Consolidated Statements of Cash Flows (Unaudited)
 Three Months EndedMarch 31,(000s omitted)
    
    2008
    
    2007OPERATING ACTIVITIES:Net income (loss)
    
    $
    (628
    )
    
    $
    948Adjustments to reconcile net income (loss) to cash
Provided by Operating Activities:Stock compensation expense
    
    
    2
    
    
    
    23Depreciation and amortization
    
    
    240
    
    
    
    229Provision for loan losses
    
    
    1,081
    
    
    
    439Loans originated for sale
    
    
    (9,901
    )
    
    
    (4,288
    )Proceeds from the sale of loans
    
    
    10,211
    
    
    
    4,246(Gain) Loss on sale of fixed assets
    
    
    (40
    )
    
    
    0(Gain) on sales of loans
    
    
    (118
    )
    
    
    (84
    )Loss on security impairment
    
    
    574
    
    
    
    0Loss on equity investment
    
    
    168
    
    
    
    0Earnings from bank owned life insurance
    
    
    (45
    )
    
    
    (57
    )Net (increase) decrease in interest receivable & other assets
    
    
    (1,593
    )
    
    
    (1,217
    )Net increase (decrease) in interest payable & other liabilities
    
    
    (1,397
    )
    
    
    (764
    )Total Adjustments
    
    
    (818
    )
    
    
    (1,473
    )Net Cash Provided By (Used In) Operating Activities
    
    
    (1,446
    )
    
    
    (525
    )Cash Flows From Investing Activities:Proceeds from maturities of securities  HTM
    
    
    1
    
    
    
    200Proceeds from maturities of securities  AFS
    
    
    2,381
    
    
    
    2,887Proceeds from calls of securities  AFS
    
    
    12,662
    
    
    
    1,200Purchases of securities  AFS
    
    
    (5,499
    )
    
    
    (133
    )Net (increase) decrease in loans
    
    
    484
    
    
    
    (9,002
    )Acquisition of premises and equipment, net
    
    
    193
    
    
    
    (2,786
    )Net Cash Provided By (Used in) Investing Activities
    
    
    10,222
    
    
    
    (7,634
    )Cash Flows From Financing Activities:Net increase (decrease) in deposits
    
    
    (20,033
    )
    
    
    2,793Net increase (decrease) in borrowings
    
    
    67
    
    
    
    (497
    )Purchase of advances from FHLB
    
    
    11,001
    
    
    
    7,000Repayments of advances from FHLB
    
    
    (8,000
    )
    
    
    (7,000
    )Net proceeds from stock issuance and purchase
    
    
    169
    
    
    
    294Cash dividends
    
    
    0
    
    
    
    (541
    )Net Cash Provided By (Used In) Financing Activities
    
    
    (16,796
    )
    
    
    2,049NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    $
    (8,020
    )
    
    $
    (6,110
    )CASH AND CASH EQUIVALENTS  BEGINNING
    
    $
    30,034
    
    
    $
    29,446CASH AND CASH EQUIVALENTS  ENDING
    
    $
    22,014
    
    
    $
    23,336CASH PAID FOR:INTEREST
    
    $
    4,803
    
    
    $
    4,004INCOME TAXES
    
    $
    0
    
    
    $
    222NONCASH DISCLOSURES:Transfers from loans to other real estate
    
    $
    1,527
    
    
    $
    216
  6




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##### 



Fentura Financial, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
 Three Months EndedMarch 31,(000s Omitted)
    
    2008
    
    2007Net Income (loss)
    
    $
    (628
    )
    
    $
    948Other comprehensive income (loss), net of tax:Unrealized holding gains (losses) arising
during period
    
    
    913
    
    
    
    262Less: Impairment loss recognized during period
    
    
    (574
    )
    
    
    0Other comprehensive income (loss)
    
    
    339
    
    
    
    262Comprehensive income (loss)
    
    $
    (289
    )
    
    $
    1,210
 Fentura Financial, Inc.  Notes to Consolidated Financial Statements (Unaudited)
 Note 1. Basis of Presentation
   Reclassifications:
 Allowance for Loan Losses:
  7




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##### 



Stock Option Plans
     Number of
    
    WeightedOptions
    
    Average PriceOptions outstanding at December 31, 2007
    
    
    40,228
    
    
    $
    29.74Options forfeited 2008
    
    
    (3,004
    )
    
    $
    30.35Options outstanding at March 31, 2008
    
    
    37,224
    
    
    $
    29.69
 8




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##### 



NOTE 2  ADOPTION OF NEW ACCOUNTING STANDARDS
 Fair Value Option and Fair Value Measurements
 Fair Value Measurements Effective Date of FASB
Statement No. 157
 The Fair Value Option for Financial Assets and
Financial Liabilities
 NOTE 3  FAIR VALUE
      9




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##### 



Assets and Liabilities Measured on a Recurring Basis
  Fair Value Measurements at March 31, 2008 UsingQuoted Prices inActive Markets for
    
    Significant Other
    
    SignificantIdentical Assets
    
    Observable Inputs
    
    Unobservable Inputs(000s omitted)
    
    March 31, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Available for sale
securities
    
    $
    62,394
    
    
    $
    17
    
    
    $
    60,121
    
    
    $
    2,256
     Fair Value Measurements UsingSignificant Unobservable Inputs(Level 3)(000s omitted)
    
    Asset
    
    
    Liability
    
    
    TotalBeginning balance, Jan. 1, 2008
    
    $
    2,721
    
    
    $
    0
    
    
    $
    2,721Total gains or losses (realized / unrealized)Included in earningsLoss on security impairment
    
    
    (574
    )
    
    
    0
    
    
    
    (574
    )Included in other comprehensive income
    
    
    109
    
    
    
    0
    
    
    
    109Purchases, issuances, and settlements
Transfers in and / or out of Level 3
    
    
    0
    
    
    
    0
    
    
    
    0Ending balance, March 31, 2008
    
    $
    2,256
    
    
    $
    0
    
    
    $
    2,256
 10




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##### 



Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurements at March 31, 2008 UsingQuoted Prices inActive Markets for
    
    Significant Other
    
    SignificantIdentical Assets
    
    Observable Inputs
    
    Unobservable Inputs(000s omitted)
    
    March 31, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Impaired loans
    
    $
    19,045
    
    
    $
    0
    
    
    $
    0
    
    
    $
    19,045
   Note 4. Securities
  11




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##### 



Note 5. Earnings Per Common Share
  Three Months EndedMarch 31,($ in thousands except per share data)
    
    2008
    
    
    2007Basic Earnings Per Common Share:NumeratorNet Income (loss)
    
    $
    (628
    )
    
    $
    948DenominatorWeighted average common shares
Outstanding
    
    
    2,167,235
    
    
    
    2,157,405Basic earnings (loss) per common share
    
    $
    (0.29
    )
    
    $
    0.44Diluted Earnings Per Common Share:NumeratorNet Income (loss)
    
    $
    (628
    )
    
    $
    948DenominatorWeighted average common shares
Outstanding for basic earnings per
Common share
    
    
    2,167,235
    
    
    
    2,157,405Add: Dilutive effects of assumed
exercises of stock options
    
    
    0
    
    
    
    3,494Weighted average common shares
and dilutive potential common
shares outstanding
    
    
    2,167,235
    
    
    
    2,160,899Diluted earnings (loss) per common share
    
    $
    (0.29
    )
    
    $
    0.44
  Note 6. Commitments and Contingencies
  12




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##### 



Results of Operations
     Net Interest Income
  13




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##### 



Table 1
 THREE MONTHS ENDEDMARCH 31,2008 COMPARED TO 2007INCREASE (DECREASE)DUE TOYIELD/(000S OMITTED)
    
    TIME
    
    
    VOL
    
    
    RATE
    
    
    TOTALTaxable Securities
    
    $
    10
    
    
    $
    (226
    )
    
    $
    (76
    )
    
    $
    (292
    )Tax-Exempt Securities
    
    
    4
    
    
    
    (89
    )
    
    
    (64
    )
    
    
    (149
    )Federal Funds Sold
    
    
    2
    
    
    
    (11
    )
    
    
    (60
    )
    
    
    (69
    )Total Loans
    
    
    96
    
    
    
    280
    
    
    
    (919
    )
    
    
    (543
    )Loans Held for Sale
    
    
    0
    
    
    
    5
    
    
    
    (5
    )
    
    
    0Total Earning Assets
    
    
    112
    
    
    
    (41
    )
    
    
    (1,124
    )
    
    
    (1,053
    )Interest Bearing Demand Deposits
    
    
    7
    
    
    
    (20
    )
    
    
    (138
    )
    
    
    (151
    )Savings Deposits
    
    
    6
    
    
    
    (148
    )
    
    
    (171
    )
    
    
    (313
    )Time CDs $100,000 and Over
    
    
    18
    
    
    
    367
    
    
    
    11
    
    
    
    396Other Time Deposits
    
    
    14
    
    
    
    142
    
    
    
    (22
    )
    
    
    134Other Borrowings
    
    
    7
    
    
    
    (104
    )
    
    
    8
    
    
    
    (89
    )Total Interest Bearing Liabilities
    
    
    52
    
    
    
    237
    
    
    
    (312
    )
    
    
    (23
    )Net Interest Income
    
    $
    60
    
    
    
    ($278
    )
    
    $
    (812
    )
    
    $
    (1,030
    )
     14




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##### 



15




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##### 



Table 2 Average Balance and Rates
 THREE MONTHS ENDED MARCH 31,2008
    
    2007AVERAGE
    
    
    INCOME/
    
    
    YIELD/
    
    
    AVERAGE
    
    
    INCOME/
    
    
    YIELD/(000s omitted)(Annualized)
    
    BALANCE
    
    
    EXPENSE
    
    
    RATE
    
    
    BALANCE
    
    
    EXPENSE
    
    
    RATEASSETSSecurities:U.S. Treasury and Government Agencies
    
    $
    57,396
    
    
    $
    595
    
    
    
    4.17
    %
    
    $
    78,344
    
    
    $
    890
    
    
    
    4.61
    %State and Political (1)
    
    
    15,383
    
    
    
    177
    
    
    
    4.63
    %
    
    
    20,857
    
    
    
    326
    
    
    
    6.34
    %Other
    
    
    8,306
    
    
    
    32
    
    
    
    1.55
    %
    
    
    4,638
    
    
    
    29
    
    
    
    2.49
    %Total Securities
    
    
    81,085
    
    
    
    804
    
    
    
    3.99
    %
    
    
    103,839
    
    
    
    1,245
    
    
    
    4.86
    %Fed Funds Sold
    
    
    12,402
    
    
    
    98
    
    
    
    3.18
    %
    
    
    13,176
    
    
    
    167
    
    
    
    5.14
    %Loans:Commercial
    
    
    370,656
    
    
    
    6,341
    
    
    
    6.88
    %
    
    
    349,252
    
    
    
    6,722
    
    
    
    7.81
    %Tax Free (1)
    
    
    3,310
    
    
    
    55
    
    
    
    6.63
    %
    
    
    3,810
    
    
    
    62
    
    
    
    6.58
    %Real Estate-Mortgage
    
    
    39,463
    
    
    
    637
    
    
    
    6.49
    %
    
    
    36,216
    
    
    
    596
    
    
    
    6.67
    %Consumer
    
    
    57,511
    
    
    
    1,062
    
    
    
    7.43
    %
    
    
    61,299
    
    
    
    1,258
    
    
    
    8.32
    %Total loans
    
    
    470,940
    
    
    
    8,095
    
    
    
    6.91
    %
    
    
    450,577
    
    
    
    8,638
    
    
    
    7.77
    %Allowance for Loan Losses
    
    
    (8,780
    )
    
    
    
    
    
    
    
    
    
    
    (6,736
    )Net Loans
    
    
    462,160
    
    
    
    8,095
    
    
    
    7.04
    %
    
    
    443,841
    
    
    
    8,638
    
    
    
    7.89
    %Loans Held for Sale
    
    
    1,971
    
    
    
    29
    
    
    
    5.92
    %
    
    
    1,697
    
    
    
    29
    
    
    
    6.82
    %TOTAL EARNING ASSETS
    
    $
    566,398
    
    
    $
    9,026
    
    
    
    6.41
    %
    
    $
    569,289
    
    
    $
    10,079
    
    
    
    7.18
    %Cash Due from Banks
    
    
    16,324
    
    
    
    
    
    
    
    
    
    
    
    17,335All Other Assets
    
    
    48,731
    
    
    
    
    
    
    
    
    
    
    
    42,706TOTAL ASSETS
    
    $
    622,673
    
    
    
    
    
    
    
    
    
    
    $
    622,594LIABILITIES & SHAREHOLDERS EQUITY:Deposits:Interest bearing  DDA
    
    $
    95,996
    
    
    $
    439
    
    
    
    1.84
    %
    
    $
    98,152
    
    
    $
    590
    
    
    
    2.44
    %Savings Deposits
    
    
    82,773
    
    
    
    222
    
    
    
    1.08
    %
    
    
    113,017
    
    
    
    535
    
    
    
    1.92
    %Time CDs $100,000 and Over
    
    
    162,450
    
    
    
    2,007
    
    
    
    4.97
    %
    
    
    130,768
    
    
    
    1,611
    
    
    
    5.00
    %Other Time CDs
    
    
    122,759
    
    
    
    1,359
    
    
    
    4.45
    %
    
    
    108,624
    
    
    
    1,225
    
    
    
    4.58
    %Total Deposits
    
    
    463,978
    
    
    
    4,027
    
    
    
    3.49
    %
    
    
    450,561
    
    
    
    3,961
    
    
    
    3.57
    %Other Borrowings
    
    
    33,134
    
    
    
    496
    
    
    
    6.02
    %
    
    
    39,635
    
    
    
    585
    
    
    
    5.99
    %INTEREST BEARING LIABILITIES
    
    $
    497,112
    
    
    $
    4,523
    
    
    
    3.66
    %
    
    $
    490,196
    
    
    $
    4,546
    
    
    
    3.76
    %Non-Interest bearing  DDA
    
    
    71,845
    
    
    
    
    
    
    
    
    
    
    
    75,615All Other Liabilities
    
    
    3,864
    
    
    
    
    
    
    
    
    
    
    
    4,815Shareholders Equity
    
    
    49,852
    
    
    
    
    
    
    
    
    
    
    
    51,968TOTAL LIABILITIES & SHAREHOLDERS EQUITY
    
    $
    622,673
    
    
    
    
    
    
    
    
    
    
    $
    622,594Net Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    0.45
    %
    
    
    
    
    
    
    
    
    
    
    3.42
    %Net Interest Income /Margin
    
    
    
    
    
    $
    4,503
    
    
    
    3.20
    %
    
    
    
    
    
    $
    5,533
    
    
    
    3.94
    %
 
 (1)
    
    Presented on a fully taxable equivalent basis using a federal income tax rate of 34%. 16




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##### 



Allowance and Provision For Loan Losses
    17




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##### 



Table 3 Analysis of the Allowance for Loan Losses
 Three Months Ended March 31,(000s omitted)
    
    2008
    
    2007Balance at Beginning of Period
    
    $
    8,554
    
    
    $
    6,692Charge-Offs:Commercial, Financial and Agriculture
    
    
    (301
    )
    
    
    (139
    )Real Estate-Mortgage
    
    
    (23
    )
    
    
    (29
    )Installment Loans to Individuals
    
    
    (106
    )
    
    
    (120
    )Total Charge-Offs
    
    
    (430
    )
    
    
    (288
    )Recoveries:Commercial, Financial and Agriculture
    
    
    148
    
    
    
    96Real Estate-Mortgage
    
    
    0
    
    
    
    0Installment Loans to Individuals
    
    
    36
    
    
    
    23Total Recoveries
    
    
    184
    
    
    
    119Net Charge-Offs
    
    
    (246
    )
    
    
    (169
    )Provision
    
    
    1,081
    
    
    
    439Balance at End of Period
    
    $
    9,389
    
    
    $
    6,962Ratio of Net Charge-Offs to Gross Loans
    
    
    0.05
    %
    
    
    0.04
    %
 Non-Interest Income
      18




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##### 



Non-Interest Expense
        19




---



##### 



Financial Condition
    Non-Performing Assets
     20




---



##### 



Table 4  Non-Performing Assets and Past Due Loans
 March 31,
    
    December 31,2008
    
    2007Non-Performing Loans:Loans Past Due 90 Days or More & Still
Accruing
    
    $
    3,677
    
    
    $
    54Non-Accrual Loans
    
    
    16,210
    
    
    
    13,056Renegotiated Loans
    
    
    430
    
    
    
    431Total Non-Performing Loans
    
    
    20,317
    
    
    
    13,541Other Non-Performing Assets:Other Real Estate
    
    
    2,313
    
    
    
    2,003REO in Redemption
    
    
    1,033
    
    
    
    1,829Other Non-Performing Assets
    
    
    175
    
    
    
    155Total Other Non-Performing Assets
    
    
    3,521
    
    
    
    3,987Total Non-Performing Assets
    
    $
    23,838
    
    
    $
    17,528Non-Performing Loans as a % of
Total Loans
    
    
    4.30
    %
    
    
    2.86
    %Allowance for Loan Losses as a % of
Non-Performing Loans
    
    
    46.21
    %
    
    
    63.18
    %Accruing Loans Past Due 90 Days or
More to Total Loans
    
    
    0.78
    %
    
    
    0.01
    %Non-performing Assets as a % of
Total Assets
    
    
    3.91
    %
    
    
    2.79
    %
 Liquidity and Interest Rate Risk Management
   21




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##### 



Capital Management
   Regulatory Capital Requirements
  22




---



##### 



Table 5
 Capital RatiosFentura Financial, Inc.Regulatory Minimum
    
    March 31,
    
    December 31,
    
    March 31,For Well Capitalized
    
    2008
    
    2007
    
    2007Total Capital to risk
Weighted assets
    
    
    10
    %
    
    
    11.65
    %
    
    
    11.60
    %
    
    
    12.47
    %Tier 1 Capital to risk
Weighted assets
    
    
    6
    %
    
    
    10.41
    %
    
    
    10.40
    %
    
    
    11.22
    %Tier 1 Capital to average
Assets
    
    
    5
    %
    
    
    9.13
    %
    
    
    9.00
    %
    
    
    9.50
    %
 Off Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    23




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##### 



Interest Rate Sensitivity Management
   Table 6 GAP Analysis  March 31, 2008
 Within
    
    Three
    
    One to
    
    AfterThree
    
    Months to
    
    Five
    
    Five(000s omitted)
    
    Months
    
    One Year
    
    Years
    
    Years
    
    TotalEarning Assets:Federal Funds Sold
    
    $
    2,700
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    2,700Securities
    
    
    7,241
    
    
    
    8,650
    
    
    
    36,867
    
    
    
    18,318
    
    
    
    71,076Loans
    
    
    67,912
    
    
    
    84,935
    
    
    
    238,338
    
    
    
    80,346
    
    
    
    471,531Loans Held for Sale
    
    
    1,463
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,463FHLB Stock
    
    
    2,032
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    2,032Total Earning Assets
    
    $
    81,348
    
    
    $
    93,585
    
    
    $
    275,205
    
    
    $
    98,664
    
    
    $
    548,802Interest Bearing Liabilities:Interest Bearing Demand Deposits
    
    $
    96,881
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    96,881Savings Deposits
    
    
    80,515
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    80,515Time Deposits Less than $100,000
    
    
    31,792
    
    
    
    61,721
    
    
    
    26,582
    
    
    
    163
    
    
    
    120,258Time Deposits Greater than $100,000
    
    
    42,297
    
    
    
    31,984
    
    
    
    79,961
    
    
    
    0
    
    
    
    152,242Short term borrowings
    
    
    716
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    716Other Borrowings
    
    
    24
    
    
    
    2,000
    
    
    
    11,116
    
    
    
    891
    
    
    
    14,031Repurchase agreements
    
    
    5,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    5,000Subordinated debentures
    
    
    14,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    14,000Total Interest Bearing Liabilities
    
    $
    271,225
    
    
    $
    95,705
    
    
    $
    115,659
    
    
    $
    1,054
    
    
    $
    485,643Interest Rate Sensitivity GAP
    
    
    ($189,877
    )
    
    
    ($2,120
    )
    
    $
    157,546
    
    
    $
    97,610
    
    
    $
    63,159Cumulative Interest Rate
Sensitivity GAP
    
    
    ($189,877
    )
    
    
    ($191,997
    )
    
    
    ($34,451
    )
    
    $
    63,159Interest Rate Sensitivity GAP
    
    
    (0.30
    )
    
    
    (0.98
    )
    
    
    2.34
    
    
    
    93.64Cumulative Interest Rate
Sensitivity GAP Ratio
    
    
    (0.30
    )
    
    
    (1.28
    )
    
    
    1.06
    
    
    
    94.70
  24




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##### 



Forward Looking Statements
  25




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##### 



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.
 26




---



##### 



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. Submission of Matters to a Vote of Securities Holders.
 
 Item 5. Other Information.
 
 Item 6. 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.
 27




---



##### 



Fentura Financial Inc.Dated:  May 14, 2008
    /s/ Donald L. GrillDonald L. GrillPresident & CEODated:  May 14, 2008
    /s/ Douglas J. KelleyDouglas J. KelleyChief Financial Officer 28




---



##### 



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.
 29