# UNITED STATES SECURITIES AND
EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 10-Q

[x]           QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT           OF 1934
For the quarterly period ended September 30, 2005

# OR

[ ] 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.(Exact Name of
Registrant as Specified in Its Charter)

|Michigan            
(State or Other Jurisdiction of
Incorporation or Organization) | 38-2806518
(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------------- | -----------------------------------------------

175 N Leroy, P.O. Box
725, Fenton, Michigan 48430 (Address of Principal Executive Offices)

(810) 629-2263
(Registrants Telephone Number)

Indicate by check mark whether the
registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes   [__] No

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

# APPLICABLE ONLY TO
CORPORATE ISSUERS

Indicate  the  number of
shares  outstanding  of each of the  issuer's  classes of common  stock,  as of the
latest practicable date: November 1, 2005

Class  Common
Stock           Shares Outstanding
 1,930,061

---



# Fentura Financial Inc.Index to Form 10-Q

|                               |  | Page                                                                                 
|------------------------------ |  | -------------------------------------------------------------------------------------
|                               |  |                                                                                      
|Part I - Financial Information |  | 3                                                                                    
|                               | 
|Item 1 -                       |  | Consolidated Financial Statements (Unaudited)                                        
|                               | 
|Item 2 -                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations
|                               | 
|Item 3 -                       |  | Quantitative and Qualitative Disclosures About Market Risk                           
|                               | 
|Item 4 -                       |  | Controls and Procedures                                                              
|                               | 
|Part II - Other Information    |  | 24                                                                                   
|                               | 
|Item 1 -                       |  | Legal Proceedings                                                                    
|                               | 
|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 Security Holders                                  
|                               | 
|Item 5 -                       |  | Other Information                                                                    
|                               | 
|Item 6 -                       |  | Exhibits                                                                             
|                               | 
|Signatures                     |  | 25                                                                                   
|                               | 
|Exhibit Index                  |  | 26                                                                                   

2

---



# PART I 
FINANCIAL INFORMATION

|ITEM 1. CONSOLIDATED
FINANCIAL STATEMENTS
      Fentura Financial, Inc.
      Consolidated
Balance Sheets
|---------------------------------------------------------------------------------------------------------
|                                                                                                         
|                                                                                                         
|                                                                                                         
|ASSETS                                                                                                   
|Cash and due from banks                                                                                  
|Federal funds sold                                                                                       
|                                                                                                         
|Total cash & cash equivalents                                                                            
|Securities-available for sale                                                                            
|Securities-held to maturity, (fair value of $13,557                                                      
|at September 30, 2005 and $18,788 at December 31, 2004)                                                  
|                                                                                                         
|Total securities                                                                                         
|Loans held for sale                                                                                      
|Loans:                                                                                                   
|Commercial                                                                                               
|Real estate loans - construction                                                                         
|Real estate loans - mortgage                                                                             
|Consumer loans                                                                                           
|                                                                                                         
|Total loans                                                                                              
|Less: Allowance for loan losses                                                                          
|                                                                                                         
|Net loans                                                                                                
|Bank Owned Life Insurance                                                                                
|Bank premises and equipment                                                                              
|Federal Home Loan Bank stock                                                                             
|Accrued interest receivable                                                                              
|Goodwill                                                                                                 
|Acquisition intangibles                                                                                  
|Other assets                                                                                             
|                                                                                                         
|Total assets                                                                                             
|                                                                                                         
|                                                                                                         
|LIABILITIES                                                                                              
|Deposits:                                                                                                
|Non-interest bearing deposits                                                                            
|Interest bearing deposits                                                                                
|                                                                                                         
|Total deposits                                                                                           
|Borrowings                                                                                               
|Federal Home Loan Bank Advances                                                                          
|Repurchase Agreements                                                                                    
|Subordinated debentures                                                                                  
|Accrued taxes, interest and other liabilities                                                            
|                                                                                                         
|Total liabilities                                                                                        
|                                                                                                         
|SHAREHOLDERS' EQUITY                                                                                     
|Common stock - no par value                                                                              
|1,926,704 shares issued (1,889,463 in Dec. 2004)                                                         
|Retained earnings                                                                                        
|Accumulated other comprehensive income (loss)                                                            
|                                                                                                         
|Total shareholders' equity                                                                               
|                                                                                                         
|Total Liabilities and Shareholders' Equity                                                               
|                                                                                                         

See notes to consolidated financial
statements.

3

---



|Fentura Financial, Inc. 
Consolidated Statements
of Income (Unaudited)
|----------------------------------------------------------------------
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|INTEREST INCOME                                                       
|Interest and fees on loans                                            
|Interest and dividends on securities:                                 
|Taxable                                                               
|Tax-exempt                                                            
|Interest on federal funds sold                                        
|                                                                      
|Total interest income                                                 
|                                                                      
|INTEREST EXPENSE                                                      
|Deposits                                                              
|Short-term borrowings                                                 
|Other borrowings                                                      
|                                                                      
|Total interest expense                                                
|                                                                      
|                                                                      
|NET INTEREST INCOME                                                   
|Provision for loan losses                                             
|                                                                      
|Net interest income after                                             
|Provision for loan losses                                             
|                                                                      
|NON-INTEREST INCOME                                                   
|Service charges on deposit accounts                                   
|Gain on sale of mortgage loans                                        
|Trust and investment services income                                  
|Gain/(Loss) on sale of securities                                     
|Other income and fees                                                 
|                                                                      
|Total non-interest income                                             
|                                                                      
|NON-INTEREST EXPENSE                                                  
|Salaries and employee benefits                                        
|Occupancy                                                             
|Furniture and equipment                                               
|Loan and collection                                                   
|Advertising and promotional                                           
|Other operating expenses                                              
|                                                                      
|Total non-interest expense                                            
|                                                                      
|                                                                      
|INCOME BEFORE TAXES                                                   
|Federal income taxes                                                  
|                                                                      
|NET INCOME                                                            
|                                                                      
|Per share:                                                            
|Net income - basic                                                    
|                                                                      
|Net income - diluted                                                  
|                                                                      
|Cash Dividends declared                                               
|                                                                      

See notes to consolidated financial
statements.

4

---



|Fentura Financial, Inc.Consolidated
Statements
of Changes in Shareholders Equity (Unaudited)
|---------------------------------------------------------------------------------------------
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|COMMON STOCK                                                                                 
|Balance, beginning of period                                                                 
|Issuance of shares under                                                                     
|Director stock purchase plan                                                                 
|Dividend reinvestment program (14,222 shares) and (3,162 shares)                             
|Stock Offering (23,019 shares and 0 shares)                                                  
|                                                                                             
|Repurchase stock                                                                             
|                                                                                             
|Balance, end of period                                                                       
|                                                                                             
|RETAINED EARNINGS                                                                            
|Balance, beginning of period                                                                 
|Net income                                                                                   
|Cash dividends declared                                                                      
|                                                                                             
|Balance, end of period                                                                       
|                                                                                             
|ACCUMULATED OTHER COMPREHENSIVE                                                              
|INCOME (LOSS)                                                                                
|Balance, beginning of period                                                                 
|Change in unrealized gain (loss)                                                             
|on securities, net of tax                                                                    
|                                                                                             
|Balance, end of period                                                                       
|                                                                                             
|TOTAL SHAREHOLDERS' EQUITY                                                                   
|                                                                                             

See notes to consolidated financial
statements.

5

---



|Fentura Financial, Inc.Consolidated Statements
of Cash Flows (Unaudited)
|------------------------------------------------------------------------
|                                                                        
|
|                                                                        
|                                                                        
|                                                                        
|OPERATING ACTIVITIES:                                                   
|Net income                                                              
|Adjustments to reconcile net income to cash                             
|Provided by Operating Activities:                                       
|Depreciation and amortization                                           
|Provision for loan losses                                               
|Loans originated for sale                                               
|Proceeds from the sale of loans                                         
|Loss on sale of securities                                              
|Loss on sales of fixed assets                                           
|Gain on sales of loans                                                  
|Net increase in bank owned life insurance                               
|Net (increase) decrease in interest receivable & other assets           
|Net increase (decrease) in interest payable & other liabilities         
|                                                                        
|Total Adjustments                                                       
|                                                                        
|Net Cash Provided By (Used In) Operating Activities                     
|                                                                        
|                                                                        
|Cash Flows From Investing Activities:                                   
|Proceeds from maturities of securities - HTM                            
|Proceeds from maturities of securities - AFS                            
|Proceeds from calls of securities - HTM                                 
|Proceeds from calls of securities - AFS                                 
|Proceeds from sales of securities - AFS                                 
|Purchases of securities - HTM                                           
|Purchases of securities - AFS                                           
|Net increase in loans                                                   
|Net cash from acquisition of WMFC                                       
|Acquisition of premises and equipment, net                              
|                                                                        
|Net Cash Provided By (Used in) Investing Activities                     
|                                                                        
|Cash Flows From Financing Activities:                                   
|Net increase (decrease) in deposits                                     
|Net increase (decrease) in borrowings                                   
|Net increase (decrease) in repurchase agreements                        
|Purchase of advances from FHLB                                          
|Repayments of advances from FHLB                                        
|Proceeds from stock offering                                            
|Net proceeds from stock issuance and purchase                           
|Cash dividends                                                          
|                                                                        
|Net Cash Provided By (Used In) Financing Activities                     
|                                                                        
|NET INCREASE IN CASH AND CASH EQUIVALENTS                               
|CASH AND CASH EQUIVALENTS - BEGINNING                                   
|                                                                        
|CASH AND CASH EQUIVALENTS - ENDING                                      
|                                                                        
|                                                                        
|CASH PAID FOR:                                                          
|INTEREST                                                                
|INCOME TAXES                                                            

See notes to consolidated financial
statements

6

---



|Fentura Financial, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
|-----------------------------------------------------------------------------------
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|                                                                                   
|Net Income                                                                         
|Other comprehensive income (loss), net of tax:                                     
|Unrealized holding gains (losses) arising                                          
|during period                                                                      
|Less: reclassification adjustment for                                              
|gains/losses included in net income                                                
|                                                                                   
|Other comprehensive income (loss)                                                  
|                                                                                   
|Comprehensive income                                                               
|                                                                                   
|                                                                                   

# Fentura Financial, Inc.Notes to Consolidated
Financial Statements (Unaudited)

# Note 1. Basis of
Presentation

The consolidated financial statements
at December 31, 2004 and September 30, 2005 include Fentura Financial, Inc. (the
Corporation) and its wholly owned subsidiaries, The State Bank in Fenton, Michigan,
Davison State Bank in Davison, Michigan and West Michigan Community Bank in Hudsonville,
Michigan (collectively the Banks). As further discussed in Note 5, on March 15, 2004, the
Corporation completed the acquisition of West Michigan Financial Corporation (WMFC) and
its subsidiary, West Michigan Community Bank (WMCB). WMFC was merged with and into the
Corporation on the date of the acquisition. WMCB remains a subsidiary of the Corporation.
The acquisition was accounted for as a purchase and accordingly, these financial
statements include the results of operations of WMFC and WMCB subsequent to March 15,
2004. Intercompany transactions and balances are eliminated in consolidation.

The accompanying unaudited
consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim financial
information and the instructions for Form  10Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by accounting
principles generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Operating
results for the three and nine months ended September 30, 2005 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2005. For
further information, refer to the consolidated financial statements and footnotes thereto
included in the Corporations annual report on Form 10-K for the year ended December
31, 2004.

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

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.

7

---



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.

Stock Option Plans

The Nonemployee Director Stock Option
Plan provides for the grant of 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 7,392 shares of stock may
be granted under the Plan in any calendar year and options to acquire not more than 73,920
shares in the aggregate may be outstanding at any one time.

The Employee Stock Option Plan
provides for the grant of 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 79,200 shares. The
administrator of the plan is a committee of directors. The administrator has the power to
determine the number of options to be granted, the exercise price of the options and other
terms of the options, subject to consistency with the terms of the plan.

The following table summarizes stock
option activity:

|                                          | Number ofOptions | Weighted
 Average Price
|----------------------------------------- | ---------------- | -----------------------
|                                          |                  |                        
|Options outstanding at December 31, 2003  |                  |                        
|Options granted 2004                      |                  |                        
|Options forfeited 2004                    |                  |                        
|                                          |                  |                        
|Options outstanding at December 31, 2004  |                  |                        
|Options granted 2005                      |                  |                        
|                                          |                  |                        
|Options outstanding at September 30, 2005 |                  |                        
|                                          |                  |                        

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):

8

---



|                             | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30,
|---------------------------- | ------------------------------- | ------------------------------
|                             |                                 |                               
|                             |                                 |                               
|Net Income                   |                                 |                               
|As reported                  |                                 |                               
|Proforma                     |                                 |                               
|                             |                                 |                               
|Basic net income per share   |                                 |                               
|As reported                  |                                 |                               
|Proforma                     |                                 |                               
|                             |                                 |                               
|Diluted net income per share |                                 |                               
|As reported                  |                                 |                               
|Proforma                     |                                 |                               

Proforma net income includes
compensation cost for the Corporations stock option plan based on the fair values of
the grants as of the dates of the awards consistent with the method prescribed by SFAS
123. The fair value of each option grant is estimated using the Black-Scholes
option-pricing model. Assumptions used in the model for options granted during 2004 were
as follows: an expected life of 6 years, a dividend yield of 2.78%, a risk free return of
3.60%, and expected volatility of 24% resulting in a value of $5.97 per option.
Assumptions used in the model for options granted during 2005 were as follows: an expected
life of 6 years, a dividend yield of 2.70%, a risk free return of 4.05% and expected
volatility of 25% resulting in a value of $7.02 per option.

Recently-Issued
Standard Not Yet Adopted:FAS 123, Revised, requires all public
companies to record compensation cost for stock options provided to employees in return
for employee service. The cost is measured at the fair value of the options when granted,
and this cost is expensed over the employee service period, which is normally the vesting
period of the options. As amended, this apply to awards granted or modified beginning with
the first quarter of 2006. Compensation cost will also be recorded for prior option grants
that vest after the date of adoption. The effect on results of operations will be impacted
by the level of future option grants and the calculation of the fair value of the options
granted at such future date, as well as the vesting periods provided, and so cannot
currently be predicted. Existing options that will vest after the adoption date are not
expected to result in significant additional compensation expense. There will be no
significant effect on financial position as total equity will not change.

9

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# Note 2. Earnings Per
Common Share

A reconciliation of the numerators
and denominators used in the computation of basic earnings per common share and diluted
earnings per common share is presented below. Earnings per common share are presented
below for the three and nine months ended September 30, 2005 and 2004

|                                   | Three Months EndedSeptember 30, | Nine Months EndedSeptember 30,
|---------------------------------- | ------------------------------- | ------------------------------
|                                   |                                 |                               
|                                   |                                 |                               
|Basic Earnings Per Common Share:   |                                 |                               
|Numerator                          |                                 |                               
|Net Income                         |                                 |                               
|                                   |                                 |                               
|                                   |                                 |                               
|Denominator                        |                                 |                               
|Weighted average common shares     |                                 |                               
|Outstanding                        |                                 |                               
|                                   |                                 |                               
|                                   |                                 |                               
|Basic earnings per common share    |                                 |                               
|                                   |                                 |                               
|                                   |                                 |                               
|Diluted Earnings Per Common Share: |                                 |                               
|Numerator                          |                                 |                               
|Net Income                         |                                 |                               
|                                   |                                 |                               
|                                   |                                 |                               
|Denominator                        |                                 |                               
|Weighted average common shares     |                                 |                               
|Outstanding for basic earnings per |                                 |                               
|Common share                       |                                 |                               
|                                   |                                 |                               
|Add:  Dilutive effects of assumed  |                                 |                               
|Exercises of stock options         |                                 |                               
|                                   |                                 |                               
|                                   |                                 |                               
|Weighted average common shares     |                                 |                               
|And dilutive potential common      |                                 |                               
|Shares outstanding                 |                                 |                               
|                                   |                                 |                               
|                                   |                                 |                               
|Diluted earnings per common share  |                                 |                               
|                                   |                                 |                               

Stock options for 14,935 shares of
common stock for the three and nine month period ended September 30, 2005 and stock
options for 5,096 shares and 19,561 shares of common stock for the three and nine month
periods ended September 30, 2004 were not considered in computing diluted earnings per
common share because they were anti-dilutive.

# Note 3. Commitments and
Contingencies

There are various contingent
liabilities that are not reflected in the financial statements including claims and legal
actions arising in the ordinary course of business. In the opinion of management, after
consultation with legal counsel, the ultimate disposition of these matters is not expected
to have a material effect on the Corporations consolidated financial condition or
results of operations.

# Note 4. Sale of Common
Stock

During 2005, Fentura sold in
aggregate approximately 23 thousand shares of common stock, raising $766 thousand net of
issuance costs ($17). Substantially all of the net proceeds are to provide support for
asset growth and for general corporate purposes.

10

---



# Note 5. Subordinated
Debenture and Trust Preferred Securities

A Trust formed by the Corporation
issued $2,000,000 trust preferred securities in 2005 as part of a pooled offering of such
securities. The interest rate is a floating rate (LIBOR plus 1.60%) and the current rate
is 3.80%. The Corporation issued subordinated debentures to the trust in exchange for the
proceeds of the offering; the debentures and related debt issuance costs represent the
sole assets of the trust. The Corporation may redeem the subordinated debentures, in whole
but not in part, any time after 2010 at a price of 100% of face value. The subordinated
debentures must be redeemed no later than 2035.

# ITEM 2 
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

# Results of Operations

Certain of the Corporations
accounting policies are important to the portrayal of the Corporations financial
condition, since they require management to make difficult, complex or subjective
judgments, some of which may relate to matters that are inherently uncertain. Estimates
associated with these policies are susceptible to material changes as a result of changes
in facts and circumstances. Facts and circumstances, which could affect these judgments,
include, but without limitation, changes in interest rates, in the performance of the
economy or in the financial condition of borrowers. Management believes that its critical
accounting policies include determining the allowance for loan losses and determining the
fair value of securities and other financial instruments.

As indicated in the income statement,
earnings for the three and nine months ended September 30, 2005 were $1,299,000 and
$3,745,000 respectively compared to $856,000 and $2,498,000 for the same periods in 2004.
Net interest income was higher due to significantly higher loan balances and the increases
to the prime rate during the first nine months of 2005 compared with the same period in
2004. The Corporation continues to focus on core banking activities and new opportunities
in current and surrounding markets.

The banking industry uses standard
performance indicators to help evaluate a banking institutions performance. Return
on average assets is one of these indicators. For the nine months ended September 30, 2005
the Corporations return on average assets (annualized) was 0.85% compared to 0.62%
for the same period in 2004. Net income per share  basic and diluted was $1.97 in
the first nine months of 2005 compared to $1.33 basic and $1.32 diluted net income per
share for the same period in 2004. Net income per share  basic and diluted was
$0.68 in the third quarter of 2005 compared to $0.45 basic and diluted net income per
share  for the same period in 2004.

Net Interest Income

Net interest income and average
balances and yields on major categories of interest-earning assets and interest-bearing
liabilities for the nine months ended September 30, 2005 and 2004 are summarized in Table
2. The effects of changes in average interest rates and average balances are detailed in
Table 1 below.

11

---



|Table 1                           
|----------------------------------
|
|                                  
|                                  
|                                  
|Taxable Securities                
|Tax-Exempt Securities             
|Federal Funds Sold                
|                                  
|Total Loans                       
|Loans Held for Sale               
|                                  
|                                  
|Total Earning Assets              
|                                  
|Interest Bearing Demand Deposits  
|Savings Deposits                  
|Time CD's $100,000 and Over       
|Other Time Deposits               
|Other Borrowings                  
|                                  
|                                  
|Total Interest Bearing Liabilities
|                                  
|                                  
|Net Interest Income               
|                                  
|                                  

As indicated in Table 1, during the
nine months ended September 30, 2005, net interest income increased compared to the same
period in 2004, principally because of the increase in loan interest income. Loan income
increased due to higher balances and the increases to the prime rate during the first nine
months of 2005 compared to the same period in 2004. Interest expenses increased compared
to the first nine months of 2004 due to the increase in deposit balances, deposit interest
rates, and an increase in borrowings for the Corporation.

Net interest income (displayed with
consideration of full tax equivalency), average balance sheet amounts, and the
corresponding yields for the nine months ended September 30, 2005 and 2004 are shown in
Table 2. Net interest income for the nine months ended September 30, 2005 was $17,297,000,
an increase of $4,277,000, or 32.8%, over the same period in 2004. Net interest margin
increased due to favorable raises in the prime rate and loan volumes during the first nine
months of 2005. Managements actions to reprice loans and deposits to improve the
margin and short-term rate stability contributed substantially to the improvement during
the third quarter of 2005 compared to the third quarter of 2004.

Management reviews economic forecasts
and strategy on a monthly basis. Accordingly, the Corporation intends to continue to
strategically manage the balance sheet structure in an effort to create stability in net
interest income. The Corporation expects to continue to seek out new loan opportunities
while continuing to maintain sound credit quality.

As indicated in Table 2, for the nine
months ended September 30, 2005, the Corporations net interest margin (with
consideration of full tax equivalency) was 4.28% compared with 3.60% for the same period
in 2004. This increase is attributable to the impact of higher loan volumes and re-pricing
of variable rate instruments, which helped increase net interest income and increased the
net interest margin. The Federal Reserve increasing interest rates during the first nine
months of 2005 also positively impacted the Corporations net interest margin.

12

---



Average earning assets increased
11.8% or approximately $56,967,000 comparing the first nine months of 2005 to the same
time period in 2004. Loans, the highest yielding component of earning assets, represented
77.5% of earning assets in 2005 compared to 72.9% in 2004. Average interest bearing
liabilities increased 10.4% or $43,865,000 comparing the first nine months of 2005 to the
same time period in 2004. Non-interest bearing deposits amounted to 15.2% of average
earning assets in the first nine months of 2005 compared with 15.1% in the same time
period of 2004.

As indicated in Table 3, for the
three months ended September 30, 2005, the Corporations net interest margin (with
consideration of full tax equivalency) was 4.26% compared with 3.71% for the same period
in 2004. This increase is attributable to the impact of higher loan volumes and increases
in the prime rate, which helped increase net interest income and increased the net
interest margin. The Federal Reserve increasing interest rates during the third quarter of
2005 also positively impacted the Corporations net interest margin.

Average earning assets increased 6.0%
or approximately $31,067,000 comparing the third quarter of 2005 to the same time period
in 2004. Loans, the highest yielding component of earning assets, represented 78.5% of
earning assets in 2005 compared to 75.0% in 2004. Average interest bearing liabilities
increased 3.0% or $13,966,000 comparing the third quarter of 2005 to the same time period
in 2004. Non-interest bearing deposits amounted to 14.9% of average earning assets in the
third quarter of 2005 compared with 13.9% in the same time period of 2004.

Management continually monitors the
Corporations balance sheet in an effort to insulate net interest income from
significant swings caused by interest rate volatility. If market rates change in 2005,
corresponding changes in funding costs will be considered to avoid any potential negative
impact on net interest income. The Corporations policies in this regard are further
discussed in the section titled Interest Rate Sensitivity Management.

13

---



# Table 2  Average Balance
and Rates

|                                            | NINE MONTHS ENDED SEPTEMBER 30,
|------------------------------------------- | -------------------------------
|                                           
|                                            |                                
|                                            |                                
|Securities:                                 |                                
|U.S. Treasury and Government Agencies       |                                
|State and Political (1)                     |                                
|Other                                       |                                
|                                            |                                
|Total Securities                            |                                
|Fed Funds Sold                              |                                
|Loans:                                      |                                
|Commercial                                  |                                
|Tax Free (1)                                |                                
|Real Estate-Mortgage                        |                                
|Consumer                                    |                                
|                                            |                                
|Total loans                                 |                                
|Allowance for Loan Losses                   |                                
|Net Loans                                   |                                
|                                            |                                
|Loans Held for Sale                         |                                
|                                            |                                
|TOTAL EARNING ASSETS                        |                                
|                                            |                                
|Cash Due from Banks                         |                                
|All Other Assets                            |                                
|                                            |                                
|TOTAL ASSETS                                |                                
|                                            |                                
|LIABILITIES & SHAREHOLDERS' EQUITY:         |                                
|Deposits:                                   |                                
|Interest bearing - DDA                      |                                
|Savings Deposits                            |                                
|Time CD's $100,000 and Over                 |                                
|Other Time CD's                             |                                
|                                            |                                
|Total Deposits                              |                                
|Other Borrowings                            |                                
|                                            |                                
|INTEREST BEARING LIABILITIES                |                                
|                                            |                                
|Non-Interest bearing - DDA                  |                                
|All Other Liabilities                       |                                
|Shareholders' Equity                        |                                
|                                            |                                
|TOTAL LIABILITIES & SHAREHOLDERS'    EQUITY |                                
|                                            |                                
|Net Interest Rate Spread                    |                                
|Impact of Non-Interest Bearing              |                                
|FUNDS ON MARGIN                             |                                
|                                            |                                
|Net Interest Income /Margin                 |                                
|                                            |                                

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

14

---



# Table 3 Average Balance
and Rates

|                                            | THREE MONTHS ENDED SEPTEMBER 30,
|------------------------------------------- | --------------------------------
|                                           
|                                            |                                 
|                                            |                                 
|Securities:                                 |                                 
|U.S. Treasury and Government Agencies       |                                 
|State and Political (1)                     |                                 
|Other                                       |                                 
|                                            |                                 
|Total Securities                            |                                 
|Fed Funds Sold                              |                                 
|Loans:                                      |                                 
|Commercial                                  |                                 
|Tax Free (1)                                |                                 
|Real Estate-Mortgage                        |                                 
|Consumer                                    |                                 
|                                            |                                 
|Total loans                                 |                                 
|Allowance for Loan Losses                   |                                 
|Net Loans                                   |                                 
|                                            |                                 
|Loans Held for Sale                         |                                 
|                                            |                                 
|TOTAL EARNING ASSETS                        |                                 
|                                            |                                 
|Cash Due from Banks                         |                                 
|All Other Assets                            |                                 
|                                            |                                 
|TOTAL ASSETS                                |                                 
|                                            |                                 
|LIABILITIES & SHAREHOLDERS' EQUITY:         |                                 
|Deposits:                                   |                                 
|Interest bearing - DDA                      |                                 
|Savings Deposits                            |                                 
|Time CD's $100,000 and Over                 |                                 
|Other Time CD's                             |                                 
|                                            |                                 
|Total Deposits                              |                                 
|Other Borrowings                            |                                 
|                                            |                                 
|INTEREST BEARING LIABILITIES                |                                 
|                                            |                                 
|Non-Interest bearing - DDA                  |                                 
|All Other Liabilities                       |                                 
|Shareholders' Equity                        |                                 
|                                            |                                 
|TOTAL LIABILITIES & SHAREHOLDERS'    EQUITY |                                 
|                                            |                                 
|Net Interest Rate Spread                    |                                 
|Impact of Non-Interest Bearing              |                                 
|FUNDS ON MARGIN                             |                                 
|                                            |                                 
|Net Interest Income /Margin                 |                                 
|                                            |                                 

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

15

---



# Allowance and Provision
For Loan Losses

The Corporation maintains formal
policies and procedures to control and monitor credit risk. Management believes the
allowance for loan losses is adequate to provide for probable incurred losses 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 loan losses. Management continues to
identify and devote attention to credits that are not performing as agreed. Of course,
deterioration of economic conditions could have an impact on the Corporations credit
quality, which could impact the need for greater provision for loan losses and the level
of the allowance for loan losses as a percentage of gross loans. Non-performing loans are
discussed further in the section titled Non-Performing Assets.

The allowance for loan losses
(ALL)reflects managements judgment as to the level considered appropriate to
absorb probable losses in the loan portfolio. Fenturas subsidiary banks
methodology in determining the adequacy of the ALLrelies on several key
elements,which includes specific allowances for identified problem loans and a
formula-based risk-allocated allowance for the remainder of the portfolio. This includes a
review of individual loans, historical loss experience, current economic conditions,
portfolio trends, and other pertinent factors. The amount of the provision for loan losses
is based on our review of the historical credit loss experience and such factors that, in
our judgment, deserve consideration under existing economic conditions in estimating
probable credit losses. While we consider the allowance for loan losses to be adequate
based on information currently available, future adjustments to the allowance may be
necessary due to changes in economic conditions, delinquencies, or loss rates. Although
portions of the allowance have been allocated to various portfolio segments, the ALLis general in nature and is available for the portfolio in its entirety. At September
30, 2005, the ALLwas $6,294,000, or 1.44% of total loans, higher than the
$5,501,000, or 1.40%, at December 31, 2004. Non-performing loan levels, discussed later,
have increased since December 31, 2004, prompting the increase in ALL. Management believes
that the allowance to gross loans percentage is appropriate given identified risk in the
loan portfolio based on asset quality.

Table 4 also summarizes loan losses
and recoveries for the first nine months of 2005 and 2004. During the first nine months of
2005 the Corporation experienced net charge-offs of $209,000 or .04% compared with net
charge-offs of $419,000 or .11% in the first nine months of 2004. The provision for loan
losses was $1,002,000 in the first nine months of 2005, similar to the provision for loan
losses of $1,019,000 for the same time period in 2004, due to an increase of higher
quality loan, a reduction of net charge-offs and the non-performing assets remaining
relatively level year over year.

16

---



|Table 4 Analysis Of The Allowance For Loan Losses
|-------------------------------------------------
|                                                 
|                                                 
|Balance at Beginning of Period                   
|                                                 
|Charge-Offs:                                     
|Commercial, Financial and Agriculture            
|Real Estate-Mortgage                             
|Installment Loans to Individuals                 
|                                                 
|Total Charge-Offs                                
|Recoveries:                                      
|Commercial, Financial and Agriculture            
|Real Estate-Mortgage                             
|Installment Loans to Individuals                 
|                                                 
|Total Recoveries                                 
|                                                 
|Net Charge-Offs                                  
|Provision                                        
|                                                 
|Addition from WMCB acquisition                   
|                                                 
|Balance at End of Period                         
|                                                 
|Ratio of Net Charge-Offs to Gross Loans          
|                                                 

Non-Interest Income

Non-interest income increased during
the nine months ended September 30, 2005 as compared to the same period in 2004, primarily
due to the increase in mortgage loan gains, offset by a decrease in service charges on
deposits and loss on sales of securities. Overall non-interest income was $5,238,000 for
the nine months ended September 30, 2005 compared to $5,139,000 for the same period in
2004. These figures represent an increase of 1.9% in the first nine months of 2005
compared to the same period in 2004. Non-interest income increased 11.0% in the third
quarter of 2005 compared to the same period in 2004. The income statement provides a
detailed breakdown of the components of non-interest income.

The most significant category of
non-interest income is service charges on deposit accounts. These fees were $2,571,000 in
the first nine months of 2005 compared to $2,847,000 for the same period of 2004. This
represents a decrease of 9.7%. Decreases are attributable to a reduction in overdraft
privilege service charges and regular deposit account service charges in the Banks.
Service charges on accounts decreased 7.0% in the third quarter of 2005 compared to the
same period in 2004. The decrease was due to higher balances in deposit accounts and fewer
customers using the overdraft privilege product during the third quarter of 2005.

Gains on the sale of mortgage loans
originated by the Banks and sold in the secondary market were $630,000 in the nine months
ended September 30, 2005 and $365,000 in the same period in 2004. This represents an
increase of 72.6%. In the third quarter of 2005 gain on the sale of mortgages increased
128.2% over the same period in 2004. The increase resulted from the increase in
residential mortgage products offered and an increase in activity.

Trust and investment services income
increased $139,000 (19.8%) in the first nine months of 2005 compared to the same period in
the prior year. Trust and investment services income was the same in the third quarter of
2005 compared to the same period in 2004. The increase in fees is attributable to the
increase in the average market value of assets under management at The State Bank and a
full year of trust fees at West Michigan Community Bank.

17

---



Loss on sale of securities was
$108,000 in the first nine months of 2005, due to the Banks selling securities in the
first nine months of 2005. The Banks took the loss to reposition their securities
portfolio into higher yielding securities. The State Bank had a $2,000 gain during the
third quarter of 2005.

Other operating income increased
$79,000 or 6.5%, to $1,303,000 in the first nine months of 2005 compared to $1,224,000 in
the same time period in 2004. Other operating income increased due to increases in ATM
surcharges, official check and foreign exchange fees collected and a full year of West
Michigan Community Bank building rental income and other income. Other operating income
increased 27.6% in the third quarter of 2005 compared to the same period in 2004.

Non-Interest Expense

Total non-interest expense increased
16.8% to $15,664,000 in the nine months ended September 30, 2005, compared with
$13,412,000 in the same period of 2004. This increase was largely attributable to an
increase in salaries and benefits expense, occupancy and furniture and equipment expenses.
In the third quarter of 2005 total non-interest expense was $5,272,000 compared to
$4,825,000, or an increase of 9.3%, in the same quarter of 2004.

Salary and benefit costs,
Fenturas largest non-interest expense category, were $9,062,000 in the first nine
months of 2005, compared with $7,332,000, or an increase of 23.6%, for the same time
period in 2004. In the third quarter of 2005 salary and benefits costs were $3,094,000
compared to $2,675,000, or an increase of 15.7%, for the same period in 2004. Increased
costs were primarily a result of the addition of the Brighton Loan Production office in
June 2004, the Goodrich and Grandville Offices in September 2004, a modest salary increase
for employees, an increase in employee benefit costs and modest staffing increases. The
year to date increase was also due, in part, to West Michigan Community Bank being
included for 9 months in 2005 compared to 7.5 months in 2004.

Occupancy expenses at $1,325,000
increased in the nine months ended September 30, 2005 compared to the same period in 2004
by $132,000 or 11.1%. The increases were attributable to the addition of the Brighton Loan
Production office in June 2004, the Goodrich and Grandville Offices in September 2004, an
increase in facility repairs and maintenance contracts expense. Occupancy expenses
increased 3.8% in the third quarter of 2005 compared to 2004. This was due to increases in
utility and real estate tax expenses.

During the nine months ended
September 30, 2005 furniture and equipment expenses were $1,576,000 compared to $1,559,000
for the same period in 2004, an increase of 1.1%. The increases in expenses were
attributable to the addition of the Brighton Loan Production office in June 2004, the
Goodrich and Grandville Offices in September 2004, an increase in equipment maintenance
contracts and equipment depreciation. In the third quarter of 2005 furniture and equipment
expenses decreased 13.5% from the same period in 2004. This was due to lower equipment
maintenance contracts.

Loan and collection expenses, at
$255,000, were up $15,000 or 6.3% during the nine months ended September 30, 2005 compared
to the same time period in 2004. In the third quarter loan and collection expense
increased 55.4% compared to the third quarter of 2004. This was due to an increase in
collection and ORE expenses.

Advertising expenses were $509,000 in
the nine months ended September 30, 2005, up 31.9% compared with $386,000 for the same
period in 2004. Advertising expenses increased $25,000 or 19.5% in the third quarter of
2005 compared to the same quarter in 2004. The increases were primarily due to the
increase in agency, media, shareholder and promotional expenses for all banks in the
Corporation and West Michigan Community Bank being included for 9 months in 2005 compared
to 7.5 months in 2004.

18

---



Other operating expenses were
$2,937,000 in the nine months ended September 30, 2005 compared to $2,702,000 in the same
time period in 2004, an increase of $235,000 or 8.7%. In the third quarter of 2005 other
operating expenses increased 3.4% from the same period in 2004. The increases were
attributable to the addition of the Brighton Loan Production office in June, 2004, the
Goodrich and Grandville Offices in September 2004, an increase in the amount of
correspondent bank service charges due to maintaining lower balances and an increase in
director fee expense, business development expenses, training expenses and fiduciary
expenses, and due to having West Michigan Community Banks operations included for
all nine months in 2005.

Financial Condition

Proper management of the volume and
composition of the Corporations earning assets and funding sources is essential for
ensuring strong and consistent earnings performance, maintaining adequate liquidity and
limiting exposure to risks caused by changing market conditions. The Corporations
securities portfolio is structured to provide a source of liquidity through maturities and
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. Customer deposits are the
primary source of funding for earning assets while short-term debt and other sources of
funds could be further utilized if market conditions and liquidity needs change.

The Corporations total assets
were $609 million at September 30, 2005 compared to December 31, 2004 total assets of $585
million. Loans comprised 71.3% of total assets at September 30, 2005 compared to 67.3% at
December 31, 2004. Loans grew $41.0 million for the Corporation. The ratio of non-interest
bearing deposits to total deposits was 15.8% at September 30, 2005 compared to 16.4% at
December 31, 2004. Interest bearing deposit liabilities totaled $435 million at September
30, 2005 compared to $410 million at December 31, 2004. Total deposits increased $25.9
million with non-interest bearing demand deposits increasing $0.9 million and interest
bearing deposits increasing $25.0 million. Short-term borrowings decreased $3.3 million
due to an increase in deposits. FHLB advance balances decreased $3.1 million during the
period due to the increase in deposits at the Banks. Repurchase agreement balances
remained steady comparing the two periods. Repurchase agreements are instruments with
deposit type characteristics, which are secured by bank securities. The repurchase
agreements were leveraged against securities to increase net interest income. The
subordinated debentures increased $2.0 million, with the issuance of Trust Preferred
Securities in the third quarter of 2005.

Bank premises and equipment increased
$433,000 to $14.2 million at September 30, 2005 compared to $13.8 million at December 31,
2004. The increase was due to the acquisition of land at one of the Banks and the purchase
of a new mainframe computer system.

# Non-Performing Assets

Non-performing assets are assets that
have more than a normal risk of loss and include loans on which interest accruals have
ceased, loans that have been renegotiated, and real estate acquired through foreclosure.
Past due loans are loans which are delinquent 90 days or more, but have not been placed on
non-accrual status. Table 5 reflects the levels of these assets at September 30, 2005 and
December 31, 2004.

Non-performing assets increased
slightly at September 30, 2005 compared to December 31, 2004. This increase was primarily
due to an increase in nonperforming loans and Other Real Estate and partially offset by
REO-in-Redemption, which decreased due to the sale of properties in the first nine months
of 2005. One residential property comprises $740,000 of the remaining balance and
marketability is dependent on the real estate market. Non-performing loans increased as
compared to December 31, 2004 due to a $385,000 increase in non-accrual loans.

19

---



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 5- Non-Performing Assets and Past Due Loans |  | 
|------------------------------------------------- |  | 
|                                                 
|                                                  |  | 
|Non-Performing Loans:                             |  | 
|Loans Past Due 90 Days or More & Still            |  | 
|Accruing                                          |  | 
|Non-Accrual Loans                                 |  | 
|Renegotiated Loans                                |  | 
|                                                  |  | 
|Total Non-Performing Loans                        |  | 
|                                                  |  | 
|Other Non-Performing Assets:                      |  | 
|Other Real Estate                                 |  | 
|REO in Redemption                                 |  | 
|Other Non-Performing  Assets                      |  | 
|                                                  |  | 
|Total Other Non-Performing Assets                 |  | 
|                                                  |  | 
|Total Non-Performing Assets                       |  | 
|                                                  |  | 
|Non-Performing Loans as a % of                    |  | 
|Total Loans                                       |  | 
|Allowance for Loan Losses as a % of               |  | 
|Non-Performing Loans                              |  | 
|Accruing Loans Past Due 90 Days or                |  | 
|More to Total Loans                               |  | 
|Non-performing Assets as a % of                   |  | 
|Total Assets                                      |  | 
|                                                  |  | 

# Liquidity and Interest
Rate Risk Management

Asset/Liability management is designed
to assure liquidity and reduce interest rate risks. The goal in managing interest rate
risk is to maintain a strong and relatively stable net interest margin. It is the
responsibility of the Asset/Liability Management Committee (ALCO) to set policy guidelines
and to establish short-term and long-term strategies with respect to interest rate
exposure and liquidity. The ALCO, which is comprised of key members of 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 Banks deposit base
plus other funding sources (federal funds purchased, short-term borrowings, FHLB advances,
repurchase agreements, other liabilities and shareholders equity) provided primarily
all funding needs in the first nine months of 2005. 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 conditions. The Corporation does
not foresee any difficulty in meeting its funding requirements.

20

---



Primary liquidity is provided through
short-term investments or borrowings (including federal funds sold and purchased) while
the securities portfolio provides secondary liquidity. The securities portfolio has
decreased $20.8 million since December 31, 2004 due to the calls and selling of securities
and the increase in loan demand. The Corporation has decided to invest the excess funds in
the securities portfolio or loan portfolio to increase yield and income versus keeping the
excess funds in federal funds sold at a lower yield. The Corporation regularly monitors
liquidity to ensure adequate cash flows to cover unanticipated reductions in the
availability of funding sources.

Interest rate risk is managed by
controlling and limiting the level of earnings volatility arising from rate movements. The
Corporation regularly performs reviews and analysis 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 decrease in borrowings and increase in
demand and savings deposits. In the first nine months of 2005, these borrowings decreased
$6,268,000 and these deposits increased $25,871,000. Cash used by investing activities was
$22,503,000 in the first nine months of 2005 compared to cash used of $16,341,000 in the
first nine months of 2004. The change in investing activities was due to the increase in
the origination of loans in the first nine months of 2005 compared to the first nine
months of 2004, which included the acquisition of West Michigan Community Bank on March
15, 2004 and securities sales.

# Capital Management

Total shareholders equity
increased 7.4% to $46,141,000 at September 30, 2005 compared with $42,969,000 at December
31, 2004. The Corporations equity to asset ratio is at 7.6% and 7.4% for September
30, 2005 and December 31, 2004, respectively. The increase in the amount of capital
resulted primarily from the Corporations net income and issuance of common stock,
partially offset by dividends declared.

At December 31, 2004, the Corporation
had accumulated other comprehensive loss of $655,000 compared to accumulated other
comprehensive loss at September 30, 2005 of $1,100,000. The increase in the loss position
was attributable to the fluctuation of the market price of securities held in the
available for sale portfolio.

Regulatory Capital
Requirements

Bank holding companies and their bank
subsidiaries are required by banking industry regulators to maintain certain levels of
capital. These are expressed in the form of certain ratios. These ratios are based on the
degree of credit risk in the Corporations assets. All assets and off-balance sheet
items such as outstanding loan commitments are assigned risk factors to create an overall
risk-weighted asset total. Capital is separated into two levels, Tier I capital
(essentially total common shareholders equity plus qualifying cumulative preferred
securities (limited to 33% of common equity), less goodwill) and Tier II capital
(essentially the allowance for loan losses limited to 1.25% of gross risk-weighted
assets). Capital levels are then measured as a percentage of total risk weighted assets.
The regulatory minimum for Tier I capital to risk weighted assets is 4% and the minimum
for Total capital (Tier I plus Tier II) to risk weighted assets is 8%. The Tier I leverage
ratio measures Tier I capital to average assets and must be a minimum of 3%. As reflected
in Table 6, at September 30, 2005 and in Table 12, at December 31, 2004, the Corporation
was well in excess of the minimum capital and leverage requirements necessary to be
considered a well capitalized banking company.

21

---



The FDIC has adopted a risk-based
insurance premium system based in part on a banks capital adequacy. Under this
system a depository institution is classified as well capitalized, adequately capitalized,
or undercapitalized according to its regulatory capital levels. Subsequently, a financial
institutions premium levels are based on these classifications and its regulatory
supervisory rating (the higher the classification the lower the premium). It is the
Corporations goal to maintain capital levels sufficient to retain a designation of
well capitalized.

|Table 6                   | Capital Ratios
|------------------------- | --------------
|
|                         
|                          |               
|Total Capital to risk     |               
|Weighted assets           |               
|Tier 1  Capital to risk   |               
|Weighted assets           |               
|Tier 1 Capital to average |               
|Assets                    |               

# ITEM 3.  QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The information concerning
quantitative and qualitative disclosures about market risk contained on page 50 in the
Corporations Annual Report on Form 10-K for the year ended December 31, 2004, is
here incorporated by reference.

Fentura 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. For the first nine months of 2005, 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 primary 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 have been managed in 2005
compared to 2004.

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 quarterly report for a
discussion of the limitations on the Corporations responsibility for such
statements.

# Interest Rate
Sensitivity Management

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

22

---



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

Table 7 sets forth the distribution
of re-pricing of the Corporations earning assets and interest bearing liabilities as
of September 30, 2005, 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.

|Table 7 GAP ANALYSIS SETPEMBER 30, 2005
(000's Omitted)
|-------------------------------------------------------
|                                                       
|                                                       
|Earning Assets:                                        
|Federal Funds Sold                                     
|Securities                                             
|Loans                                                  
|Loans Held for Sale                                    
|FHLB Stock                                             
|                                                       
|Total Earning Assets                                   
|                                                       
|                                                       
|Interest Bearing Liabilities:                          
|Interest Bearing Demand Deposits                       
|Savings Deposits                                       
|Time Deposits Less than $100,000                       
|Time Deposits Greater than $100,000                    
|Short term borrowings                                  
|Other Borrowings                                       
|Repurchase agreements                                  
|Subordinated debentures                                
|                                                       
|Total Interest Bearing Liabilities                     
|                                                       
|Interest Rate Sensitivity GAP                          
|Cumulative Interest Rate                               
|Sensitivity GAP                                        
|Interest Rate Sensitivity GAP                          
|Cumulative Interest Rate                               
|Sensitivity GAP Ratio                                  
|                                                       

As indicated in Table 7, 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 rates decline, this
should theoretically have a short-term positive impact. 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 volumes. These limitations are evident when
considering the Corporations Gap position at September 30, 2005 and the change in
net interest margin for the nine months ended September 30, 2005 compared to the same time
period in 2004. At September 30, 2004 the Corporation was negatively gapped through one
year and since that time interest rates have increased further, yet net interest margin
increased when the first nine months of 2005 is compared to the same period in 2004. This
occurred because certain deposit categories, specifically interest bearing demand and
savings deposits, repriced at the same time but not at the same level as the asset
portfolios resulting in an increase in net interest margin. In addition to the GAP
analysis, the Corporation, as a part of managing interest rate risk, also performs
simulation modeling, which measures the impact of upward and downward movements of
interest rates on interest margin and the market value of equity. Assuming continued
success at achieving repricing of loans to higher rates at a faster pace than repricing of
deposits, simulation modeling indicates that an upward movement of interest rates could
have a positive impact on net interest income. Because management believes that it should
be able to continue these repricing relationships, it anticipates improved performance in
net interest margin as a result of a rising interest rate environment.

23

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# Forward Looking
Statements

This report includes
forward-looking statements as that term is used in the securities laws. All
statements regarding our expected financial position, business and strategies are
forward-looking statements. In addition, the words anticipates,
believes, estimates, seeks, expects,
plans, intends, and similar expressions, as they relate to us or
our management, are intended to identify forward-looking statements. The presentation and
discussion of the provision and allowance for loan losses and statements concerning future
profitability or future growth or increases, are examples of inherently forward looking
statements in that they involve judgments and statements of belief as to the outcome of
future events. Our ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Factors which could have a material adverse affect on
our operations and our future prospects include, but are not limited to, changes in:
interest rates, general economic conditions, legislative/regulatory changes, monetary and
fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the
Federal Reserve Board, the quality or composition of the loan or investment portfolios,
demand for loan products, deposit flows, competition, demand for financial services in our
market area and accounting principles, policies and guidelines. These risks and
uncertainties should be considered in evaluating forward-looking statements and undue
reliance should not be placed on such statements. Further information concerning us and
our business, including additional factors that could materially affect our financial
results, is included in our other filings with the Securities and Exchange Commission.

# ITEM 4: 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-Quarterly Report 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

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# PART II  OTHER
INFORMATION

|Item 1. | Legal Proceedings. - None
|------- | -------------------------

|Item 2. | Unregistered Sales of Equity, Securities, and Use of Proceeds- None
|------- | -------------------------------------------------------------------

|Item 3. | Defaults Upon Senior Securities. - None
|------- | ---------------------------------------

|Item 4. | Submission of Matters to a Vote of Securities Holders. - None
|------- | -------------------------------------------------------------

|Item 5. | Other Information.- None
|------- | ------------------------

|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.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

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Signatures

Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

|Dated:  November 11, 2005
Dated:  November 11, 2005 |  | Fentura Financial Inc./s/ Donald L. Grill
Donald L. GrillPresident and CEO/s/ Douglas J. Kelley
Douglas J. KelleyChief Financial Officer
|--------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

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# EXHIBIT INDEX

|Exhibit | Description
|------- | -----------

| | 
| | 

|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