##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from  to
 Commission file number 000-23550
 Fentura Financial, Inc.
  Michigan
    
    38-2806518(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employee Identification No.)
 175 N Leroy, P.O. Box 725, Fenton, Michigan 48430
  (810) 629-2263
  þ o
 o o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ
  Class  Common Stock
    
    Shares Outstanding  2,196,037




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##### 



Fentura Financial Inc.
Index to Form 10-Q
 PagePart I  Financial Information
    
    
    3Item 1  Consolidated Financial Statements (Unaudited)
    
    
    3-14Item 2  Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    15-26Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    27-28Item 4T  Controls and Procedures
    
    
    29Part II  Other Information
    
    
    30Item 1  Legal Proceedings
    
    
    30Item 1A  Risk Factors
    
    
    30Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3  Defaults Upon Senior Securities
    
    
    30Item 4 Submission of Matters to a Vote of Security Holders
    
    
    30Item 5  Other Information
    
    
    30Item 6  Exhibits
    
    
    30Signatures
    
    
    31Exhibit Index
    
    
    32EX-31.1EX-31.2EX-32.1EX-32.2
  2




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PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 Fentura Financial, Inc.
Consolidated Balance Sheets
 March 31,2009
    
    Dec 31,(000s omitted except share data)
    
    (unaudited)
    
    2008ASSETSCash and due from banks
    
    $
    26,643
    
    
    $
    13,626Federal funds sold
    
    
    0
    
    
    
    0Total cash & cash equivalents
    
    
    26,643
    
    
    
    13,626Securities-available for sale
    
    
    42,737
    
    
    
    47,065Securities-held to maturity, (fair value of $7,769
at March 31, 2009 and $8,220 at December 31, 2008)
    
    
    6,563
    
    
    
    6,765Total securities
    
    
    49,300
    
    
    
    53,830Loans held for sale
    
    
    4,842
    
    
    
    690Loans:Commercial
    
    
    282,184
    
    
    
    289,523Real estate loans  construction
    
    
    51,001
    
    
    
    48,777Real estate loans  mortgage
    
    
    36,235
    
    
    
    37,828Consumer loans
    
    
    51,206
    
    
    
    52,910Total loans
    
    
    420,626
    
    
    
    429,038Less: Allowance for loan losses
    
    
    (11,405
    )
    
    
    (10,455
    )Net loans
    
    
    409,221
    
    
    
    418,583Bank owned life insurance
    
    
    7,034
    
    
    
    7,282Bank premises and equipment
    
    
    16,610
    
    
    
    16,879Federal Home Loan Bank stock
    
    
    1,900
    
    
    
    1,900Accrued interest receivable
    
    
    2,275
    
    
    
    2,231Acquisition intangibles
    
    
    252
    
    
    
    293Equity Investment
    
    
    845
    
    
    
    1,360Other real estate owned
    
    
    5,703
    
    
    
    5,983Assets of held for sale operations
    
    
    43,878
    
    
    
    45,650Other assets
    
    
    8,831
    
    
    
    10,297Total assets
    
    $
    577,334
    
    
    $
    578,604LIABILITIESDeposits:Non-interest bearing deposits
    
    $
    65,668
    
    
    $
    64,325Interest bearing deposits
    
    
    409,224
    
    
    
    405,039Total deposits
    
    
    474,892
    
    
    
    469,364Short term borrowings
    
    
    886
    
    
    
    1,500Federal Home Loan Bank advances
    
    
    10,007
    
    
    
    12,707Subordinated debentures
    
    
    14,000
    
    
    
    14,000Note payable
    
    
    750
    
    
    
    1,000Liabilities of held for sale operations
    
    
    40,856
    
    
    
    42,174Accrued taxes, interest and other liabilities
    
    
    2,090
    
    
    
    1,735Total liabilities
    
    
    543,481
    
    
    
    542,480SHAREHOLDERS EQUITYCommon stock  no par value
2,195,326 shares issued (2,185,765 at Dec. 31, 2008)
    
    
    42,814
    
    
    
    42,778Retained deficit
    
    
    (6,336
    )
    
    
    (4,677
    )Accumulated other comprehensive loss
    
    
    (2,625
    )
    
    
    (1,977
    )Total shareholders equity
    
    
    33,853
    
    
    
    36,124Total liabilities and shareholders equity
    
    $
    577,334
    
    
    $
    578,604
  3




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Fentura Financial, Inc.  Consolidated Statements of Income (Unaudited)
 Three Months EndedMarch 31(000s omitted except per share data)
    
    2009
    
    
    2008INTEREST INCOMEInterest and fees on loans
    
    $
    6,463
    
    
    $
    7,483Interest and dividends on securities:Taxable
    
    
    420
    
    
    
    547Tax-exempt
    
    
    144
    
    
    
    111Interest on federal funds sold
    
    
    0
    
    
    
    93Total interest income
    
    
    7,027
    
    
    
    8,234INTEREST EXPENSEDeposits
    
    
    2,613
    
    
    
    3,745Borrowings
    
    
    311
    
    
    
    486Total interest expense
    
    
    2,924
    
    
    
    4,231NET INTEREST INCOME
    
    
    4,103
    
    
    
    4,003Provision for loan losses
    
    
    1,655
    
    
    
    980Net interest income after
Provision for loan losses
    
    
    2,448
    
    
    
    3,023NON-INTEREST INCOMEService charges on deposit accounts
    
    
    436
    
    
    
    623Gain on sale of mortgage loans
    
    
    235
    
    
    
    118Trust and investment services income
    
    
    364
    
    
    
    456Loss on equity investment
    
    
    (515
    )
    
    
    (168
    )Other income and fees
    
    
    620
    
    
    
    372Total non-interest income
    
    
    1,140
    
    
    
    1,401NON-INTEREST EXPENSESalaries and employee benefits
    
    
    2,552
    
    
    
    2,824Occupancy
    
    
    503
    
    
    
    505Furniture and equipment
    
    
    424
    
    
    
    471Loan and collection
    
    
    385
    
    
    
    148Advertising and promotional
    
    
    41
    
    
    
    85Loss on security impairment
    
    
    0
    
    
    
    574Loss on impairment of held for sale operations
    
    
    700
    
    
    
    0Other operating expenses
    
    
    1,231
    
    
    
    799Total non-interest expense
    
    
    5,836
    
    
    
    5,406Loss from continuing operations before income tax
    
    
    (2,248
    )
    
    
    (982
    )Federal income tax benefit
    
    
    (592
    )
    
    
    (364
    )Net loss from continuing operations
    
    $
    (1,656
    )
    
    $
    (618
    )Net loss from held for sale operations, net of tax
    
    
    (3
    )
    
    
    (10
    )Net loss
    
    $
    (1,659
    )
    
    $
    (628
    )Loss per share from continuing operationsBasic
    
    $
    (0.76
    )
    
    $
    (0.29
    )Diluted
    
    $
    (0.76
    )
    
    $
    (0.29
    )Net loss per shareBasic
    
    $
    (0.76
    )
    
    $
    (0.29
    )Diluted
    
    $
    (0.76
    )
    
    $
    (0.29
    )Cash Dividends declared
    
    $
    0.00
    
    
    $
    0.00
  4




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Fentura Financial, Inc.  Consolidated Statements of Changes in Shareholders Equity (Unaudited)
 Three Months EndedMarch 31,(000s omitted)
    
    2009
    
    
    2008COMMON STOCKBalance, beginning of period
    
    $
    42,778
    
    
    $
    42,478Issuance of shares underDirector stock purchase plan &
Dividend reinvestment program (9,561 and 8,296 shares)
    
    
    36
    
    
    
    169Stock options exercised
    
    
    0
    
    
    
    0Stock compensation expense
    
    
    0
    
    
    
    2Balance, end of period
    
    
    42,814
    
    
    
    42,649RETAINED EARNINGSBalance, beginning of period
    
    
    (4,677
    )
    
    
    7,488Net loss
    
    
    (1,659
    )
    
    
    (628
    )Cash dividends declared
    
    
    0
    
    
    
    0Balance, end of period
    
    
    (6,336
    )
    
    
    6,860ACCUMULATED OTHER COMPREHENSIVE LOSSBalance, beginning of period
    
    
    (1,977
    )
    
    
    (470
    )Change in unrealized gain (loss)
on securities, net of tax
    
    
    (648
    )
    
    
    339Balance, end of period
    
    
    (2,625
    )
    
    
    (131
    )Total Shareholders Equity
    
    $
    33,853
    
    
    $
    49,378
  5




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Fentura Financial,
Inc.  Consolidated Statements of Cash Flows (Unaudited)
 Three Months EndedMarch 31,(000s omitted)
    
    2009
    
    2008OPERATING ACTIVITIES:Net loss
    
    $
    (1,659
    )
    
    $
    (628
    )Adjustments to reconcile net income (loss) to cash
Provided by Operating Activities:Stock compensation expense
    
    
    0
    
    
    
    2Depreciation and amortization
    
    
    342
    
    
    
    216Provision for loan losses
    
    
    1,655
    
    
    
    980Loans originated for sale
    
    
    (17,275
    )
    
    
    (9,901
    )Proceeds from the sale of loans
    
    
    13,358
    
    
    
    10,211(Gain) on sales of loans
    
    
    (235
    )
    
    
    (118
    )(Gain) Loss on sale of fixed assets
    
    
    0
    
    
    
    (40
    )(Gain) Loss on sale of other real estate owned
    
    
    57
    
    
    
    0Loss on security impairment
    
    
    0
    
    
    
    574Loss on equity investment
    
    
    515
    
    
    
    168Earnings from bank owned life insurance
    
    
    (251
    )
    
    
    (45
    )Net (increase) decrease in interest receivable & other assets
    
    
    356
    
    
    
    (755
    )Net increase (decrease) in interest payable & other liabilities
    
    
    427
    
    
    
    (1,397
    )Total Adjustments
    
    
    (1,051
    )
    
    
    (105
    )Net cash used in operating activities
    
    
    (2,710
    )
    
    
    (733
    )CASH FLOWS FROM INVESTING ACTIVITES:Proceeds from maturities of securities  HTM
    
    
    200
    
    
    
    0Proceeds from maturities of securities  AFS
    
    
    2,039
    
    
    
    2,309Proceeds from calls of securities  AFS
    
    
    2,000
    
    
    
    11,112Purchases of securities  AFS
    
    
    0
    
    
    
    (5,499
    )Net (increase) decrease in loans
    
    
    9,858
    
    
    
    292Sales of other real estate owned
    
    
    663
    
    
    
    0Acquisition of premises and equipment, net
    
    
    (53
    )
    
    
    167Net cash provided by investing activities
    
    
    14,707
    
    
    
    8,381CASH FLOWS FROM FINANCING ACTIVITIES:Net increase (decrease) in deposits
    
    
    4,473
    
    
    
    (14,738
    )Net increase (decrease) in borrowings
    
    
    (614
    )
    
    
    67(Repayment) of notes payable
    
    
    (250
    )
    
    
    0Purchase of advances from FHLB
    
    
    55,495
    
    
    
    9,001Repayments of advances from FHLB
    
    
    (58,195
    )
    
    
    (8,000
    )Net proceeds from stock issuance and purchase
    
    
    36
    
    
    
    169Net cash provided by (used in) financing activities
    
    
    945
    
    
    
    (13,501
    )Net Change in Cash and Cash Equivalents
    
    $
    12,942
    
    
    $
    (5,853
    )Change in cash and cash equivalents of held for sale operations
    
    
    75
    
    
    
    (2,252
    )Cash and cash equivalents  Beginning
    
    $
    13,626
    
    
    $
    30,034Cash and cash equivalents  Ending
    
    $
    26,643
    
    
    $
    22,014Cash paid for:Interest
    
    $
    2,085
    
    
    $
    4,803Income Taxes
    
    $
    195
    
    
    $
    0Noncash Disclosures:Transfers from loans to other real estate
    
    $
    1,238
    
    
    $
    1,527
  6




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Fentura Financial, Inc.  Consolidated Statements of Comprehensive Income (Unaudited)
 Three Months EndedMarch 31,(000s Omitted)
    
    2009
    
    2008Net loss
    
    $
    (1,659
    )
    
    $
    (628
    )Other comprehensive income (loss), net of tax:Unrealized holding gains (losses) arising
during period
    
    
    (648
    )
    
    
    913Less: Impairment loss recognized during period
    
    
    0
    
    
    
    (574
    )Other comprehensive income (loss)
    
    
    (648
    )
    
    
    339Comprehensive income (loss)
    
    $
    (2,307
    )
    
    $
    (289
    )
 Fentura Financial, Inc.  Notes to Consolidated Financial Statements (Unaudited)
 NOTE 1  BASIS OF PRESENTATION
     7




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Reclassifications:
 Allowance for Loan Losses:
  Income Taxes
   Dividend Restriction
 Stock Option Plans
   8




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Number of
    
    WeightedOptions
    
    Average PriceOptions outstanding at December 31, 2008
    
    
    26,597
    
    
    $
    29.85Options granted 2009
    
    
    0
    
    
    $
    0.00Options forfeited 2009
    
    
    0
    
    
    $
    0.00Options outstanding at March 31, 2009
    
    
    26,597
    
    
    $
    29.85
 NOTE 2  ADOPTION OF NEW ACCOUNTING STANDARDS
 New Accounting Pronouncements:
  Non-controlling Interest in Consolidated Financial
Statements, an amendment of ARB No. 51
  Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities. Earnings Per Share.
 9




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Recently Issued and Not Yet Effective Accounting Standards
 Recognition and
Presentation of Other-Than-Temporary Impairments,
 Determining Fair Value When the
Volume and Level of Activity for the Asset and Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
 Interim Disclosures
about Fair Value of Financial Instruments Disclosures
about Fair Value of Financial Instruments
 10




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NOTE 3  FAIR VALUE
      Assets and Liabilities Measured on a Recurring Basis
  Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    Significant Other
    
    SignificantIdentical Assets
    
    Observable Inputs
    
    Unobservable Inputs(000s omitted)
    
    
    
    
    
    Total
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Available for sale
securities
    
    March 31, 2009
    
    $
    42,737
    
    
    $
    23
    
    
    $
    41,724
    
    
    $
    990Available for sale
securities
    
    December 31, 2008
    
    $
    52,722
    
    
    $
    9
    
    
    $
    45,827
    
    
    $
    1,229
     11




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Fair Value Measurements UsingSignificant Unobservable Inputs(Level 3)(000s omitted)
    
    Asset
    
    
    Liability
    
    
    TotalBeginning balance, Jan. 1, 2009
    
    $
    1,229
    
    
    $
    0
    
    
    $
    1,229Total gains or losses (realized / unrealized)Included in earningsLoss on security impairment
    
    
    0
    
    
    
    0
    
    
    
    0Included in other comprehensive income
    
    
    (239
    )
    
    
    0
    
    
    
    (239
    )Purchases, issuances, and settlements
    
    
    0
    
    
    
    0
    
    
    
    0Transfers in and / or out of Level 3
    
    
    0
    
    
    
    0
    
    
    
    0Ending balance, March 31, 2009
    
    $
    990
    
    
    $
    0
    
    
    $
    990
 Assets and Liabilities Measured on a Non-Recurring Basis
  Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    Significant Other
    
    SignificantIdentical Assets
    
    Observable Inputs
    
    Unobservable Inputs(000s omitted)
    
    
    
    Total
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Assets:Impaired loans
    
    March 31, 2009
    
    $
    29,266
    
    
    $
    0
    
    
    $
    0
    
    
    $
    29,266Other real estate owned
    
    March 31, 2009
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Impaired loans
    
    December 31, 2008
    
    $
    21,235
    
    
    $
    0
    
    
    $
    0
    
    
    $
    21,235
    NOTE 4  SECURITIES
  12




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NOTE 5  EARNINGS PER COMMON SHARE
  Three Months EndedMarch 31,000s omitted except share and per share data
    
    2009
    
    
    2008BasicNet loss
    
    $
    (1,659
    )
    
    $
    (628
    )Weighted average common shares outstanding
    
    
    2,187,084
    
    
    
    2,167,235OutstandingBasic loss per common share
    
    $
    (0.76
    )
    
    $
    (0.29
    )DilutedNet loss
    
    $
    (1,659
    )
    
    $
    (628
    )Weighted average common shares outstanding for
basic earnings per common share
    
    
    2,187,084
    
    
    
    2,167,235Add: Dilutive effects of assumed exercises of stock
Options
    
    
    0
    
    
    
    0Average shares and dilutive potential common shares
    
    
    2,187,084
    
    
    
    2,167,235Diluted loss per common share
    
    $
    (0.76
    )
    
    $
    (0.29
    )
  NOTE 6  COMMITMENTS AND CONTINGENCIES
  NOTE 7  HELD FOR SALE OPERATIONS
  13




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NOTE 7  HELD FOR SALE OPERATIONS (continued)
 DAVISON STATE BANK
CONDENSED BALANCE SHEET OF HELD FOR SALE OPERATIONS
(Unaudited)
 March 31,
    
    Dec 31,(000s omitted)
    
    2009
    
    2008ASSETSCash and cash equivalents
    
    $
    6,953
    
    
    $
    7,327Securities  available for sale
    
    
    5,019
    
    
    
    5,789Securities  held to maturity
    
    
    1,190
    
    
    
    1,190Loans, net of allowance ($1,187-2009, $1,318-2008)
    
    
    28,372
    
    
    
    28,954Other assets
    
    
    2,341
    
    
    
    2,390Total assets
    
    $
    43,878
    
    
    $
    45,650LIABILITIES AND SHAREHOLDERS EQUITYDeposits:Non-interest bearing
    
    $
    8,207
    
    
    $
    9,361Interest bearing
    
    
    31,103
    
    
    
    31,004Total deposits
    
    
    39,310
    
    
    
    40,365Federal Home Loan Bank advances
    
    
    2,000
    
    
    
    2,000Accrued taxes, interest and other liabilities
    
    
    (453
    )
    
    
    (191
    )Shareholders equity
    
    
    3,021
    
    
    
    3,476Total liabilities and shareholders Equity
    
    $
    43,878
    
    
    $
    45,650
 DAVISON STATE BANK
CONDENSED STATEMENT OF INCOME OF HELD FOR SALE OPERATIONS
(Unaudited)
 Three Months EndedMarch 31(000s omitted)
    
    2009
    
    2008Interest income
    
    $
    549
    
    
    $
    714Interest expense
    
    
    188
    
    
    
    292Net interest income
    
    
    361
    
    
    
    422Provision for loan losses
    
    
    (1
    )
    
    
    101Net interest income after provision for loan losses
    
    
    362
    
    
    
    321Non-interest income
    
    
    122
    
    
    
    157Non-interest expense
    
    
    487
    
    
    
    499Loss before federal income tax
    
    
    (3
    )
    
    
    (21
    )Federal income tax benefit
    
    
    0
    
    
    
    (11
    )Net loss
    
    $
    (3
    )
    
    $
    (10
    )
 14




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Results of Operations
       15




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##### Table of Contents



Net Interest Income
  Table 1
 THREE MONTHS ENDEDMARCH 31,2009 COMPARED TO 2008INCREASE (DECREASE)DUE TOYIELD/(000s omitted)
    
    TIME
    
    
    VOL
    
    
    RATE
    
    
    TOTALTaxable securities
    
    $
    (6
    )
    
    $
    (149
    )
    
    $
    29
    
    
    $
    (126
    )Tax-exempt securities
    
    
    (2
    )
    
    
    (4
    )
    
    
    58
    
    
    
    52Federal funds sold
    
    
    (1
    )
    
    
    (92
    )
    
    
    0
    
    
    
    (93
    )Total loans
    
    
    (82
    )
    
    
    (196
    )
    
    
    (735
    )
    
    
    (1,013
    )Loans held for sale
    
    
    0
    
    
    
    2
    
    
    
    (6
    )
    
    
    (4
    )Total earning assets
    
    
    (91
    )
    
    
    (439
    )
    
    
    (654
    )
    
    
    (1,184
    )Interest bearing demand deposits
    
    
    (5
    )
    
    
    (17
    )
    
    
    (197
    )
    
    
    (219
    )Savings deposits
    
    
    (2
    )
    
    
    (10
    )
    
    
    (81
    )
    
    
    (93
    )Time CDs $100,000 and over
    
    
    (21
    )
    
    
    (259
    )
    
    
    (202
    )
    
    
    (482
    )Other time deposits
    
    
    (13
    )
    
    
    (11
    )
    
    
    (312
    )
    
    
    (336
    )Other borrowings
    
    
    (5
    )
    
    
    (30
    )
    
    
    (140
    )
    
    
    (175
    )Total interest bearing liabilities
    
    
    (46
    )
    
    
    (327
    )
    
    
    (932
    )
    
    
    (1,305
    )Net Interest Income
    
    $
    (45
    )
    
    $
    (112
    )
    
    $
    278
    
    
    $
    121
     16




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##### Table of Contents



17




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##### Table of Contents



Table 2 Average Balance and Rates
 THREE MONTHS ENDED MARCH 31,2009
    
    
    2008AVERAGE
    
    
    INCOME/
    
    
    YIELD/
    
    
    AVERAGE
    
    
    INCOME/
    
    
    YIELD/(000s omitted)(Annualized)
    
    BALANCE
    
    
    EXPENSE
    
    
    RATE
    
    
    BALANCE
    
    
    EXPENSE
    
    
    RATEASSETSSecurities:U.S. Treasury and Government Agencies
    
    $
    36,469
    
    
    $
    377
    
    
    
    4.19
    %
    
    $
    50,229
    
    
    $
    517
    
    
    
    4.14
    %State and Political (1)
    
    
    14,409
    
    
    
    220
    
    
    
    6.18
    %
    
    
    14,801
    
    
    
    168
    
    
    
    4.57
    %Other
    
    
    3,638
    
    
    
    43
    
    
    
    4.79
    %
    
    
    5,151
    
    
    
    29
    
    
    
    2.26
    %Total Securities
    
    
    54,516
    
    
    
    640
    
    
    
    4.76
    %
    
    
    70,181
    
    
    
    714
    
    
    
    4.09
    %Fed Funds Sold
    
    
    0
    
    
    
    0
    
    
    
    0.00
    %
    
    
    11,716
    
    
    
    93
    
    
    
    3.19
    %Loans:Commercial
    
    
    333,313
    
    
    
    5,082
    
    
    
    6.18
    %
    
    
    343,848
    
    
    
    5,876
    
    
    
    6.87
    %Tax Free (1)
    
    
    2,752
    
    
    
    44
    
    
    
    6.48
    %
    
    
    2,009
    
    
    
    32
    
    
    
    6.37
    %Real Estate-Mortgage
    
    
    37,606
    
    
    
    591
    
    
    
    6.37
    %
    
    
    38,247
    
    
    
    612
    
    
    
    6.44
    %Consumer
    
    
    52,227
    
    
    
    735
    
    
    
    5.71
    %
    
    
    53,366
    
    
    
    945
    
    
    
    7.12
    %Total loans
    
    
    425,898
    
    
    
    6,452
    
    
    
    6.14
    %
    
    
    437,470
    
    
    
    7,465
    
    
    
    6.86
    %Allowance for Loan Losses
    
    
    (10,421
    )
    
    
    
    
    
    
    
    
    
    
    (7,804
    )Net Loans
    
    
    415,477
    
    
    
    6,452
    
    
    
    6.30
    %
    
    
    429,666
    
    
    
    7,465
    
    
    
    6.99
    %Loans Held for Sale
    
    
    2,089
    
    
    
    25
    
    
    
    4.85
    %
    
    
    1,971
    
    
    
    29
    
    
    
    5.92
    %TOTAL EARNING ASSETS CONTINUING OPERATIONS
    
    $
    482,503
    
    
    $
    7,117
    
    
    
    5.98
    %
    
    $
    521,338
    
    
    $
    8,301
    
    
    
    6.40
    %Cash Due from Banks
    
    
    16,689
    
    
    
    
    
    
    
    
    
    
    
    13,983Assets of held for sale operations
    
    
    44,880
    
    
    
    
    
    
    
    
    
    
    
    49,573All Other Assets
    
    
    49,856
    
    
    
    
    
    
    
    
    
    
    
    45,583TOTAL ASSETS
    
    $
    575,640
    
    
    
    
    
    
    
    
    
    
    $
    622,673LIABILITIES & SHAREHOLDERS EQUITY:Deposits:Interest bearing  DDA
    
    $
    89,959
    
    
    $
    216
    
    
    
    0.97
    %
    
    $
    93,624
    
    
    $
    435
    
    
    
    1.87
    %Savings Deposits
    
    
    69,370
    
    
    
    97
    
    
    
    0.57
    %
    
    
    73,461
    
    
    
    190
    
    
    
    1.04
    %Time CDs $100,000 and Over
    
    
    131,924
    
    
    
    1,414
    
    
    
    4.35
    %
    
    
    153,017
    
    
    
    1,896
    
    
    
    4.98
    %Other Time CDs
    
    
    109,694
    
    
    
    888
    
    
    
    3.28
    %
    
    
    110,668
    
    
    
    1,224
    
    
    
    4.45
    %Total Deposits
    
    
    400,947
    
    
    
    2,615
    
    
    
    2.65
    %
    
    
    430,770
    
    
    
    3,745
    
    
    
    3.50
    %Other Borrowings
    
    
    29,809
    
    
    
    311
    
    
    
    4.23
    %
    
    
    31,791
    
    
    
    486
    
    
    
    6.15
    %INTEREST BEARING LIABILITIES
    
    $
    430,756
    
    
    $
    2,926
    
    
    
    2.75
    %
    
    $
    462,561
    
    
    $
    4,231
    
    
    
    3.68
    %Non-Interest bearing  DDA
    
    
    64,973
    
    
    
    
    
    
    
    
    
    
    
    63,393Liabilities of held for sale operations
    
    
    41,364
    
    
    
    
    
    
    
    
    
    
    
    43,158All Other Liabilities
    
    
    1,907
    
    
    
    
    
    
    
    
    
    
    
    3,709Shareholders Equity
    
    
    36,640
    
    
    
    
    
    
    
    
    
    
    
    49,852TOTAL LIABILITIES & SHAREHOLDERS EQUITY
    
    $
    575,640
    
    
    
    
    
    
    
    
    
    
    $
    622,673Net Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.23
    %
    
    
    
    
    
    
    
    
    
    
    2.72
    %Net Interest Income /Margin
    
    
    
    
    
    $
    4,191
    
    
    
    3.52
    %
    
    
    
    
    
    $
    4,070
    
    
    
    3.14
    %
 
 (1)
    
    Presented on a fully taxable equivalent basis using a federal income tax rate of 34%. 18




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Allowance and Provision For Loan Losses
      19




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##### Table of Contents



Table 3 Analysis of the Allowance for Loan Losses
 Three Months Ended March 31,(000s omitted)
    
    2009
    
    2008Balance at Beginning of Period
    
    $
    10,455
    
    
    $
    7,592Charge-Offs:Commercial, Financial and Agriculture
    
    
    (627
    )
    
    
    (301
    )Real Estate-Mortgage
    
    
    (36
    )
    
    
    (23
    )Installment Loans to Individuals
    
    
    (101
    )
    
    
    (105
    )Total Charge-Offs
    
    
    (764
    )
    
    
    (429
    )Recoveries:Commercial, Financial and Agriculture
    
    
    35
    
    
    
    148Real Estate-Mortgage
    
    
    3
    
    
    
    0Installment Loans to Individuals
    
    
    21
    
    
    
    34Total Recoveries
    
    
    59
    
    
    
    182Net Charge-Offs
    
    
    (705
    )
    
    
    (247
    )Provision
    
    
    1,655
    
    
    
    980Balance at End of Period
    
    $
    11,405
    
    
    $
    8,325Ratio of Net Charge-Offs to Gross Loans
    
    
    0.17
    %
    
    
    0.06
    %
 Non-Interest Income
      20




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##### Table of Contents



Non-Interest Expense
        21




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##### Table of Contents



Financial Condition
    Non-Performing Assets
     22




---



##### Table of Contents



Table 4  Non-Performing Assets and Past Due Loans
 March 31,
    
    December 31,2009
    
    2008Non-Performing Loans:Loans Past Due 90 Days or More & Still
Accruing
    
    $
    687
    
    
    $
    667Non-Accrual Loans
    
    
    21,734
    
    
    
    22,574Renegotiated Loans
    
    
    940
    
    
    
    942Total Non-Performing Loans
    
    
    23,361
    
    
    
    24,183Other Non-Performing Assets:Other Real Estate
    
    
    5,703
    
    
    
    5,983REO in Redemption
    
    
    1,627
    
    
    
    390Other Non-Performing Assets
    
    
    0
    
    
    
    25Total Other Non-Performing Assets
    
    
    7,329
    
    
    
    6,398Total Non-Performing Assets
    
    $
    30,691
    
    
    $
    30,581Non-Performing Loans as a % of
Total Loans
    
    
    5.49
    %
    
    
    5.63
    %Allowance for Loan Losses as a % of
Non-Performing Loans
    
    
    48.82
    %
    
    
    43.23
    %Accruing Loans Past Due 90 Days or
More to Total Loans
    
    
    0.16
    %
    
    
    0.16
    %Non-performing Assets as a % of
Total Assets
    
    
    5.31
    %
    
    
    5.29
    %
 Liquidity and Interest Rate Risk Management
   23




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##### Table of Contents



Capital Management
   Regulatory Capital Requirements
  24




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##### Table of Contents



Table 5
 Capital RatiosFentura Financial, Inc.Regulatory Minimum
    
    March 31,
    
    December 31,
    
    March 31,For Well Capitalized
    
    2009
    
    2008
    
    2008Total Capital to riskWeighted assets
    
    
    10
    %
    
    
    11.37
    %
    
    
    11.40
    %
    
    
    11.65
    %Tier 1 Capital to riskWeighted assets
    
    
    6
    %
    
    
    10.10
    %
    
    
    10.20
    %
    
    
    10.41
    %Tier 1 Capital to averageAssets
    
    
    5
    %
    
    
    8.76
    %
    
    
    8.80
    %
    
    
    9.13
    %
  25




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##### Table of Contents



Critical Accounting Policies and Estimates
      Off Balance Sheet Arrangements
  26




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    Interest Rate Sensitivity Management
   27




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##### Table of Contents



Table 6 GAP Analysis  March 31, 2009
 Within
    
    Three
    
    One to
    
    AfterThree
    
    Months to
    
    Five
    
    Five(000s omitted)
    
    Months
    
    One Year
    
    Years
    
    Years
    
    TotalEarning Assets:Federal Funds Sold
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0Securities
    
    
    7,067
    
    
    
    11,626
    
    
    
    20,416
    
    
    
    10,191
    
    
    
    49,300Loans
    
    
    99,444
    
    
    
    69,801
    
    
    
    198,165
    
    
    
    53,216
    
    
    
    420,626Loans Held for Sale
    
    
    4,842
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    4,842FHLB Stock
    
    
    1,900
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,900Total Earning Assets
    
    $
    113,253
    
    
    $
    81,427
    
    
    $
    218,581
    
    
    $
    63,407
    
    
    $
    476,668Interest Bearing Liabilities:Interest Bearing Demand Deposits
    
    $
    87,281
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    87,281Savings Deposits
    
    
    72,866
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    72,866Time Deposits Less than $100,000
    
    
    21,359
    
    
    
    49,008
    
    
    
    43,897
    
    
    
    142
    
    
    
    114,406Time Deposits Greater than $100,000
    
    
    27,736
    
    
    
    35,491
    
    
    
    71,444
    
    
    
    0
    
    
    
    134,671Short term borrowings
    
    
    1,636
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,636Other Borrowings
    
    
    26
    
    
    
    2,000
    
    
    
    7,126
    
    
    
    855
    
    
    
    10,007Subordinated debentures
    
    
    14,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    14,000Total Interest Bearing Liabilities
    
    $
    224,904
    
    
    $
    86,499
    
    
    $
    122,467
    
    
    $
    997
    
    
    $
    434,867Interest Rate Sensitivity GAP
    
    
    ($111,651
    )
    
    
    ($5,072
    )
    
    $
    96,114
    
    
    $
    62,410
    
    
    $
    41,801Cumulative Interest RateSensitivity GAP
    
    
    ($111,651
    )
    
    
    ($116,723
    )
    
    
    ($20,609
    )
    
    $
    41,801Interest Rate Sensitivity GAP
    
    
    (0.50
    )
    
    
    (0.94
    )
    
    
    1.78
    
    
    
    63.59Cumulative Interest RateSensitivity GAP Ratio
    
    
    (0.50
    )
    
    
    (1.44
    )
    
    
    0.34
    
    
    
    63.93
  28




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##### Table of Contents



Forward Looking Statements
  
 ITEM 4T: CONTROLS AND PROCEDURES
 (a)
    
    Evaluation of Disclosure Controls and Procedures. The Corporations Chief Executive
Officer and Chief Financial Officer, after evaluating the effectiveness of the Corporations
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
as of the end of the period covered by this Form 10-Q Quarterly Report, have concluded that
the Corporations disclosure controls and procedures were adequate and effective to ensure
that material information relating to the Corporation would be made known to them by others
within the Corporation, particularly during the period in which this Form 10-Q was being
prepared.(b)
    
    Changes in Internal Controls. During the period covered by this report, there have
been no changes in the Corporations internal control over financial reporting that have
materially affected or are reasonably likely to materially affect the Corporations internal
control over financial reporting.
 29




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings. None
 
 Item 1A.
    
    Risk Factors There have been no material changes in the risk factors applicable to the
Corporation from those disclosed in its Annual Report on Form 10-K for the year ended December
31, 2008.
 
 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.
  For
    
    Against
    
    Abstain
    
    Non-Votes1,285,699
    
    178,127
    
    22,257
    
    694,985
 
 Item 5.
    
    Other Information. None
 
 Item 6.
    
    Exhibits.
 (a)
    
    Exhibits
 3(i)
    
    Articles of Incorporation (Incorporated by reference from Form
10-K for the year ended 12/31/08).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.
 30




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##### Table of Contents



Fentura Financial, Inc.Dated:  May 15, 2009

/s/ Donald L. GrillDonald L. GrillPresident & CEODated:  May 15, 2009

/s/ Douglas J. KelleyDouglas J. KelleyChief Financial Officer 31




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    Description3(i)
    
    Articles of Incorporation (Incorporated by reference from Form 10-K for the year ended
12/31/08).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.
 32