##### 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, 2007
 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 þ
 o þ
  Class  Common Stock
    
    Shares Outstanding  2,165,244




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##### 



Fentura Financial Inc.
Index to Form 10-Q
 PagePart I  Financial Information
    
    
    3Item 1  Consolidated Financial Statements (Unaudited)
    
    
    3-10Item 2  Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    11-21Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4  Controls and Procedures
    
    
    23Part II  Other Information
    
    
    24Item 1  Legal Proceedings
    
    
    24Item 1A  Risk Factors
    
    
    24Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3  Defaults Upon Senior Securities
    
    
    24Item 4 Submission of Matters to a Vote of Security Holders
    
    
    24Item 5  Other Information
    
    
    24Item 6  Exhibits
    
    
    24Signatures
    
    
    25Exhibit Index
    
    
    26Certificate of the President and Chief Executive Officer Pursuant to Section 302Certificate of the Chief Financial Officer Pursuant to Section 302Certificate of the Chief Executive Officer Pursuant to Section 906Certificate of the Chief Financial Officer Pursuant to Section 906
  2




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PART I  FINANCIAL INFORMATION
 
 ITEM
1. CONSOLIDATED FINANCIAL STATEMENTS   Fentura Financial, Inc.  Consolidated Balance Sheets
 March 31,2007
    
    Dec 31,(000s omitted except share data)
    
    (unaudited)
    
    2006ASSETSCash and due from banks
    
    $
    17,236
    
    
    $
    19,946Federal funds sold
    
    
    6,100
    
    
    
    9,500Total cash & cash equivalents
    
    
    23,336
    
    
    
    29,446Securitiesavailable for sale
    
    
    88,783
    
    
    
    91,104Securitiesheld to maturity, (fair value of $10,403
at March 31, 2007 and $11,821 at December 31, 2006)
    
    
    10,441
    
    
    
    11,899Total securities
    
    
    99,224
    
    
    
    103,003Loans held for sale
    
    
    2,352
    
    
    
    2,226Loans:Commercial
    
    
    298,338
    
    
    
    272,402Real estate loans  construction
    
    
    64,973
    
    
    
    78,927Real estate loans  mortgage
    
    
    35,562
    
    
    
    36,867Consumer loans
    
    
    60,953
    
    
    
    62,797Total loans
    
    
    459,826
    
    
    
    450,993Less: Allowance for loan losses
    
    
    (6,962
    )
    
    
    (6,692
    )Net loans
    
    
    452,864
    
    
    
    444,301Bank Owned Life Insurance
    
    
    6,872
    
    
    
    6,815Bank premises and equipment
    
    
    19,509
    
    
    
    16,854Federal Home Loan Bank stock
    
    
    2,032
    
    
    
    2,032Accrued interest receivable
    
    
    3,313
    
    
    
    2,985Goodwill
    
    
    7,955
    
    
    
    7,955Acquisition intangibles
    
    
    683
    
    
    
    759Other assets
    
    
    6,812
    
    
    
    5,922Total assets
    
    $
    624,952
    
    
    $
    622,298LIABILITIESDeposits:Non-interest bearing deposits
    
    $
    77,790
    
    
    $
    74,886Interest bearing deposits
    
    
    453,559
    
    
    
    453,669Total deposits
    
    
    531,349
    
    
    
    528,555Short term borrowings
    
    
    1,003
    
    
    
    1,500Federal Home Loan Bank Advances
    
    
    11,052
    
    
    
    11,052Repurchase Agreements
    
    
    10,000
    
    
    
    10,000Subordinated debentures
    
    
    14,000
    
    
    
    14,000Accrued taxes, interest and other liabilities
    
    
    5,244
    
    
    
    5,873Total liabilities
    
    
    572,648
    
    
    
    570,980SHAREHOLDERS EQUITYCommon stock  no par value
2,162,107 shares issued (2,152,862 at Dec. 31, 2006)
    
    
    42,475
    
    
    
    42,158Retained earnings
    
    
    10,525
    
    
    
    10,118Accumulated other comprehensive income (loss)
    
    
    (696
    )
    
    
    (958
    )Total shareholders equity
    
    
    52,304
    
    
    
    51,318Total Liabilities and Shareholders Equity
    
    $
    624,952
    
    
    $
    622,298
  3




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Fentura Financial, Inc.  Consolidated Statements of Income (Unaudited)
 Three Months EndedMarch 31(000s omitted except per share data)
    
    2007
    
    
    2006INTEREST INCOMEInterest and fees on loans
    
    $
    8,647
    
    
    $
    8,430Interest and dividends on securities:Taxable
    
    
    917
    
    
    
    883Tax-exempt
    
    
    215
    
    
    
    207Interest on federal funds sold
    
    
    167
    
    
    
    94Total interest income
    
    
    9,946
    
    
    
    9,614INTEREST EXPENSEDeposits
    
    
    3,961
    
    
    
    3,241Borrowings
    
    
    585
    
    
    
    507Total interest expense
    
    
    4,546
    
    
    
    3,748NET INTEREST INCOME
    
    
    5,400
    
    
    
    5,866Provision for loan losses
    
    
    439
    
    
    
    400Net interest income after
Provision for loan losses
    
    
    4,961
    
    
    
    5,466NON-INTEREST INCOMEService charges on deposit accounts
    
    
    851
    
    
    
    831Gain on sale of mortgage loans
    
    
    84
    
    
    
    163Trust and investment services income
    
    
    507
    
    
    
    383Other income and fees
    
    
    423
    
    
    
    420Total non-interest income
    
    
    1,865
    
    
    
    1,797NON-INTEREST EXPENSESalaries and employee benefits
    
    
    3,247
    
    
    
    3,334Occupancy
    
    
    503
    
    
    
    432Furniture and equipment
    
    
    525
    
    
    
    508Loan and collection
    
    
    91
    
    
    
    71Advertising and promotional
    
    
    112
    
    
    
    153Other operating expenses
    
    
    1,018
    
    
    
    1,071Total non-interest expense
    
    
    5,496
    
    
    
    5,569INCOME BEFORE TAXES
    
    
    1,330
    
    
    
    1,694Federal income taxes
    
    
    382
    
    
    
    487NET INCOME
    
    $
    948
    
    
    $
    1,207Per share: (adjusted for 10% stock dividend paid on August 4, 2006)Net income  basic
    
    $
    0.44
    
    
    $
    0.57Net income  diluted
    
    $
    0.44
    
    
    $
    0.56Cash Dividends declared
    
    $
    0.25
    
    
    $
    0.25
  4




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Fentura Financial, Inc.  Consolidated Statements of Changes in Shareholders Equity (Unaudited)
 Three Months EndedMarch 31,(000s omitted)
    
    2007
    
    
    2006COMMON STOCKBalance, beginning of period
    
    $
    42,158
    
    
    $
    34,491Issuance of shares under
Director stock purchase plan &
Dividend reinvestment program (8,950 and 7,625 shares)
    
    
    287
    
    
    
    252Stock repurchase (977 shares  2006)
    
    
    0
    
    
    
    (32
    )Stock options exercised (295 and 5,023 shares)
    
    
    7
    
    
    
    87Stock compensation expense
    
    
    23
    
    
    
    0Balance, end of period
    
    
    42,475
    
    
    
    34,798RETAINED EARNINGSBalance, beginning of period
    
    
    10,118
    
    
    
    13,729Net income
    
    
    948
    
    
    
    1,207Stock dividend
    
    
    0
    
    
    
    0Cash dividends declared
    
    
    (541
    )
    
    
    (507
    )Balance, end of period
    
    
    10,525
    
    
    
    14,429ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)Balance, beginning of period
    
    
    (958
    )
    
    
    (1,325
    )Change in unrealized gain (loss)
on securities, net of tax
    
    
    262
    
    
    
    (177
    )Balance, end of period
    
    
    (696
    )
    
    
    (1,502
    )TOTAL SHAREHOLDERS EQUITY
    
    $
    52,304
    
    
    $
    47,725
  5




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Fentura
Financial, Inc.Consolidated Statements of Cash Flows (Unaudited)Three Months EndedMarch 31,(000s omitted)
    
    2007
    
    2006OPERATING ACTIVITIES:Net income
    
    $
    948
    
    
    $
    1,207Adjustments to reconcile net income to cash
Provided by Operating Activities:Depreciation and amortization
    
    
    229
    
    
    
    119Provision for loan losses
    
    
    439
    
    
    
    400Loans originated for sale
    
    
    (4,288
    )
    
    
    (9,933
    )Proceeds from the sale of loans
    
    
    4,246
    
    
    
    9,443Gain on sales of loans
    
    
    (84
    )
    
    
    (163
    )Stock compensation expense
    
    
    23
    
    
    
    0Net (increase) decrease in bank owned life insurance
    
    
    (57
    )
    
    
    (63
    )Net (increase) decrease in interest receivable & other assets
    
    
    (1,217
    )
    
    
    172Net increase (decrease) in interest payable & other liabilities
    
    
    (764
    )
    
    
    177Total Adjustments
    
    
    (1,473
    )
    
    
    152Net Cash Provided By (Used In) Operating Activities
    
    
    (525
    )
    
    
    1,359Cash Flows From Investing Activities:Proceeds from maturities of securities  HTM
    
    
    200
    
    
    
    151Proceeds from maturities of securities  AFS
    
    
    2,887
    
    
    
    5,427Proceeds from calls of securities  HTM
    
    
    0
    
    
    
    0Proceeds from calls of securities  AFS
    
    
    1,200
    
    
    
    985Proceeds from sales of securities  AFS
    
    
    0
    
    
    
    0Purchases of securities  HTM
    
    
    0
    
    
    
    (700
    )Purchases of securities  AFS
    
    
    (133
    )
    
    
    (394
    )FHLB stock buy back
    
    
    0
    
    
    
    0Net increase in loans
    
    
    (9,002
    )
    
    
    (13,211
    )Acquisition of premises and equipment, net
    
    
    (2,786
    )
    
    
    (1,082
    )Net Cash Provided By (Used in) Investing Activities
    
    
    (7,634
    )
    
    
    (8,824
    )Cash Flows From Financing Activities:Net increase (decrease) in deposits
    
    
    2,793
    
    
    
    5,911Net increase (decrease) in borrowings
    
    
    (497
    )
    
    
    (1,517
    )Net increase (decrease) in repurchase agreements
    
    
    0
    
    
    
    0Purchase of advances from FHLB
    
    
    7,000
    
    
    
    4,000Repayments of advances from FHLB
    
    
    (7,000
    )
    
    
    (4,000
    )Net proceeds from stock issuance and purchase
    
    
    294
    
    
    
    307Cash dividends
    
    
    (541
    )
    
    
    (507
    )Net Cash Provided By (Used In) Financing Activities
    
    
    2,049
    
    
    
    4,194NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    $
    (6,110
    )
    
    $
    (3,271
    )CASH AND CASH EQUIVALENTS  BEGINNING
    
    $
    29,446
    
    
    $
    31,077CASH AND CASH EQUIVALENTS  ENDING
    
    $
    23,336
    
    
    $
    27,806CASH PAID FOR:INTEREST
    
    $
    4,004
    
    
    $
    3,674INCOME TAXES
    
    $
    222
    
    
    $
    51NONCASH DISCLOSURES:Transfers from loans to other real estate
    
    $
    216
    
    
    $
    0
  6




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Fentura Financial, Inc.Consolidated Statements of Comprehensive Income (Unaudited)Three Months EndedMarch 31,(000s Omitted)
    
    2007
    
    2006Net Income
    
    $
    948
    
    
    $
    1,207Other comprehensive income (loss), net of tax:Unrealized holding gains (losses) arising
during period
    
    
    262
    
    
    
    (177
    )Other comprehensive income (loss)
    
    
    262
    
    
    
    (177
    )Comprehensive income
    
    $
    1,210
    
    
    $
    1,030
 Fentura Financial, Inc.  Notes to Consolidated Financial Statements (Unaudited)
 Note 1. Basis of Presentation
   Reclassifications:
 Allowance for Loan Losses:
  7




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Stock Option Plans
     Number of
    
    WeightedOptions
    
    Average PriceOptions outstanding at December 31, 2005
    
    
    46,532
    
    
    $
    28.04Options exercised 2006
    
    
    (5,525
    )
    
    
    15.74Options forfeited 2006
    
    
    (484
    )
    
    
    30.88Options outstanding at December 31, 2006
    
    
    40,523
    
    
    $
    29.68Options exercised 2007
    
    
    (295
    )
    
    
    21.90Options outstanding at March 31, 2007
    
    
    40,228
    
    
    $
    29.74
 8




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Effect of Newly Issued Accounting Standards
   Effect of Newly Issued but not yet Effective Accounting Standards
  9




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Note 2. Earnings Per Common Share
  Three Months EndedMarch 31,2007
    
    
    2006Basic Earnings Per Common Share:NumeratorNet Income
    
    $
    948,000
    
    
    $
    1,207,000DenominatorWeighted average common shares
Outstanding
    
    
    2,157,405
    
    
    
    2,130,564Basic earnings per common share
    
    $
    0.44
    
    
    $
    0.57Diluted Earnings Per Common Share:NumeratorNet Income
    
    $
    948,000
    
    
    $
    1,207,000DenominatorWeighted average common shares
Outstanding for basic earnings per
Common share
    
    
    2,157,405
    
    
    
    2,130,564Add: Dilutive effects of assumed
exercises of stock options
    
    
    3,494
    
    
    
    1,971Weighted average common shares
and dilutive potential common
shares outstanding
    
    
    2,160,899
    
    
    
    2,132,535Diluted earnings per common share
    
    $
    0.44
    
    
    $
    0.56
  Note 3. Commitments and Contingencies
  10




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Results of Operations
    Net Interest Income
  11




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Table 1
 THREE MONTHS ENDEDMARCH 31,2007 COMPARED TO 2006INCREASE (DECREASE)DUE TOYIELD/(000S OMITTED)
    
    VOL
    
    
    RATE
    
    
    TOTALTaxable Securities
    
    $
    (91
    )
    
    $
    127
    
    
    $
    36Tax-Exempt Securities
    
    
    (14
    )
    
    
    26
    
    
    
    12Federal Funds Sold
    
    
    54
    
    
    
    19
    
    
    
    73Total Loans
    
    
    70
    
    
    
    136
    
    
    
    206Loans Held for Sale
    
    
    6
    
    
    
    0
    
    
    
    6Total Earning Assets
    
    
    25
    
    
    
    308
    
    
    
    333Interest Bearing Demand Deposits
    
    
    (58
    )
    
    
    57
    
    
    
    (1
    )Savings Deposits
    
    
    23
    
    
    
    195
    
    
    
    218Time CDs $100,000 and Over
    
    
    59
    
    
    
    236
    
    
    
    295Other Time Deposits
    
    
    (18
    )
    
    
    226
    
    
    
    208Other Borrowings
    
    
    (17
    )
    
    
    95
    
    
    
    78Total Interest Bearing Liabilities
    
    
    (11
    )
    
    
    809
    
    
    
    798Net Interest Income
    
    $
    36
    
    
    $
    (501
    )
    
    $
    (465
    )
     12




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13




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Table 2 Average Balance and Rates
 THREE MONTHS ENDED MARCH 31,2007
    
    
    2006AVERAGE
    
    
    INCOME/
    
    
    YIELD/
    
    
    AVERAGE
    
    
    INCOME/
    
    
    YIELD/(000s omitted)(Annualized)
    
    BALANCE
    
    
    EXPENSE
    
    
    RATE
    
    
    BALANCE
    
    
    EXPENSE
    
    
    RATEASSETSSecurities:U.S. Treasury and Government Agencies
    
    $
    78,344
    
    
    $
    890
    
    
    
    4.61
    %
    
    $
    88,026
    
    
    $
    852
    
    
    
    3.93
    %State and Political (1)
    
    
    20,857
    
    
    
    326
    
    
    
    6.34
    %
    
    
    21,817
    
    
    
    314
    
    
    
    5.84
    %Other
    
    
    4,638
    
    
    
    29
    
    
    
    2.49
    %
    
    
    4,308
    
    
    
    31
    
    
    
    2.92
    %Total Securities
    
    
    103,839
    
    
    
    1,245
    
    
    
    4.86
    %
    
    
    114,151
    
    
    
    1,197
    
    
    
    4.25
    %Fed Funds Sold
    
    
    13,176
    
    
    
    167
    
    
    
    5.14
    %
    
    
    8,357
    
    
    
    94
    
    
    
    4.56
    %Loans:Commercial
    
    
    349,252
    
    
    
    6,722
    
    
    
    7.81
    %
    
    
    335,935
    
    
    
    6,363
    
    
    
    7.68
    %Tax Free (1)
    
    
    3,810
    
    
    
    62
    
    
    
    6.58
    %
    
    
    4,538
    
    
    
    73
    
    
    
    6.52
    %Real Estate-Mortgage
    
    
    36,216
    
    
    
    596
    
    
    
    6.67
    %
    
    
    35,751
    
    
    
    654
    
    
    
    7.42
    %Consumer
    
    
    61,299
    
    
    
    1,258
    
    
    
    8.32
    %
    
    
    70,665
    
    
    
    1,342
    
    
    
    7.70
    %Total loans
    
    
    450,577
    
    
    
    8,638
    
    
    
    7.77
    %
    
    
    446,889
    
    
    
    8,432
    
    
    
    7.65
    %Allowance for Loan Losses
    
    
    (6,736
    )
    
    
    
    
    
    
    
    
    
    
    (6,426
    )Net Loans
    
    
    443,841
    
    
    
    8,638
    
    
    
    7.89
    %
    
    
    440,463
    
    
    
    8,432
    
    
    
    7.76
    %Loans Held for Sale
    
    
    1,697
    
    
    
    29
    
    
    
    6.82
    %
    
    
    1,354
    
    
    
    23
    
    
    
    6.89
    %TOTAL EARNING ASSETS
    
    $
    569,289
    
    
    $
    10,079
    
    
    
    7.18
    %
    
    $
    570,751
    
    
    $
    9,746
    
    
    
    6.93
    %Cash Due from Banks
    
    
    17,335
    
    
    
    
    
    
    
    
    
    
    
    17,688All Other Assets
    
    
    42,706
    
    
    
    
    
    
    
    
    
    
    
    37,385TOTAL ASSETS
    
    $
    622,594
    
    
    
    
    
    
    
    
    
    
    $
    619,398LIABILITIES & SHAREHOLDERS EQUITY:Deposits:Interest bearing  DDA
    
    $
    98,152
    
    
    $
    590
    
    
    
    2.44
    %
    
    $
    108,790
    
    
    $
    591
    
    
    
    2.20
    %Savings Deposits
    
    
    113,017
    
    
    
    535
    
    
    
    1.92
    %
    
    
    105,353
    
    
    
    317
    
    
    
    1.22
    %Time CDs $100,000 and Over
    
    
    130,768
    
    
    
    1,611
    
    
    
    5.00
    %
    
    
    125,158
    
    
    
    1,316
    
    
    
    4.26
    %Other Time CDs
    
    
    108,624
    
    
    
    1,225
    
    
    
    4.58
    %
    
    
    110,606
    
    
    
    1,017
    
    
    
    3.73
    %Total Deposits
    
    
    450,561
    
    
    
    3,961
    
    
    
    3.57
    %
    
    
    449,907
    
    
    
    3,241
    
    
    
    2.92
    %Other Borrowings
    
    
    39,635
    
    
    
    585
    
    
    
    5.99
    %
    
    
    41,034
    
    
    
    507
    
    
    
    5.01
    %INTEREST BEARING LIABILITIES
    
    $
    490,196
    
    
    $
    4,546
    
    
    
    3.76
    %
    
    $
    490,941
    
    
    $
    3,748
    
    
    
    3.10
    %Non-Interest bearing  DDA
    
    
    75,615
    
    
    
    
    
    
    
    
    
    
    
    77,418All Other Liabilities
    
    
    4,815
    
    
    
    
    
    
    
    
    
    
    
    3,102Shareholders Equity
    
    
    51,968
    
    
    
    
    
    
    
    
    
    
    
    47,937TOTAL LIABILITIES & SHAREHOLDERS EQUITY
    
    $
    622,594
    
    
    
    
    
    
    
    
    
    
    $
    619,398Net Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.42
    %
    
    
    
    
    
    
    
    
    
    
    3.83Net Interest Income /Margin
    
    
    
    
    
    $
    5,533
    
    
    
    3.94
    %
    
    
    
    
    
    $
    5,998
    
    
    
    4.26
 
 (1)
    
    Presented on a fully taxable equivalent basis using a federal income tax rate of 34%. 14




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##### Table of Contents



Allowance and Provision For Loan Losses
  ALL) ALL ALL ALL ALL
  15




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##### Table of Contents



Table 3 Analysis of the Allowance for Loan Losses
 Three Months Ended March 31,(000s omitted)
    
    2007
    
    2006Balance at Beginning of Period
    
    $
    6,692
    
    
    $
    6,301Charge-Offs:Commercial, Financial and Agriculture
    
    
    (139
    )
    
    
    (138
    )Real Estate-Mortgage
    
    
    (29
    )
    
    
    0Installment Loans to Individuals
    
    
    (120
    )
    
    
    (72
    )Total Charge-Offs
    
    
    (288
    )
    
    
    (210
    )Recoveries:Commercial, Financial and Agriculture
    
    
    96
    
    
    
    8Real Estate-Mortgage
    
    
    0
    
    
    
    0Installment Loans to Individuals
    
    
    23
    
    
    
    19Total Recoveries
    
    
    119
    
    
    
    27Net Charge-Offs
    
    
    (169
    )
    
    
    (183
    )Provision
    
    
    439
    
    
    
    400Balance at End of Period
    
    $
    6,962
    
    
    $
    6,518Ratio of Net Charge-Offs to Gross Loans
    
    
    0.04
    %
    
    
    0.04
    %
 Non-Interest Income
      16




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##### Table of Contents



Non-Interest Expense
        17




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##### Table of Contents



Financial Condition
    Non-Performing Assets
    18




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##### Table of Contents



Table 4  Non-Performing Assets and Past Due Loans
 March 31,
    
    December 31,2007
    
    2006Non-Performing Loans:Loans Past Due 90 Days or More & Still
Accruing
    
    $
    528
    
    
    $
    2,311Non-Accrual Loans
    
    
    3,555
    
    
    
    2,354Renegotiated Loans
    
    
    685
    
    
    
    437Total Non-Performing Loans
    
    
    4,768
    
    
    
    5,102Other Non-Performing Assets:Other Real Estate
    
    
    1,128
    
    
    
    1,145REO in Redemption
    
    
    935
    
    
    
    318Other Non-Performing Assets
    
    
    180
    
    
    
    155Total Other Non-Performing Assets
    
    
    2,243
    
    
    
    1,618Total Non-Performing Assets
    
    $
    7,011
    
    
    $
    6,720Non-Performing Loans as a % of
Total Loans
    
    
    1.03
    %
    
    
    1.13
    %Allowance for Loan Losses as a % of
Non-Performing Loans
    
    
    146.02
    %
    
    
    131.16
    %Accruing Loans Past Due 90 Days or
More to Total Loans
    
    
    0.11
    %
    
    
    0.51
    %Non-performing Assets as a % of
Total Assets
    
    
    1.12
    %
    
    
    1.08
    %
 Liquidity and Interest Rate Risk Management
    19




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##### Table of Contents



Capital Management
   Regulatory Capital Requirements
   20




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##### Table of Contents



Table 5
 Capital RatiosFentura Financial, Inc.Regulatory Minimum
    
    March 31,
    
    December 31,
    
    March 31,For Well Capitalized
    
    2007
    
    2006
    
    2006Total Capital to risk
Weighted assets
    
    
    10
    %
    
    
    12.47
    %
    
    
    12.50
    %
    
    
    11.84
    %Tier 1 Capital to risk
Weighted assets
    
    
    6
    %
    
    
    11.22
    %
    
    
    11.30
    %
    
    
    10.61
    %Tier 1 Capital to average
Assets
    
    
    5
    %
    
    
    9.50
    %
    
    
    8.60
    %
    
    
    8.89
    %
 Off Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    Interest Rate Sensitivity Management
  21




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##### Table of Contents



Table 6 GAP Analysis  March 31, 2007
 Within
    
    Three
    
    One to
    
    AfterThree
    
    Months to
    
    Five
    
    Five(000s omitted)
    
    Months
    
    One Year
    
    Years
    
    Years
    
    TotalEarning Assets:Federal Funds Sold
    
    $
    6,100
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    6,100Securities
    
    
    15,703
    
    
    
    18,760
    
    
    
    44,588
    
    
    
    20,173
    
    
    
    99,224Loans
    
    
    67,865
    
    
    
    86,104
    
    
    
    242,675
    
    
    
    63,182
    
    
    
    459,826Loans Held for Sale
    
    
    2,352
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    2,352FHLB Stock
    
    
    2,032
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    2,032Total Earning Assets
    
    $
    94,052
    
    
    $
    104,864
    
    
    $
    287,263
    
    
    $
    83,355
    
    
    $
    569,534Interest Bearing Liabilities:Interest Bearing Demand Deposits
    
    $
    99,568
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    99,568Savings Deposits
    
    $
    89,112
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    89,112Time Deposits Less than $100,000
    
    
    29,221
    
    
    
    62,416
    
    
    
    33,658
    
    
    
    221
    
    
    
    125,516Time Deposits Greater than $100,000
    
    
    49,137
    
    
    
    41,922
    
    
    
    48,304
    
    
    
    0
    
    
    
    139,363Short term borrowings
    
    
    1,003
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,003Other Borrowings
    
    
    22
    
    
    
    5,000
    
    
    
    5,107
    
    
    
    923
    
    
    
    11,052Repurchase agreements
    
    
    5,000
    
    
    
    0
    
    
    
    5,000
    
    
    
    0
    
    
    
    10,000Subordinated debentures
    
    
    0
    
    
    
    0
    
    
    
    14,000
    
    
    
    0
    
    
    
    14,000Total Interest Bearing Liabilities
    
    $
    273,063
    
    
    $
    109,338
    
    
    $
    106,069
    
    
    $
    1,144
    
    
    $
    489,614Interest Rate Sensitivity GAP
    
    
    ($179,011
    )
    
    
    ($4,474
    )
    
    $
    181,194
    
    
    $
    82,211
    
    
    $
    79,920Cumulative Interest Rate
Sensitivity GAP
    
    
    ($179,011
    )
    
    
    ($183,485
    )
    
    
    ($2,291
    )
    
    $
    79,920Interest Rate Sensitivity GAP
    
    
    (0.34
    )
    
    
    (0.96
    )
    
    
    2.71
    
    
    
    72.84Cumulative Interest Rate
Sensitivity GAP Ratio
    
    
    (0.34
    )
    
    
    (0.52
    )
    
    
    (1.00
    )
    
    
    1.16
  22




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##### Table of Contents



Forward Looking Statements
  
 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-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.
 23




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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, 2006.
 
 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.
 (a)
    
    Exhibits
 10.1
    
    Supplemental Executive Retirement Agreement with Donald Grill dated March 16,
2007. (Incorporated by reference from Current Report filed on Form 8-K on March 22,
2007).10.2
    
    Supplemental Executive Retirement Agreement with Robert Sewick dated March
16, 2007. (Incorporated by reference from Current Report filed on Form 8-K on March
22, 2007).10.3
    
    Severance Compensation Agreement with Donald Grill dated March 16, 2007.
(Incorporated by reference from Current Report filed on Form 8-K on March 22, 2007).10.4
    
    Severance Compensation Agreement with Robert Sewick dated March 16, 2007.
(Incorporated by reference from Current Report filed on Form 8-K
on March 22, 2007).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.
 24




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##### Table of Contents



Fentura Financial Inc.Dated:  May 11, 2007
    /s/ Donald L. GrillDonald L. GrillPresident & CEODated:  May 11, 2007
    /s/ Douglas J. KelleyDouglas J. KelleyChief Financial Officer 25




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    Description10.1
    
    Supplemental Executive Retirement Agreement with Donald Grill dated March 16, 2007.
(Incorporated by reference from Current Report filed on Form 8-K on March 22, 2007).10.2
    
    Supplemental Executive Retirement Agreement with Robert Sewick dated March 16, 2007.
(Incorporated by reference from Current Report filed on Form 8-K on March 22, 2007).10.3
    
    Severance Compensation Agreement with Donald Grill dated March 16, 2007. (Incorporated by
reference from Current Report filed on Form 8-K on March 22, 2007).10.4
    
    Severance Compensation Agreement with Robert Sewick dated March 16, 2007. (Incorporated by
reference from Current Report filed on Form 8-K on March 22, 2007.31.1
    
    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.
 26