##### 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 June 30, 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
    
    (IRS Employee Identification No.)incorporation or organization)
 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  2,162,393




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##### 



Fentura Financial Inc.
Index to Form 10-Q
 PagePart I  Financial Information
    
    
    3Item 1  Consolidated Financial Statements (Unaudited)
    
    
    3-9Item 2  Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    10-21Item 3  Quantitative and Qualitative Disclosures about Market Risk
    
    
    22Item 4  Controls and Procedures
    
    
    24Part II  Other Information
    
    
    25Item 1  Legal Proceedings
    
    
    25Item 1A  Risk Factors
    
    
    25Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3  Defaults Upon Senior Securities
    
    
    25Item 4 Submission of Matters to a Vote of Security Holders
    
    
    25Item 5  Other Information
    
    
    25Item 6  Exhibits
    
    
    25Signatures
    
    
    26Exhibit Index
    
    
    27Section 302 CertificationSection 302 CertificationSection 906 CertificationSection 906 Certification
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 Fentura Financial, Inc.
 Consolidated Balance Sheets
 June 30,
    
    Dec 31,2007
    
    2006(000s omitted except share data)
    
    (unaudited)ASSETSCash and due from banks
    
    $
    18,658
    
    
    $
    19,946Federal funds sold
    
    
    4,250
    
    
    
    9,500Total cash & cash equivalents
    
    
    22,908
    
    
    
    29,446Securities-available for sale
    
    
    88,816
    
    
    
    91,104Securities-held to maturity, (fair value of $8,852
at June 30, 2007 and $11,821 at December 31, 2006)
    
    
    8,934
    
    
    
    11,899Total securities
    
    
    97,750
    
    
    
    103,003Loans held for sale
    
    
    1,066
    
    
    
    2,226Loans:Commercial
    
    
    298,359
    
    
    
    272,402Real estate loans  construction
    
    
    62,722
    
    
    
    78,927Real estate loans  mortgage
    
    
    37,842
    
    
    
    36,867Consumer loans
    
    
    59,147
    
    
    
    62,797Total loans
    
    
    458,070
    
    
    
    450,993Less: Allowance for loan losses
    
    
    (7,174
    )
    
    
    (6,692
    )Net loans
    
    
    450,896
    
    
    
    444,301Bank Owned Life Insurance
    
    
    6,920
    
    
    
    6,815Bank premises and equipment
    
    
    19,383
    
    
    
    16,854Federal Home Loan Bank stock
    
    
    2,032
    
    
    
    2,032Accrued interest receivable
    
    
    3,272
    
    
    
    2,985Goodwill
    
    
    7,955
    
    
    
    7,955Acquisition intangibles
    
    
    616
    
    
    
    759Other assets
    
    
    6,321
    
    
    
    5,922Total assets
    
    $
    619,119
    
    
    $
    622,298LIABILITIESDeposits:Non-interest bearing deposits
    
    $
    81,606
    
    
    $
    74,886Interest bearing deposits
    
    
    451,012
    
    
    
    453,669Total deposits
    
    
    532,618
    
    
    
    528,555Short term borrowings
    
    
    1,074
    
    
    
    1,500Federal Home Loan Bank Advances
    
    
    11,030
    
    
    
    11,052Repurchase Agreements
    
    
    5,000
    
    
    
    10,000Subordinated debentures
    
    
    14,000
    
    
    
    14,000Accrued taxes, interest and other liabilities
    
    
    3,070
    
    
    
    5,873Total liabilities
    
    
    566,792
    
    
    
    570,980SHAREHOLDERS EQUITYCommon stock  no par value
2,164,050 shares issued (2,152,862 at Dec. 31, 2006)
    
    
    42,538
    
    
    
    42,158Retained earnings
    
    
    10,827
    
    
    
    10,118Accumulated other comprehensive income (loss)
    
    
    (1,038
    )
    
    
    (958
    )Total shareholders equity
    
    
    52,327
    
    
    
    51,318Total Liabilities and Shareholders Equity
    
    $
    619,119
    
    
    $
    622,298
  3




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##### Table of Contents



Fentura Financial, Inc.
Consolidated Statements of Income (Unaudited)
 Three Months Ended
    
    Six Months EndedJune 30
    
    June 30(000s omitted except per share data)
    
    2007
    
    2006
    
    2007
    
    2006INTEREST INCOMEInterest and fees on loans
    
    $
    8,917
    
    
    $
    8,852
    
    
    $
    17,564
    
    
    $
    17,282Interest and dividends on securities:Taxable
    
    
    801
    
    
    
    852
    
    
    
    1,718
    
    
    
    1,735Tax-exempt
    
    
    180
    
    
    
    196
    
    
    
    395
    
    
    
    403Interest on federal funds sold
    
    
    44
    
    
    
    79
    
    
    
    211
    
    
    
    173Total interest income
    
    
    9,942
    
    
    
    9,979
    
    
    
    19,888
    
    
    
    19,593INTEREST EXPENSEDeposits
    
    
    3,990
    
    
    
    3,594
    
    
    
    7,951
    
    
    
    6,835Borrowings
    
    
    560
    
    
    
    540
    
    
    
    1,145
    
    
    
    1,047Total interest expense
    
    
    4,550
    
    
    
    4,134
    
    
    
    9,096
    
    
    
    7,882NET INTEREST INCOME
    
    
    5,392
    
    
    
    5,845
    
    
    
    10,792
    
    
    
    11,711Provision for loan losses
    
    
    649
    
    
    
    240
    
    
    
    1,088
    
    
    
    640Net interest income after
Provision for loan losses
    
    
    4,743
    
    
    
    5,605
    
    
    
    9,704
    
    
    
    11,071NON-INTEREST INCOMEService charges on deposit accounts
    
    
    836
    
    
    
    950
    
    
    
    1,687
    
    
    
    1,760Gain on sale of mortgage loans
    
    
    119
    
    
    
    157
    
    
    
    203
    
    
    
    320Trust and investment services income
    
    
    461
    
    
    
    417
    
    
    
    968
    
    
    
    800Other income and fees
    
    
    612
    
    
    
    364
    
    
    
    1,035
    
    
    
    800Total non-interest income
    
    
    2,028
    
    
    
    1,888
    
    
    
    3,893
    
    
    
    3,680NON-INTEREST EXPENSESalaries and employee benefits
    
    
    3,193
    
    
    
    3,313
    
    
    
    6,440
    
    
    
    6,641Occupancy
    
    
    510
    
    
    
    510
    
    
    
    1,013
    
    
    
    943Furniture and equipment
    
    
    534
    
    
    
    551
    
    
    
    1,059
    
    
    
    1,059Loan and collection
    
    
    85
    
    
    
    84
    
    
    
    176
    
    
    
    155Advertising and promotional
    
    
    159
    
    
    
    201
    
    
    
    271
    
    
    
    354Other operating expenses
    
    
    1,117
    
    
    
    1,054
    
    
    
    2,135
    
    
    
    2,125Total non-interest expense
    
    
    5,598
    
    
    
    5,713
    
    
    
    11,094
    
    
    
    11,277INCOME BEFORE TAXES
    
    
    1,173
    
    
    
    1,780
    
    
    
    2,503
    
    
    
    3,474Federal income taxes
    
    
    329
    
    
    
    522
    
    
    
    711
    
    
    
    1,009NET INCOME
    
    $
    844
    
    
    $
    1,258
    
    
    $
    1,792
    
    
    $
    2,465Per share: (adjusted for 10% stock dividend paid on August 4, 2006)Net income  basic
    
    $
    0.39
    
    
    $
    0.59
    
    
    $
    0.83
    
    
    $
    1.15Net income  diluted
    
    $
    0.39
    
    
    $
    0.59
    
    
    $
    0.83
    
    
    $
    1.15Cash Dividends declared
    
    $
    0.25
    
    
    $
    0.23
    
    
    $
    0.50
    
    
    $
    0.45
  4




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Fentura Financial, Inc.
Consolidated Statements of Changes in Shareholders Equity (Unaudited)
 Six Months EndedJune 30,(000s omitted)
    
    2007
    
    
    2006COMMON STOCKBalance, beginning of period
    
    $
    42,158
    
    
    $
    34,491Issuance of shares under
Stock Dividend (194,772 shares-2006)
    
    
    0
    
    
    
    6,846Director stock purchase plan &
Dividend reinvestment program (14,677 and
12,381 shares)
    
    
    458
    
    
    
    418Stock repurchase (3,784 shares and 977 shares )
    
    
    (112
    )
    
    
    (32
    )Stock options exercised (295 and 5,023 shares)
    
    
    6
    
    
    
    87Stock compensation expense
    
    
    28
    
    
    
    0Balance, end of period
    
    
    42,538
    
    
    
    41,810RETAINED EARNINGSBalance, beginning of period
    
    
    10,118
    
    
    
    13,729Net income
    
    
    1,792
    
    
    
    2,465Stock dividend
    
    
    0
    
    
    
    (6,846
    )Cash dividends declared
    
    
    (1,083
    )
    
    
    (990
    )Balance, end of period
    
    
    10,827
    
    
    
    8,358ACCUMULATED OTHER COMPREHENSIVE
INCOME (LOSS)Balance, beginning of period
    
    
    (958
    )
    
    
    (1,325
    )Change in unrealized gain (loss)
on securities, net of tax
    
    
    (80
    )
    
    
    (799
    )Balance, end of period
    
    
    (1,038
    )
    
    
    (2,124
    )TOTAL SHAREHOLDERS EQUITY
    
    $
    52,327
    
    
    $
    48,044
  5




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Fentura Financial, Inc.
Consolidated Statements of Cash Flows (Unaudited)
 Six Months EndedJune 30,(000s omitted)
    
    2007
    
    2006OPERATING ACTIVITIES:Net income
    
    $
    1,792
    
    
    $
    2,465Adjustments to reconcile net income to cash
Provided by Operating Activities:Depreciation and amortization
    
    
    882
    
    
    
    872Provision for loan losses
    
    
    1,088
    
    
    
    640Loans originated for sale
    
    
    (10,328
    )
    
    
    (19,997
    )Proceeds from the sale of loans
    
    
    11,703
    
    
    
    20,680Gain on sales of loans
    
    
    (203
    )
    
    
    (320
    )Stock compensation expense
    
    
    28
    
    
    
    0Net (increase) decrease in bank owned life insurance
    
    
    (105
    )
    
    
    (104
    )Net (increase) decrease in interest receivable & other assets
    
    
    (541
    )
    
    
    (698
    )Net increase (decrease) in interest payable & other liabilities
    
    
    (2,762
    )
    
    
    141Total Adjustments
    
    
    (238
    )
    
    
    1,214Net Cash Provided By (Used In) Operating Activities
    
    
    1,554
    
    
    
    3,679Cash Flows From Investing Activities:Proceeds from maturities of securities  HTM
    
    
    1,570
    
    
    
    761Proceeds from maturities of securities  AFS
    
    
    5,746
    
    
    
    8,799Proceeds from calls of securities  HTM
    
    
    140
    
    
    
    925Proceeds from calls of securities  AFS
    
    
    1,700
    
    
    
    985Proceeds from sales of securities  AFS
    
    
    0
    
    
    
    0Purchases of securities  HTM
    
    
    0
    
    
    
    (3,802
    )Purchases of securities  AFS
    
    
    (4,071
    )
    
    
    (4,209
    )Purchase of FHLB Stock
    
    
    0
    
    
    
    (132
    )Net increase in loans
    
    
    (7,761
    )
    
    
    (17,880
    )Acquisition of premises and equipment, net
    
    
    (3,300
    )
    
    
    (2,793
    )Net Cash Provided By (Used in) Investing Activities
    
    
    (5,976
    )
    
    
    (17,347
    )Cash Flows From Financing Activities:Net increase (decrease) in deposits
    
    
    4,063
    
    
    
    6,346Net increase (decrease) in borrowings
    
    
    (426
    )
    
    
    5,028Net increase (decrease) in repurchase agreements
    
    
    (5,000
    )
    
    
    0Advances from FHLB
    
    
    7,000
    
    
    
    4,000Repayments of advances from FHLB
    
    
    (7,022
    )
    
    
    (6,020
    )Net proceeds from stock issuance and purchase
    
    
    352
    
    
    
    473Cash dividends
    
    
    (1,083
    )
    
    
    (990
    )Net Cash Provided By (Used In) Financing Activities
    
    
    (2,116
    )
    
    
    8,837NET CHANGE IN CASH AND CASH EQUIVALENTS
    
    $
    (6,538
    )
    
    $
    (4,831
    )CASH AND CASH EQUIVALENTS  BEGINNING
    
    $
    29,446
    
    
    $
    31,077CASH AND CASH EQUIVALENTS  ENDING
    
    $
    22,908
    
    
    $
    26,246CASH PAID FOR:INTEREST
    
    $
    9,212
    
    
    $
    7,899INCOME TAXES
    
    $
    831
    
    
    $
    1,435NONCASH DISCLOSURES:Transfers from loans to other real estate
    
    $
    78
    
    
    $
    0
  6




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Fentura Financial, Inc.
Consolidated Statements of Comprehensive Income (Unaudited)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(000s Omitted)
    
    2007
    
    2006
    
    2007
    
    2006Net Income
    
    $
    844
    
    
    $
    1,258
    
    
    $
    1,792
    
    
    $
    2,465Other comprehensive income (loss), net of tax:Unrealized holding gains (losses) arising
during period
    
    
    (343
    )
    
    
    (622
    )
    
    
    (80
    )
    
    
    (799
    )Other comprehensive income (loss)
    
    
    (343
    )
    
    
    (622
    )
    
    
    (80
    )
    
    
    (799
    )Comprehensive income
    
    $
    501
    
    
    $
    636
    
    
    $
    1,712
    
    
    $
    1,666
 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, 2006
    
    
    40,523
    
    
    $
    29.68Options exercised 2007
    
    
    (295
    )
    
    
    21.90Options outstanding at June 30, 2007
    
    
    40,228
    
    
    $
    29.74
 8




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Note 2. Earnings Per Common Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Basic Earnings Per Common Share:NumeratorNet Income
    
    $
    844,000
    
    
    $
    1,258,000
    
    
    $
    1,792,000
    
    
    $
    2,465,000DenominatorWeighted average common shares
Outstanding
    
    
    2,162,599
    
    
    
    2,137,592
    
    
    
    2,160,016
    
    
    
    2,133,926Basic earnings per common share
    
    $
    0.39
    
    
    $
    0.59
    
    
    $
    0.83
    
    
    $
    1.15Diluted Earnings Per Common Share:NumeratorNet Income
    
    $
    844,000
    
    
    $
    1,258,000
    
    
    $
    1,792,000
    
    
    $
    2,465,000DenominatorWeighted average common shares
Outstanding for basic earnings per
Common share
    
    
    2,162,599
    
    
    
    2,137,592
    
    
    
    2,160,016
    
    
    
    2,133,926Add: Dilutive effects of assumed
exercises of stock options
    
    
    3,068
    
    
    
    4,662
    
    
    
    3,281
    
    
    
    4,520Weighted average common shares
and dilutive potential common
shares outstanding
    
    
    2,165,667
    
    
    
    2,142,254
    
    
    
    2,163,297
    
    
    
    2,138,446Diluted earnings per common share
    
    $
    0.39
    
    
    $
    0.59
    
    
    $
    0.83
    
    
    $
    1.15
  Note 3. Commitments and Contingencies
  9




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Results of Operations
    Net Interest Income
  10




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Table 1
 SIX MONTHS ENDEDJUNE 30,2007 COMPARED TO 2006INCREASE (DECREASE)DUE TOYIELD/(000S OMITTED)
    
    VOL
    
    RATE
    
    TOTALTaxable Securities
    
    $
    (174
    )
    
    $
    161
    
    
    $
    (13
    )Tax-Exempt Securities
    
    
    (58
    )
    
    
    45
    
    
    
    (13
    )Federal Funds Sold
    
    
    21
    
    
    
    17
    
    
    
    38Total Loans
    
    
    148
    
    
    
    117
    
    
    
    265Loans Held for Sale
    
    
    10
    
    
    
    (4
    )
    
    
    6Total Earning Assets
    
    
    (53
    )
    
    
    336
    
    
    
    283Interest Bearing Demand Deposits
    
    
    (61
    )
    
    
    70
    
    
    
    9Savings Deposits
    
    
    (80
    )
    
    
    34
    
    
    
    (46
    )Time CDs $100,000 and Over
    
    
    214
    
    
    
    261
    
    
    
    475Other Time Deposits
    
    
    165
    
    
    
    513
    
    
    
    678Other Borrowings
    
    
    (69
    )
    
    
    167
    
    
    
    98Total Interest Bearing Liabilities
    
    
    169
    
    
    
    1,045
    
    
    
    1,214Net Interest Income
    
    $
    (222
    )
    
    $
    (709
    )
    
    $
    (931
    )
     11




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12




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Table 2 Average Balance and Rates
 SIX MONTHS ENDED JUNE 30,2007
    
    
    2006AVERAGE
    
    
    INCOME/
    
    
    YIELD/
    
    
    AVERAGE
    
    
    INCOME/
    
    
    YIELD/(000s omitted)(Annualized)
    
    BALANCE
    
    
    EXPENSE
    
    
    RATE
    
    
    BALANCE
    
    
    EXPENSE
    
    
    RATEASSETSSecurities:U.S.
Treasury
and
Government
Agencies
    
    $
    77,242
    
    
    $
    1,673
    
    
    
    4.37
    %
    
    $
    86,522
    
    
    $
    1,676
    
    
    
    3.91
    %State
and
Political (1)
    
    
    19,435
    
    
    
    598
    
    
    
    6.21
    %
    
    
    21,487
    
    
    
    611
    
    
    
    5.37
    %Other
    
    
    4,881
    
    
    
    49
    
    
    
    2.02
    %
    
    
    4,441
    
    
    
    59
    
    
    
    2.68
    %Total
Securities
    
    
    101,558
    
    
    
    2,320
    
    
    
    4.61
    %
    
    
    112,450
    
    
    
    2,346
    
    
    
    4.21
    %Fed
Funds
Sold
    
    
    8,244
    
    
    
    211
    
    
    
    5.16
    %
    
    
    7,341
    
    
    
    173
    
    
    
    4.75
    %Loans:Commercial
    
    
    354,834
    
    
    
    13,717
    
    
    
    7.80
    %
    
    
    341,248
    
    
    
    13,104
    
    
    
    7.74
    %Tax
Free
(1)
    
    
    3,748
    
    
    
    121
    
    
    
    6.52
    %
    
    
    4,467
    
    
    
    142
    
    
    
    6.43
    %Real
Estate-Mortgage
    
    
    36,259
    
    
    
    1,223
    
    
    
    6.80
    %
    
    
    35,962
    
    
    
    1,333
    
    
    
    7.47
    %Consumer
    
    
    60,358
    
    
    
    2,488
    
    
    
    8.31
    %
    
    
    69,658
    
    
    
    2,705
    
    
    
    7.83
    %Total loans
    
    
    455,199
    
    
    
    17,549
    
    
    
    7.77
    %
    
    
    451,335
    
    
    
    17,284
    
    
    
    7.72
    %Allowance for Loan Losses
    
    
    (6,843
    )
    
    
    
    
    
    
    
    
    
    
    (6,538
    )Net Loans
    
    
    448,356
    
    
    
    17,549
    
    
    
    7.89
    %
    
    
    444,797
    
    
    
    17,284
    
    
    
    7.84
    %Loans Held for Sale
    
    
    1,599
    
    
    
    52
    
    
    
    6.56
    %
    
    
    1,315
    
    
    
    46
    
    
    
    7.05
    %TOTAL EARNING ASSETS
    
    $
    566,600
    
    
    $
    20,132
    
    
    
    7.17
    %
    
    $
    572,441
    
    
    $
    19,849
    
    
    
    6.99
    %Cash Due from Banks
    
    
    17,234
    
    
    
    
    
    
    
    
    
    
    
    17,326All Other Assets
    
    
    44,151
    
    
    
    
    
    
    
    
    
    
    
    37,715TOTAL ASSETS
    
    $
    621,142
    
    
    
    
    
    
    
    
    
    
    $
    620,944LIABILITIES & SHAREHOLDERS EQUITY:Deposits:Interest bearing  DDA
    
    $
    100,091
    
    
    $
    1,189
    
    
    
    2.40
    %
    
    $
    105,573
    
    
    $
    1,180
    
    
    
    2.25
    %Savings Deposits
    
    
    89,820
    
    
    
    577
    
    
    
    1.30
    %
    
    
    102,978
    
    
    
    623
    
    
    
    1.22
    %Time CDs $100,000 and Over
    
    
    135,472
    
    
    
    3,341
    
    
    
    4.97
    %
    
    
    126,068
    
    
    
    2,866
    
    
    
    4.58
    %Other Time CDs
    
    
    125,369
    
    
    
    2,844
    
    
    
    4.57
    %
    
    
    116,482
    
    
    
    2,166
    
    
    
    3.75
    %Total Deposits
    
    
    450,752
    
    
    
    7,951
    
    
    
    3.56
    %
    
    
    451,101
    
    
    
    6,835
    
    
    
    3.06
    %Other Borrowings
    
    
    38,264
    
    
    
    1,145
    
    
    
    6.03
    %
    
    
    40,966
    
    
    
    1,047
    
    
    
    5.15
    %INTEREST BEARING LIABILITIES
    
    $
    489,016
    
    
    $
    9,096
    
    
    
    3.75
    %
    
    $
    492,067
    
    
    $
    7,882
    
    
    
    3.23
    %Non-Interest bearing  DDA
    
    
    74,830
    
    
    
    
    
    
    
    
    
    
    
    77,536All Other Liabilities
    
    
    4,468
    
    
    
    
    
    
    
    
    
    
    
    3,260Shareholders Equity
    
    
    52,828
    
    
    
    
    
    
    
    
    
    
    
    48,081TOTAL LIABILITIES & SHAREHOLDERS EQUITY
    
    $
    621,142
    
    
    
    
    
    
    
    
    
    
    $
    620,944Net Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.41
    %
    
    
    
    
    
    
    
    
    
    
    3.76
    %Net Interest Income /Margin
    
    
    
    
    
    $
    11,036
    
    
    
    3.93
    %
    
    
    
    
    
    $
    11,967
    
    
    
    4.22
    %
 
 (1)
    
    Presented on a fully taxable equivalent basis using a federal income tax rate of 34%. 13




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##### Table of Contents



Table 3 Average Balance and Rates
 THREE MONTHS ENDED JUNE 30,2007
    
    
    
    
    
    
    
    
    
    
    2006AVERAGE
    
    
    INCOME/
    
    
    YIELD/
    
    
    AVERAGE
    
    
    INCOME/
    
    
    YIELD/(000s omitted)(Annualized)
    
    BALANCE
    
    
    EXPENSE
    
    
    RATE
    
    
    BALANCE
    
    
    EXPENSE
    
    
    RATEASSETSSecurities:U.S. Treasury and Government Agencies
    
    $
    76,091
    
    
    $
    782
    
    
    
    4.12
    %
    
    $
    84,493
    
    
    $
    824
    
    
    
    3.91
    %State and Political (1)
    
    
    18,092
    
    
    
    273
    
    
    
    6.05
    %
    
    
    21,608
    
    
    
    297
    
    
    
    5.51
    %Other
    
    
    5,365
    
    
    
    20
    
    
    
    1.50
    %
    
    
    4,240
    
    
    
    28
    
    
    
    2.65
    %Total Securities
    
    
    99,548
    
    
    
    1,075
    
    
    
    4.33
    %
    
    
    110,341
    
    
    
    1,149
    
    
    
    4.18
    %Fed Funds Sold
    
    
    3,366
    
    
    
    44
    
    
    
    5.24
    %
    
    
    6,335
    
    
    
    79
    
    
    
    5.00
    %Loans:Commercial
    
    
    360,535
    
    
    
    6,996
    
    
    
    7.78
    %
    
    
    346,505
    
    
    
    6,740
    
    
    
    7.80
    %Tax Free (1)
    
    
    3,686
    
    
    
    59
    
    
    
    6.43
    %
    
    
    4,397
    
    
    
    70
    
    
    
    6.36
    %Real Estate-Mortgage
    
    
    36,303
    
    
    
    628
    
    
    
    6.94
    %
    
    
    36,170
    
    
    
    679
    
    
    
    7.53
    %Consumer
    
    
    59,425
    
    
    
    1,230
    
    
    
    8.30
    %
    
    
    68,662
    
    
    
    1,364
    
    
    
    7.97
    %Total loans
    
    
    459,949
    
    
    
    8,913
    
    
    
    7.77
    %
    
    
    455,734
    
    
    
    8,853
    
    
    
    7.79
    %Allowance for Loan Losses
    
    
    (6,950
    )
    
    
    
    
    
    
    
    
    
    
    (6,650
    )Net Loans
    
    
    452,999
    
    
    
    8,913
    
    
    
    7.89
    %
    
    
    449,084
    
    
    
    8,853
    
    
    
    7.91
    %Loans Held for Sale
    
    
    1,501
    
    
    
    23
    
    
    
    6.15
    %
    
    
    1,277
    
    
    
    23
    
    
    
    7.22
    %TOTAL EARNING ASSETS
    
    $
    564,364
    
    
    $
    10,055
    
    
    
    7.15
    %
    
    $
    573,687
    
    
    $
    10,104
    
    
    
    7.06
    %Cash Due from Banks
    
    
    16,704
    
    
    
    
    
    
    
    
    
    
    
    16,967All Other Assets
    
    
    45,131
    
    
    
    
    
    
    
    
    
    
    
    38,470TOTAL ASSETS
    
    $
    619,249
    
    
    
    
    
    
    
    
    
    
    $
    622,474LIABILITIES & SHAREHOLDERS EQUITY:Deposits:Interest bearing  DDA
    
    $
    100,345
    
    
    $
    600
    
    
    
    2.39
    %
    
    $
    102,391
    
    
    $
    588
    
    
    
    2.30
    %Savings Deposits
    
    
    89,038
    
    
    
    290
    
    
    
    1.31
    %
    
    
    100,627
    
    
    
    306
    
    
    
    1.22
    %Time CDs $100,000 and Over
    
    
    134,374
    
    
    
    1,659
    
    
    
    4.95
    %
    
    
    126,968
    
    
    
    1,544
    
    
    
    4.88
    %Other Time CDs
    
    
    125,523
    
    
    
    1,441
    
    
    
    4.60
    %
    
    
    122,296
    
    
    
    1,156
    
    
    
    3.79
    %Total Deposits
    
    
    449,280
    
    
    
    3,990
    
    
    
    3.56
    %
    
    
    452,282
    
    
    
    3,594
    
    
    
    3.19
    %Other Borrowings
    
    
    36,907
    
    
    
    560
    
    
    
    6.09
    %
    
    
    40,899
    
    
    
    540
    
    
    
    5.30
    %INTEREST BEARING LIABILITIES
    
    $
    486,187
    
    
    $
    4,550
    
    
    
    3.75
    %
    
    $
    493,181
    
    
    $
    4,134
    
    
    
    3.36
    %Non-Interest bearing  DDA
    
    
    75,714
    
    
    
    
    
    
    
    
    
    
    
    77,653All Other Liabilities
    
    
    4,124
    
    
    
    
    
    
    
    
    
    
    
    3,417Shareholders Equity
    
    
    53,224
    
    
    
    
    
    
    
    
    
    
    
    48,223TOTAL LIABILITIES & SHAREHOLDERS EQUITY
    
    $
    619,249
    
    
    
    
    
    
    
    
    
    
    $
    622,474Net Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.39
    %
    
    
    
    
    
    
    
    
    
    
    3.70
    %Net Interest Income /Margin
    
    
    
    
    
    $
    5,505
    
    
    
    3.91
    %
    
    
    
    
    
    $
    5,970
    
    
    
    4.17
    %
 
 (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 ALL ALL
  15




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##### Table of Contents



Table 4 Analysis of the Allowance for Loan Losses
 Six Months Ended June 30,(000s omitted)
    
    2007
    
    2006Balance at Beginning of Period
    
    $
    6,692
    
    
    $
    6,301Charge-Offs:Commercial, Financial and Agriculture
    
    
    (534
    )
    
    
    (172
    )Real Estate-Mortgage
    
    
    (30
    )
    
    
    0Installment Loans to Individuals
    
    
    (191
    )
    
    
    (135
    )Total Charge-Offs
    
    
    (755
    )
    
    
    (307
    )Recoveries:Commercial, Financial and Agriculture
    
    
    102
    
    
    
    15Real Estate-Mortgage
    
    
    0
    
    
    
    0Installment Loans to Individuals
    
    
    47
    
    
    
    33Total Recoveries
    
    
    149
    
    
    
    48Net Charge-Offs
    
    
    (606
    )
    
    
    (259
    )Provision
    
    
    1,088
    
    
    
    640Balance at End of Period
    
    $
    7,174
    
    
    $
    6,682Ratio of Net Charge-Offs to Gross Loans
    
    
    0.13
    %
    
    
    0.06
    %
 Non-Interest Income
      16




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##### Table of Contents



Non-Interest Expense
      17




---



##### Table of Contents



Financial Condition
    18




---



##### Table of Contents



Non-Performing Assets
  ALLL
  Table 5  Non-Performing Assets and Past Due Loans
 June 30,
    
    December 31,2007
    
    2006Non-Performing Loans:Loans Past Due 90 Days or More & Still
Accruing
    
    $
    51
    
    
    $
    2,311Non-Accrual Loans
    
    
    2,576
    
    
    
    2,354Renegotiated Loans
    
    
    434
    
    
    
    437Total Non-Performing Loans
    
    
    3,061
    
    
    
    5,102Other Non-Performing Assets:Other Real Estate
    
    
    1,066
    
    
    
    1,145REO in Redemption
    
    
    2,019
    
    
    
    318Other Non-Performing Assets
    
    
    166
    
    
    
    155Total Other Non-Performing Assets
    
    
    3,251
    
    
    
    1,618Total Non-Performing Assets
    
    $
    6,312
    
    
    $
    6,720Non-Performing Loans as a % of
Total Loans
    
    
    0.66
    %
    
    
    1.13
    %Allowance for Loan Losses as a % of
Non-Performing Loans
    
    
    234.37
    %
    
    
    131.16
    %Accruing Loans Past Due 90 Days or
More to Total Loans
    
    
    0.01
    %
    
    
    0.51
    %Non-performing Assets as a % of
Total Assets
    
    
    1.01
    %
    
    
    1.08
    %
 19




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##### Table of Contents



Liquidity and Interest Rate Risk Management
      Capital Management
  20




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##### Table of Contents



Regulatory Capital Requirements
   Table 6
 Capital RatiosFentura Financial, Inc.Regulatory Minimum
    
    June 30,
    
    December 31,
    
    June 30,For Well Capitalized
    
    2007
    
    2006
    
    2006Total Capital to risk
Weighted assets
    
    
    10
    %
    
    
    12.60
    %
    
    
    12.50
    %
    
    
    11.88
    %Tier 1 Capital to risk
Weighted assets
    
    
    6
    %
    
    
    11.37
    %
    
    
    11.30
    %
    
    
    10.63
    %Tier 1 Capital to average
Assets
    
    
    5
    %
    
    
    9.60
    %
    
    
    8.60
    %
    
    
    8.22
    %
 Off Balance Sheet Arrangements
  21




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
    Interest Rate Sensitivity Management
   22




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##### Table of Contents



Table
7 GAP Analysis  June 30, 2007
 Within
    
    Three
    
    One to
    
    AfterThree
    
    Months to
    
    Five
    
    Five(000s omitted)
    
    Months
    
    One Year
    
    Years
    
    Years
    
    TotalEarning Assets:Federal Funds Sold
    
    $
    4,250
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    4,250Securities
    
    
    25,607
    
    
    
    9,776
    
    
    
    48,327
    
    
    
    14,040
    
    
    
    97,750Loans
    
    
    59,824
    
    
    
    99,800
    
    
    
    235,186
    
    
    
    63,260
    
    
    
    458,070Loans Held for Sale
    
    
    1,066
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,066FHLB Stock
    
    
    2,032
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    2,032Total Earning Assets
    
    $
    92,779
    
    
    $
    109,576
    
    
    $
    283,513
    
    
    $
    77,300
    
    
    $
    563,168Interest Bearing Liabilities:Interest Bearing Demand Deposits
    
    $
    99,827
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    99,827Savings Deposits
    
    $
    86,205
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    86,205Time Deposits Less than $100,000
    
    
    27,729
    
    
    
    67,050
    
    
    
    29,917
    
    
    
    199
    
    
    
    124,895Time Deposits Greater than $100,000
    
    
    37,039
    
    
    
    46,381
    
    
    
    56,665
    
    
    
    0
    
    
    
    140,085Short term borrowings
    
    
    1,074
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,074Other Borrowings
    
    
    0
    
    
    
    5,000
    
    
    
    5,140
    
    
    
    890
    
    
    
    11,030Repurchase agreements
    
    
    0
    
    
    
    5,000
    
    
    
    0
    
    
    
    0
    
    
    
    5,000Subordinated debentures
    
    
    0
    
    
    
    0
    
    
    
    14,000
    
    
    
    0
    
    
    
    14,000Total Interest Bearing Liabilities
    
    $
    251,874
    
    
    $
    123,431
    
    
    $
    105,722
    
    
    $
    1,089
    
    
    $
    482,116Interest Rate Sensitivity GAP
    
    
    ($159,095
    )
    
    
    ($13,855
    )
    
    $
    177,791
    
    
    $
    76,211
    
    
    $
    81,052Cumulative Interest Rate
Sensitivity GAP
    
    
    ($159,095
    )
    
    
    ($172,950
    )
    
    $
    4,841
    
    
    $
    81,052Interest Rate Sensitivity GAP
    
    
    (0.37
    )
    
    
    (0.89
    )
    
    
    2.68
    
    
    
    71.00Cumulative Interest Rate
Sensitivity GAP Ratio
    
    
    (0.37
    )
    
    
    (0.54
    )
    
    
    1.01
    
    
    
    1.17
  23




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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.
 24




---



##### 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. The registrants annual meeting was held April 24,
2007. Three directors were elected at the meeting, each to a three year term. The vote was as follows:
 VOTEDirector Nominee
    
    Term Expires
    
    
    For
    
    
    WithheldJ. David Karr
    
    
    2010
    
    
    
    1,716,292
    
    
    
    61,356Thomas P. McKenney
    
    
    2010
    
    
    
    1,755,724
    
    
    
    21,924Brian P. Petty
    
    
    2010
    
    
    
    1,754,179
    
    
    
    23,469
  
 Item 5.
    
    Other Information. None
 
 Item 6.
    
    Exhibits.
 (a)
    
    Exhibits
 31.1
    
    Certificate of the President and Chief Executive Officer of
Fentura Financial, Inc. pursuant to 15 U.S.C. Section 7241, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certificate of the Chief Financial Officer of Fentura
Financial, Inc. pursuant to 15 U.S.C. Section 7241, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certificate of the Chief Executive Officer of Fentura
Financial, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certificate of the Chief Financial Officer of Fentura
Financial, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 25




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##### Table of Contents



Fentura Financial Inc.Dated: August 10, 2007
    
    /s/Donald L. GrillDonald L. Grill 

President & CEODated: August 10, 2007
    
    /s/Douglas J. KelleyDouglas J. Kelley 

Chief Financial Officer
 26




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    Description31.1
    
    Certificate of the President and Chief Executive Officer of Fentura Financial, Inc. pursuant
to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certificate of the Chief Financial Officer of Fentura Financial, Inc. pursuant to 15 U.S.C.
Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certificate of the Chief Executive Officer of Fentura Financial, Inc. pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certificate of the Chief Financial Officer of Fentura Financial, Inc. pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 27