10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For fiscal year ended December 31, 2008

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 000-23550

FENTURA FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Michigan	38-2806518
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

175 North Leroy, Fenton, Michigan	48430-0725
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (810) 750-8725

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o  Accelerated filer o  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller reporting company þ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

State the aggregate market value of the voting and nonvoting common equity held by nonaffiliates of the registrant computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second quarter.

Aggregate Market Value as of June 30, 2008: $25,014,617

State the number of shares outstanding of each of issuer’s classes of common equity, as of the latest practicable date. 2,186,438 shares of Common Stock as of March 2, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Fentura Financial, Inc. Proxy Statement for its annual meeting of shareholders to be held April 28, 2009 and its Rule 14a-3 annual report are incorporated by reference into Parts II and III.

Fentura Financial, Inc.

2008 Annual Report on Form 10-K

Table Of Contents

	Page
PART I
Item 1. Description of Business		3
Item 1A Risk Factors		11
Item 1B Unresolved Staff Comments		15
Item 2. Properties		16
Item 3. Legal Proceedings		16
Item 4. Submission of Matters to a Vote of Security Holders		16
Additional Item — Executive Officers of Registrant		17
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		18
Item 6. Selected Financial Data		18
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 7A. Quantitative and Qualitative Disclosures about Market Risk		18
Item 8. Financial Statements and Supplementary Data		19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		19
Item 9A(T).Controls and Procedures		19
Item 9B. Other Information		19
PART III
Item 10. Directors, Executive Officers and Corporate Governance		20
Item 11. Executive Compensation		20
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		20
Item 13. Certain Relationships and Related Transactions, and Director Independence		21
Item 14. Principal Accountant Fees and Services		21
PART IV
Item 15. Exhibits and Financial Statement Schedules		21
SIGNATURES		23
EXHIBIT INDEX		24
EX-3.1
EX-13
EX-14
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

The Company

     Fentura Financial, Inc. (the “Corporation” or “Fentura”) is a bank holding company headquartered in Fenton, Michigan that owns three subsidiary banks (see “The Banks” below). All information in this Item 1 is as of December 31, 2008. The Corporation’s subsidiary banks operate 16 community banking offices offering a full range of banking services principally to individuals, small businesses, and government entities throughout mid-Michigan and western Michigan. At the close of business on December 31, 2008, the Corporation had assets of $579 million, deposits of $510 million, and shareholders’ equity of $36 million. Trust assets under management totaled $115 million.

     Fentura was incorporated in 1987 to serve as the holding company of its sole subsidiary bank, The State Bank (“TSB” or one of the “Banks”). TSB traces its origins to its predecessor, The Commercial Savings Bank of Fenton, which was incorporated in 1898. See “The Banks” below. On March 13, 2000 a second bank subsidiary, Davison State Bank (“DSB” or one of the “Banks”) commenced operation. On March 15, 2004, Fentura acquired West Michigan Community Bank (“WMCB” or one of the “Banks”).

     The Corporation’s principal executive offices are located at 175 North Leroy, Fenton, Michigan 48430-0725, and its telephone number is (810) 750-8725.

The Banks

     TSB’s original predecessor was incorporated as a state banking corporation under the laws of Michigan on September 16, 1898 under the name “The Commercial Savings Bank of Fenton.” In 1931, it changed its name to State Savings Bank of Fenton, and in 1988 became The State Bank. For over 100 years, TSB has been engaged in the general banking business in the Fenton, Michigan area. TSB is headquartered in Fenton and considers its primary service area to be portions of Genesee, Oakland, and Livingston counties in Michigan. As of December 31, 2008, TSB operated four offices and an operations center in the City of Fenton, Michigan, one office in the City of Linden, Michigan, one office in the Village of Holly, Michigan, two offices in the Township of Grand Blanc, Michigan, and one office in Brighton, Michigan. Its main office is located in downtown Fenton.

     DSB commenced operations on March 13, 2000, and is engaged in the general banking business in the Davison, Michigan area. DSB is headquartered in Davison and considers its primary service area to be portions of Genesee and Lapeer Counties. As of December 31, 2008, DSB operated two offices in the City of Davison, Michigan.

     Fentura acquired West Michigan Community Bank on March 15, 2004. WMCB is engaged in the general banking business in Hudsonville, Michigan, and other portions of Ottawa County and western Kent County, Michigan. WMCB is headquartered in Hudsonville and considers its primary service areas to be portions of Kent and Ottawa counties. As of December 31, 2008, WMCB operated two offices in the City of Hudsonville, Michigan, one office in the City of Jenison, Michigan, and two offices in the City of Holland, Michigan.

     All of the Banks are community-oriented providers of financial services engaged in the business of general commercial banking. Their activities include investing in state and federal securities, accepting demand deposits, savings and other time deposits, extending retail, commercial, consumer and real estate loans to individuals and businesses, providing safe deposit boxes, transmitting funds and providing other services generally associated with full service commercial banking. Lending is focused on individuals and small businesses in the local markets served by the Banks. In addition, TSB and WMCB operate trust departments offering a full range of fiduciary services.

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     All three banks are state banks, chartered under the Michigan Banking Code. None are members of the Federal Reserve, but the deposits of each are insured by the Federal Deposit Insurance Corporation (the “FDIC”). See “Supervision and Regulation” below.

     As of December 31, 2008, TSB employed 112 full time personnel, including 39 officers, and an additional 41 part time employees; DSB employed 10 full time personnel, including 2 officers, and an additional 6 part time employees; WMCB employed 40 full time personnel, including 13 officers, and an additional 8 part time employees. All Banks consider their employee relations to be excellent.

Competition

     The financial services industry is highly competitive. The Banks compete with other commercial banks, many of which are subsidiaries of bank holding companies, for loans, deposits, trust accounts, and other business on the basis of interest rates, fees, convenience and quality of service. The Banks also compete with a variety of other financial services organizations including savings and loan associations, finance companies, mortgage banking companies, brokerage firms, credit unions and other financial organizations. Many of the Banks’ competitors have substantially greater resources than the Banks.

Supervision and Regulation

     The following is a summary of certain statutes and regulations affecting the Company and the Banks. This summary is qualified in its entirety by such statutes and regulations. A change in applicable laws or regulations may have a material effect on the Corporation, the Banks and the business of the Corporation and the Banks.

General

     Financial institutions and their holding companies are extensively regulated under federal and state law. Consequently, the growth and earnings performance of the Corporation and the Banks can be affected not only by management decisions and general economic conditions, but also by the statutes administered by, and the regulations and policies of, various governmental regulatory authorities. Those authorities include, but are not limited to, the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), the FDIC, the Commissioner of the Michigan Office of Financial and Insurance Regulation (“Commissioner”), the Internal Revenue Service, and state taxing authorities. The effect of such statutes, regulations and policies can be significant, and cannot be predicted with a high degree of certainty.

     Federal and state laws and regulations generally applicable to financial institutions and their holding companies regulate, among other things, the scope of business, investments, reserves against deposits, capital levels relative to operations, lending activities and practices, the nature and amount of collateral for loans, the establishment of branches, mergers, consolidations and dividends. The system of supervision and regulation applicable to the Corporation and the Banks establishes a comprehensive framework for their respective operations and is intended primarily for the protection of the FDIC’s deposit insurance funds, the depositors of the Banks, and the public, rather than shareholders of the Banks or the Corporation.

     Federal law and regulations establish supervisory standards applicable to the lending activities of the Banks, including internal controls, credit underwriting, loan documentation and loan-to-value ratios for loans secured by real property.

     The Corporation’s common stock is registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It is therefore subject to the information, proxy solicitation, insider trading and other restrictions and requirements of the SEC under the Exchange Act. On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act provided for numerous changes to the reporting, accounting, corporate governance and business practices of companies as well as financial and other professionals who have involvement with the U.S. public markets.

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     On February 7, 2009, a Bank in the Corporation was presented with a Consent Order from the Federal Deposit Insurance Corporation (FDIC). This Consent Order outlined items which were deemed to require managements prompt attention and correction. Bank management reviewed the Consent Order and after discussions signed the Consent Order agreeing to work through its covenants. This Consent Order is effective March 1, 2009.

The Company

     General. The Corporation, as the sole shareholder of the Banks, is a bank holding company and is registered with, and subject to regulation by, the Federal Reserve Board under the Bank Holding Company Act, as amended (the “BHCA”). Under the BHCA, the Company is subject to periodic examination by the Federal Reserve Board, and is required to file with the Federal Reserve Board periodic reports of its operations and such additional information as the Federal Reserve Board may require.

     In accordance with Federal Reserve Board policy, the Corporation is expected to act as a source of financial strength to the Banks and to commit resources to support the Banks in circumstances where the Corporation might not do so absent such policy. In addition, if the Commissioner deems a bank’s capital to be impaired, the Commissioner may require the bank to restore its capital by a special assessment upon the Corporation as the Bank’s sole shareholder. If the Corporation were to fail to pay any such assessment, the directors of the bank would be required, under Michigan law, to sell the shares of the Bank’s stock owned by the Corporation to the highest bidder at either a public or private auction and use the proceeds of the sale to restore the Bank’s capital.

     Investments and Activities. Under the BHCA, a bank holding company must obtain Federal Reserve Board approval before: (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares (unless it already owns or controls the majority of such shares); (ii) acquiring all or substantially all of the assets of another bank or bank holding company; or (iii) merging or consolidating with another bank holding company. The Federal Reserve Board may allow a bank holding company to acquire banks located in any state of the United States without regard to geographic restrictions or reciprocity requirements imposed by state law, but subject to certain conditions, including limitations on the aggregate amount of deposits that may be held by the acquiring holding company and all of its insured depository institution affiliates.

     The merger or consolidation of an existing bank subsidiary of the Corporation with another bank, or the acquisition by such a subsidiary of assets of another bank, or the assumption of liability by such a subsidiary to pay any deposits in another bank, will require the prior written approval of the responsible Federal depository institution regulatory agency under the Bank Merger Act. In addition, in certain such cases, an application to, and the prior approval of, the Federal Reserve Board under the BHCA and/or the Commissioner under the Michigan Banking Code, may be required.

     With certain limited exceptions, the BHCA prohibits any bank holding company from engaging, either directly or indirectly through a subsidiary, in any activity other than managing or controlling banks unless the proposed non-banking activity is one that the Federal Reserve Board has determined to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Under current Federal Reserve Board regulations, such permissible non-banking activities include such things as mortgage banking, equipment leasing, securities brokerage, and consumer and commercial finance company operations. Well-capitalized and well-managed bank holding companies may engage de novo in certain types of non-banking activities without prior notice to, or approval of, the Federal Reserve Board, provided that written notice of the new activity is given to the Federal Reserve Board within 10 business days after the activity is commenced. If a bank holding company wishes to engage in a non-banking activity by acquiring a going concern, prior notice and/or prior approval will be required, depending upon the activities in which the company to be acquired is engaged, the size of the company to be acquired and the financial and managerial condition of the acquiring bank holding company.

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     A bank holding company whose subsidiary depository institutions all are well-capitalized and well-managed and who have Community Reinvestment Act ratings of at least “satisfactory” may elect to become a financial holding company. A financial holding company is permitted to engage in a broader range of activities than are permitted to bank holding companies.

     Those expanded activities include any activity which the Federal Reserve (in certain instances in consultation with the Department of the Treasury) determines, by order or regulation, to be financial in nature or incidental to such financial activity, or to be complementary to a financial activity and not to pose a substantial risk to the safety or soundness of depository institutions or the financial system generally. Such expanded activities include, among others: insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability or death, or issuing annuities, and acting as principal, agent, or broker for such purposes; providing financial, investment, or economic advisory services, including advising a mutual fund; and underwriting, dealing in, or making a market in securities. The Corporation has not elected to be treated as a financial holding company.

     The BHCA generally does not place territorial restrictions on the domestic activities of non-bank subsidiaries of bank or financial holding companies.

     Federal legislation also prohibits the acquisition of control of a bank holding company, such as the Corporation, by a person or a group of persons acting in concert, without prior notice to the Federal Reserve. Control is defined in certain cases as the acquisition of 10% of the outstanding shares of a bank holding company.

     Capital Requirements. The Federal Reserve Board uses capital adequacy guidelines in its examination and regulation of bank holding companies. If capital falls below minimum guidelines, a bank holding company may, among other things, be denied approval to acquire or establish additional banks or non-bank businesses. These capital guidelines are comparable to those established by the regulatory authorities for the Banks discussed below.

     Dividends. The bank holding company is a corporation separate and distinct from the Banks. Most of the Corporation’s revenues are received by it in the form of dividends paid by the Banks. Thus, the Corporation’s ability to pay dividends to its shareholders is indirectly limited by statutory restrictions on the Banks’ ability to pay dividends described below. Further, in a policy statement, the Federal Reserve Board has expressed its view that a bank holding company experiencing earnings weaknesses should not pay cash dividends exceeding its net income or which can only be funded in ways that weaken the bank holding company’s financial health, such as by borrowing. Additionally, the Federal Reserve Board possesses enforcement powers over bank holding companies and their non-bank subsidiaries to prevent or remedy actions that represent unsafe or unsound practices or violations of applicable statutes and regulations. Among these powers is the ability to proscribe the payment of dividends by banks and bank holding companies. Similar enforcement powers over the Banks are possessed by the FDIC. The “prompt corrective action” provisions of federal law and regulation authorizes the Federal Reserve Board to restrict the payment of dividends by the Corporation for an insured bank which fails to meet specified capital levels.

     In addition to the restrictions on dividends imposed by the Federal Reserve Board, the Michigan Business Corporation Act provides that dividends may be legally declared or paid only if after the distribution a corporation, such as the Corporation, can pay its debts as they come due in the usual course of business and its total assets equal or exceed the sum of its liabilities plus the amount that would be needed to satisfy the preferential rights upon dissolution of any holders of preferred stock whose preferential rights are superior to those receiving the distribution.

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The Banks

     General. The Banks are Michigan banking corporations, and their deposit accounts are insured by the deposit insurance fund of the FDIC. As FDIC-insured Michigan chartered banks, the Banks are subject to the examination, supervision, reporting and enforcement requirements of the Commissioner, as the chartering authority for Michigan banks, and the FDIC, as administrator of the deposit insurance fund. These agencies and the federal and state laws applicable to the Banks and their operations, extensively regulate various aspects of the banking business including, among other things, permissible types and amounts of loans, investments and other activities, capital adequacy, branching, interest rates on loans and on deposits, the maintenance of non-interest bearing reserves on deposit accounts, and the safety and soundness of banking practices.

     Deposit Insurance. As FDIC-insured institutions, the Banks are required to pay deposit insurance premium assessments to the FDIC. Deposit accounts are generally insured u to a maximum of $100,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. Effective October 3, 2008, the Emergency Economic Stabilization Act of 2008 (“EESA”) raised the basic limit on federal deposit insurance coverage from $100,000 to $250,000 per depositor. This increase is effective on a temporary basis until December 31, 2009. Following the adoption of the Federal Deposit Insurance Reform Act of 2005, the FDIC has the opportunity, through its rulemaking authority, to better price deposit insurance for risk than was previously authorized. The FDIC adopted regulations effective January 1, 2007 that created a new system of risk-based assessments. Under the new regulations there are four risk categories, and each insured institution is assigned to a risk category based on capital levels and supervisory ratings. Well-capitalized institutions with CAMELS composite ratings of 1 or 2 are placed in Risk Category I while other institutions are placed in Risk Categories II, III or IV depending on their capital levels and CAMELS composite ratings. The assessment rates may be changed by the FDIC as necessary to maintain the insurance fund at the reserve ratio designated by the FDIC, which currently is 1.25% of insured deposits. The FDIC may set the reserve ratio annually at between 1.15% and 1.50% of insured deposits. Deposit insurance assessments will be collected for a quarter at the end of the next quarter. Assessments will be based on deposit balances at the end of the quarter, except institutions with $1 billion or more in assets and any institutions that become insured on or after January 1, 2007 will have their assessment base determined using average daily balances of insured deposits. In late 2008, the FDIC increased insurance coverage to $250,000 per depositor, per insured bank. This coverage applies to all depositors of an insured bank.

As of September 30, 2008, the reserve ratio of the deposit insurance fund fell to 0.76%. On October 7, 2008, the FDIC established a restoration plan to restore the reserve ratio to at least 1.15% within five years (effective February 27, 2009 the FDIC extended this time to seven years) and proposed rules increasing the assessment rate for deposit insurance and making adjustments to the assessment system. On December 16, 2008, the FDIC adopted and issued a final rule increasing the rates banks pay for deposit insurance uniformly by 7 basis points (annualized) effective January 1, 2009. Under the final rule, risk-based rates for the first quarter 2009 assessment will range between 12 and 50 basis points (annualized). The 2009 first quarter assessment rates established by the FDIC provide that the highest rated institutions, those in Risk Category I, will pay premiums of between 12 and 14 basis points and the lowest rated institutions, those in Risk Category IV, will pay premiums of 50 basis points. On February 27, 2009, the FDIC adopted a final rule amending the way that the assessment system differentiates for risk and setting new assessment rates beginning with the second quarter of 2009. Beginning April 1, 2009, for the highest rated institutions, those in Risk Category I, the initial base assessment rate will be between 12 and 16 basis points and for the lowest rated institutions, those in Risk Category IV, the initial base assessment rate will be 45 basis points. The final rule modifies the means to determine a Risk Category I institution’s initial base assessment rate. It also provides for the following adjustments to an institution’s assessment rate: (1) a decrease for long-term unsecured debt, including most senior and subordinated debt and, for small institutions, a portion of Tier 1 capital; (2) an increase for secured liabilities above a threshold amount; and (3) for institutions in risk categories other than Risk Category I, an increase for brokered deposits above a threshold amount. After applying these adjustments, for the highest rated institutions, those in Risk Category I, the total base assessment rate will be between 7 and 24 basis points and for the lowest rated institutions, those in Risk Category IV, the total base assessment rate will be between 40 and 77.5 basis points.

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     On February 27, 2009, the FDIC also adopted an interim rule, with a request for comments that imposes an emergency special assessment equal to 20 basis points of an institution’s assessment base on June 30, 2009, which will be collected on September 30, 2009. This interim rule also provides for possible additional special assessments of up to 10 basis points at the end of any calendar quarter whenever the FDIC estimates that the deposit insurance fund reserve ratio will fall to a level that the FDIC believes would adversely affect public confidence or to a level close to zero or negative.

     On November 21, 2008, the FDIC adopted final regulations implementing the Temporary Liquidity Guarantee Program (“TLGP”) pursuant to which depository institutions could elect to participate. Pursuant to the TLGP, the FDIC will (i) guarantee, through the earlier of maturity or June 30, 2012, certain newly issued senior unsecured debt issued by participating institutions on or after October 14, 2008 and before June 30, 2009 (the “Debt Guarantee”), and (ii) provide full FDIC deposit insurance coverage for non-interest bearing deposit transaction accounts regardless of dollar amount for an additional fee assessment by the FDIC (the “Transaction Account Guarantee”). These accounts are mainly payment-processing accounts, such as business payroll accounts. The Transaction Account Guarantee will expire on December 31, 2009. Participating institutions will be assessed a 10 basis point surcharge on the portion of eligible accounts that exceeds the general limit on deposit insurance coverage.

     Coverage under the TLGP was available to any eligible institution that did not elect to opt out of the TLGP on or before December 5, 2008. The Banks did not opt out of the Transaction Account Guarantee portion of the TLGP. The Company and the Banks did not opt out of the Debt Guarantee program.

     FICO Assessments. The Banks are subject to assessments to cover the payments on outstanding obligations of the Financing Corporation (“FICO”). FICO was created to finance the recapitalization of the Federal Savings and Loan Insurance Corporation, during the thrift crisis in the 1980s. From now until the maturity of the outstanding FICO obligations in 2019, insured institutions will share the cost of the interest on the FICO bonds on a pro rata basis.

     Commissioner Assessments. Michigan banks are required to pay supervisory fees to the Commissioner to fund the operations of the Commissioner. The amount of supervisory fees paid by a bank is based upon the bank’s total assets, as reported to the Commissioner.

     Capital Requirements. The FDIC has established the following minimum capital standards for state-chartered, FDIC insured non-member banks, such as the Banks: a leverage requirement consisting of a minimum ratio of Tier 1 capital to total average assets of 3% for the most highly-rated banks with minimum requirements of 4% to 5% for all others, and a risk-based capital requirement consisting of a minimum ratio of total capital to total risk-weighted assets of 8%, at least one-half of which must be Tier 1 capital. Tier 1 capital consists principally of shareholders’ equity. These capital requirements are minimum requirements. Higher capital levels will be required if warranted by the particular circumstances or risk profiles of individual institutions.

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     Prompt Corrective Regulatory Action. Federal law provides the federal banking regulators with broad power to take prompt corrective action to resolve the problems of undercapitalized institutions. The extent of the regulators’ powers depends on whether the institution in question is “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” Federal regulations define these capital categories as follows:

	Total	Tier 1
	Risk-Based	Risk-Based
	Capital Ratio	Capital Ratio	Leverage Ratio
Well capitalized	10% or above	6% or above	5% or above
Adequately capitalized	8% or above	4% or above	4% or above
Undercapitalized	Less than 8%	Less than 4%	Less than 4%
Significantly undercapitalized	Less than 6%	Less than 3%	Less than 3%
Critically undercapitalized	—	—	A ratio of tangible equity to total assets of 2% or less

     As of December 31, 2008, each of the Banks’ ratios exceeded minimum requirements for the well capitalized category. On February 7, 2009, West Michigan Community Bank was presented with a Consent Order from the Federal Deposit Insurance Corporation (FDIC). This Consent Order outlined items which were deemed to require prompt attention and correction. Bank directors and management reviewed the Consent Order and after discussions signed the Consent Order agreeing to work through its covenants. This Consent Order is effective March 1, 2009.

     In general, a depository institution may be reclassified to a lower category than is indicated by its capital levels if the appropriate federal depository institution regulatory agency determines the institution to be otherwise in an unsafe or unsound condition or to be engaged in an unsafe or unsound practice. This could include a failure by the institution, following receipt of a less-than-satisfactory rating on its most recent examination report, to correct the deficiency.

     Dividends. Under Michigan law, the Banks are restricted as to the maximum amount of dividends they may pay on their common stock. The Banks may not pay dividends except out of net income after deducting their losses and bad debts. A Michigan state bank may not declare or pay a dividend unless the bank will have surplus amounting to at least 20% of its capital after the payment of the dividend.

     Federal law generally prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized. The FDIC may prevent an insured bank from paying dividends if the bank is in default of payment of any assessment due to the FDIC. In addition, the FDIC may prohibit the payment of dividends by an insured bank, if such payment is determined, by reason of the financial condition of the bank, to be an unsafe and unsound banking practice.

     Insider Transactions. The Banks are subject to certain restrictions imposed by the Federal Reserve Act on any extensions of credit to the Corporation or its subsidiaries, on investments in the stock or other securities of the Corporation or its subsidiaries and the acceptance of the stock or other securities of the Corporation or its subsidiaries as collateral for loans. Certain limitations and reporting requirements are also placed on extensions of credit by the Banks to their directors and officers, to directors and officers of the Corporation and its subsidiaries, to principal shareholders of the Corporation, and to “related interests” of such directors, officers and principal shareholders. In addition, federal law and regulations may affect the terms upon which any person becoming a director or officer of the Corporation or one of its subsidiaries or a principal shareholder of the Corporation may obtain credit from banks with which the Banks maintain a correspondent relationship.

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     Safety and Soundness Standards. The FDIC has adopted guidelines to promote the safety and soundness of federally insured depository institutions. These guidelines establish standards for internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, asset quality and earnings.

     Investments and Other Activities. Under federal law and FDIC regulations, FDIC -insured state banks are prohibited, subject to certain exceptions, from making or retaining equity investments of a type, or in an amount, that are not permissible for a national bank. Federal law, as implemented by FDIC regulations, also prohibits FDIC insured state banks and their subsidiaries, subject to certain exceptions, from engaging as principal in any activity that is not permitted for a national bank or its subsidiary, respectively, unless the bank meets, and continues to meet, its minimum regulatory capital requirements and the FDIC determines the activity would not pose a significant risk to the deposit insurance fund. Impermissible investments and activities must be divested or discontinued within certain time frames set by the FDIC in accordance with federal law. These restrictions are not currently expected to have a material impact on the operations of the Banks.

     Federal law also authorizes insured state banks to engage in financial activities, through subsidiaries, similar to the activities permitted for financial holding companies. If a state bank wants to establish a subsidiary engaged in financial activities, it must meet certain criteria, including that it and all of its affiliated insured depository institutions are well-capitalized and have a Community Reinvestment Act rating of at least “satisfactory” and that it is well-managed. There are capital deduction and financial statement requirements and financial and operational safeguards that apply to subsidiaries engaged in financial activities. Such a subsidiary is considered to be an affiliate of the bank and there are limitations on certain transactions between a bank and a subsidiary engaged in financial activities of the same type that apply to transactions with a bank’s holding company and its subsidiaries.

     Consumer Protection Laws. The Banks’ businesses include making a variety of types of loans to individuals. In making these loans, the Banks are subject to State usury and regulatory laws and to various federal statutes, including the privacy of consumer financial information provisions of the Gramm-Leach-Bliley Act and regulations promulgated there under, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, and the Home Mortgage Disclosure Act, and the regulations promulgated there under, which prohibit discrimination, specify disclosures to be made to borrowers regarding credit and settlement costs, and regulate the mortgage loan servicing activities of the Banks, including the maintenance and operation of escrow accounts and the transfer of mortgage loan servicing. In receiving deposits, the Banks are subject to extensive regulation under State and federal law and regulations, including the Truth in Savings Act, the Expedited Funds Availability Act, the Bank Secrecy Act, the Electronic Funds Transfer Act, and the Federal Deposit Insurance Act. Violation of these laws could result in the imposition of significant damages and fines upon the Banks and its directors and officers.

     Branching Authority. Michigan banks, such as the Banks, have the authority under Michigan law to establish branches in any state, including Michigan, the District of Columbia, a territory or protectorate of the United States or a foreign country, subject to receipt of all required regulatory approvals. Under federal law banks may establish interstate branch networks through merger or consolidation with other banks without regard to whether such activity is contrary to state law. The establishment of de novo interstate branches or the acquisition of individual branches of a bank in another state (rather than the merger or consolidation with an out-of-state bank) is allowed only if specifically authorized by the law of the state where the branch will be established or acquired.

     Michigan law permits both U.S. and non-U.S. banks to establish branch offices in Michigan. The Michigan Banking Code permits, in appropriate circumstances and with the approval of the Commissioner, (1) sale by a Michigan bank of branches to an FDIC-insured bank, savings bank or savings and loan association located in a state in which a Michigan bank could purchase branches of the purchasing entity, (2) consolidation of Michigan banks and FDIC-insured banks, savings banks or savings and loan associations located in other states having laws which permit such a consolidation, (3) establishment of branches in Michigan by FDIC-insured banks located in other states, the District of Columbia or U.S. territories or protectorates having laws permitting a Michigan bank to establish a branch in such jurisdiction, and (4) establishment by foreign banks of branches located in Michigan.

10

Reserve Requirement. Under a regulation promulgated by the Federal Reserve, depository institutions, including the Banks, are required to maintain cash reserves against a stated percentage of their transaction accounts. Effective October 9, 2008, the Federal Reserve Banks are now authorized to pay interest on such reserves. The current reserve requirements are as follows:

• for transaction accounts totaling $10.3 million or less, a reserve of 0%; and

• for transaction accounts in excess of $10.3 million up to and including $44.4 million, a reserve of 3%; and

• for transaction accounts totaling in excess of $44.4 million, a reserve requirement of $1.023 million plus 10% of that portion of the total transaction accounts greater than $44.4 million.

The dollar amounts and percentages reported here are all subject to adjustment by the Federal Reserve.

ITEM 1A. Risk Factors.

     You should carefully consider the following risk factors, together with the other information provided in this Annual Report on Form 10-K.

     If economic conditions deteriorate in our primary market, our results of operations and financial condition could be adversely impacted as borrowers’ ability to repay loans weakens and the value of the collateral securing loans decreases.

          Our financial results may be adversely affected by changes in prevailing economic conditions, including decreases in real estate values, change in interest rates which may cause a decrease in interest rate spreads, adverse employment conditions, the monetary and fiscal policies of federal government and other significant external events. Decreases in real estate values could potentially adversely affect the value of property used as collateral for our mortgage loans. In the event that we are required to foreclose on a property securing a mortgage loan, there can be no assurance that we will recover funds in an amount equal to any remaining loan balance as a result of prevailing general economic conditions, real estate values and other factors associated with the ownership of real property. As a result, the market value of the real estate underlying the loans may not, at any given time, be sufficient to satisfy the outstanding principal amount of the loans. Consequently, we would sustain loan losses and potentially incur a higher provision for loan loss expense. Adverse changes in the economy may also have a negative effect of the ability of borrowers to make timely repayments of their loans, which could have an adverse impact on earnings.

     Continuation of current economic conditions will adversely affect the Corporation’s loan portfolio.

     The Corporation’s success depends to a great extent upon general economic conditions. The Corporation has in general experienced a slowing economy in Michigan since 2001. Unlike larger banks that are more geographically diversified, the Corporation provides banking services to customers primarily in mid-Michigan and, with the March 2004 acquisition of West Michigan Community Bank, in West Michigan. The Corporation’s loan portfolio, the ability of the borrowers to repay these loans, and the value of the collateral securing these loans are impacted by local economic conditions.

     The continuation of the current economic conditions will have many adverse consequences, including the following:

• Loan delinquencies will increase;

• Problem assets and foreclosures will increase;

11

• Demand for the Corporation’s products and services will decline; and

• Collateral for the Corporation’s loans will decline in value, in turn reducing customers’ borrowing power and reducing the value of assets and collateral associated with existing loans.

In addition to local economic conditions in Michigan, the Corporation’s success will also depend in part upon the state of the national economy. The continued downturn in the local or national economy will impact the Corporation’s operations. In addition, the effect of possible future terrorist attacks or war on the Corporation or the local or national economy cannot be known or predicted.

     The Corporation may need additional capital in the future and adequate financing may not be available to it on acceptable terms, or at all.

     We suffered a loss in excess of $12 million during 2008 and as a result, saw our shareholders’ equity decline from $49 million to $36 million. There can be no assurance that we will not suffer additional losses. A number of financial institutions have recently raised considerable amounts of capital as a result of deterioration in their results of operations and financial condition arising from deteriorating economic conditions, declines in real estate values and other factors. Our ability to raise additional capital will depend on conditions in the capital markets, our financial performance, economic conditions and a number of other factors, many of which are outside our control. Accordingly, we cannot be assured of our ability to raise additional capital if needed or on terms acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our financial condition, results of operations and future performance prospects.

     The Corporation has credit risk inherent in its asset portfolio, and its allowance for loan losses may not be sufficient to cover actual loan losses.

     The Banks’ loan customers may not repay their loans according to their respective terms, and any collateral securing the payment of these loans may be insufficient to assure repayment. As a result, the Banks may experience significant credit losses which could have a material adverse effect on the Corporation’s operating results.

     To offset this risk, the Corporation makes various assumptions and judgments about the collectability of the loan portfolios of the Banks, including the creditworthiness of borrowers and the value of the real estate and other assets that may serve as collateral for the repayment of loans. In determining the size of the allowance for loan losses, the Corporation relies on its experience and its evaluation of current economic conditions. If its assumptions prove to be incorrect, its current allowance for loan losses may not be sufficient to cover any loan losses inherent in its loan portfolio and adjustments may be necessary to allow for different economic conditions or adverse developments in its loan portfolio. Material additions to the allowance would materially decrease net income.

     The allowance for loan losses is based upon ranges of estimates and is not intended to imply either limitations on the usage of the allowance or precision of the specific amounts. The Corporation does not view the allowance for loan losses as being divisible among the various categories of loans. The entire allowance is available to absorb any future losses without regard to the category or categories in which the charged-off loans are classified. In addition, federal and state regulators periodically review the Corporation’s allowance for loan losses and may require it to increase the provision for loan losses or recognize additional loan charge-offs. Any increase in the allowance for loan losses or loan charge-offs required by these regulatory agencies could have a material adverse effect on the results of operations and financial condition of the Corporation.

12

     The Corporation has credit risk inherent in its securities portfolio.

     The Corporation maintains diversified securities portfolios, which include obligations of the U.S. Treasury and government-sponsored agencies as well as securities issued by states and political subdivisions, corporate securities, and mortgage-backed securities. The Corporation may also invest in capital securities, which include preferred stocks and trust preferred securities. At December 31, 2008, the Corporation owned (stated at fair value) approximately $2.6 million of common stock in other entities, which primarily represents its minority investments in four Michigan banks and a 24.99% investment in an Arizona bank.

     The Corporation seeks to limit credit losses in its securities portfolios by generally purchasing only highly rated securities (rated “A” or higher by a major debt rating agency) or by conducting significant due diligence on the issuer for unrated securities. However, the Corporation may, in the future, experience losses in its securities portfolio which may be other than temporary in nature and result in charges that could materially adversely affect its results of operations.

     The Corporation’s mortgage-banking revenues are susceptible to substantial variations dependent largely upon factors that the Corporation does not control, such as market interest rates.

     The Corporation’s mortgage-banking revenues are earned in the form of gains on the sale of real estate mortgage loans. The amount of gains realized by the Corporation primarily depends on the volume of loans the Corporation sells, which depends on the Corporation’s ability to originate real estate mortgage loans and the demand for fixed-rate obligations and other loans that are outside of its established interest-rate risk parameters. Net gains on real estate mortgage loans are also dependent upon economic and competitive factors, which are largely outside of the Corporation’s control, as well as the Corporation’s ability to effectively manage exposure to changes in interest rates and can often be a volatile part of its overall revenues.

     Fluctuations in interest rates and economic conditions could reduce the Company’s profitability and negatively affect its capital and liquidity.

     The Company realizes income primarily from the difference between interest earned on loans and investments and the interest paid on deposits and borrowings. The Company’s interest income and interest expense are affected by general economic conditions and by the policies of regulatory authorities. While the Company has taken measures intended to manage the risks of operating in a changing interest rate environment, there can be no assurance that these measures will be effective in avoiding undue interest rate risk. The Company expects that it will periodically experience “gaps” in the interest rate sensitivities of its assets and liabilities, meaning that either its interest-bearing liabilities will be more sensitive to changes in market interest rates than its interest-earning assets, or vice versa. In either event, if market interest rates should move contrary to its position, this “gap” will work against it, and its earnings may be negatively affected.

     The Corporation is unable to predict fluctuations of market interest rates, which are affected by, among other factors, changes in the following:

• inflation or deflation rates;

• levels of business activity;

• recession;

• unemployment levels;

• money supply;

• domestic or foreign events; and

• instability in domestic and foreign financial markets.

     In addition, substantially all of its loans are to businesses and individuals in mid-Michigan and West Michigan, and any decline in the economy of either of these areas could adversely affect it.

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     The Corporation’s operations may be adversely affected if the Corporation is unable to secure adequate funding. The Corporation’s use of wholesale funding sources exposes it to liquidity risk and potential earnings volatility.

     The Corporation relies on wholesale funding to a modest extent, including its revolving credit facility, Federal Home Loan Bank borrowings, and brokered deposits, to augment its core deposits to fund its business. Because wholesale funding sources are affected by general market conditions, the availability of funding from wholesale lenders may be dependent on the confidence these investors have in the Corporation’s commercial and consumer finance operations. The continued availability to the Corporation of these funding sources is uncertain, and it may be difficult to retain or replace brokered deposits at attractive rates as they mature. The Corporation’s liquidity will be constrained if it is unable to renew its wholesale funding sources or if adequate financing is not available in the future at acceptable rates of interest or at all. The Corporation may not have sufficient liquidity to continue to fund new loans, and the Corporation may need to liquidate loans or other assets unexpectedly in order to repay obligations as they mature.

     The Corporation relies heavily on its management team, and the unexpected loss of key managers may adversely affect its operations.

     The Corporation’s success to date has been influenced strongly by its ability to attract and to retain senior management experienced in banking and financial services. The ability to retain executive officers and the current management teams of each of its lines of business will continue to be important to successful implementation of its strategies. The Corporation does not have employment or non-compete agreements with any of these key employees, except that the Corporation entered into non-compete agreements with each of the directors of West Michigan Financial Corp. in connection with the Corporation’s acquisition of West Michigan Financial Corp. and its subsidiaries (including West Michigan Community Bank). The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on the Corporation’s business and financial results.

     Competition with other financial institutions could adversely affect the Corporation’s profitability.

     The Corporation faces vigorous competition from banks and other financial institutions, including savings and loan associations, savings banks, finance companies, mortgage banking companies, credit unions, and other financial organizations. A number of these banks and other financial institutions have substantially greater resources and lending limits, larger branch systems, and a wider array of banking services. To a limited extent, the Corporation also competes with other providers of financial services, such as money market mutual funds, brokerage firms, consumer finance companies, and insurance companies, which are not subject to the same degree of regulation as that imposed on the Banks. As a result, these non-bank competitors may have an advantage over the Corporation in providing certain services, and this competition may reduce or limit the Corporation’s margins on banking services, reduce its market share, and adversely affect its results of operations and financial condition.

     Our securities portfolio may be negatively impacted by fluctuations in market value.

     Our securities portfolio may be impacted by fluctuations in market value, potentially reducing accumulated other comprehensive income and/or earnings. Fluctuations in market value may be caused by decreases in interest rates, lower market prices for securities and lower investor demand. Our securities portfolio is evaluated for other-than-temporary impairment on at lease a quarterly basis. If this evaluation shows an impairment to cash flow connected with one or more securities, a potential loss to earnings may occur.

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     The Corporation operates in a highly regulated environment and may be adversely affected by changes in federal and local laws and regulations.

     The Corporation is subject to extensive regulation, supervision, and examination by federal and state banking authorities. Any change in applicable regulations or federal or state legislation could have a substantial impact on it and its Banks and their operations. Additional legislation and regulations may be enacted or adopted in the future that could significantly affect its powers, authority, and operations, which could increase its costs of doing business and, as a result, give an advantage to its competitors who may not be subject to similar legislative and regulatory requirements. Further, regulators have significant discretion and power to prevent or remedy unsafe or unsound practices or violations of laws by banks and bank holding companies in the performance of their supervisory and enforcement duties. The exercise of regulatory power may have a negative impact on the Corporation’s results of operations and financial condition. The effect of this regulation can be significant and cannot be predicted with a high degree of certainty.

     The Corporation may face challenges in managing its operational risks.

     Like other financial services companies, the Corporation faces a number of operational risks, including the potential for processing errors, internal or external fraud, failure of computer systems, and external events beyond its control such as natural disasters. Acts of fraud are difficult to detect and deter, and the Corporation cannot assure investors that its risk management procedures and controls will prevent losses from fraudulent activity.

There is only a limited trading market for the Corporation’s common stock.

     The Corporation’s common stock is reported on the OTC Bulletin Board under the symbol “FETM.” The development and maintenance of an active trading market depends, however, upon the existence of willing buyers and sellers, the presence of which is beyond the Corporation’s control or the control of any market maker. Although the Corporation is publicly traded and files reports with the SEC, the volume of trading activity in its stock is relatively limited. Even if a more active market develops, there can be no assurance that such a market will continue.

ITEM 1B. Unresolved Staff Comments.

     Not applicable.

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ITEM 2. PROPERTIES

     The Corporation’s executive offices are located at 175 North Leroy Street, Fenton, Michigan, which is also the main office of The State Bank. The State Bank also has the following community offices (all of which are in Michigan):

• Branch — 15095 Silver Parkway, Fenton (owned)

• Branch — 18005 Silver Parkway, Fenton (leased)

• Loan Extension Office — 101 North Leroy Street, Fenton (owned)

• Branch — 107 Main Street, Linden (owned)

• Branch — 4043 Grange Hall Road, Holly (leased)

• Branch — 7606 S Saginaw, Grand Blanc (owned)

• Branch — 1401 E. Hill Road, Grand Blanc (owned)

• Branch — 134 N. First St, Brighton (owned)

• Operations Center — 3202 Owen Road, Fenton (owned)

     Davison State Bank is headquartered in Davison, Michigan, at 625 S. State Street. Davison State Bank also has the following community office (which is in Michigan):

• Branch — 8503 Davison Road, Davison (leased)

     West Michigan Community Bank is headquartered in Hudsonville, Michigan, at 5367 School Avenue. West Michigan Community Bank also has the following community offices (all of which are in Michigan):

• Branch — 3467 Kelly Street, Hudsonville (owned)

• Branch — 81 E. 8^th Street, Holland (leased)

• Branch — 3493 W. Shore Dr, Holland (owned)

• Branch — 437 Baldwin Road, Jenison (owned)

     The Corporation owns the headquarters of each of its three Banks and many of the other bank offices (as noted above). The balance of the bank offices are leased from third parties. All properties have maintenance contracts and are maintained in good condition.

ITEM 3. LEGAL PROCEEDINGS

     From time to time, the Corporation and its subsidiaries are parties to various legal proceedings incident to their business. At December 31, 2008, there were no legal proceedings which management anticipates would have a material adverse effect on the Corporation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted during the fourth quarter of 2008 to a vote of security holders through the solicitation of proxies or otherwise.

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ADDITIONAL ITEM — EXECUTIVE OFFICERS OF REGISTRANT

     The following information concerning executive officers of the Corporation has been omitted from the Registrant’s proxy statement pursuant to Instruction 3 to Regulation S-K, Item 401(b).

     Officers of the Corporation are appointed annually by the Board of Directors of the Corporation and serve at the pleasure of the Board of Directors. Certain of the officers named below are appointed annually by the Board of Directors of one or the other of the Banks and serve at the pleasure of the Board of the Bank that appointed them. The Bank officers are included in the listing of executive officers of the Corporation because of the nature of the office they hold. Information concerning these executive officers is given below:

     Donald L. Grill (age 61) serves as President and Chief Executive Officer of the Corporation and Chief Executive Officer of The State Bank since 1996. From 1983 to 1996, Mr. Grill was employed by First of America Bank Corporation and served as President and Chief Executive Officer of First of America Bank — Frankenmuth.

     Ronald L. Justice (age 44) is the CEO and President of West Michigan Community Bank and Senior Vice President of the Corporation. Prior to holding these positions, he served as the CEO and President of Davison State Bank, Secretary of the Corporation and CFO of the Corporation and its subsidiary Banks. Prior to that, Mr. Justice held other positions with The State Bank.

     Dennis E. Leyder (age 55) was appointed Senior Vice President of the Corporation on December 1, 2004 and was promoted to President and Chief Operating Officer of The State Bank in December 2006. In his new capacity at The State Bank, he is responsible for all retail banking, marketing, trust and investment management. Mr. Leyder has over 25 years of banking experience, all in Genesee County.

     Holly J Pingatore (age 51) is the CEO and President of Davison State Bank and a Senior Vice President of the Corporation. Prior holding this position, she was a Senior Vice President of The State Bank. Prior to joining The State Bank in 1999, Ms. Pingatore served in various capacities at a large Michigan based regional bank.

     Douglas J. Kelley (age 39) was appointed Chief Financial Officer of the Corporation in 2003 and was appointed Senior Vice President of the Corporation on December 1, 2004. Mr. Kelley also serves as Secretary of the Corporation. Prior to being named Chief Financial Officer, he served as Controller and CFO of The State Bank and Davison State Bank. Prior to joining the Banks, Mr. Kelley was an Assistant Vice President and Accounting Officer with Citizens Bank. Mr. Kelley has over 18 years of banking experience.

     Daniel J. Wollschlager (age 58) is the Chief Lending Officer of The State Bank and Davison State Bank as well as a Senior Vice President of The State Bank. Prior to holding these positions, he was a community bank President and CEO.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

     The market, dividend, and holders of record information required by this item appears under the caption “Fentura Financial, Inc. Common Stock” and Table 16 on pages 57 and 58 under the title “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”, of the Company’s 2008 Rule 14a-3 annual report, and is incorporated herein by reference. The performance graph is incorporated by reference from page 58 of the Company’s 2008 Rule 14a-3 annual report. Please refer to the caption “Dividends” under “Item 1. Description of Business” of this Form 10-K for a discussion of regulations which affect our ability to pay dividends.

     The following table summarizes the repurchase activity of the Corporation’s common stock during the quarter ended December 31, 2008:

	Total				Total Number of		Maximum Number of
	Number of		Average		Purchased as		Shares that May Yet
	Share		Price Paid		Publicly Announced		be Purchased Under
	Purchased		per Share		Plans or Programs		the Program
October 1-October 31		0	$	0.00		0		0
November 1-November 30		0	$	0.00		0		0
December 1-December 31		0	$	0.00		0		0
Total		0	$	0.00		0		0

     The Company does not currently have a repurchase program in place.

ITEM 6. SELECTED FINANCIAL DATA

     The information required by this item appears under the title “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — SELECTED FINANCIAL DATA”, appearing in Table 1 on page 37 of the Company’s 2008 Rule 14a-3 annual report, and is incorporated herein by reference.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The information required by this item appears under the title “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”, appearing on pages 37 through 58 of the Company’s 2008 Rule 14a-3 annual report, and is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The information required by this item appears under the headings “Liquidity and Interest Rate Risk Management” on page 53, “Quantitative and Qualitative Disclosure About Market Risk” on page 54 and “Interest Rate Sensitivity Management” on pages 55 under the title “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” of the Company’s 2008 Rule 14a-3 annual report, and is incorporated herein by reference.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements of the Company including the notes thereto and Report of Crowe Horwath LLP, Independent Registered Public Accounting Firm, appear on pages 1 through 36 of the Financial Statements portion of the Corporation’s 2008 Rule 14a-3 annual report, and are incorporated herein by reference. The supplementary data is not required for smaller reporting companies.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None

ITEM 9A(T) CONTROLS AND PROCEDURES

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 15(d)-15(e)) as of the end of the period covered by this Form 10-K Annual 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-K Annual Report was being prepared.

Internal Control over Financial Reporting.

     Management’s Annual Report on Internal Control over Financial Reporting.

The management of Fentura Financial Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Fentura Financial Inc.’s internal control over financial reporting is a process designed under the supervision of the Corporation’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Corporation’s financial statements for external reporting purposes in accordance with United States generally accepted accounting principles.

Fentura Financial Inc.’s management assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2008 based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated Framework.” Based on that assessment, management determined that, as of December 31, 2008, the Corporation’s internal control over financial reporting is effective, based on those criteria.

There was no change in the Corporation’s internal control over financial reporting that occurred during the Corporation’s fiscal quarter ended December 31, 2008, that materially affected, or is reasonably likely to affect, the Corporation’s internal control over financial reporting.

This annual report does not include an attestation report of the Corporation’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Corporation’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Corporation to provide only management’s report in this annual report.

ITEM 9B OTHER INFORMATION

     None

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     The Corporation’s executive officers are identified under “Additional Item” in Part I of this Report on Form 10-K. The other information required by this item appears under the captions “2009 Election of Directors,” “The Corporation’s Board of Directors,” “Code of Ethics,” “Committees of the Corporation Board,” and “Compliance with Section 16 Reporting” on pages 3, 4, 5, 6, 7, 8, 9, 10 and 21, respectively, of the Corporation’s 2009 Notice of Annual Shareholders Meeting and Proxy Statement, and is incorporated herein by reference.

     The Board of Directors of the Corporation has determined that Kenneth R. Elston, a director and member of the Audit Committee, qualifies as an “Audit Committee financial expert” as defined in rules adopted by the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002 and is independent pursuant to NASDAQ listing standards.

     The Board of Directors of the Corporation has adopted a Code of Ethics, which details principles and responsibilities governing ethical conduct for all Corporation directors and executive officers. The Code of Ethics is filed as an Exhibit to this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this item appears under the captions “Director Compensation,” “Report of Compensation/ESOP Committee,” “Executive Compensation,” “Payments upon Termination/Change in Control” and “Compensation/ESOP Committee Interlocks,” on pages 9 through 21 of the Company’s 2009 Notice of Annual Shareholders Meeting and Proxy Statement, and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     The information required by this item appears under the caption “Stock Ownership of Directors, Executive Officers and Certain Major Shareholders” on pages 5 and 6 of the Corporation’s 2009 Notice of Annual Shareholders Meeting and Proxy Statement, and is incorporated herein by reference.

     Securities Authorized for Issuance Under Equity Compensation Plans. The Corporation had the following equity compensation plans at December 31, 2008:

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EQUITY COMPENSATION PLAN INFORMATION

					Number of securities
					remaining available for
					future issuance under
					equity compensation
	Number of securities to		Weighted-average		plans (excluding
	be issued upon exercise		exercise price of		securities reflected
	of outstanding options		outstanding options		in column (1))
Plan Category	(1)		(2)		(3)
Equity compensation plans approved by security holders		26,597	$	29.85		120,400
Equity compensation plans not approved by security holders		0		0		0
Total		26,597	$	29.85		120,400

     These equity compensation plans are more fully described in Note 11 to the Consolidated Financial Statements.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

     The information required by this item appears under the captions “Independence of Directors and Attendance at Meetings” and “Other Information — Transactions with Certain Interested Parties” on pages 7 and 21 respectively, of the Company’s 2009 Notice of Annual Shareholders Meeting and Proxy Statement, and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information required by this item appears under the caption “Relationship with Independent Public Accountants” on pages 20 and 21 of the Company’s 2009 Notice of Annual Shareholders Meeting and Proxy Statement and is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)      1.       Financial Statements:

The following consolidated financial statements of the Corporation and Report of Crowe Horwath LLP, Independent Registered Public Accounting Firm, are incorporated by reference under Item 8 “Financial Statements and Supplementary Data” of this document:

Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial statements
Report of Crowe Horwath LLP, Independent Registered Public Accounting Firm

21

2.	Financial Statement Schedules All schedules are omitted — see Item 15(c) below.
3.	Exhibits: The exhibits listed on the “Exhibit Index” following the signature page of this report are filed herewith and are incorporated herein by reference.

(b)	Exhibits: The “Exhibit Index” follows the signature page of this report and is incorporated herein by reference.
(c)	Financial Statement Schedules: All financial statement schedules normally required by Article 9 of Regulation S-X are omitted since they are either not applicable or the required information is shown in the consolidated financial statements or notes thereto.

22

Signatures

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, dated March 18, 2009.

Fentura Financial, Inc.        (Registrant)
By	/s/Donald L. Grill
	Donald L. Grill
	On behalf of the registrant and as President & CEO
By	/s/Douglas J. Kelley
	Douglas J. Kelley
	Chief Financial Officer (Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each director of the Registrant, whose signature appears below, hereby appoints Forrest A. Shook and Donald L. Grill, and each of them severally, as his or her attorney-in-fact, to sign his or her name and on his or her behalf, as a director of the Registrant, and to file with the Commission any and all amendments to this report on Form 10-K.

Signature	Capacity	Date
/s/Forrest A. Shook Forrest A. Shook	Chairman of the Board Director	March 18, 2009
/s/Donald L. Grill Donald L. Grill	Director	March 18, 2009
/s/Kenneth R. Elston Kenneth R. Elston	Director	March 18, 2009
/s/J. David Karr J. David Karr	Director	March 18, 2009
/s/Thomas P. McKenney Thomas P. McKenney	Director	March 18, 2009
/s/Thomas L. Miller Thomas L. Miller	Director	March 18, 2009
/s/Brian P. Petty Brian P. Petty	Director	March 18, 2009
/s/Douglas W. Rotman Douglas W. Rotman	Director	March 18, 2009
/s/Ian W. Schonsheck Ian W. Schonsheck	Director	March 18, 2009
/s/Sheryl E. Stephens Sheryl E. Stephens	Director	March 18, 2009

23

FENTURA FINANCIAL, INC.

2008 Annual Report on Form 10-K

EXHIBIT INDEX

Exhibit
No.	Exhibit
3(i)	Articles of Incorporation of Fentura Financial, Inc. (Filed herewith).
3(ii)	Bylaws of Fentura Financial, Inc. (Incorporated by reference to Form 10-SB Registration Number 0-23550).
4.1	Amended and Restated Automatic Dividend Reinvestment Plan (Incorporated by reference to Registration Statement on Form S-3 — Registration No. 333-75194).
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 Daniel Wollschlager dated October 24, 2008 (Incorporated by reference from Current Report filed on Form 8-K on October 29, 2008).
10.3	Non-Employee Director Stock Option Plan (Incorporated by reference to Form 10-K SB filed on March 17, 1996).
10.4	Form of Non Employee Stock Option Plan Agreement (Incorporated by reference to Form 10-Q SB filed on May 2, 1996)
10.5	Retainer Stock Option Plan for Directors (Incorporated by reference to Form 10-K SB filed on March 17, 1996).
10.6	Employee Stock Option Plan (Incorporated by reference to Form 10-K SB filed on March 17, 1996).
10.7	Form of Employee Stock Option Plan Agreement (Incorporated by reference to Form 10-K SB filed on March 17, 1996).
10.8	Stock Purchase Plan between The State Bank and Donald E. Johnson, Jr., Mary Alice J. Heaton, and Linda J. LeMieux dated November 17, 1996 (Incorporated by reference to Exhibit 10.19 to the Form 10-K SB filed March 20, 1997).
10.9	Stock Purchase Plan (Incorporated by reference to Exhibit 99.1 Form S-8 filed on August 10, 2004).
10.10	Severance Compensation Agreement between Donald L. Grill. (Incorporated by reference from Current Report on Form 8-K filed on July 24, 2008).
10.11	Severance Compensation Agreement between Ronald L. Justice. (Incorporated by reference from Current Report on Form 8-K filed on July 24, 2008).
10.12	Severance Compensation Agreement between Dennis E. Leyder. (Incorporated by reference from Current Report on Form 8-K filed on July 24, 2008).
10.13	Severance Compensation Agreement between Douglas J. Kelley. (Incorporated by reference from Current Report on Form 8-K filed on July 24, 2008).

24

Exhibit
No.	Exhibit
10.14	Severance Compensation Agreement between Holly J. Pingatore. (Incorporated by reference from Current Report on Form 8-K filed on July 24, 2008).
10.15	Nonqualified Deferred Compensation Plan. (Incorporated by reference from Exhibit 10.11 to the Current report on Form 8-K filed October 29, 2008).
10.16	Fentura Bancorp, Inc. Employee Deferred Compensation and Stock Ownership Plan. (Incorporated by reference to Exhibit 10.13 to the Form 10-K filed March 28, 2005).
10.17	2006 Executive Stock Bonus Plan (Filed as Exhibit 10.1 Form 8-K filed on December 4, 2006).
13	Rule 14a-3 Annual Report to Security Holders (This report, except for those portions which are expressly incorporated by reference in this filing, is furnished for the information of the Securities and Exchange Commission and is not deemed filed as a part of this Report).
14	Code of Ethics for Directors and Executive Officers (Filed herewith).
21.1	Subsidiaries of the Registrant (Filed herewith).
23.1	Consent of Independent Registered Public Accounting Firm (Filed herewith).
24	Powers of Attorney. Contained on the signature page of this report.
31.1	Certificate of 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 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 Chief Executive Office and 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

EX-3.1

EXHIBIT 3.1

This is to Certify that the annexed copy has been compared by me with the record on file in this Department and that the same is a true copy thereof.

This certificate is in due form, made by me as the proper officer, and is entitled to have full faith and credit given it in every court and office within the United States.

In testimony whereof, I have hereunto set my hand,
in the City of Lansing, this 3rd day of May, 2006
 

 , Director

Bureau of Commercial Services 

GOLD SEAL APPEARS ONLY ON ORIGINAL

RECEIVED	FILED
	B74E#7461 1217 DRG & FI $2510.00
DEC 1 1987	DEC 16 1987
MICHIGAN DEPT. OF COMMERCE	Administrator MICHIGAN DEPT. OF COMMERCE Corporation & Securities Bureau

ARTICLES OF INCORPORATION
OF
FENTURA BANCORP, INC.

     These Articles of Incorporation are signed by the Incorporator for the purpose of forming a profit corporation under, and in all respects in compliance with, the provisions of Act No. 284 of the Public Acts of the State of Michigan of 1972, as amended, as follows:

403 566

ARTICLE I

     The name of the Corporation is: Fentura Bancorp, Inc.

ARTICLE II

     The purpose or purposes for which the Corporation is organized is to engage in any activity within the purposes for which corporations may be organized under the Business Corporation Act of the State of Michigan, and to act and operate as a bank holding company as permitted by the Federal Bank Holding Company Act of 1956, as amended.

ARTICLE III

     The aggregate number of shares of all classes of capital stock that the Corporation shall have authority to issue is 1,000,000 shares of Common Stock, of the par value of $5.00 per share (“Common Stock”).

     A statement of the designation and the powers and rights, and the qualifications, limitations or restrictions of the above class of capital stock shall be as follows:

     The Corporation has only one class of capital stock, Common Stock of the par value of $5.00 per share, which has full voting rights and powers and all other rights and powers and no qualifications, limitations or restrictions.

ARTICLE IV

Section 1. The street address of the initial registered office of the Corporation is:

One Fenton Square
Fenton, Michigan 48430-0725

GOLD SEAL APPEARS ONLY ON ORIGINAL

Section 2. The mailing address of the initial registered office of the Corporation is:

One Fenton Square
Drawer E
Fenton, Michigan 48430-0725

Section 3. The name of the initial resident agent of the Corporation at the registered office is:

Robert L. Cole

ARTICLE V

     The name and business address of the incorporator is as follows:

Robert L. Cole
One Fenton Square
Drawer E
Fenton, Michigan 48430-0725

ARTICLE VI

     The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not less than five nor more than twelve directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors, with the term of office of the initial Class I directors to expire at the 1989 annual meeting of shareholders, the term of office of the initial Class II directors to expire at the 1990 annual meeting of shareholders and the term of office of the initial Class III directors to expire at the 1991 annual meeting of shareholders. At each succeeding annual meeting of shareholders beginning in 1989, successors to the class of directors whose term expires at that annual meeting shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders after their election. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such

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class shall hold office for a term that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year at which his or her term expires and thereafter until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor. Any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of not less than 75% of the outstanding shares of capital stock of the Corporation entitled to vote, voting together as a single class.

     Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of shareholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Articles of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article VI unless expressly provided by such terms.

     Any amendment, change or repeal of this Article VI or any other amendment or change of the Articles of Incorporation that will have the effect of modifying or permitting circumvention of this Article VI, shall require the favorable vote, at a meeting of the shareholders of the Corporation, of the holders of at least 75% of the then outstanding shares of capital stock of the Corporation entitled to vote; provided, however, that such 75% vote shall not be required for any such amendment, change or repeal recommended to shareholders by the affirmative vote of not less than three-fourths of the Board of Directors then in office, and such amendment, change or repeal so recommended shall require only the vote, if any, required under the applicable provisions of the Business Corporation Act of the State of Michigan.

ARTICLE VII

     The directors shall have the power to make, alter, amend, change, add to or repeal the Bylaws of the Corpora-

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tion not inconsistent with the provisions of the Articles of Incorporation, or any amendment thereto. The affirmative vote of the holders of not less than 75% of the outstanding shares of capital stock of the Corporation entitled to vote shall be required for the approval and adoption of any amendment, alteration, change, addition to or repeal of the Bylaws of the Corporation proposed by any shareholder of the Corporation.

     Any amendment, change or repeal of this Article VII, or any other amendment of the Articles of Incorporation that will have the effect of modifying or permitting circumvention of this Article VII, shall require the favorable vote, at a meeting of the shareholders of the Corporation, of the holders of a least 75% of the then outstanding shares of capital stock of the Corporation entitled to vote; provided, however, that such 75% vote shall not be required for any such amendment, change or repeal recommended to shareholders by the affirmative vote of not less than three-fourths of the Board of Directors, and such amendment, change or repeal so recommended shall require only the vote, if any, required under the applicable provisions of the Business Corporation Act of the State of Michigan.

ARTICLE VIII

Section 1. The affirmative vote of (i) the holders of not less than 75% of the outstanding shares of capital stock of the Corporation entitled to vote and (ii) the holders of not less than a majority of the outstanding shares of capital stock of the Corporation entitled to vote excluding for purposes of determining the affirmative vote required by this clause (ii) all such shares of which a “Related Person” (as hereinafter defined) shall be a “Beneficial Owner” (as hereinafter defined), shall be required for the approval or authorization of any “Business Combination” (as hereinafter defined) involving a Related Person; provided, however, that the foregoing voting requirements set forth in clauses (i) and (ii) above shall not be applicable, and the provisions of Michigan law relating to the requisite percentage of shareholder approval, if any, determined without regard to this Article VIII shall apply to any such Business Combination if:

          (A) The “Continuing Directors” of the Corporation (as hereinafter defined) by a three-fourths vote thereof have expressly approved the Business Combination either in advance or subsequent to the acquisition of outstanding shares of capital stock of the Corporation that caused the Related Person to become a Related Person; or

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          (B) If each of the following conditions are satisfied:

     (1) The aggregate amount of the cash and the fair market value of the property, securities or other consideration to be received per share of any class or series of capital stock of the Corporation in the Business Combination by holders of such capital stock of the Corporation, other than the Related Person involved in the Business Combination, is not less than the “Highest Per Share Price” or the “Highest Equivalent Price” (as these terms are hereinafter defined), paid or to be paid by the Related Person in acquiring any of such class or series of the capital stock of the Corporation outside of such Business Combination; and

     (2) A proxy statement complying with the requirements of the Securities Exchange Act of 1934, as amended, shall have been mailed to all shareholders of the Corporation for the purpose of soliciting shareholder approval of the Business Combination. The proxy statement shall contain at the front thereof, in a prominent place, the position of the Continuing Directors as to the advisability (or inadvisability) of the Business Combination and, if deemed advisable by a majority of the Continuing Directors, the opinion of an investment banking firm selected by the Continuing Directors as to the fairness of the terms of the Business Combination, from the point of view of the holders of the outstanding shares of capital stock of the Corporation other than any Related Person.

Section 2. For purpose of this Article VIII:

          (A) The term “Business Combination” means (i) any merger, consolidation or share exchange of the Corporation or any of its subsidiaries into or with any member of any Related Person, in each case irrespective of which corporation or company is the surviving entity; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with any member of any Related Person (in a single transaction or a series of related transactions) of all or a Substantial Part (as hereinafter defined) of the assets of the Corporation (including without limitation any securities of a subsidiary) or a Substantial Part of the assets of any of its subsidiaries; (iii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to or with the Corporation or to or with any of its subsidiaries (in a single transaction or series of related

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transactions) of all or a Substantial Part of the assets of any member of any Related Person; (iv) the issuance or transfer of any securities, or of any rights, warrants or options to acquire any securities, of the Corporation or any of its subsidiaries by the Corporation or any of its subsidiaries to any member of any Related Person (other than an issuance or transfer of securities, or of any rights, warrants or options to acquire any securities, which is effected on a pro rata basis to all shareholders of the Corporation); (v) the acquisition by the Corporation or any of its subsidiaries of any securities, or of any rights, warrants or options to acquire any securities, of any member of any Related Person; and (vi) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Business Combination.

     (B) The term “Related Person” shall mean any individual, corporation, partnership or other person or entity, including any member of a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934 as in effect at the date of the filing of the Articles of Incorporation of the Corporation; such Act and such Rules and Regulations promulgated thereunder, collectively and as so in effect, being hereinafter referred to as the “Exchange Act”), and any “Affiliate” or “Associate” (as defined in Rule 12b-2 of the Exchange Act) of any such individual, corporation, partnership or other person or entity that, as of the record date for the determination of shareholders entitled to notice of and to vote on any Business Combination, or immediately prior to the consummation of such transaction, together with their Affiliates and Associates, are “Beneficial Owners” (as defined in Rule l3d-3 of the Exchange Act) in the aggregate of 10% or more of the outstanding shares of any class or series of capital stock of the Corporation.

     (C) The term “Substantial Part” shall mean more than 10% of the fair market value, as determined by three-fourths of the Continuing Directors, of the total consolidated assets of the Corporation and its subsidiaries taken as a whole, as of the end of its most recent fiscal year ending prior to the time the determination is being made.

     (D) For the purposes of subparagraph (B)(1) of Section 1 of this Article VIII, the term “other consideration to be received” shall include, without limitation, Common Stock or other capital stock of the Corporation retained by shareholders of the Corporation other than Related Persons or parties to such Business Combination in the event of a Business Combination in which the Corporation is the surviving corporation.

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     (E) The term “Continuing Director” shall mean a director who either (i) was a member of the Board of Directors of the Corporation immediately prior to the time that the Related Person involved in a Business Combination became a Related Person, or (ii) has been designated (before his or her initial election as director) as a Continuing Director by a majority of the then Continuing Directors.

     (F) A “Related person” shall be deemed to have acquired a share of the capital stock of the Corporation at the time when such Related Person became a Beneficial Owner thereof. With respect to the shares owned by Affiliates, Associates or other persons whose ownership is aggregated with that of a Related Person under the foregoing definition of Related Person, if the price paid by such Related Person for such shares is not determinable by the Continuing Directors, such price shall be deemed to be the higher of (i) the price paid upon the acquisition thereof by the Affiliate, Associate or other person or (ii) the market price of the shares in question at the time when the Related Person became a Beneficial Owner thereof.

     (G) The terms “Highest Per Share Price” and “Highest Equivalent Price” as used in this Article VIII shall mean the following: If there is only one class of capital stock of the Corporation issued and outstanding, the Highest Per Share Price shall mean the highest price that can be determined to have been paid at any time or to have been agreed to be paid, by the Related Person for any share or shares of that class of capital stock. If there is more than one class of capital stock of the Corporation issued and outstanding, the Highest Equivalent Price shall mean with respect to each class and series of capital stock of the Corporation, the amount determined by three-fourths of the Continuing Directors, on whatever basis they believe is appropriate, to be the highest per share price equivalent for each such class or series of the highest price that can be determined to have been paid at any time, or to have been agreed to be paid, by the Related Person for any share or shares of any class or series of capital stock of the Corporation. In determining the Highest Per Share Price and Highest Equivalent Price, all acquisitions by the Related Person shall be taken into account regardless of whether the shares were acquired before or after the Related Person became a Related Person. The Highest Per Share Price and the Highest Equivalent Price shall also include any brokerage commissions, transfer taxes and soliciting dealers’ fees paid by the Related Person with respect to the shares of capital stock of the Corporation acquired by the Related Person.

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Section 3. The Board of Directors of the Corporation shall have the power and duty to determine for the purposes of this Article VIII on the basis of information then known to it (i) whether any person is an Affiliate or Associate of another person, (ii) the extent to which any person is the Beneficial Owner of Shares of any class or series of capital stock of the Corporation, (iii) whether any proposed sale, lease, exchange or other disposition of part of the properties or assets of the Corporation involves a Substantial Part of the properties or assets of the Corporation, (iv) the value of the Highest Per Share Price and Highest Equivalent Price, and (v) whether a proposed transaction is subject to the provisions of this Article VIII and such other matters with respect to which a determination is required under this Article VIII. Any such determination by the Board shall be conclusive and binding for all purposes of this Article VIII.

Section 4. The affirmative vote required by this Article VIII is in addition to the vote of the holders of any class or series of capital stock of the Corporation otherwise required by law, the Articles of Incorporation, any resolution that has been adopted by the Board of Directors providing for the issuance of a class or series of capital stock or any agreement between the Corporation and any securities exchange.

Section 5. Any amendment, change or repeal of this Article VIII, or any other amendment of the Articles of Incorporation that will have the effect of modifying or permitting circumvention of this Article VIII, shall require the favorable vote, at a meeting of the shareholders of the Corporation, of (i) the holders of at least 75% of the then outstanding shares of capital stock of the Corporation entitled to vote and (ii) a majority of the outstanding shares of capital stock of the Corporation entitled to vote of which a Related Person is not a Beneficial Owner; provided however, that this Section 5 shall not apply to, and such 75% and majority vote shall not be required for, any such amendment, change or repeal recommended to shareholders by the affirmative vote of not less than three- fourths of the Continuing Directors, and such amendment, change or repeal so recommended shall require only the vote, if any, required under the applicable provisions of the Business Corporation Act of the State of Michigan.

ARTICLE IX

     The Corporation shall be, and is hereby declared to be, subject to the provisions of Chapter 7a of the Business Corporation Act of the Sate of Michigan, as enacted through the adoption of Act No. 115 of the Public Acts of the State of Michigan of 1984, and as the same may be amended from

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time to time. The requirements therein provided and made applicable with respect to the Corporation shall be in addition to all other requirements of law and other provisions of the Articles of Incorporation, or any amendment thereto.

ARTICLE X

     A director of this Corporation shall not be personally liable to this Corporation or its shareholders for monetary damages for a breach of the director’s fiduciary duty, except in the event of any of the following:

(a)	A breach of the director’s duty of loyalty to the Corporation or its shareholders.
(b)	Acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law.
(c)	A violation of Section 551(1) of the Business Corporation Act of the State of Michigan, as amended.
(d)	A transaction from which the director derived an improper personal benefit.
(e)	Acts or omissions occurring before the date that these Articles of Incorporation become effective upon filing with the appropriate agency of the State of Michigan.

     The undersigned Incorporator signs his name this 30th day of November, 1987.

/s/ Robert L. Cole  

Robert L. Cole 

86135 — 0001
BJKT0399

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DOCUMENT WILL BE RETURNED TO NAME AND MAILING
ADDRESS INDICATED IN THE BOX BELOW. Include name, street and
number (or P.O. box), city, state and ZIP code.

Melinda K. Johnson Miller, Canfield, Paddock & Stone	Name of person or organization remitting fees:
1400 N. Woodward, P.O. Box 2014 Bloomfield Hills, MI 48303-2014
	Preparer’s name and business telephone number:
	(               )

GOLD SEAL APPEARS ONLY ON ORIGINAL

MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES CORPORATION SECURITIES AND LAND DEVELOPMENT BUREAU
Date Received	ADJUSTED TO AGREE WITH BUREAU RECORDS	(FOR BUREAU USE ONLY)
MAR 25 1997	ADJUSTED TO AGREE WITH BUREAU RECORDS			FILED MAR 26 1997 Administrator MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
David D. Warner Jaffe, Raitt, Heuer & Weiss, P.C. 1 Woodward Ave Ste 2400 Detroit, MI 48226-3418
			EFFECTIVE DATE:

G Document will be returned to the name and address you enter above G

CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION

For use by Domestic Profit and Nonprofit Corporations
(Please read information and instructions on the last page)

     Pursuant to the provisions of Act 284, Public Acts of 1972 (profit corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the undersigned corporation executes the following Certificate:

1.	The present name of the corporation is: Fentura Bancorp, Inc.
2.	The identification number assigned by the Bureau is: 403 — 566
3.	The location of the registered office is:
One Fenton Square, Fenton, Michigan 48430 — 0725

4. Article III of the Articles of Incorporation is hereby amended to read as follows:

Article III

     The aggregate number of shares of all classes of capital stock that the Corporation shall have authority to issue is 2,000,000 shares of Common Stock (“Common Stock”), all of which will be of the same class, with full voting rights and powers and all other rights and powers and no qualifications, limitations or restrictions.

GOLD SEAL APPEARS ONLY ON ORIGINAL

5.	(For amendments adopted by unanimous consent of incorporators before the first meeting of the board of directors or trustees.)
	The foregoing amendment to the Articles of Incorporation was duly adopted on the                      day of                                         , 19___, in accordance with the provisions of the Act by the unanimous consent of the incorporator(s) before the first meeting of the Board of Directors or Trustees.

Signed this            day of                     , 19                    

(Signature)	(Signature)
(Type or Print Name)	(Type or Print Name)
(Signature)	(Signature)
(Type or Print Name)	(Type or Print Name)

6.	(For profit corporations, and for nonprofit corporations whose articles state the corporation is organized on a stock or membership basis.)
	The foregoing amendment to the Articles of Incorporation was duly adopted on the 19th day of March, 1997 by the shareholders is a profit corporation, or by the shareholders or members if a nonprofit corporation (check one of the following)

þ at a meeting. The necessary votes were cast in favor of the amendment.

o by written consent of the shareholders or members having not less than the minimum number of votes required by statute in accordance with Section 407(1) and (2) of the Act if a nonprofit corporation, or Section 407(1) of the Act if a profit corporation. Written notice to shareholders or members who have not consented in writing has been given. (Note: Written consent by less than all of the shareholders or members is permitted only if such provision appears in the Articles of Incorporation.)

o by written consent of all the shareholders of members entitled to vote in accordance with Section 407(3) of the Act if a nonprofit corporation, or Section 407(2) of the Act if a profit corporation.

Signed this 20th day of March, 1997
By:	/s/ Donald L. Grill
	(Signature of President, Vice-President, Chairperson or Vice-Chairperson)  Donald L. Grill, President

GOLD SEAL APPEARS ONLY ON ORIGINAL

Michigan Department of Consumer and Industry Services

Filing Endorsement

This is to Certify that the CERTIFICATE OF AMENDMENT — CORPORATION

for

FENTURA BANCORP, INC.

ID NUMBER: 403566

received by facsimile transmission on May 8, 2000 is hereby endorsed

Filed on May 9, 2000 by the Administrator.

The document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.

In testimony whereof, I have hereunto set my hand and affixed the Seal of the Department, in the City of Lansing, this 9th day of May, 2000.

 , Director

Corporation, Securities and Land Development Bureau

GOLD SEAL APPEARS ONLY ON ORIGINAL

MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
Date Received	(FOR BUREAU USE ONLY)
	This document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.

Name
David D. Warner
Address
One Woodward Avenue, Suite 2400
City	State	Zip Code
Detroit,	MI	48226-3418	EFFECTIVE DATE:

ÇDocument will be returned to the name and address you enter above. È
If left blank document will be mailed to the registered office.

CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Profit and Nonprofit Corporations
(Please read information and instructions on the last page)

     Pursuant to the provisions of Act 284, Public Acts of 1972 (profit corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the undersigned corporation executes the following Certificate:

1.	The present name of the corporation is: Fentura Bancorp, Inc.
2.	The identification number assigned by the Bureau is: 403 — 566
3.	Article III of the Articles of Incorporation is hereby amended to read as follows:

ARTICLEIII

     The aggregate number of shares of all classes of capital stock that the Corporation shall have authority to issue is 5,000,000 shares of Common Stock (“Common Stock”), all of which will be of the same class, with full voting rights and powers and all other rights and powers and no qualifications, limitations or restrictions.

GOLD SEAL APPEARS ONLY ON ORIGINAL

COMPLETE ONLY ONE OF THE FOLLOWING:

4. (For amendments adopted by unanimous consent of incorporators before the first meeting of the board of directors or trustees.)

The foregoing amendment to the Articles of Incorporation was duly adopted on the                      day of                      19___, in accordance with the provisions of the Act by the unanimous consent of the incorporator(s) before the first meeting of the Board of Directors or Trustees.

    Signed this                      day of                     , 19          

(Signature)	(Signature)
(Type or Print Name)	(Type or Print Name)
(Signature)	(Signature)
(Type or Print Name)	(Type or Print Name)

5. (For profit and nonprofit corporations whose Articles state the corporation is organized on a stock or on a membership basis.)

The foregoing amendment to the Articles of Incorporation was duly adopted on the 26th day of April, 2000 by the shareholders if a profit corporation, or by the shareholders or members if a nonprofit corporation (check one of the following)

þ at a meeting the necessary votes were cast in favor of the amendment.

o by written consent of the shareholders or members having not less than the minimum number of votes required by statute in accordance with Section 407(1) and (2) of the Act if a nonprofit corporation, or Section 407(1) of the Act if a profit corporation. Written notice to shareholders or members who have not consented in writing has been given. (Note: Written consent by less than all of the shareholders or members is permitted only if such provision appears in the Articles of Incorporation.)

o by written consent of all the shareholders or members entitled to vote in accordance with section 407(3) of the Act if a nonprofit corporation, or Section 407(2) of the Act if a profit corporation.

o by the board of a profit corporation pursuant to section 611(2).

Profit Corporations		Nonprofit Corporations
Signed this 28th day of April 2000		Signed this ____ day of                      19 ____
By	/s/ Donald L. Grill	By
	(Signature of an authorized officer or agent)		(Signature of President, Vice-President, Chairperson or Vice-Chairperson)
	Donald L. Grill, President
	(Type or Print Name)		(Type or Print Name)     (Type or Print Title)

GOLD SEAL APPEARS ONLY ON ORIGINAL

Michigan Department of Consumer and Industry Services

Filing Endorsement

This is to Certify that the CERTIFICATE OF AMENDMENT— CORPORATION

for

FENTURA FINANCIAL, INC.

ID NUMBER: 403566

received by facsimile transmission on April 30, 2002 is hereby endorsed

Filed on May 1, 2002 by the Administrator.

The document is effective on the date filed, unless a
subsequent effective date within 90 days after
received date is stated in the document.

In testimony whereof, I have hereunto set my
hand and affixed the Seal of the Department,
in the City of Lansing, this 1st day
of May, 2002.
 

, Director   

Bureau of Commercial Services 

GOLD SEAL APPEARS ONLY ON ORIGINAL
Sent by facsimile Transmission (Illegible)

MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES BUREAU OF COMMERCIAL SERVICES
Date Received	(FOR BUREAU USE ONLY)
	This document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.

Name
VARNUM, RIDDERING, SCHMIT & HOWETT LLP
Address
P.O. BOX 352
City	State	Zip Code
GRAND RAPIDS	MI	49501-0352	EFFECTIVE DATE:

Document will be returned to the name and address you enter above.
If left blank document will be mailed to the registered office.

CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Profit and Nonprofit Corporations
(Please read information and instructions on the last page)

     Pursuant to the provisions of Act 284, Public Acts of 1972 (profit corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the undersigned corporation executes the following Certificate:

1.	The present name of the corporation is: FENTURA BANCORP, INC.
2.	The identification number assigned by the Bureau is: 403566
3.	Article I of the Articles of Incorporation is hereby amended to read as follows:
	The name of the Corporation is Fentura Financial, Inc.

GOLD SEAL APPEARS ONLY ON ORIGINAL

COMPLETE ONLY ONE OF THE FOLLOWING:

4. (For amendments adopted by unanimous consent of incorporators before the first meeting of the board of directors or trustees.)

The foregoing amendment to the Articles of Incorporation was duly adopted on the                      day of                     ,                     , in accordance with the provisions of the Act by the unanimous consent of the incorporator(s) before the first meeting of the Board of Directors or Trustees.

Signed this                      day of                     ,                     

(Signature)	(Signature)
(Type or Print Name)	(Type or Print Name)
(Signature)	(Signature)
(Type or Print Name)	(Type or Print Name)

5. (For profit and nonprofit corporations whose Articles state the corporation is organized on a stock or on a membership basis.)

The foregoing amendment to the Articles of Incorporation was duly adopted on the 24th day of April, 2002, by the shareholders if a profit corporation, or by the shareholders or members if a nonprofit corporation (check one of the following)

þ  at a meeting the necessary votes were cast in favor of the amendment.

o  by written consent of the shareholders or members having not less than the minimum number of votes required by statute in accordance with Section 407 (1) and (2) of the Act if a nonprofit corporation, or Section 407(1) of the Act if a profit corporation. Written notice to shareholders or members who have not consented in writing has been given. (Note: Written consent by less than all of the shareholders or members is permitted only if such provision appears in the Articles of Incorporation.)

o  by written consent of all the shareholders or members entitled to vote in accordance with section 407(3) of the Act if a nonprofit corporation, or Section 407(2) of the Act if a profit corporation.

o  by the board of a profit corporation pursuant to section 611(2).

	Profit Corporations		Nonprofit and Professional Service Corporations
Signed this 24th day of APRIL, 2002			Signed this                      day of                     ,
By	/s/ Donald L. Grill	By
	(Signature of an authorized officer or agent)		(Signature of President, Vice-President, Chairperson or Vice-Chairperson)
	DONALD L. GRILL, PRESIDENT
	(Type or Print Name)		(Type or Print Name)        (Type or Print Title)

GOLD SEAL APPEARS ONLY ON ORIGINAL

Michigan Department of Consumer and Industry Services

Filing Endorsement

This is to Certify that the MERGER DOCUMENT

for

FENTURA FINANCIAL, INC.

ID NUMBER: 403566

received by facsimile transmission on March 29, 2004 is hereby endorsed filed on April 2, 2004 by the Administrator. The document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.

	In testimony whereof, I have hereunto set my
	hand and affixed the Seal of the Department,
	in the City of Lansing, this 2nd day
	of April, 2004.
	, Director
	Bureau of Commercial Services
GOLD SEAL APPEARS ONLY ON ORIGINAL
Sent by Facsimile Transmission 04093

MICHIGAN DEPARTMENT OF LABOR AND ECONOMIC GROWTH BUREAU OF COMMERCIAL SERVICES
Date Received	(FOR BUREAU USE ONLY)
	This document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.

Name
MICHELE M. CARLSON
Address			EFFECTIVE DATE:  Expiration date for new assumed names: December 31, Expiration date for transferred assumed names appear in Item 6
P.O. BOX 352
City	State	Zip Code
GRAND RAPIDS	MI	49501-0352

Document will be returned to the name and address you enter above.
If left blank document will be mailed to the registered office.

CERTIFICATE OF MERGER
For use by Parent and Subsidiary Profit Corporations
(Please read information and instructions on last page)

Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned corporation executes the following Certificate:

1. a.	The name of each constituent corporation and its identification number is:
	Fentura Financial, Inc. 403566
	West Michigan Financial Corporation 428673

b.	The name of the surviving corporation and its identification number is:
	Fentura Financial, Inc. 403566

   c. For each subsidiary corporation, state:  

	Number of outstanding	Number of shares owned by the
Name of corporation	shares in each class	parent corporation in each class
West Michigan Financial Corporation	1,000 Shares Common	1,000 Shares Common
	$1.00 Par Value	$1.00 Par Value

GOLD SEAL APPEARS ONLY ON ORIGINAL

d. The manner and basis of converting the shares of each constituent corporation is as follows: There will be no conversion of shares. On the Effective Date of Merger each share of common stock of West Michigan Financial Corporation stock will be cancelled and each share of Fentura Financial, Inc. stock will remain issued and outstanding.

e. The amendments to the Articles or a Restatement of the Articles of Incorporation of the surviving corporation to be effected by the merger are as follows: There shall be no amendments to or restatement of the Articles of Incorporation of the Surviving Corporation effected by the Plan of Merger.

f.	Other provisions with respect to the merger are as follows:
	NONE

GOLD SEAL APPEARS ONLY ON ORIGINAL

2.	This merger is permitted by the state or country under whose law it is Incorporated and each foreign corporation has complied with that law in effecting the merger.
3.	(Delete if not applicable) The consent to the merger by the shareholders of the subsidiary corporation was obtained pursuant to its Articles of Incorporation. (Such consent is necessary if the Articles of Incorporation require approval of the merger by the vote of the holders of more than the percentage of the shares owned by the parent corporation.)
4.	(Delete if not applicable) The consent to the merger by the shareholders of the parent corporation was obtained (Such consent is necessary if its Articles of Incorporation require shareholder approval of the merger, the plan of merger amends its Articles of Incorporation, or a subsidiary is to be the surviving corporation.)
5.	(Complete only if an effective date is desired other than the date of filing) The merger shall be effective the                      day of                                         ,                      .

Signed this 22nd day of March, 2004
Fentura Financial, Inc.
(Name of parent corporation)
By	/s/ Donald L. Grill
	(Signature of an authorized officer or agent)
Donald L. Grill, President
(Type or Print Name)

Certificate of Merger Fentura and West Michigan Financial_1

GOLD SEAL APPEARS ONLY ON ORIGINAL

Michigan Department of Labor & Economic Growth

Filing Endorsement

This is to Certify that the CERTIFICATE OF AMENDMENT — CORPORATION

for

FENTURA FINANCIAL, INC.

ID NUMBER: 403566

received by facsimile transmission on January 23, 2009 is hereby endorsed Filed on January 23, 2009 by the Administrator.

The document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.

In testimony whereof, I have hereunto set my hand and affixed the Seal of the Department, in the City of Lansing, this 23RD day of January, 2009.  

, Director  

Bureau of Commercial Services 

Sent by Facsimile Transmission 09023

MICHIGAN DEPARTMENT OF LABOUR & ECONOMIC GROWTH BUREAU OF COMMERCIAL SERVICES
Date Received	(FOR BUREAU USE ONLY)
	This document is effective on the date filed, unless a subsequent effective date within 90 days after received date is stated in the document.

Name
Joseph B. Hemker, Esq., Howard & Howard Attorneys PLLC
Address
151 8. Ross Street, Suite 800
City	State	Zip Code
Kalamazoo	MI	49007	EFFECTIVE DATE:

Ç Document will be returned to the name and address you enter above. È
If left blank document will be mailed to the registered office.

CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
For use by Domestic Profit and Nonprofit Corporations
(Please read information and instructions on the last page)

Pursuant to the provisions of Act 284, Public Acts of 1972, (profit corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the undersigned corporation executes the following Certificate:

1. The present name of the corporation is: FENTURA FINANCIAL, INC.

2. The identification number assigned by the Bureau is: 403566

3. Article III of the Articles of Incorporation is hereby amended to read as follows:

     See Exhibit A attached hereto.

COMPLETE ONLY ONE OF THE FOLLOWING:

4. Profit or Nonprofit Corporation: For amendments adopted by unanimous consent of Incorporators before the first meeting of the board of directors or trustees.

The foregoing amendment to the Articles of Incorporation was duly adopted on the                      day of                     ,                     , in accordance with the provisions of the Act by the unanimous consent of the incorporator(s) before the first meeting of the Board of Directors or Trustees.

                                        Signed this                      day of                                                 ,                     

(Signature)	(Signature)
(Type or Print Name)	(Type or Print Name)
(Signature)	(Signature)
(Type or Print Name)	(Type or Print Name)

5. Profit Corporation Only: Shareholder or Board Approval

The foregoing amendment to the Articles of Incorporation proposed by the board was duly adopted on the 23rd day of January, 2009, by the: (check one of the following)

þ shareholders at a meeting in accordance with Section 611(3) of the Act.

o written consent of the shareholders having not less than the minimum number of votes required by statute in accordance with Section 407(1) of the Act. Written notice to shareholders who have not consented in writing has been given. (Note: Written consent by less than all of the shareholders is permitted only if such provision appears in the Articles of Incorporation.)

o written consent of all the shareholders entitled to vote in accordance with Section 407(2) of the Act.

o board of a profit corporation pursuant to section 611(2) of the Act.

Profit Corporations and Professional Service Corporations
Signed this 23rd day of January, 2009
By	/s/ Donald L. Grill
	(Signature of an authorized officer or agent)

Donald L. Grill, President  

(Type or Print Name) 

EXHIBIT A

FENTURA FINANCIAL, INC.

AMENDMENT TO ARTICLES OF INCORPORATION

ARTICLE III

     The total number of shares of all classes of the capital stock which the Corporation has authority to issue is 5,200,000, which shall be divided into a class of 5,000,000 shares of common stock and a class of 200,000 shares of preferred stock.

Preferred Stock

     Subject to the limitations and restrictions set forth in this Article III, the board of directors is authorized and empowered at any time, and from time to time, to designate and issue any authorized and unissued preferred stock (whether or not previously designated as shares of a particular series, and including preferred stock of any series issued and thereafter acquired by the Corporation) as shares of one or more series, hereby or hereafter to be designated. Each different series of preferred stock may vary as to dividend rate, redemption price, liquidation price, voting rights and conversion rights, if any, all of which shall be fixed as hereinafter provided. Each series of preferred stock issued hereunder shall be so designated as to distinguish the shares thereof from the shares of the other series and classes. All preferred stock of any one series shall be alike in every particular.

     The rights, qualifications, limitations or restrictions or each series of preferred stock shall be as stated and expressed in the resolution or resolutions adopted by the board of directors which provides for the issuance of such series, which resolutions may include, but shall not be limited to, the following:

(i)	The distinctive designation and number of shares comprising such series, which number may (except where otherwise provided by the board of directors in creating such series) be increased or decreased (but not below the number of shares then outstanding) from time to time by action of the board of directors;
(ii)	The rate of the dividends thereon and the relation which such dividends shall bear to the dividends payable on any other class of capital stock or any other series of preferred stock, the terms and conditions upon which and the periods in respect of which dividends shall be payable, whether and upon what conditions such dividends shall be cumulative and if cumulative, the date or dates from which dividends shall accumulate;
(iii)	The amount per share, if any, which the holders of preferred stock of such series shall be entitled to receive, in addition to any dividends accrued and unpaid thereon, (a) upon the redemption thereof, plus the premium payable upon redemption, if any; or (b) upon the voluntary liquidation, dissolution or winding up of the Corporation; or (c) upon the involuntary liquidation, dissolution or winding up of the Corporation;

(iv)	The conversion or exchange rights, if any, of such series, including without limitation, the price or prices, rate or rates, provision for the adjustment thereof (including provisions for protection against the dilution or impairment of such rights), and all other terms and conditions upon which preferred stock constituting such series may be convertible into, or exchangeable for shares of any other class or classes or series;
(v)	Whether the shares of such series shall be redeemable, and, if redeemable, whether redeemable for cash, property or rights, including securities of any other corporation, at the option of either the holder or the Corporation or upon the happening of a specified event, the limitations and restrictions with respect to such redemption, the time or times when, the price or prices or rate or rates at which, the adjustments with which and the manner in which such shares shall be redeemable, including the manner of selecting shares of such series for redemption if less than all shares are to be redeemed;
(vi)	Whether the shares of such series shall be subject to the operation of a purchase, retirement, or sinking fund, and, if so, whether and upon what conditions such purchase, retirement or sinking fund shall be cumulative or noncumulative, the extent to which and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof;
(vii)	The voting rights per share, if any, of each such series, and whether and under what conditions the shares of such series (alone or together with the shares of one or more other series) shall be entitled to vote separately as a single class, upon any merger, share exchange or other transaction of the Corporation, or upon any other matter, including (without limitation) the elections of one or more additional directors of the Corporation in case of dividend arrearage or other specified events; and
(viii)	Whether the issuance of any additional shares of such series, or of any shares of any other series shall be subject to restrictions of such series, as the board of directors may deem advisable and as shall not be inconsistent with the provisions of these articles of incorporation.

Common Stock

     No shares of common stock shall be entitled to any preferences, and each share of common stock shall be equal to every other share of such class of stock in every respect. At all meetings of shareholders of the Corporation, the holders of the common stock shall be entitled to one vote for each share of common stock held by them of record.

2

EX-13

Exhibit 13

Rule 14a-3 Annual Report

FENTURA FINANCIAL, INC.

FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
December 31, 2008 and 2007

and

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FENTURA FINANCIAL, INC.

Fenton, Michigan
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	1
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS	2
CONSOLIDATED STATEMENTS OF INCOME	3
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	5
CONSOLIDATED STATEMENTS OF CASH FLOWS	6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7-36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS	37-59

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Fentura Financial, Inc.
Fenton, Michigan

We have audited the accompanying consolidated balance sheets of Fentura Financial, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Fentura Financial, Inc. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008 in conformity with U.S. generally accepted accounting principles.

Crowe Horwath LLP

Grand Rapids, Michigan
March 17, 2009

FENTURA FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2008 and 2007

(000’s omitted except share and per share data)

	2008			2007
ASSETS
Cash and due from banks	$	20,953		$	22,734
Federal funds sold		0			7,300
Total cash and cash equivalents		20,953			30,034
Securities available for sale, at fair value		52,722			71,792
Securities held to maturity (fair value 2008 - $8,220; 2007 - $8,714)		7,955			8,685
Loans held for sale		690			1,655
Loans, net of allowance of 2008- $11,773; 2007- $8,554		447,536			462,849
Bank premises and equipment		18,669			20,101
Accrued interest receivable		2,405			2,813
Bank owned life insurance		7,282			7,042
Goodwill		0			7,955
Acquisition intangibles		293			485
Federal Home Loan Bank stock		2,032			2,032
Equity investment		1,360			3,089
Other real estate owned		6,349			2,003
Other assets		10,358			7,484
Total Assets	$	578,604		$	628,019
LIABILITIES AND STOCKHOLDERS EQUITY
Deposits:
Non-interest-bearing deposits	$	73,685		$	75,148
Interest-bearing deposits		436,043			468,355
Total deposits		509,728			543,503
Short-term borrowings		1,500			649
Federal Home Loan Bank advances		14,707			11,030
Repurchase agreements		0			5,000
Subordinated debentures		14,000			14,000
Note payable		1,000			0
Accrued taxes, interest and other liabilities		1,545			4,341
Total liabilities		542,480			578,523
Stockholders’ equity
Common stock — $0 par value, 5,000,000 shares authorized, shares issued and outstanding 2,185,765 — 2008; 2,163,385 — 2007		42,778			42,478
Retained earnings (deficit)		(4,677	)		7,488
Accumulated other comprehensive income (loss)		(1,977	)		(470	)
Total stockholders equity		36,124			49,496
Total liabilities and stockholders equity	$	578,604		$	628,019

See accompanying notes to consolidated financial statements. 2

FENTURA FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31, 2008, 2007 and 2006

(000’s omitted except share and per share data)

	2008			2007			2006
Interest income
Loans, including fees	$	30,206		$	34,964		$	35,131
Securities:
Taxable		2,192			3,217			3,461
Tax-exempt		588			722			809
Short-term investments		157			311			515
Total interest income		33,143			39,214			39,916
Interest expense
Deposits		13,365			16,404			14,743
Other borrowings		1,663			2,217			2,165
Total interest expense		15,028			18,621			16,908
Net interest income		18,115			20,593			23,008
Provision for loan losses		8,402			7,466			1,120
Net interest income after provision for loan losses		9,713			13,127			21,888
Non-interest income
Service charges on deposit accounts		2,938			3,421			3,708
Gain on sale of mortgage loans		338			402			615
Trust and investment services income		1,818			1,901			1,554
Gain (loss) on sale of securities		0			2			(2	)
Loss on equity investment		(1,729	)		(199	)		0
Other income and fees		1,722			2,052			1,768
Total non-interest income		5,087			7,579			7,643
Non-interest expense
Salaries and employee benefits		11,127			12,183			12,738
Occupancy		2,096			2,090			1,858
Furniture and equipment		1,978			2,139			2,140
Loan and collection		1,037			753			320
Advertising and promotional		422			486			624
Loss on security impairment		843			0			0
Goodwill impairment charge		7,955			0			0
Telephone and communication services		396			570			538
Other professional services		1,238			1,143			1,066
Other general and administrative		2,462			2,470			2,702
Total non-interest expense		29,554			21,834			21,986
Income (loss) before taxes		(14,754	)		(1,128	)		7,545
Federal income taxes (benefit)		(2,589	)		(661	)		2,237
Net income (loss)	$	(12,165	)	$	(467	)	$	5,308
Per share:
Earnings (loss) — basic	$	(5.60	)	$	(0.22	)	$	2.48
Earnings (loss)— diluted		(5.60	)		(0.22	)		2.47

See accompanying notes to consolidated financial statements. 3

FENTURA FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2008, 2007 and 2006

(000’s omitted except share and per share data)

	2008			2007			2006
Net income (loss)	$	(12,165	)	$	(467	)	$	5,308
Other comprehensive income:
Unrealized holding gains (losses) on available for sale securities		(2,283	)		737			558
Less: reclassification adjustment for (gains) and losses later recognized in income		0			(2	)		2
Net unrealized gains (losses)		(2,283	)		739			556
Tax effect		776			(251	)		(189	)
Other comprehensive income (loss), net of tax		(1,507	)		488			367
Comprehensive income (loss)	$	(13,672	)	$	(21	)	$	5,675

See accompanying notes to consolidated financial statements. 4

FENTURA FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

Years ended December 31, 2008, 2007 and 2006

(000’s omitted except share and per share data)

							Accumulated
							Other			Total
	Common			Retained			Comprehensive			Stockholders
	Stock			Earnings			Income (Loss)			Equity
Balance, January 1, 2006	$	34,491		$	13,729		$	(1,325	)	$	46,895
Net Income		0			5,308			0			5,308
Cash Dividends ($0.94 per share)		0			(2,069	)		0			(2,069	)
Stock Dividend		6,850			(6,850	)		0			0
Issuance of shares under stock purchase and dividend reinvestment plans (22,541 shares)		742			0			0			742
Stock compensation expense		20			0			0			20
Issuance of shares under stock option exercise (4,046 shares)		55			0			0			55
Other comprehensive loss (net of tax)		0			0			367			367
Balance, December 31, 2006		42,158			10,118			(958	)		51,318
Net loss		0			(467	)		0			(467	)
Cash Dividends ($1.00 per share)		0			(2,163	)		0			(2,163	)
Issuance of shares under stock purchase and Dividend reinvestment plans (27,412 shares)		818			0			0			818
Stock repurchase (17,184 shares)		(520	)		0			0			(520	)
Stock compensation expense		16			0			0			16
Issuance of shares under stock option exercise (295 shares)		6			0			0			6
Other comprehensive income (net of tax)		0			0			488			488
Balance, December 31, 2007		42,478			7,488			(470	)		49,496
Net loss		0			(12,165	)		0			(12,165	)
Issuance of shares under stock purchase and Dividend reinvestment plans (22,380 shares)		292			0			0			292
Stock compensation expense		8			0			0			8
Other comprehensive income (net of tax)		0			0			(1,507	)		(1,507	)
Balance, December 31, 2008	$	42,778		$	(4,677	)	$	(1,977	)	$	36,124

See accompanying notes to consolidated financial statements. 5

FENTURA FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2008, 2007 and 2006

(000’s omitted except share and per share data)

	2008			2007			2006
OPERATING ACTIVITIES:
Net income (loss)	$	(12,165	)	$	(467	)	$	5,308
Adjustments to reconcile net income to cash Provided by Operating Activities:
Stock compensation expense		8			16			20
Depreciation and amortization		1,333			1,863			2,008
Provision for loan losses		8,402			7,466			1,120
Loans originated for sale		(24,609	)		(21,709	)		(37,099	)
Proceeds from the sale of loans		25,912			22,682			36,530
Gain on sales of loans		(338	)		(402	)		(615	)
(Gain) Loss on sale of other real estate		(4	)		11			19
Write downs to other real estate owned		268			339			0
(Gain) Loss on sale of securities		0			(2	)		2
(Gain) Loss on sale of fixed assets		(118	)		(11	)		0
(Gain) Loss on equity investment		1,729			199			0
(Gain) Loss on security impairment		843			0			0
Goodwill impairment charge		7,955			0			0
Earnings from bank owned life insurance		(240	)		(227	)		(236	)
Net (increase) decrease in interest receivable & other assets		(2,462	)		(4,374	)		(1,132	)
Net increase (decrease) in interest payable & other liabilities		(2,021	)		(1,780	)		1,329
Total Adjustments		16,658			4,071			1,946
Net Cash Provided By (Used In) Operating Activities		4,493			3,604			7,254
Cash Flows From Investing Activities:
Proceeds from maturities of securities — HTM		1,474			1,819			5,063
Proceeds from maturities of securities — AFS		8,675			15,040			15,178
Proceeds from calls of securities — HTM		0			140			925
Proceeds from calls of securities — AFS		12,662			4,700			975
Proceeds from sales of securities — AFS		1,999			3,000			1,103
Purchases of securities — HTM		(750	)		0			(3,050	)
Purchases of securities — AFS		(7,068	)		(1,482	)		(8,568	)
Equity investment purchase		0			(3,288	)		0
Net increase in loans		(1,258	)		(26,872	)		(13,830	)
Purchase of FHLB stock		0			0			(132	)
FHLB stock buy back		0			0			400
Sales of other real estate owned		3,555			1,458			603
Acquisition of premises and equipment, net		92			(4,779	)		(3,744	)
Net Cash Provided By (Used in) Investing Activities		19,381			(10,264	)		(5,077	)
Cash Flows From Financing Activities:
Net increase (decrease) in deposits		(33,775	)		14,948			501
Net increase (decrease) in short term borrowings		851			(851	)		(37	)
Net increase (decrease) in repurchase agreements		(5,000	)		(5,000	)		0
Proceeds from Notes payable		1,000			0			0
Proceeds from FHLB advances		128,615			9,000			4,000
Repayments of FHLB advances		(124,938	)		(9,022	)		(7,020	)
Net proceeds from stock issuance and repurchase		292			336			817
Cash dividends		0			(2,163	)		(2,069	)
Net Cash Provided By (Used In) Financing Activities		(32,955	)		7,248			(3,808	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		(9,081	)		588			(1,631	)
CASH AND CASH EQUIVALENTS — BEGINNING		30,034			29,446			31,077
CASH AND CASH EQUIVALENTS — ENDING	$	20,953		$	30,034		$	29,446
CASH PAID FOR:
Interest	$	15,619		$	18,964		$	16,341
Income taxes	$	(1,276	)	$	(418	)	$	1,781
NONCASH DISCLOSURES:
Transfers from loans to other real estate	$	8,169		$	2,552		$	1,567

See accompanying notes to consolidated financial statements. 6

FENTURA FINANCIAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Principles of Consolidation: The consolidated financial statements include Fentura Financial, Inc. (the Corporation) and its wholly owned subsidiaries, The State Bank in Fenton, Michigan; Davison State Bank in Davison, Michigan; and West Michigan Community Bank in Hudsonville, Michigan (“the Banks”), as well as Fentura Mortgage Company, West Michigan Mortgage Company, LLC, and the other subsidiaries of the Banks. Intercompany transactions and balances are eliminated in consolidation.

The Corporation provides banking and trust services principally to individuals, small businesses and governmental entities through its eleven community banking offices in Genesee, Livingston, and Oakland Counties in southeastern Michigan and five community banking offices in Ottawa and Kent Counties in west Michigan. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets and real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. Real estate loans are secured by both residential and commercial real estate. The Corporation’s exposure to credit risk is substantially affected by the economy in the Corporation’s market area. Other financial instruments which potentially represent concentrations of credit risk include deposit accounts in other financial institutions and federal funds sold.

Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, the carrying value of goodwill and the fair values of securities and other financial instruments are particularly subject to change.

Cash Flows: Cash and cash equivalents, includes cash, deposits with other financial institutions under 90 days, and federal funds sold. Net cash flows are reported for customer loan and deposit transactions and short-term borrowings.

Securities: Securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Securities are classified as available for sale when they might be sold before maturity. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income.

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments, except for mortgage-backed securities, where prepayments are anticipated. Gains and losses on sales are based on the amortized cost of the security sold. Securities are written down to fair value when a decline in fair value is not temporary.

Declines in the fair value of securities below their cost that are other than temporary are reflected as realized losses. In estimating other-than-temporary losses, management considers: the length of time and extent the fair value has been less than cost, the financial condition and near term prospects of the issuer, and the Corporation’s ability and intent to hold the security for a period sufficient to allow for any anticipated recovery in fair value.

7

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses. Loans held for sale are reported at the lower of cost or market, on an aggregate basis and are sold with servicing rights released.

Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. Interest income is not reported when full loan repayment is in doubt, typically when the loan is impaired or payments are past due over 90 days (180 days for residential mortgages).

All interest accrued but not received for loans placed on nonaccrual are reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses: The allowance for loan losses is a valuation allowance for probable incurred credit losses, increased by the provision for loan losses and decreased by charge-offs less recoveries. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. Loan losses are charged against the allowance when management believes the uncollectbility of a loan balance is confirmed. Consumer loans are typically charged off no later than 120 days past due.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired or loans otherwise classified as substandard or doubtful. The general component covers non-classified loans and is based on historical loss experience adjusted for current factors.

A loan is impaired when full payment under the loan terms is not expected. Commercial and commercial real estate loans are individually evaluated for impairment. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans are collectively evaluated for impairment, and accordingly, they are not separately identified for impairment disclosures.

Other Real Estate Owned and Foreclosed Assets: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less estimated selling costs when acquired, establishing a new cost basis. If fair value declines, a valuation allowance is recorded through expense. Costs after acquisition are expensed.

8

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 15 to 40 years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 7 years.

Federal Home Loan Bank (FHLB) stock: The Banks are members of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Equity Investment: The Corporation made an investment in 2007 of 24.99% ownership in Valley Capital Bank headquartered in Mesa, Arizona. This investment is recorded utilizing the equity method of accounting. Gains or losses on the investment are recorded through the income statement. The balance sheet value of this investment is adjusted for the gains or losses resulting from the equity method of accounting. During 2008 the Corporation recognized $1,729,000 of losses related to this equity investment.

Long-term Assets: Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

Bank Owned Life Insurance: The Banks have purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, in accordance with EITF 06-5, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Goodwill: Goodwill results from prior business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment is recognized in the period identified. Goodwill is further discussed in Note 7 to the financial statements.

Acquisition Intangibles: Acquisition intangibles consist of core deposit, acquired customer and trust relationship intangible assets arising from acquisitions. They are initially measured at fair value and then are amortized on an accelerated method over their estimated useful lives. Acquisition intangibles are assessed at least annually for impairment and any such impairment will be recognized in the period identified.

Stock Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Corporation’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award.

9

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

The Corporation adopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), as of January 1, 2007. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Prior to 2007, the Corporation accounted for contingencies associated with certain tax positions in accordance with SFAS No. 5, Accounting for Contingencies, which provides the recording of a contingency based on the probability of certain events to transpire that range from probable to remote as opposed to applying a more likely than not recognition threshold. The adoption had no effect on the Corporation’s financial statements.

The Corporation recognizes interest and/or penalties related to income tax matters in income tax expense.

Loan Commitments and Financial Instruments: Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and standby letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.

Earnings Per Common Share: Basic earnings per common share are net income divided by the weighted average number of common shares outstanding during the period. Employee Stock Ownership Plan (ESOP) shares are considered outstanding for this calculation unless unearned. Diluted earnings per common share include the dilutive effect of additional potential common shares issuable under stock options. Earnings and dividends per share are restated for all stock splits and dividends through the date of issue of the financial statements.

Comprehensive Income: Comprehensive income consists of net income (loss) and other comprehensive income (loss). Other comprehensive income includes unrealized gains and losses on securities available for sale, which are also recognized as separate components of equity.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there now are such matters that will have a material effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank of $1,611,000 and $753,000 was required to meet regulatory reserve and clearing requirements at year-end 2008 and 2007 respectively.

10

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Banks to the Corporation or by the Corporation to shareholders. West Michigan Community Bank has been restricted from dividend payments due to the signing of a Consent Order with the Federal Deposit Insurance Corporation (FDIC).

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

Operating Segments: While the Corporation’s chief decision-makers monitor the revenue streams of the various Corporation products and services, operations are managed and financial performance is evaluated on a Corporate-wide basis. Accordingly, all of the Corporation’s financial service operations are considered by management to be aggregated in one reportable operating segment.

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

Effect of Newly Issued Accounting Standards:

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement establishes a fair value hierarchy about the assumptions used to measure fair value and clarifies assumptions about risk and the effect of a restriction on the sale or use of an asset. The standard was effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of FAS 157 for all nonfinancial assets and all nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Corporation adopted the standard effective January 1, 2008 and applicable disclosures have been added to the Notes to Consolidated Financial Statements. On October 10, 2008, the FASB issued Staff Position (FSP) 157-3, Determining the Fair Value of a Financial Asset when the Market for That Asset Is Not Active which illustrates key considerations in determining fair value of a financial asset when the market for that asset is not active. The FSP provides clarification for how to consider various inputs in determining fair vale under current market conditions consistent with the principles of FAS 157. The adoption of this FSP was not material.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The standard provides companies with an option to report selected financial assets and liabilities at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The new standard is effective for the Corporation on January 1, 2008. The Corporation did not elect the fair value option for any financial assets or financial liabilities as of January 1, 2008.

11

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In September 2006, the FASB Emerging Issues Task Force finalized Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements. This issue requires that a liability be recorded during the service period when a split-dollar life insurance agreement continues after participants’ employment or retirement. The required accrued liability will be based on either the post-employment benefit cost for the continuing life insurance or based on the future death benefit depending on the contractual terms of the underlying agreement. This issue is effective on January 1, 2008. The impact of adoption was not material.

On November 5, 2007, the SEC issued Staff Accounting Bulletin No. 109, Written Loan Commitments Recorded at Fair Value through Earnings (“SAB 109”). Previously, SAB 105, Application of Accounting Principles to Loan Commitments, stated that in measuring the fair value of a derivative loan commitment, a company should not incorporate the expected net future cash flows related to the associated servicing of the loan. SAB 109 supersedes SAB 105 and indicates that the expected net future cash flows related to the associated servicing of the loan should be included in measuring fair value for all written loan commitments that are accounted for at fair value through earnings. SAB 105 also indicated that internally-developed intangible assets should not be recorded as part of the fair value of a derivative loan commitment, and SAB 109 retains that view. SAB 109 is effective for derivative loan commitments issued or modified in fiscal quarters in 2008. The Corporation adopted SAB 109 and the impact of the adoption was not material.

In December 2007, the SEC issued SAB No. 110, which expresses the views of the SEC regarding the use of a “simplified” method, as discussed in SAB No. 107, in developing an estimate of expected term of “plain vanilla” share options in accordance with SFAS No. 123(R), Share-Based Payment. The SEC concluded that a corporation could, under certain circumstances, continue to use the simplified method for share option grants after December 31, 2007. The Corporation does not use the simplified method for share options and therefore SAB No. 110 has no impact to the Corporation’s consolidated financial statements.

12

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 2 — EARNINGS PER SHARE

The factors in the earnings per share computation follow (adjusted for 10% stock dividend paid on August 4, 2006).

	2008			2007			2006
000’s omitted except share and per share data
Basic
Net income (loss)	$	(12,165	)	$	(467	)	$	5,308
Weighted average common shares outstanding		2,174,226			2,159,586			2,141,388
Basic earnings per common share	$	(5.60	)	$	(0.22	)	$	2.48
Diluted
Net income (loss)	$	(12,165	)	$	(467	)	$	5,308
Weighted average common shares outstanding for basic earnings per common share		2,174,226			2,159,586			2,141,388
Add: Dilutive effects of assumed exercises of stock options		0			0			4,674
Average shares and dilutive potential common shares		2,174,226			2,159,586			2,146,062
Diluted earnings per common share	$	(5.60	)	$	(0.22	)	$	2.47

Stock options for 26,597, 24,447 and 14,255 shares of common stock were not considered in computing diluted earnings per common share for 2008, 2007 and 2006 respectively, because they were antidilutive.

13

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 3 — SECURITIES

Year-end securities were as follows (000’s omitted):

Available for Sale

			Gross		Gross
	Fair		Unrealized		Unrealized
	Value		Gains		Losses
2008
U.S. Government and federal agency	$	11,216	$	216	$	0
Mortgage-backed		31,802		127		(2,393	)
State and municipal		7,967		42		(161	)
Equity securities		1,737		0		(826	)
	$	52,722	$	385	$	(3,380	)
2007
U.S. Government and federal agency	$	21,152	$	41	$	(37	)
Mortgage-backed		40,562		140		(662	)
State and municipal		6,823		25		(61	)
Equity securities		3,255		47		(207	)
	$	71,792	$	253	$	(967	)

Held to Maturity

			Gross		Gross
	Amortized		Unrecognized		Unrecognized			Fair
	Cost		Gains		Losses			Value
2008
Mortgage-backed	$	3	$	0	$	0		$	3
State and municipal		7,952		275		(10	)		8,217
	$	7,955	$	275	$	(10	)	$	8,220
2007
Mortgage-backed	$	6	$	0	$	0		$	6
State and municipal		8,679		61		(32	)		8,708
	$	8,685	$	61	$	(32	)	$	8,714

Sales of available for sale securities were as follows (000’s omitted):

	2008		2007		2006
Proceeds	$	1,999	$	3,000	$	1,103
Gross gains		0		2		0
Gross losses		0		0		(2	)

14

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 3 — SECURITIES (Continued)

Contractual maturities of securities at year-end 2008 were as follows. Securities not due at a single maturity date, primarily mortgage-backed and equity securities, are shown separately (000’s omitted).

	Held to Maturity				Available for Sale
	Amortized		Fair		Fair
	Cost		Value		Value
Due in one year or less	$	2,088	$	2,100	$	7,108
Due from one to five years		3,534		3,684		4,108
Due from five to ten years		1,960		2,072		4,949
Due after ten years		370		361		3,018
Mortgage-backed securities		3		3		31,802
Equity securities		0		0		1,737
	$	7,955	$	8,220	$	52,722

Securities pledged at year-end 2008 and 2007 had a carrying amount of $31,247,000 and $33,380,000 and were pledged to secure public deposits and borrowings.

At year-end 2008 and 2007, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

Securities with unrealized losses at year-end 2008 and 2007, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows:

2008 (000’s omitted)	Less than 12 Months					12 Months or More					Total
Description of	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	Value		Loss			Value		Loss			Value		Loss
State & municipal	$	2,790	$	(91	)	$	1,583	$	(80	)	$	4,373	$	(171	)
Mortgage-backed		3,968		(83	)		19,550		(2,310	)		23,518		(2,393	)
Equity securities		1,049		(598	)		188		(228	)		1,237		(826	)
Total temporarily impaired	$	7,807	$	(772	)	$	21,321	$	(2,618	)	$	29,128	$	(3,390	)

2007 (000’s omitted)	Less than 12 Months					12 Months or More					Total
Description of	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Securities	Value		Loss			Value		Loss			Value		Loss
US Government & federal agency	$	5,985	$	(15	)	$	6,978	$	(22	)	$	12,963	$	(37	)
State & municipal		509		(2	)		5,601		(91	)		6,110		(93	)
Mortgage-backed		27,849		(662	)		0		0			27,849		(662	)
Equity securities		1,034		(192	)		18		(15	)		1,052		(207	)
Total temporarily impaired	$	35,377	$	(871	)	$	12,597	$	(128	)	$	47,974	$	(999	)

15

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 3 — SECURITIES (Continued)

The Corporation evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and the ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of the reviews of the issuer’s financial condition.

In 2008, the Corporation recognized other-than-temporary impairment of $843,000 on a single investment. This impairment was recognized prior to the cessation of operations of the related financial institution.

Unrealized losses have not been recognized into income because the issuers are of high credit quality, management has the intent and ability to hold for the foreseeable future, and the decline in fair value is largely due to increased market interest rates. The fair value is expected to recover as the bonds approach their maturity date or if market rates decline prior to maturity. With respect to equity securities, accounted for under the cost method management believes that the unrealized losses on these instruments are temporary. This is due to the nature of the companies invested in being primarily denovo banks which are expected to have net losses during their first few years of operation. Management works directly with these institutions and is kept abreast of their financial status on a regular basis, in some cases participating in their Board meetings. Management reviews capital levels and performance ratios of these denovo banks. Management anticipates that each of these institutions will improve their performance in the near future and their market value will improve.

NOTE 4 — LOANS

Major categories of loans at December 31, are as follows (000’s omitted):

	2008		2007
Commercial	$	311,520	$	318,555
Real estate — construction		51,823		54,892
Real estate — mortgage		39,027		39,817
Consumer		56,939		58,139
		459,309		471,403
Less allowance for loan losses		11,773		8,554
	$	447,536	$	462,849

The Corporation originates primarily residential and commercial real estate loans, commercial, construction and installment loans. The Corporation estimates that the majority of their loan portfolio is based in Genesee, Oakland and Livingston counties within southeast Michigan; in Kent and Ottawa counties in west Michigan, with the remainder of the portfolio distributed throughout Michigan. The ability of the Corporation’s debtors to honor their contracts is dependent upon the real estate and general economic conditions in these areas.

16

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 4- LOANS (Continued)

Certain directors and executive officers of the Corporation, including their affiliates are loan customers of the Banks. Total loans to these persons at December 31, 2008 and 2007 amounted to $15,581,000 and $13,398,000 respectively. During 2008, $2,531,000 of new loans was made to these persons, and repayments totaled $348,000.

Activity in the allowance for loan losses for the years is as follows (000’s omitted)

	2008			2007			2006
Balance, beginning of year	$	8,554		$	6,692		$	6,301
Provision for loan losses		8,402			7,466			1,120
Loans charged off		(5,740	)		(5,859	)		(877	)
Loan recoveries		557			255			148
Balance, end of year	$	11,773		$	8,554		$	6,692

Loan impairment is measured by estimating the expected future cash flows and discounting them at the respective effective interest rate or by valuing the underlying collateral. The recorded investment in these loans is as follows at December 31, (000’s omitted):

	2008		2007
Year end loans not requiring allocation	$	19,086	$	11,197
Year end loans requiring allocation		29,090		18,186
	$	48,176	$	29,383
Amount of the allowance for loan losses allocated	$	5,642	$	2,751

	2008		2007		2006
Average of individually impaired loans during the year	$	47,508	$	17,073	$	4,439
Interest income recognized during impairment		386		599		130
Cash-basis interest income recognized		386		599		130

Nonaccrual loans and loans past due 90 days still on accrual were as follows:

(000’s omitted)	2008		2007
Loans past due over 90 days still on accrual	$	667	$	54
Renegotiated loans		942		431
Nonaccrual loans		24,325	$	13,056

Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

17

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 5 — OTHER REAL ESTATE OWNED

Other real estate owned at December 31 was (000’s omitted):

	2008			2007
Beginning balance	$	2,003		$	1,248
Transfers into other real estate		8,169			2,552
Sales of other real estate owned		(3,555	)		(1,458	)
Write downs of other real estate owned		(268	)		(339	)
Ending balance	$	6,349		$	2,003

Net gains (losses) on sales of other real estate were $4,000 in 2008, ($11,000) in 2007 and ($19,000) in 2006. Due to declining real estate values, the Corporation experienced write-downs of other real estate owned of $268,000 in 2008 and $339,000 in 2007. Carrying costs associated with other real estate owned totaled $621,000 in 2008 and $420,000 in 2007.

NOTE 6 — PREMISES AND EQUIPMENT, NET

Bank premises and equipment is comprised of the following at December 31 (000’s omitted):

	2008		2007
Land and land improvements	$	5,525	$	5,721
Building and building improvements		16,231		16,043
Furniture and equipment		10,203		9,568
Construction in progress		0		1,169
		31,959		32,501
Less accumulated depreciation		13,290		12,400
	$	18,669	$	20,101

Depreciation expense was $1,458,000, $1,543,000 and $1,507,000 for 2008, 2007 and 2006, respectively.

The Corporation leases property for certain branches and ATM locations. Rent expense for 2008 was $251,000, for 2007 was $300,000 and for 2006 was $325,000. Rent commitments under non-cancelable operating leases were as follows, before considering renewal options that generally are present (000’s omitted).

2009	$	209
2010		197
2011		176
2012		173
2013		105
	$	860

18

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 7 — GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill relates to the acquisition of West Michigan Financial Corporation during 2004.

Acquired Intangible Assets

Acquired intangible assets related to the 2004 acquisition of West Michigan Financial Corporation were as follows as of year-end (000’s omitted):

			Accumulated
	Gross Carrying		Amortization
Amortized intangible assets	Amounts		2008		2007
Core deposit assets	$	1,509	$	1,216	$	1,037
Customer relationship intangibles		216		216		203
Total	$	1,725	$	1,432	$	1,240

Aggregate amortization expense was $192,000, $274,000 and $316,000 for 2008, 2007 and 2006, respectively.

Estimated amortization expense for each of the next five years (000’s omitted):

2009	$	136
2010		94
2011		52
2012		11
2013		0

The weighted average remaining amortization period for the intangible assets is 1.79 years.

In December 2008, the Corporation prepared a valuation analysis of goodwill and other intangibles as required under Statement of Financial Accounting Standards (SFAS) No. 142 “Goodwill and Other Intangible Assets” and SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. The analysis of goodwill was completed by developing the implied fair value of the Corporation’s equity utilizing three different evaluation methods as follows: discounted cash flow analysis of future earnings; comparable transaction method, based on the equity value of the sale of other banks that have recently occurred; and publicly traded method, based primarily by the Corporation’s stock price and the market capitalization of comparable companies. As a result, the Corporation took a pre-tax non-cash impairment charge of $7,955,000 against goodwill in the fourth quarter of 2008.

Like many publicly traded financial institutions, during 2008 the Corporation’s stock price and market capitalization declined below its book value, and the Corporation sustained higher credit losses and related costs to administrate credit. Throughout the financial services sector, these trends were not uncommon. As a result of its goodwill impairment analysis, the Corporation determined it was necessary to record this impairment charge. The Corporation does not have a goodwill balance at December 31, 2008.

19

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 8 — DEPOSITS

The following is a summary of deposits at December 31 (000’s omitted):

	2008		2007
Noninterest-bearing:
Demand	$	73,685	$	75,148
Interest-bearing:
Savings		76,096		86,778
Money market demand		103,138		98,362
Time, $100,000 and over		138,436		160,633
Time, $100,000 and under		118,373		122,582
	$	509,728	$	543,503

Brokered deposits totaled approximately $67,127,000 and $76,261,000 at December 31, 2008 and 2007. At December 31, 2008 and 2007, brokered deposits had interest rates ranging from 4.00% to 5.40% and 4.70% to 5.40%, respectively, and maturities ranging from five months to forty-six months.

Scheduled maturities of time deposits at December 31, were as follows (000’s omitted):

	2008		2007
In one year	$	137,060	$	178,369
In two years		59,126		36,338
In three years		29,175		26,530
In four years		25,499		21,460
In five years		5,782		20,351
Thereafter		167		167
	$	256,809	$	283,215

Deposits from principal officers, directors, and their affiliates at year-end December 31, 2008 and 2007 were $5,605,000 and $12,758,000.

20

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 9 — BORROWINGS

Short-Term Borrowings

Short-term borrowings consist of term federal funds purchased and treasury tax and loan deposits and generally are repaid within one to 120 days from the transaction date.

Federal Home Loan Bank Advances

At year-end, advances from the FHLB were as follows (dollars 000’s omitted):

	Advance
Principal Terms	Amount		Range of Maturities
December 31, 2008
Single Maturity fixed rate advances, fixed rate at rates from 2.74%-7.34%, averaging 3.85%	$	13,007	January 2009 to May 2016
Single Maturity variable rate advances, Variable rate as of December 31, 2008 of 0.65%	$	1,700	June 2009
Total advances	$	14,707
December 31, 2007
Single Maturity fixed rate advances, fixed rate at rates from 4.55%-7.34%, averaging 5.02%	$	11,030	January 2008 to May 2016

Each advance is payable at its maturity date, a prepayment penalty is assessed with early payoffs of advances. The advances were collateralized by securities totaling $23,483,000 and $21,615,000; first mortgage loans totaling $14,509,000 and $12,111,000 and commercial loans totaling $31,820,000 under a blanket lien arrangement at December 31, 2008 and 2007. Commercial loans were not utilized as collateral in 2007.

Maturities over the next five years are (dollars 000’s omitted):

2009	$	2,726
2010		6,028
2011		5,030
2012		33
2013		35
Thereafter		855
	$	14,707

Note Payable

The Corporation has a demand note line of credit which it draws upon from time to time. As of December 31, 2008, the Corporation has two outstanding advances, totaling $1,000,000. These advances are floating rate advances, with a rate of 4.75% at December 31, 2008. The notes are secured by stock in one of the Banks.

21

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 9 — BORROWINGS (Continued)

Repurchase Agreements

Repurchase agreements are secured by mortgage-backed securities held by a third party trustee. The Corporation repaid the final issuance, at maturity, in 2008, leaving a balance of $0 at the end of 2008 compared to $9.7 million at year-end 2007.

Information concerning repurchase agreements is summarized as follows (000’s omitted):

	2008			2007
Average daily balance during the year	$	2,377		$	7,356
Average interest rate during the year		2.67	%		3.11	%
Maximum month-end balance during the year	$	5,000		$	10,000
Weighted average interest rate at year-end		0.00	%		2.67	%

Subordinated Debenture and Trust Preferred Securities

A trust formed by the Corporation issued $12,000,000 of trust preferred securities in 2003 as part of a pooled offering of such securities. The interest rate is a floating rate (LIBOR plus 3.00%) and the current rate at December 31, 2008 is 5.78%. The Corporation issued subordinated debentures at the same terms as the trust preferred securities to the trust in exchange for the proceeds of the offering; the debentures and related debt issuance costs represent the sole assets of the trust. The Corporation may redeem the subordinated debentures, in whole but not in part, any time after 2008 at a price of 100% of face value. The subordinated debentures must be redeemed no later than 2033.

A trust formed by the Corporation issued $2,000,000 of trust preferred securities in 2005 as part of a pooled offering of such securities. The interest rate is a floating rate (LIBOR plus 1.60%) and the current rate at December 31, 2008 is 3.75%. The Corporation issued subordinated debentures at the same terms as the trust preferred securities to the trust in exchange for the proceeds of the offering; the debentures and related debt issuance costs represent the sole assets of the trust. The Corporation may redeem the subordinated debentures, in whole but not in part, any time after 2010 at a price of 100% of face value. The subordinated debentures must be redeemed no later than 2035.

22

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 10 — INCOME TAXES

The provision (benefit) for income taxes reflected in the consolidated statements of income for the years ended December 31 consists of the following (000’s omitted):

	2008			2007			2006
Current expense (benefit)	$	7		$	434		$	2,552
Deferred expense (benefit)		(2,596	)		(1,095	)		(315	)
	$	(2,589	)	$	(661	)	$	2,237

Income tax expense (benefit) was less than the amount computed by applying the statutory federal income tax rate to income (loss) before income taxes. The reasons for the difference are as follows (000’s omitted):

	2008			2007			2006
Income tax at statutory rate	$	(5,017	)	$	(384	)	$	2,565
Goodwill impairment		2,705			0			0
Tax exempt interest		(231	)		(242	)		(284	)
Other		(46	)		(35	)		(44	)
	$	(2,589	)	$	(661	)	$	2,237

     The net deferred tax asset recorded includes the following amounts of deferred tax assets and liabilities (000’s omitted):

	2008			2007
Deferred tax assets
Allowance for loan losses	$	4,003		$	2,909
Unrealized loss on securities available for sale		1,193			244
Compensation		481			416
Non-accrual interest		618			216
Equity investment		656			0
Capital loss		287			0
Other		291			176
		7,528			3,961
Deferred tax liabilities
Depreciation		(518	)		(367	)
Purchase accounting adjustments		(300	)		(397	)
Other		(93	)		(125	)
		(911	)		(889	)
	$	6,617		$	3,072

A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefit related to such assets will not be realized. Management has reviewed the deferred tax position for the Corporation at December 31, 2008 and 2007. The deferred tax position was impacted by several significant transactions in 2008 and 2007. These transactions included a write-off of an investment and a 60% write down of an equity investment. After evaluating the impact of the significant transactions, the Corporation’s history of taxable income and near-term earnings prospects, the Corporation has determined that no valuation reserve is required.

23

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 11 — BENEFIT PLANS

The Corporation has a noncontributory discretionary employee stock ownership plan (Plan) covering substantially all of its employees. It is a requirement of the plan to invest principally in the Corporation’s common stock. The contribution to the Plan in 2008, 2007 and 2006 was $0, $25,000 and $40,000, respectively.

The Corporation has also established a 401(k) Plan in which 50% of the employees’ contribution can be matched with a discretionary contribution by the Corporation up to a maximum of 6% of gross wages. The contribution to the 401(k) Plan for 2008, 2007 and 2006 was $289,000, $313,000 and $292,000, respectively.

The Corporation has entered into Supplemental Executive Retirement Agreements (SERP Agreements) with certain executives. The SERP Agreements are designed to encourage executives to remain long term employees of the Corporation, and to provide specified benefits to certain key executives who contribute materially to the continued growth, development and future business success of the Corporation. The retirement benefits are an unsecured obligation of the Corporation. The Corporation and the Affiliate Banks have established other Non-Qualified Deferred Compensation arrangements for employees not covered under the SERP. The arrangements are designed to encourage certain officers to remain long term employees of the Corporation and the Affiliate Banks, and to provide the officers with supplemental retirement income. At year end 2008 and 2007, accumulated liability for these plans totaled $1,177,644 and $1,168,940. The Corporation’s contributions to the plans in 2008, 2007 and 2006 were $84,412, $119,512 and $124,339.

NOTE 12 — STOCK PURCHASE AND OPTION PLANS

Director and Employee Plans

The Directors Stock Purchase Plan permits directors of the Corporation to purchase shares of common stock made available for purchase under the plan at the fair market value on the fifteenth day prior to the annual issuance date. The total number of shares issuable under this plan is limited to 9,600 shares in any calendar year.

The Retainer Stock Plan allows directors to elect to receive shares of common stock in full or partial payment of the director’s retainer fees and fees for attending meetings. The number of shares is determined by dividing the dollar amount of fees to be paid in shares by the market value of the stock on the first business day prior to the payment date.

The Executive Stock Bonus Plan permits the administrator of the plan to grant shares of the Corporation’s common stock to eligible employees. Any executive or managerial level employee is eligible to receive grants under the plan. The Board of Directors administers the plan and the numbers of shares issued are at the sole discretion of the Board of Directors, with no shares granted as of December 31, 2008.

24

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 12 — STOCK PURCHASE AND OPTION PLANS (Continued)

Dividend Investment Plan

The Automatic Dividend Reinvestment Plan (“DRIP”) permits enrolled shareholders to automatically use dividends paid on common stock to purchase additional shares of the Corporation’s common stock at the fair market value on the investment date. Any shareholder who is the beneficial or record owner of not more than 9.9% of the issued and outstanding shares of the Corporation’s common stock is eligible to participate in the plan.

Pursuant to a separate agreement with a family who collectively holds more than 9.9% of the Corporation’s stock on or prior to January 31 of each year beginning January 31, 1997, the Corporation is to advise the family, in a written notice, of the number of shares sold under the DRIP. Each family member will have the option, until February 28 of the same year, to purchase from the Corporation one-third of the total number of shares that would be sufficient to prevent the dilution to all family members as a group that result solely as a result of the DRIP shares. The purchase price under this agreement is the fair market value on December 31 of the year immediately preceding the year in which the written notice is given. Similarly, a reverse agreement exists which allows the Corporation to redeem family shares to maintain the family ownership percentage in the event that stock repurchase activity more than offsets the shares available because of the DRIP.

The following summarizes shares issued under the various plans:

	2008		2007		2006
Automatic dividend reinvestment plan		4,293		13,418		13,337
Director stock purchase & retainer stock		16,140		10,754		7,892
Stock options		0		295		5,525
Other issuance of stock		1,947		3,240		2,890
		22,380		27,707		29,644

Stock Option Plans

The Nonemployee Director Stock Option Plan provides for granting options to nonemployee directors to purchase the Corporation’s common stock. No options were granted in 2008. The purchase price of the shares is the fair market value at the date of the grant, and there is a three-year vesting period before options may be exercised. Options to acquire no more than 8,131 shares of stock may be granted under the Plan in any calendar year and options to acquire not more than 73,967 shares in the aggregate may be outstanding at any one time.

The Employee Stock Option Plan grants options to eligible employees to purchase the Corporation’s common stock at or above, the fair market value of the stock at the date of the grant. Awards granted under this plan are limited to an aggregate of 86,936 shares. The administrator of the plan is a committee of directors. The administrator has the power to determine the number of options to be granted, the exercise price of the options and other terms of the options, subject to consistency with the terms of the Plan.

25

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 12 — STOCK PURCHASE AND OPTION PLANS (Continued)

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Corporation’s common stock as of the date of grant.. The Corporation uses historical data to estimate option exercise and post-vesting termination behavior. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. Shares are issued upon option exercise come from authorized but unissued shares.

The following table summarizes stock option activity :

						Weighted
						Average
	Number			Weighted		Remaining		Aggregate
	of			Average		Contractual		Intrinsic
	Options			Price		Life		Value
Options outstanding at January 1, 2008		40,228		$	29.74
Options forfeited 2008		(13,631	)		29.49
Options outstanding at December 31, 2008		26,597		$	29.85		4.15	$	0
Exercisable at December 31, 2008		26,597		$	29.85		4.15	$	0

Information related to the stock option plan during each year follows:

(000’s omitted)	2008		2007
Intrinsic value of options exercised	$	0	$	3
Cash received from option exercises		0		6
Tax benefit realized from option exercises		0		0

As of December 31, 2008, there was no unrecognized compensation cost related to non-vested stock options granted under the Plan.

26

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 13 — FAIR VALUE

Statement No. 157 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing and asset or liability.

The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used to in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The remaining fair values of securities (Level 3 inputs) are based on the reporting entity’s own assumptions and basic knowledge of market conditions and individual investment performance. The Corporation reviews the performance of the securities that comprise level 3 on a quarterly basis.

Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below:

	Fair Value Measurements at December 31, 2008 Using
			Quoted Prices
			in Active		Significant Other		Significant
			Markets for		Observable		Unobservable
	December		Identical Assets		Inputs		Inputs
(000’s omitted)	31, 2008		(Level 1)		(Level 2)		(Level 3)
Assets:
Available for sale securities	$	52,722	$	9	$	51,484	$	1,229

Level 1 assets are comprised of investments in other financial institutions, which are publicly traded on the open market.

Level 2 assets are comprised of available for sale securities including, U.S. Treasuries, Government Agencies and Municipal Securities.

Level 3 assets are comprised of investments in other financial institutions including DeNovo banks.

27

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 13 — FAIR VALUE (Continued)

The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2008:

	Fair Value Measurements Using Significant
	Unobservable Inputs
	(Level 3)
(000’s omitted)	Asset			Liability		Total
Beginning balance, Jan. 1, 2008	$	2,721		$	0	$	2,721
Total gains or losses (realized / unrealized)
Included in earnings
Loss on security impairment		(843	)		0		(843	)
Included in other comprehensive income		(649	)		0		(649	)
Transfers in and / or out of Level 3		0			0		0
Ending balance, December 31, 2008	$	1,229		$	0	$	1,229

Assets and Liabilities Measured on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below:

			Fair Value Measurements at December 31, 2008 Using
					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	December		Identical Assets		Inputs		Inputs
(000’s omitted)	31, 2008		(Level 1)		(Level 2)		(Level 3)
Assets:
Impaired loans	$	23,448	$	0	$	0	$	23,448

The following represent impairment charges recognized during the period:

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $29,090,000, with a valuation allowance of $5,642,000, resulting in an additional provision for loan losses of $808,000 for the period. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.

28

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 13 — FAIR VALUE (Continued)

Carrying amount and estimated fair value of financial instruments, not previously presented, at year end were as follows (000’s omitted):

	2008				2007
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Assets:
Cash and cash equivalents	$	20,953	$	20,953	$	30,034	$	30,034
Securities — held to maturity		7,955		8,220		8,685		8,714
FHLB stock		2,032		n/a		2,032		n/a
Loans held for sale		690		690		1,655		1,655
Loans		447,536		424,892		462,849		457,693
Accrued interest receivable		2,405		2,405		2,813		2,813
Liabilities:
Deposits	$	509,728	$	491,371	$	543,503	$	536,969
Short-term borrowings		1,500		1,500		649		649
FHLB advances		14,707		14,475		11,030		10,907
Repurchase agreements		0		0		5,000		5,000
Subordinated debentures		14,000		13,896		14,000		13,934
Note payable		1,000		1,000		0		0
Accrued interest payable		674		674		921		921

The following methods and assumptions were used by the Corporation in estimating its fair value disclosures for financial instruments:

Cash and cash equivalents

The carrying amounts reported in the balance sheet for cash and short-term instruments approximate their fair values.

Securities (including mortgage-backed securities)

Fair values for securities held to maturity are based on similar information previously presented for securities available for sale.

FHLB Stock

It was not practical to determine the fair value of FHLB stock due to restrictions placed on its transferability.

Loans held for sale

The market value of these loans represents estimated fair value. The market value is determined in the aggregate on the basis of existing forward commitments or fair values attributable to similar loans.

Loans

For variable rate loans that re-price frequently and with no significant change in credit risk, fair values are based on carrying values. The fair value for other loans are estimated using discounted cash flow analysis, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. The carrying amount of accrued interest receivable approximates its fair value.

29

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 13 — FAIR VALUE (Continued)

Off-balance-sheet instruments

The fair value of off-balance sheet items is not considered material.

Deposit liabilities

The fair values disclosed for demand deposits are, by definition equal to the amount payable on demand at the reporting date. The carrying amounts for variable rate, fixed term money market accounts and certificates of deposit approximate their fair values at the reporting date. Fair values for fixed certificates of deposit are estimated using discounted cash flow calculation that applies interest rates currently being offered on similar certificates. The carrying amount of accrued interest payable approximates its fair value.

Short-term borrowings

The carrying amounts of federal funds purchased and other short-term borrowings approximate their fair values.

Note Payable

The carrying amount of the note payable approximates its fair value.

FHLB advances

Rates currently available for FHLB debt with similar terms and remaining maturities are used to estimate the fair value of the existing debt.

Repurchase agreements

Rates currently available for repurchase agreements with similar terms and remaining maturities are used to estimate the fair value of the existing repurchase agreements.

Subordinated Debentures

Rates currently available for subordinated debentures with similar terms and remaining maturities are used to estimate the fair value of the existing subordinated debentures.

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Corporation’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Corporation’s financial instruments, fair value estimates are based on management’s judgments regarding future expected loss experience, current economic conditions, risk characteristics and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

30

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 14 — REGULATORY MATTERS

The Corporation (on a consolidated basis) and its Bank subsidiaries are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary - - actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Banks must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items are calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Banks to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2008, that the Banks meet all capital adequacy requirements to which they are subject. As of December 31, 2008 and 2007, the most recent notifications from Federal Deposit Insurance Corporation categorized the Banks as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Banks must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table. West Michigan Community Bank has entered into a Consent Order with the regulatory agencies in 2009 that will make it less than well-capitalized, on March 1, 2009 when the Consent Order is effective. The Consent Order requires West Michigan Community Bank to retain a Tier 1 capital to total assets ratio of a minimum of 8.0%. As of December 31, 2008, West Michigan Community Bank had a Tier 1 capital to total assets ratio of 8.1%. The Consent Order also restricts dividend payments from West Michigan Community Bank to the Holding Company. The Consent Order does not place any restrictions on the Holding Company.

The Corporation’s principal source of funds for dividend payments is dividends received from the Banks. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above.

31

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 14 — REGULATORY MATTERS (Continued)

											To Be Well
											Capitalized
											Under
											Prompt
						For Capital					Corrective
						Adequacy					Action
	Actual					Purposes					Provisions
As of December 31, 2008 (000’s omitted)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	58,194		11.4	%	$	40,726		8.0	%	NA		NA
The State Bank		34,807		10.7			25,952		8.0			32,440		10.0
Davison State Bank		4,170		11.7			2,863		8.0			3,578		10.0
West Michigan Community Bank		15,656		10.8			11,558		8.0			14,448		10.0
Tier 1 Capital (to Risk Weighted Assets)
Consolidated		51,827		10.2			20,363		4.0		NA		NA
The State Bank		30,720		9.5			12,976		4.0			19,464		6.0
Davison State Bank		3,712		10.4			1,431		4.0			2,147		6.0
West Michigan Community Bank		13,834		9.6			5,779		4.0			8,669		6.0
Tier 1 Capital (to Average Assets)
Consolidated		51,827		8.8			23,320		4.0		NA		NA
The State Bank		30,720		8.5			14,498		4.0			18,123		5.0
Davison State Bank		3,712		8.2			1,804		4.0			2,255		5.0
West Michigan Community Bank		13,834		8.1			6,833		4.0			8,541		5.0

32

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 14 — REGULATORY MATTERS (Continued)

											To Be Well
						For Capital					Capitalized Under
						Adequacy					Prompt Corrective
	Actual					Purposes					Action Provisions
As of December 31, 2007 (000’s omitted)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk Weighted Assets)
Consolidated	$	61,993		11.6	%	$	42,738		8.0	%	NA		NA
The State Bank		36,342		10.7			27,164		8.0			33,955		10.0
Davison State Bank		4,408		11.2			3,160		8.0			3,950		10.0
West Michigan Community Bank		15,280		10.3			11,908		8.0			14,884		10.0
Tier 1 Capital (to Risk Weighted Assets)
Consolidated		55,370		10.4			21,369		4.0		NA		NA
The State Bank		32,087		9.4			13,582		4.0			20,373		6.0
Davison State Bank		3,908		9.9			1,580		4.0			2,370		6.0
West Michigan Community Bank		13,409		9.0			5,954		4.0			8,931		6.0
Tier 1 Capital (to Average Assets)
Consolidated		55,370		9.0			24,573		4.0		NA		NA
The State Bank		32,087		8.3			15,403		4.0			19,253		5.0
Davison State Bank		3,908		8.0			1,945		4.0			2,432		5.0
West Michigan Community Bank		13,409		7.9			6,767		4.0			8,459		5.0

33

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 15 — LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Off-balance-sheet risk

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment.

The contractual amount of financial instruments with off-balance-sheet risk was as follows at year-end (000’s omitted):

	2008		2007
Commitments to make loans (at market rates)	$	25,898	$	35,633
Unused lines of credit and letters of credit		51,515		74,506

Commitments to make loans are generally made for periods of 90 days or less. At December 31, 2008, $395,000 of the outstanding loan commitments had fixed interest rates ranging from 4.65% to 6.98% and maturities of five years.

34

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 16 — PARENT ONLY CONDENSED FINANCIAL INFORMATION

The condensed financial information that follows presents the financial condition of Fentura Financial, Inc. (parent company only), along with the results of its operations and its cash flows.

CONDENSED BALANCE SHEETS
December 31 (000’s omitted)

	2008		2007
ASSETS
Cash and cash equivalents	$	814	$	842
Securities available for sale, at market		1,237		2,738
Equity investment		1,360		3,089
Other assets		773		63
Investment in subsidiaries		47,103		57,479
	$	51,287	$	64,211
LIABILITIES AND STOCKHOLDERS EQUITY
Other liabilities	$	163	$	715
Subordinated debt		14,000		14,000
Other borrowings		1,000		0
Stockholders equity		36,124		49,496
	$	51,287	$	64,211

CONDENSED STATEMENTS OF INCOME
Years ended December 31 (000’s omitted)

	2008			2007			2006
Other income (Loss) on equity investment	$	(1,729	)	$	(199	)	$	1
Dividends from subsidiaries		400			2,208			6,849
Interest expense		(976	)		(1,256	)		(1,264	)
Operating expenses		(1,178	)		(351	)		(326	)
Dividends in excess of earnings		(9,218	)		(1,462	)		(468	)
Income/(loss) before income taxes		(12,700	)		(1,059	)		4,792
Federal income tax expense (benefit)		(535	)		(593	)		(517	)
Net income (loss)	$	(12,165	)	$	(467	)	$	5,308

35

FENTURA FINANCIAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 16 — PARENT ONLY CONDENSED FINANCIAL INFORMATION (Continued)

CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31 (000’s omitted)

	2008			2007			2006
Cash flows from operating activities
Net income (loss)	$	(12,165	)	$	(467	)	$	5,308
Change in other assets		68			201			38
Change in other liabilities		(312	)		(35	)		383
Dividends in excess of earnings		9,218			1,462			468
Loss on security impairment		843			0			0
Net loss of equity investment		1,729			199			0
Net cash from operating activities		(620	)		1,360			6,197
Cash flows provided by investing activities
Equity Investment		0			(3,288	)		0
Sales and maturities of securities-AFS		0			0			0
Purchases of securities-AFS		0			(783	)		(213	)
Investment in subsidiary		(700	)		0			(1,000	)
Net cash from investing activities		(700	)		(4,071	)		(1,213	)
Cash flows used in financing activities
Issuance of subordinated debt		0			0			0
Net short-term borrowings		1,000			0			0
Dividends paid		0			(2,163	)		(2,069	)
Stock repurchase		0			(520	)		0
Proceeds from stock issuance		292			840			817
Net cash from financing activities		1,292			(1,843	)		(1,252	)
Change in cash and cash equivalents		(28	)		(4,554	)		3,732
Cash and cash equivalents at beginning of year		842			5,396			1,664
Cash and cash equivalents at end of year	$	814		$	842		$	5,396

NOTE 17 — SUBSEQUENT EVENTS

On March 17, 2009, The Corporation entered into an agreement to sell all of the stock of one of its bank subsidiaries, Davison State Bank, to a private, non-affiliated, investor group. The transaction is expected to close during the third quarter of 2009. At year-end 2008 Davison had assets of $46.0 million, loans of $29.0 million, deposits of $40.0 million, equity of $3.7 million and a net loss of $196,000. The agreement calls for consideration to be received of $3 million plus or minus certain closing equity adjustments. The Corporation expects to record an estimated loss on the sale of Davison State Bank of $700,000 in the first quarter of 2009. The agreement also provides for a termination payment of $150,000 if either party breaches the agreement. The Corporation is accepting a loss on the sale of Davison State Bank to utilize the capital from the sale to strengthen support of the continuing bank subsidiaries and improve the future financial performance of the organization. The loss is commensurate with the cost of raising capital and the current market for bank transactions and does not represent an impairment in the value of Davison State Bank at December 31, 2008. Accordingly, no such loss has been recognized in the 2008 financial statements.

36

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section provides a narrative discussion and analysis of the consolidated financial condition and results of operations of Fentura Financial, Inc. (the Corporation), together with its subsidiaries, The State Bank, Davison State Bank, and West Michigan Community Bank (the Banks), as well as Fentura Mortgage Company and West Michigan Mortgage Company, LLC for the years ended December 31, 2008, 2007 and 2006. The supplemental financial data included throughout this discussion should be read in conjunction with the primary financial statements presented on pages 4 through 36 of this report. It provides a more detailed and comprehensive review of operating results and financial position than could be obtained from a reading of the financial statements alone. The financial data and results of operations for West Michigan Community Bank are included only from the date of acquisition on March 15, 2004.

TABLE 1

Selected Financial Data

$ 000’s omitted except per share data and ratios	2008			2007			2006			2005			2004
Summary of Consolidated Statements of Income:
Interest Income	$	33,143		$	39,214		$	39,916		$	33,878		$	26,094
Interest Expense		15,028			18,621			16,908			11,298			8,263
Net Interest Income		18,115			20,593			23,008			22,580			17,831
Provision for Loan Losses		8,402			7,466			1,120			1,389			1,389
Net Interest Income after Provision		9,713			13,127			21,888			21,191			16,442
Total Other Operating Income		5,087			7,579			7,643			6,882			7,292
Total Other Operating Expense		29,554			21,834			21,986			20,800			18,176
Income (loss) Before Income Taxes		(14,754	)		(1,128	)		7,545			7,273			5,558
Federal Income Taxes (Benefit)		(2,589	)		(661	)		2,237			2,219			1,524
Net Income (loss)	$	(12,165	)	$	(467	)	$	5,308		$	5,054		$	4,034
Earnings Per Share — Basic*	$	(5.60	)	$	(0.22	)	$	2.48		$	2.41		$	1.95
Earnings Per Share — Diluted*	$	(5.60	)	$	(0.22	)	$	2.47		$	2.40		$	1.94
Summary of Consolidated Balance Sheets:
Assets	$	578,604		$	628,019		$	622,298		$	619,089		$	584,890
Securities, including FHLB stock		62,709			82,509			105,035			116,693			131,429
Loans, including loans held for sale		459,999			473,058			453,219			440,398			395,017
Deposits		509,728			543,503			528,555			528,054			491,065
Borrowings		30,207			30,679			36,552			39,765			46,602
Stockholders’ Equity		36,124			49,496			51,318			46,895			42,969
Other Financial and Statistical Data:
Tier 1 Capital to Risk Weighted Assets		10.21	%		10.40	%		11.30	%		10.60	%		10.20	%
Total Capital to Risk Weighted Assets		11.43	%		11.60	%		12.50	%		11.90	%		11.40	%
Tier 1 Capital to Average Assets		8.84	%		9.00	%		8.60	%		8.90	%		8.70	%
Total Cash Dividends	$	0		$	2,163		$	2,069		$	1,839		$	1,758
Book Value Per Share*	$	16.53		$	22.88		$	24.08		$	22.07		$	20.67
Cash Dividends Paid Per Share*	$	0		$	1.00		$	0.94		$	0.88		$	0.84
Period End Market Price Per Share*	$	6.75		$	22.00		$	32.55		$	29.77		$	33.41
Dividend Pay-out Ratio		0.00	%		-463.17	%		38.98	%		36.39	%		43.58	%
Return on Average Stockholders’ Equity		-25.20	%		-0.89	%		10.82	%		11.09	%		9.72	%
Return on Average Assets		-2.03	%		-0.08	%		0.85	%		0.85	%		0.74	%
Net Interest Margin		3.40	%		3.72	%		4.11	%		4.23	%		3.70	%
Total Equity to Assets at Period End		6.24	%		7.88	%		8.25	%		7.57	%		7.34	%

* Per Share data calculated using average shares outstanding in each period. Per share amounts and average shares outstanding have been adjusted to reflect a 10% stock dividend paid on August 4, 2006 and February 13, 2004.

37

RESULTS OF OPERATIONS

The Corporation posted a net loss of $12,165,000 in 2008, compared to a net loss of $467,000 in 2007. Goodwill impairment charges, $7,955,000, write downs of equity investments, $2,572,000, a reduction in net interest income, $2,492,000, and increases in loan losses and associated collection expenses, $1,220,000, all contributed to the increased loss in 2008. Salary and benefit reductions of $1,056,000 provided a partial offset. Net-interest income declined $2,478,000, in 2008 due to a reduction in interest income of $6,071,000 versus a reduction of $3,593,000 in interest expense. Interest income declined primarily due to decreases in market rates, which resulted in a drop of 1.10% in the average rate earned on commercial loans and an increase in nonperforming loans over 2007. Non-interest income decreased in 2008 by $2,492,000 or 32.9% from the non-interest income in the prior year. Of this decrease, $1,729,000 was due to larger than anticipated losses related to the equity investment in Arizona. Non-interest expense increased by $7,720,000 or 35.4%, primarily due to the impairment of goodwill for $7,955,000. The goodwill impairment charge was evaluated by comparing the book value of West Michigan Community Bank to its current market value. There had been a substantial decrease in value of West Michigan Community Bank and necessitated the charge to goodwill. Also, when reviewing sales and mergers of similar institutions in relative proximity, it was found that many of the transactions occurred at prices below book value, confirming that there was impairment of goodwill. In addition, the Corporation wrote off an equity investment, Main Street Bank, of $843,000. Main Street Bank was placed into receivership by the FDIC in 2008.

Standard performance indicators used in the banking industry help management evaluate the Corporation’s performance. Two of these performance indicators are return on average assets and return on average equity. For 2008, 2007, and 2006 respectively, the Corporation posted a return on average assets of (2.03%), (0.08%), and 0.85%. Return on average equity was (25.20%) in 2008, (0.89%) in 2007, and 10.82% in 2006. While the Corporation maintained a strong capital position it experienced a decrease in equity of $13.4 million or 27% in 2008. Total assets decreased $49.4 million in 2008. Total assets increased $5.7 million in 2007, and $3.2 million in 2006. Diluted earnings (loss) per share was ($5.60) in 2008, ($0.22) in 2007, and $2.47 in 2006.

On March 17, 2009, The Corporation entered into an agreement to sell all of the stock of one of its bank subsidiaries, Davison State Bank, to a private, non-affiliated, investor group. The transaction is expected to close during the third quarter of 2009. At year-end 2008 Davison had assets of $46.0 million, loans of $29.0 million, deposits of $40.0 million, equity of $3.7 million and a net loss of $196,000. The agreement calls for consideration to be received of $3 million plus or minus certain closing equity adjustments. The Corporation expects to record an estimated loss on the sale of Davison State Bank of $700,000 in the first quarter of 2009. The agreement also provides for a termination payment of $150,000 if either party breaches the agreement. This transaction will have minimal impact to 2009 core earnings due to the proportionate size of Davison State Bank. The Corporation projects cost savings for the fourth quarter of 2009 and beyond, as a result of this transaction.

NET INTEREST INCOME

Net interest income, the principal source of income, is the amount of interest income generated by earning assets (principally securities and loans) less interest expense paid on interest bearing liabilities (largely deposits and other borrowings).

A critical task of management is to price assets and liabilities so that the spread between the interest earned on assets and the interest paid on liabilities is maximized without unacceptable risk. While interest rates on interest earning assets and interest bearing liabilities are subject to market forces, in general, the Corporation can exert more control over deposit costs than earning asset rates. Deposit costs are somewhat limited though due to the timing of repricing of time deposits. Loan products carry either fixed rates of interest or rates tied to market indices which are determined independently. The Corporation sets its own rates on deposits, providing management with some flexibility in determining the timing and proportion of rate changes for the cost of its deposits.

38

Table 2 summarizes the changes in net interest income resulting from changes in volume and rates for the years ended December 31, 2008 and 2007. Net interest income (displayed with consideration of full tax equivalency), average balance sheet amounts, and the corresponding yields for the last three years are shown in Table 3. Tax equivalent net interest income decreased by $2,525,000 in 2008 or 12.0% and decreased by $2,472,000 or 10.5% in 2007. The primary factors contributing to the decrease in net interest income in 2008 were a decrease in loan volume, a significant increase in non-performing loans as well as decreases in the prime rate. Net interest income was also reduced by reversal of accrued interest income on loans that were re-classified to non-accrual status throughout the year.

As indicated in Table 3, for the year ended December 31, 2008, the Corporation’s net interest margin was 3.40% compared with 3.72% and 4.11% in 2007 and 2006, respectively. The decrease in 2008 is primarily attributable to declining interest income on loans. This was due to a combination of declining market rates and increases in non-performing loans. Management attempted to offset these decreases by reducing deposit rates, however maturity constraints on time deposits did not allow for a rapid enough reduction for a complete offset. The decrease in 2007 was attributed to declining interest income on loans due to non-performing loans and increasing deposit yields.

Average earning assets decreased 3.9% in 2008, decreased 1.1% in 2007, and increased 4.7% in 2006. Average earning assets were reduced through lower total average securities when comparing 2008 to 2007. Loan balances, the highest yielding component of earning assets, represent 86.0% of earning assets in 2008, compared to 81.7% in 2007 and compared to 79.1% in 2006. Average interest bearing liabilities decreased 2.8% in 2008, decreased 0.8% in 2007, and increased 5.5% in 2006. Non-interest bearing deposits amounted to 13.6% of average earning assets in 2008 compared with 13.3% in 2007 and 13.5% in 2006.

39

TABLE 2

Changes in Net Interest Income
Due to Changes in Average Volume
and Interest Rates
Years Ended December 31,

				INCREASE									INCREASE
				(DECREASE)									(DECREASE)
				2008									2007
				DUE									DUE
				TO:									TO:
				YIELD/									YIELD/
(000’s omitted)	VOL			RATE			TOTAL			VOL			RATE			TOTAL
TAXABLE SECURITIES	$	(1,027	)	$	18		$	(1,009	)	$	(372	)	$	125		$	(247	)
TAX-EXEMPT SECURITIES		(123	)		(80	)		(203	)		(210	)		78			(132	)
FEDERAL FUNDS SOLD		2			(148	)		(146	)		(198	)		(2	)		(200	)
TOTAL LOANS		435			(5,148	)		(4,713	)		790			(968	)		(178	)
LOANS HELD FOR SALE		(41	)		(6	)		(47	)		2			(4	)		(2	)
TOTAL EARNING ASSETS		(754	)		(5,364	)		(6,118	)		12			(771	)		(759	)
INTEREST BEARING DEMAND DEPOSITS		(55	)		(980	)		(1,035	)		(120	)		83			(37	)
SAVINGS DEPOSITS		(76	)		(394	)		(470	)		(131	)		69			(62	)
TIME CDs $100,000 AND OVER		(401	)		(10	)		(411	)		1,018			(103	)		915
OTHER TIME DEPOSITS		175			(1,297	)		(1,122	)		(253	)		1,098			845
OTHER BORROWINGS		(51	)		(503	)		(554	)		(187	)		239			52
TOTAL INTEREST BEARING LIABILITIES		(408	)		(3,184	)		(3,592	)		327			1,386			1,713
NET INTEREST INCOME	$	(346	)	$	(2,180	)	$	(2,526	)	$	(315	)	$	(2,157	)	$	(2,472	)

40

TABLE 3
(000’s omitted)

Summary of Net Interest Income
Years Ended December 31,

	2008								2007								2006
	AVG								AVG								AVG
	BAL			INC/EXP		YIELD			BAL			INC/EXP		YIELD			BAL			INC/EXP		YIELD
ASSETS
Securities:
U.S. Treasury and Government Agencies	$	49,733		$	2,089		4.20	%	$	73,051		$	3,120		4.27	%	$	84,099		$	3,348		3.98	%
State and Political (1)		15,728			891		5.66	%		17,716			1,094		6.17	%		21,376			1,226		5.73	%
Other		4,651			127		2.73	%		6,641			105		1.58	%		4,304			124		2.88	%
Total Securities		70,112			3,107		4.43	%		97,408			4,319		4.43	%		109,779			4,698		4.28	%
Fed Funds Sold		6,113			157		2.57	%		6,082			303		4.98	%		10,045			503		5.01	%
Loans:
Commercial		366,882			23,600		6.43	%		359,262			27,276		7.59	%		343,702			26,820		7.80	%
Tax Free (1)		3,329			226		6.78	%		3,552			233		6.57	%		4,217			271		6.43	%
Real Estate-Mortgage		38,592			2,486		6.44	%		38,047			2,531		6.65	%		36,330			2,638		7.26	%
Consumer		57,853			3,908		6.76	%		60,057			4,893		8.15	%		66,526			5,382		8.09	%
Total loans		466,656			30,220		6.48	%		460,918			34,933		7.58	%		450,775			35,111		7.79	%
Allowance for Loan Loss		(10,561	)							(8,014	)							(6,632	)
Net Loans		456,095			30,220		6.63	%		452,904			34,933		7.71	%		444,143			35,111		7.91	%
Loans Held for Sale		1,042			63		6.05	%		1,662			110		6.62	%		1,626			112		6.89	%
TOTAL EARNING ASSETS		543,923			33,547		6.17	%		566,070			39,665		7.01	%		572,225			40,424		7.06	%
Cash Due from Banks		16,603								17,321								18,155
All Other Assets		50,558								45,500								39,663
TOTAL ASSETS	$	600,523							$	620,877							$	623,411
LIABILITIES & SHAREHOLDERS’ EQUITY:
Deposits:
Interest bearing — DDA	$	95,880			1,323		1.38	%	$	98,172		$	2,358		2.40	%	$	103,356		$	2,395		2.32	%
Savings Deposits		83,245			720		0.86	%		88,943			1,190		1.34	%		99,339			1,252		1.26	%
Time CD’s $100,000 and Over		143,736			6,719		4.67	%		152,305			7,130		4.68	%		130,860			6,215		4.75	%
Other Time CD’s		117,675			4,604		3.91	%		114,182			5,726		5.01	%		120,427			4,881		4.05	%
Total Interest Bearing Deposits		440,536			13,366		3.03	%		453,602			16,404		3.62	%		453,982			14,743		3.25	%
Other Borrowings		35,043			1,663		4.75	%		35,868			2,217		6.18	%		39,268			2,165		5.51	%
INTEREST BEARING LIABILITIES		475,579			15,029		3.16	%		489,470			18,621		3.80	%		493,250			16,908		3.43	%
Non-interest bearing — DDA		73,991								75,177								77,256
All Other Liabilities		2,672								4,008								3,832
Shareholders Equity		48,281								52,222								49,073
TOTAL LIABILITIES and S/H EQUITY	$	600,523							$	620,877							$	623,411
Net Interest Rate Spread							3.01	%							3.20	%							3.64	%
Impact of Non-Interest Bearing
Funds on Margin							0.40	%							0.51	%							0.47	%
Net Interest Income/Margin				$	18,518		3.40	%				$	21,044		3.72	%				$	23,516		4.11	%

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

41

ALLOWANCE AND PROVISION FOR LOAN LOSSES

The allowance for loan losses reflects management’s judgment as to the level considered appropriate to absorb probable incurred losses in the loan portfolio. The Corporation’s methodology in determining the adequacy of the allowance is based on ongoing quarterly assessments and relies on several key elements, which include specific allowances for identified problem loans and a formula based risk allocated allowance for the remainder of the portfolio. This includes a review of individual loans, size and composition of the loan portfolio, historical loss experience, current economic conditions, financial condition of borrowers, the level and composition of non-performing loans, portfolio trends, estimated net charge-offs, and other pertinent factors. Although reserves have been allocated to various portfolio segments, the allowance is general in nature and is available for the portfolio in its entirety. At December 31, 2008, the allowance for loan losses was $11,773,000 or 2.56% of total loans. This compares with $8,554,000 or 1.81% at December 31, 2007 and $6,692,000, or 1.48%, at December 31, 2006. Management believes the allowance for loan losses at December 31, 2008 of $11,773,000 is sufficient to cover all known losses in the loan portfolio at this time.

The provision for loan losses was $8,402,000 in 2008 and $7,466,000 and $1,120,000 in 2007 and 2006, respectively. Provision for 2008 increased from the 2007 level by $936,000. The amount of provision taken for the year is a direct output of the calculation of loan loss adequacy. The Banks review loan loss adequacy on a quarterly basis. The increase for the year was due to the downgrading of a number of loans, which required additional, substantial provision be provided for them. The increase of the 2008 provision for loan loss was to provide specific reserves for non-performing construction and land development loans, increased charge-offs and continuing decline in the Michigan economy. In addition, the Banks had substantial charge-offs of non-performing assets of $5,740,000 for 2008. A continuation of the present economic conditions or further declines could lead to further loan losses in 2009.

In 2008, the Corporation strategically shrank the commercial loan portfolio. Commercial loans decreased $7,035,000 from 2007 year end. Real estate construction and mortgage loans decreased $3,859,000 from year end 2007. The decline in real estate construction and mortgage loans was primarily due to management efforts to continue to reduce exposure as well as diminishing demand for these types of loans given the surplus of available homes in the market. In 2008, the Corporation also recognized the need to charge-off several construction and land development loans. Charge-offs of commercial loans totaled $5,005,000 in 2008. The Special Asset Group (SAG), formed in 2007, was assembled to act as an action group for watch credits and in the collection of credits that have already been classified as loss or doubtful. While non-performing loans continued to rise in 2008, management believes that the creation of the SAG will assist in mitigating non-performing loan impact in future years. Additionally, with the establishment of the SAG and the nature of its focus, the Corporation expects an increased level of loan and collection expenses as this group works through troubled credits.

Table 4 summarizes loan losses and recoveries from 2004 through 2008. During 2008, the Corporation experienced net charge-offs of $5,183,000, compared with net charge-offs of $5,604,000 and $729,000 in 2007 and 2006, respectively. The year to year increase in charge offs was due to an increase in commercial loan charge-offs by $14,000 year over year. Of the $5,005,000 in total commercial loan charge-offs in 2008, $3,928,000 was construction and land development loans. Also, mortgage loan charge-offs increased by $111,000 and consumer charge-offs decreased by $244,000. Total recoveries increased by $302,000 comparing 2008 with 2007. The net charge-off ratio is the difference of charged-off loans minus the recoveries from loans divided by average gross loans. Accordingly, the net charge-off ratio for 2008 was 1.13% compared to 1.19% and 0.16% at the end of 2007 and 2006, respectively.

The Corporation maintains formal policies and procedures to control and monitor credit risk. Management believes the allowance for loan losses is adequate to meet normal credit risks in the loan portfolio. The Corporation has identified a concentration level connected with construction and land development loans. Specific strategies have been developed to reduce the concentration level and limit exposure to this type of lending in the future. The Corporation’s loan portfolio has no exposure in foreign

42

loans. The Corporation has not extended credit to finance highly leveraged transactions nor does it intend to do so in the future. The Michigan economy, employment levels and other economic conditions in the Corporation’s local markets may have a significant impact on the level of credit losses. Management continues to identify and devote attention to credits that may not be performing as agreed. Non-performing loans are discussed further in the section titled “Non-Performing Assets”.

TABLE 4
Analysis of the Allowance for Loan Losses

	Years Ended December 31,
(000’s omitted)	2008			2007			2006			2005			2004
Balance Beginning of Period	$	8,554		$	6,692		$	6,301		$	5,501		$	3,414
Charge-offs:
Commercial, Financial and Agricultural		(5,005	)		(4,991	)		(554	)		(405	)		(365	)
Real Estate-Mortgage		(297	)		(186	)		0			0			0
Installment Loans to Individuals		(438	)		(682	)		(323	)		(360	)		(306	)
Total Charge-offs		(5,740	)		(5,859	)		(877	)		(765	)		(671	)
Recoveries:
Commercial and Financial		314			155			51			70			38
Real Estate-Mortgage		23			1			0			0			0
Installment Loans to Individuals		220			99			97			106			172
Total Recoveries		557			255			148			176			210
Net Charge-offs		(5,183	)		(5,604	)		(729	)		(589	)		(461	)
Provision for loan losses		8,402			7,466			1,120			1,389			1,389
Addition from WMCB acquisition		0			0			0			0			1,159
Balance at End of Period	$	11,773		$	8,554		$	6,692		$	6,301		$	5,501
Ratio of Net Charge-Offs During the Period		1.13	%		1.19	%		0.16	%		0.14	%		0.12	%

NON-INTEREST INCOME

Non-interest income was $5,087,000 in 2008, $7,579,000 and $7,643,000 in 2007 and 2006, respectively. These amounts represent a decrease of 32.9% in 2008 compared to 2007 and a decrease of 0.8% in 2007 compared to 2006.

The most significant category of non-interest income is service charges on deposit accounts. These fees were $2,938,000 in 2008, compared to $3,421,000 and $3,708,000 in 2007 and 2006, respectively. This was a decrease of $483,000 or 14.1% in 2008 and a decrease of $287,000 or 7.7% in 2007. The decrease in 2008 was in all categories of service charges, with the largest declining component being NSF and overdraft privilege fees. The decrease in 2007 was due to a decrease in NSF and overdraft privilege fees.

Gains on the sale of mortgage loans originated by the Banks and sold in the secondary market were $338,000 in 2008, $402,000 in 2007, and $615,000 in 2006. The decrease of 15.9% in 2008 is due to the continuance of a stagnant to declining mortgage market. The Corporation sells the majority of the mortgage loans originated in the secondary market on a servicing released basis. For 2009, Management anticipates gains on the sale of mortgage loans to remain steady or increase slightly. This is due to declining interest rates, which could provide consumers the ability to refinance their mortgage and the Corporation to collect additional fee income from the sale of such loans.

Trust and investment income decreased $83,000 or 4.4% in 2008 to $1,818,000 compared with $1,901,000 in 2007 and $1,554,000 in 2006. The 4.4% decrease is due to unfavorable changes in the market value of trust and investment assets, partially offset by growth in financial planning and brokerage assets. Management is anticipating continued growth in trust and investment income in 2009, by growing the number of client relationships and growing assets under management.

43

Other income and fees includes income from the sale of checks, safe deposit box rent, merchant account income, ATM income, and other miscellaneous income items. Other income and fees were $1,722,000 in 2008 compared to $1,853,000 and $1,768,000 in 2007 and 2006, respectively.

The Corporation experienced a loss of $1,032,000 during the fourth quarter of 2008, on the equity investment held on a bank in Arizona. The year-to-date loss, for 2008, on this investment was $1,729,000, compared to a $199,000 loss in 2007. The year-to-year difference has two components. In 2007, the investment was held for only four months. In 2008, in addition to holding the investment for 12 months, the investee bank took a large write off of their goodwill during the 4^th quarter, of which our Corporation accounted for its respective 24.99% share. If performance of the investee bank continues, the Corporation will experience additional losses in 2009.

NON-INTEREST EXPENSE

Total non-interest expense was $29,554,000 in 2008 compared to $21,834,000 in 2007 and $21,986,000 in 2006. This was an increase of 35.4% in 2008 and a decrease of 0.7% in 2007.

Salaries and employee benefits, the Corporation’s largest operating expense category, were $11,127,000 in 2008, compared with $12,183,000 in 2007 and $12,738,000 in 2006. The decrease between 2008 and 2007 was a result of personnel reductions as well as performance incentive payments being eliminated for 2008.

Occupancy expenses associated with the Corporation’s facilities were $2,096,000 in 2008 compared to $2,090,000 in 2007 and $1,858,000 in 2006. In 2008, this was an increase of less than 1.0% and in 2007, an increase of 12.5%. In mid-2008 the banks closed a leased facility, which assisted in maintaining occupancy expenses. The increase in 2007 was due to the acquisition of a new bank building in Livingston County and the opening of a new office in Holland and their related depreciation expense, as well as increases in general utility and property tax expenses. These were partially offset by decreases in lease payment expenses with the closure of an office of West Michigan Community Bank at the end of September 2007.

In 2008, equipment expenses were $1,978,000 compared to $2,139,000 in 2007 and $2,140,000 in 2006. This is a decrease of 7.5% in 2008 which followed a decrease of 0.1% in 2007. In 2008, the Corporation’s mainframe computer system became fully depreciated, resulting in a year to year savings of $46,000 of depreciation expense. In addition, depreciation of other assets was down $80,000, rental and repair expenses were also down a combined total of $33,000.

Loan and collection expenses were $1,037,000 in 2008 compared to $753,000 in 2007 and $320,000 in 2006. The increase was due to significant increases related to other real estate owned held by the Corporation that has resulted from the declining Michigan economy. Several properties being held in ORE required additional negative valuation adjustments totaling $100,000, which were made during the fourth quarter, as real estate prices continued to decline during 2008.

Advertising expenses were $422,000 in 2008 compared to $486,000 in 2007 and $624,000 in 2006. When comparing 2008 to 2007, the Corporation reduced media expenses and other promotional expenses. The Banks continued to maintain presence in their local markets through continued sponsorship of local activities and community groups. The Corporation continues to remain focused on targeted advertising in all of its markets to continue growth.

Other professional service fees include audit fees, consulting fees, legal fees, and various other professional services. Other professional services were $1,238,000 in 2008 compared to $1,143,000 in

44

2007 and $1,066,000 in 2006. Increases in legal fees, were nearly offset by decreases in audit fees and other professional services, an 8.3% increase comparing year to year. The increase of 7.2% in 2007 was comprised of increases in legal fees and audit fees.

In the fourth quarter of 2008, the Corporation utilized an external consulting firm to conduct the goodwill evaluation. To prepare the analysis, the book value of West Michigan Community Bank was compared to its fair value at December 31, 2008. The evaluation computed the fair market value of West Michigan Community Bank by applying three separate methodologies. First, the analysis included a computation based on present value of projected earnings of the Bank. Next, the analysis included a computation based on market values of comparable financial institutions. Finally, a computation was based on prices paid on recent whole bank acquisitions in the Midwest. These three approaches were weighted and an overall value was assigned. As the value determined was below book value of the Bank, impairment was determined to exist and a second step evaluation was performed. This second step evaluation consisted of determining fair value of the assets and liabilities of West Michigan Community Bank. Any remaining fair value would be determined to be residual goodwill. The results of this second step evaluation were that there was no residual goodwill, and as a result the Corporation wrote off the entire goodwill balance of $7,955,000 at December 31, 2008.

During 2008, the Corporation recognized $843,000 in other-than-temporary impairment its investment in Main Street Bancorp, a startup bank located in Northville, Michigan. The Corporation wrote off this investment entirely during the first three quarters as it became clear to management that this institution was troubled. Ultimately, the regulators closed this Bank early in the fourth quarter of 2008.

Other general and administrative expenses, including telephone and communication services, were $2,858,000 in 2008, or a decrease of 6.0%, compared to $3,040,000 in 2007 and $3,240,000 in 2006. The reduction in 2008 was the result of decreases in director expense, communication expenses, business development, customer service expenses, conferences and education, and officer and staff meeting expenses. These were partially offset by increases in FDIC assessment, other losses, and operating expenses. In 2009 the Banks will have increased FDIC assessments. These increases will have a meaningful unfavorable impact to our income.

FINANCIAL CONDITION

Proper management of the volume and composition of the Corporation’s earning assets and funding sources is essential for ensuring strong and consistent earnings performance, maintaining adequate liquidity and limiting exposure to risks caused by changing market conditions. The Corporation’s securities portfolio is structured to provide a source of liquidity through maturities and to generate an income stream with relatively low levels of principal risk. The Corporation does not engage in securities trading. Loans comprise the largest component of earning assets and are the Corporation’s highest yielding assets. Client deposits are the primary source of funding for earning assets while short-term debt and other sources of funds could be utilized if market conditions and liquidity needs change.

The Corporation’s total assets averaged $600.5 million for 2008 declining from the 2007 average of $620.9 million by $20.0 million or 3.2%. Average loans comprised 77.7% of total average assets during 2008 compared to 74.2% in 2007. Loans grew $5.7 million, on average, from year end 2007 to year end 2008, with commercial loans having the largest gain of $7.6 million or 2.1%. The ratio of average non-interest bearing deposits to total deposits was 14.4% in 2008 compared to 14.2% in 2007. Interest bearing deposits comprised 92.6% of total average interest bearing liabilities during 2008, up from 92.6% during 2007. The Corporation’s year-end total assets were $578.6 million for 2008 down from $628 million in 2007. The decrease was due to the strategic shrinkage of the loan portfolio, along with a decreasing investment portfolio, and an $8.0 million decrease of goodwill. These were partially offset by an increase in other real estate owned.

45

SECURITIES PORTFOLIO

Securities totaled $60,677,000 at December 31, 2008 compared to $80,477,000 at December 31, 2007. This was a decrease of $19,800,000 or 24.6%. At December 31, 2008 these securities comprised 11.6% of earning assets, down from 14.3% at December 31, 2007. The Corporation considers all of its securities as available for sale except for Michigan tax-exempt securities and a few mortgage backed securities, which are classified as held to maturity. Although loan balances decreased in 2008, these decreases were paralleled by decreases in the deposit portfolio. The decreases in securities in 2008 funded the differential between the loan and deposit decline, as well as allowing the Corporation to repay $5,000,000 of repurchase agreements at their June 2008 maturity date. Thus, federal funds sold decreased $7,300,000 comparing year–end 2008 to year-end 2007. Federal funds sold were $0 at December 31, 2008 compared with $7,300,000 at December 31, 2007.

The Corporation’s present policies, with respect to the classification of securities, are discussed in Note 1 to the Consolidated Financial Statements. As of December 31, 2008, the estimated aggregate fair value of the Corporation’s securities portfolio was $2,730,000 below amortized cost. At December 31, 2008, gross unrealized gains were $660,000 and gross unrealized losses were $3,390,000. A summary of estimated fair values and unrealized gains and losses for the major components of the securities portfolio is provided in Item 1 of the Form 10-K. As of year end 2008, the Corporation has the ability to hold these securities until maturity and continue to receive a favorable rate of return on the securities.

With regard to equity investments held by the Corporation, management regularly reviews the performance of each institution that is not publicly traded. On a quarterly basis, following the availability of call report filings, management reviews each bank on factors including: net income, total risk based capital and tier 1 capital to risk weighted assets, charged off loans, nonaccrual loans, past due loans, loan to deposit ratio, loan loss reserve to loans ratio, brokered CD’s, and other borrowings.. Management considers the need for other-than-temporary impairment when the institutions present material, unfavorable changes when compared to the prior quarter. If a performance decrease is found, management looks at trends from prior periods to evaluate the potential of an unfavorable long term decline. Management also makes these considerations when the receipt of unfavorable financial information is received and verified. As of December 31, 2008, the Corporation has recognized $843,000 of other-than-temporary impairment on a single investment, Main Street Bank, due to its related institution financial performance (see earlier discussion under Noninterest Expense).

46

TABLE 5
Analysis and Maturities of Securities

	Amortized		Fair
(000’s omitted)	Cost		Value		Yield(1)
AVAILABLE FOR SALE
U.S. Agencies
One year or less	$	7,000	$	7,108		3.68	%
Over one through five years		4,000		4,108		4.35	%
Over five through ten years		0		0		0.00	%
Over ten years		0		0		0.00	%
Total		11,000		11,216
Mortgage-Backed
One year or less	$	0	$	0		0.00	%
Over one through five years		7,929		7,906		4.11	%
Over five through ten years		2,555		2,526		4.25	%
Over ten years		23,584		21,370		4.64	%
Total		34,068		31,802
State and Political
One year or less	$	0	$	0		0.00	%
Over one through five years		0		0		0.00	%
Over five through ten years		3,349		3,330		6.72	%
Over ten years		4,737		4,637		6.34	%
Total		8,086		7,967
Equity Securities	$	2,563	$	1,737
HELD TO MATURITY
Mortgage-Backed
One year or less	$	0	$	0		0.00	%
Over one through five years		3		3		9.00	%
Over five through ten years		0		0		0.00	%
Over ten years		0		0		0.00	%
Total		3		3
State and Political
One year or less	$	2,088	$	2,100		5.92	%
Over one through five years		2,841		3,684		6.13	%
Over five through ten years		2,404		2,072		6.61	%
Over ten years		619		361		6.25	%
Total		7,952		8,217
Total Securities	$	63,672	$	60,942

⁽¹⁾ Tax equivalent yield

47

LOAN PORTFOLIO

The Corporation extends credit primarily within in its local markets in Genesee, Oakland, Livingston, Kent and Ottawa counties. The Corporation’s commercial loan portfolio is widely diversified but includes a concentration in construction and land development, as discussed previously and in the following paragraph. The Corporation’s loan portfolio balances are summarized in Table 6.

Total loans decreased $12,094,000 for the year ended December 31, 2008, with total loans comprising 88.1% of earning assets as compared to 81.4% of December 31, 2007 earning assets. The economic challenges in the State of Michigan that began in 2007, continued to worsen in 2008. Continued employment and economic declines, primarily in the automotive industry, contributed to steepening unemployment rates and a declining population. With these burdening challenges as well as by management strategy, the Corporation had commercial loan reduction during the year. In 2008, commercial loans decreased $7,035,000 or 2.2% to $311,520,000. Real estate construction and mortgage loans also decreased by $3,859,000 or 4.1% in 2008. The decline was primarily in the real estate construction portfolio as this type of loan demand continued to diminish given the continuing surplus of homes available in the housing market. Additional decreases in loans were due to charge-offs of several construction and land development loans in 2008. Consumer loans decreased $1,200,000 or 2.1% in 2008. In 2007, commercial loan totals increased $46,153,000 to $318,555,000 or had growth of 16.9%. In contrast, real estate construction and development loans decreased $24,035,000 or 30.4% to $54,982,000 at December 31, 2007. Consumer loans decreased $4,658,000 or 7.4% in 2007.

TABLE 6
Loan Portfolio

December 31,
(000’s omitted)	2008		2007		2006		2005		2004
Commercial	$	311,520	$	318,555	$	272,402	$	254,498	$	229,012
Real estate — construction		51,823		54,892		78,927		76,386		61,278
Real estate — mortgage		39,027		39,817		36,867		37,627		32,705
Consumer		56,939		58,139		62,797		70,845		70,435
Total	$	459,309	$	471,403	$	450,993	$	439,356	$	393,430

The Corporation originates primarily residential and commercial real estate loans, commercial, construction, and consumer loans. The Corporation estimates that the majority of the loan portfolio is based in Genesee, Oakland and Livingston counties within southeast Michigan and Kent and Ottawa counties in western Michigan. The ability of the Corporation’s debtors to honor their contracts is dependent upon the general economic conditions in the markets we serve.

TABLE 7
Maturities of the Loan Portfolio by Loan Type

	Within		One-		After
December 31, 2008	One		Five		Five
(000’s omitted)	Year		Years		Years		Total
Commercial	$	126,280	$	160,795	$	24,445	$	311,520
Real estate — construction		44,000		5,909		1,914		51,823
Real estate — mortgage		6,411		10,177		22,439		39,027
Consumer		8,639		31,564		16,736		56,939
	$	185,330	$	208,445	$	65,534	$	459,309

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TABLE 8
Maturities of the Loan Portfolio by Rate Categories

	Within		One-		After
December 31, 2008	One		Five		Five
(000’s omitted)	Year		Years		Years		Total
Loans:
Fixed Rate	$	89,067	$	183,042	$	45,554	$	317,663
Variable Rate		96,263		25,403		19,980		141,646
	$	185,330	$	208,445	$	65,534	$	459,309

Credit risk is managed via specific credit approvals and monitoring procedures. The Corporation’s outside loan review function examines the loan portfolio on a quarterly basis for compliance with credit policies and to assess the overall credit quality of the loan portfolio. These procedures provide management with information on an ongoing basis for setting appropriate direction and taking corrective action as needed.

The Corporation closely monitors its construction and commercial mortgage loan portfolios. Construction loans at December 31, 2008, which comprised 11.3% of total loans, totaled $51,823,000 as compared to $54,892,000 and $78,927,000 at the end of 2007 and 2006, respectively.

The construction and commercial real estate loan properties are located principally in the Corporation’s local markets. Included are loans to various industrial and professional organizations. The Corporation believes that the portfolio is reasonably well diversified. Management expects the economy to remain soft during 2009.

NON-PERFORMING ASSETS

Non-performing assets include loans on which interest accruals have ceased, real estate acquired through foreclosure, loans past due 90 days or more and still accruing and renegotiated loans. Table 9 represents the levels of these assets at December 31, 2004 through 2008. Non-performing assets increased substantially at December 31, 2008 as compared to 2007. Other Real Estate Owned increased $4,346,000 in 2008. The composition of Other Real Estate Owned is twenty-seven commercial and three residential properties totaling $6,349,000. Other Real Estate in Redemption decreased to $390,000 at the end of 2008 from $1,829,000 at the end of 2007. Real Estate Owned in Redemption balance is comprised of nine commercial properties. Non-performing loans increased by $11,882,000 as compared to December 31, 2007. This was due to a substantial increase in non-accrual loans of $11,269,000 as compared to December 31, 2007. The composition of the added non-accrual loans was largely from commercial real estate and development loans. Loans past due over 90 days and still accruing interest increased $613,000 during this period. Renegotiated loans increased $511,000 when comparing December 31, 2008 to December 31, 2007.

The level and composition of non-performing assets are both affected by economic conditions in the Corporation’s local markets. Non-performing assets, charge-offs, and provisions for loan losses tend to decline in a strong economy and increase in a weak economy, thereby impacting the Corporation’s operating results. In addition to non-performing loans, management carefully monitors other credits that are current in terms of principal and interest payments but, in management’s opinion, may deteriorate in quality if economic conditions change.

49

TABLE 9
Non-Performing Assets and Past Due Loans (000’s omitted)

	December 31,
	2008			2007			2006			2005			2004
Non-Performing Loans:
Loans Past Due 90 Days or More & Still Accruing	$	667		$	54		$	2,311		$	80		$	91
Non-Accrual Loans		24,325			13,056			2,354			1,476			1,102
Renegotiated Loans		942			431			437			1,401			477
Total Non-Performing Loans		25,934			13,541			5,102			2,957			1,670
Other Non-Performing Assets:
Other Real Estate		6,349			2,003			1,247			500			208
Other Real Estate Owned in Redemption		390			1,829			216			0			856
Other Non-Performing Assets		25			155			155			6			4
Total Other Non-Performing Assets		6,764			3,987			1,618			506			1,068
Total Non-Performing Assets	$	32,698		$	17,528		$	6,720		$	3,463		$	2,738
Non-Performing Loans as a % of Total Loans		5.64	%		2.86	%		1.13	%		0.67	%		0.70	%
Non-Performing Assets as a % of Total Loans and Other Real Estate		5.37	%		3.70	%		1.48	%		0.79	%		0.69	%
Allowance for Loan Losses as a % of Non-Performing Loans		45.40	%		63.18	%		131.16	%		213.09	%		350.16	%
Accruing Loans Past Due 90 Days or More to Total Loans		0.15	%		0.01	%		0.51	%		0.02	%		0.02	%
Non-performing Assets as a % of Total Assets		5.65	%		2.79	%		1.08	%		0.56	%		0.47	%

Table 10 reflects the allocation of the allowance for loan losses and is based upon ranges of estimates and is not intended to imply either limitations on the usage of the allowance or precision of the specific amounts. The Corporation does not view the allowance for loan losses as being divisible among the various categories of loans. The entire allowance is available to absorb any future losses without regard to the category or categories in which the charged-off loans are classified. Table 10 also reflects the percentage ratio of outstanding loans by category to total loans at the end of each of the respective years.

TABLE 10
Allocation of the Allowance for Loan Losses

December 31,	2008					2007					2006					2005					2004
(000’s omitted)	Amount		Loan %			Amount		Loan %			Amount		Loan %			Amount		Loan %			Amount		Loan %
Commercial and construction	$	10,187		79.11	%	$	7,321		79.22	%	$	5,657		77.90	%	$	5,339		75.31	%	$	4,600		73.79	%
Real estate mortgage		440		8.50	%		389		8.45	%		328		8.17	%		263		8.56	%		312		8.31	%
Consumer		1,137		12.39	%		767		12.33	%		623		13.93	%		593		16.13	%		508		17.90	%
Unallocated		9					77					84					106					81
Total	$	11,773		100.00	%	$	8,554		100.00	%	$	6,692		100.00	%	$	6,301		100.00	%	$	5,501		100.00	%

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As discussed earlier under “Allowance and Provision for Loan Losses” the Corporation has a methodology that provides for formula based allowances as well as specific allocations for impaired loans. A loan is considered impaired when management determines it is probable that the principal and interest due under the contractual terms of the loan will not be collected. In most instances, impairment is measured based on the fair value of the underlying collateral. Impairment may also be measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate. Interest income on impaired non-accrual loans is recognized on a cash basis. Interest income on all other impaired loans is recorded on an accrual basis.

Certain of the Corporation’s non-performing loans included in Table 9 are considered impaired. The Corporation measures impairment on all large balance non-accrual commercial loans. Certain large balance accruing loans rated watch or lower are also measured for impairment. Impairment losses are believed to be adequately covered by the provision for loan losses. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment and include certain smaller balance commercial loans, consumer loans, and residential real estate loans, and are not included in the impaired loan data in the following paragraphs.

The Corporation maintains policies and procedures to identify and monitor non-accrual loans. A loan is placed on non-accrual status when there is doubt regarding collection of principal or interest, or when principal or interest is past due 90 days or more. Interest accrued but not collected is reversed against income for the current quarter and charged to the allowance for loan losses for prior quarters when the loan is placed on non-accrual status.

DEPOSITS
TABLE 11
Average Deposits
Years Ended December 31,

	2008					2007					2006					2005					2004
	Average					Average					Average					Average					Average
(000’s omitted)	Balance		Rate			Balance		Rate			Balance		Rate			Balance		Rate			Balance		Rate
Non-int. bearing demand	$	73,991				$	75,177				$	77,256				$	81,471				$	73,553
Interest-bearing demand		95,880		1.38	%		98,172		2.40	%		103,356		2.32	%		111,670		1.51	%		108,704		1.10	%
Savings		83,245		0.87	%		88,943		1.34	%		99,339		1.26	%		125,031		1.12	%		149,099		1.53	%
Time		261,411		4.33	%		266,487		4.82	%		251,287		4.73	%		183,048		3.45	%		130,115		2.71	%
Total	$	514,527		2.60	%	$	528,779		3.10	%	$	531,238		2.89	%	$	501,220		1.87	%	$	461,471		1.52	%

The Corporation’s average deposit balances and rates for the past five years are summarized in Table 11. Total average deposits were 2.7% lower in 2008 as compared to 2007. All categories of deposits experienced declining averages in 2008. Despite the declines, the proportion each category held of total deposits remained fairly flat from year to year. Interest-bearing demand average deposits comprised 18.6% of total average deposits, savings average deposits comprised 16.2% of total average deposits, and time average deposits comprised 50.8% of total average deposits.

As of December 31, 2008 certificates of deposit of $100,000 or more accounted for approximately 26.9% of total deposits compared to 29.6% at December 31, 2007. The maturities of these deposits are summarized in Table 12.

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TABLE 12
Maturity of Time Certificates of Deposit of $100,000 or More

	December 31,
(000’s omitted)	2008		2007
Three months or less	$	15,152	$	41,891
Over three through six months		22,951		22,833
Over six through twelve months		23,146		19,451
Over twelve months		77,187		76,458
Total	$	138,436	$	160,633

Repurchase agreements are secured by mortgage-backed securities held by a third party trustee. During 2008, the Corporation repaid, in full, the remaining $5,000,000 of the agreement. At the end of 2008, the Corporation no longer held any repurchase agreements. When the agreement matured the securities underlying the agreements were returned to the Corporation. These repurchase agreements were used as part of the securities leverage strategy to help enhance net interest income for the Corporation.

FEDERAL INCOME TAXES

The Corporation’s effective tax rate was (17.2%) for 2008, (58.6%) for 2007, and 29.7% for 2006. The principal difference between the effective tax rates and the statutory tax rate of 34% is the Corporation’s investments in certain tax-exempt securities and loans. Additional information relating to federal income taxes is included in Note 10 to the Consolidated Financial Statements.

LIQUIDITY AND INTEREST RATE RISK MANAGEMENT

Asset/Liability management is designed to assure liquidity and reduce interest rate risks. The goal in managing interest rate risk is to maintain a strong and relatively stable net interest margin. It is the responsibility of the Asset/Liability Management Committee (ALCO) to set policy guidelines and to establish short-term and long-term strategies with respect to interest rate exposure and liquidity. The ALCO, which is comprised of key members of senior management, meets regularly to review financial performance and soundness, including interest rate risk and liquidity exposure in relation to present and prospective markets, business conditions, and product lines. Accordingly, the committee adopts funding and balance sheet management strategies that are intended to maintain earnings, liquidity, and growth rates consistent with policy and prudent business standards. Liquidity maintenance, together with a solid capital base and strong earnings performance are key objectives of the Corporation. The Corporation’s liquidity is derived from a strong deposit base comprised of individual and business deposits. The Corporation’s deposit base plus other funding sources (federal funds purchased, other liabilities and shareholders’ equity) provided primarily all funding needs in 2008, 2007, and 2006. While these sources of funds are expected to continue to be available to provide funds in the future, the mix and availability of funds will depend upon future economic and market conditions.

Primary liquidity is provided through short-term investments or borrowings (including federal funds sold and purchased), while the security portfolio provides secondary liquidity along with FHLB advances. As of December 31, 2008, the Corporation did not have any federal funds sold as compared to 1.2% of total assets at the end of 2007. The Corporation regularly monitors liquidity to ensure adequate cash flows to cover unanticipated reductions in the availability of funding sources.

Interest rate risk is managed by controlling and limiting the level of earnings volatility arising from rate movements. The Corporation regularly performs reviews and analyses of those factors impacting interest rate risk. Factors include maturity and re-pricing frequency of balance sheet components, impact of rate changes on interest margin and prepayment speeds, market value impacts of rate changes, and other issues. Both actual and projected performance, are reviewed, analyzed, and compared to policy and objectives to assure present and future financial viability.

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The Corporation had cash flows from financing activities resulting primarily from the outflow of demand and savings deposits and decrease of borrowings. In 2008, these deposits decreased $33,775,000 and these borrowings decreased $472,000. Cash provided by investing activities was $19,381,000 in 2008 compared to cash used of $11,722,000 in 2007. The change in investing activities was due to increases of called securities, along with scheduled maturities, which were partially offset by securities purchases. Loan demand decreased in 2008 compared to 2007, while the sales of other real estate owned increased in 2008 when compared to 2007.

The following table discloses information on the maturity of the Corporation’s contractual long-term obligations:

Table 13

	Less than 1								More than
(000’s omitted)	Total		year		1-3 years		3-5 years		5 years
Time Deposits	$	256,809	$	137,060	$	88,301	$	31,281	$	167
Short-term borrowings		1,500		1,500		0		0		0
FHLB advances		14,707		2,726		11,058		68		855
Subordinated debt		14,000		0		0		0		14,000
Note payable		1,000		1,000		0		0		0
Operating leases		860		209		373		278		0
Total	$	288,876	$	142,495	$	99,732	$	31,627	$	15,022

CAPITAL RESOURCES

Management closely monitors capital levels to provide for current and future business needs and to comply with regulatory requirements. Regulations prescribed under the Federal Deposit Insurance Corporation Improvement Act of 1991 have defined “well capitalized” institutions as those having total risk-based ratios, tier 1 risk-based capital ratios and tier 1 leverage ratios of at least 10%, 6%, and 5%, respectively. At December 31, 2008, the Corporation was in excess of the minimum capital and leverage requirements as defined by federal law.

Total shareholders’ equity declined 27.0% to $36,124,000 at December 31, 2008, compared with $49,496,000 at December 31, 2007. The Corporation’s equity to asset ratio was 6.24% at December 31, 2008, compared to 7.88% at December 31, 2007. The decrease in equity in 2008 resulted from negative earnings and increases in accumulated other comprehensive losses. In 2008, the Corporation did not pay dividends, compared to $1.00 of dividends per share paid in 2007.

At December 31, 2008, the Corporation’s tier 1 and total risk-based capital ratios were 10.2% and 11.4%, respectively, compared with 10.4% and 11.6% in 2007. The Corporation’s tier 1 leverage ratio was 8.8% at December 31, 2008 compared with 9.0% at December 31, 2007. Although the Corporation experienced a decline in equity from year to year, the Corporation was also able to simultaneously shrink the balance sheet and was able to maintain risk-based ratios at levels considered to be well capitalized.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Management’s Discussion and Analysis of financial condition and results of operations are based on the Corporation’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, income and expenses. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, and actual results could differ from those estimates.

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The allowance for loan losses is maintained at a level we believe is adequate to absorb probable losses identified and inherent in the loan portfolio. Our evaluation of the adequacy of the allowance for loan losses is an estimate based on reviews of individual loans, assessments of the impact of current and anticipated economic conditions on the portfolio, and historical loss experience. The allowance for loan losses represents management’s best estimate, but significant downturns in circumstances relating to loan quality or economic conditions could result in a requirement for an increased allowance for loan losses in the near future. Likewise, an upturn in loan quality or improved economic conditions may result in a decline in the required allowance for loan losses. In either instance unanticipated changes could have a significant impact on operating earnings.

The allowance for loan losses is increased through a provision charged to operating expense. Uncollectible loans are charged-off through the allowance for loan losses. Recoveries of loans previously charged-off are added to the allowance for loan losses. A loan is considered impaired when it is probable that contractual interest and principal payments will not be collected either for the amounts or by the dates as scheduled in the loan agreement.

Goodwill and intangible assets arose from our past acquisition of West Michigan Community Bank, as discussed in Note 7 to the financial statements. We test our goodwill for impairment utilizing the methodology and guidelines established in SFAS No. 142, Goodwill and Other Intangible Assets. This methodology involves assumptions regarding the valuation of West Michigan Community Bank and related intangible assets. We believe the assumptions we have made are reasonable. Based upon our annual impairment analysis in 2008 we found it necessary to completely write off the goodwill balance. The balance of goodwill at December 31, 2008 and 2007 was $0 and $7,955,000, respectively.

Our accounting for income taxes involves the valuation of deferred tax assets and liabilities primarily associated with differences in the timing of the recognition of revenues and expenses for financial reporting and tax purposes. We have recorded no valuation allowance on the balance of our deferred tax assets as we conclude that the tax benefits associated with this asset will more likely than not be realized based upon the levels of taxable income in prior years and the expectation of a return to profitability and generation of taxable income in future years. Management has reviewed the deferred tax position for the Corporation at December 31, 2008 and 2007. The deferred tax position was impacted by several significant transactions in 2008 and 2007. These transactions included write-off of an investment and a 60% write down of an equity investment. After evaluating the impact of the significant transactions the Corporation has determined that no valuation reserve is required.

The Corporation evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and the ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of the reviews of the issuer’s financial condition.

OFF-BALANCE-SHEET ITEMS

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss

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exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. The amounts of commitments are included in Note 14 to the consolidated financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Fentura Financial, Inc. faces market risk to the extent that both earnings and the fair value of its financial instruments are affected by changes in interest rates. The Corporation manages this risk with static GAP analysis and has begun simulation modeling. Throughout 2008, the results of these measurement techniques were within the Corporation’s policy guidelines. The Corporation does not believe that there has been a material change in the nature of the Corporation’s substantially influenced market risk exposures, including the categories of market risk to which the Corporation is exposed and the particular markets that present the primary risk of loss to the Corporation, or in how those exposures were managed in 2008 compared to 2007.

The Corporation’s market risk exposure is mainly comprised of its vulnerability to interest rate risk. Prevailing interest rates and interest rate relationships in the future will be primarily determined by market factors, which are outside of the Corporation’s control. All information provided in this section consists of forward-looking statements. Reference is made to the section captioned “Forward Looking Statements” in this annual report for a discussion of the limitations on the Corporation’s responsibility for such statements. The following table provides information about the Corporation’s financial instruments that are sensitive to changes in interest rates as of December 31, 2008. The table shows expected cash flows from market sensitive instruments for each of the next five years and thereafter. The expected maturity date values for loans and securities (at amortized cost) were calculated without adjusting the instruments’ contractual maturity dates for expected prepayments. Maturity date values for interest bearing core deposits were not based on estimates of the period over which the deposits would be outstanding, but rather the opportunity for re-pricing. The Corporation believes that re-pricing dates, as opposed to expected maturity dates, may be more relevant in analyzing the value of such instruments and are reported as such in the following table.

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TABLE 14

Rate Sensitivity of Financial Instruments

(000’s omitted)	2009			2010			2011			2012			2013			Thereafter			Total		Fair Value
Rate Sensitive Assets:
Fixed interest rate loans	$	89,067		$	46,365		$	47,876		$	46,017		$	42,784		$	45,554		$	317,663	$	294,978
Average interest rate		6.91	%		6.91	%		6.80	%		6.83	%		7.20	%		6.72	%
Variable interest rate loans	$	96,263		$	9,194		$	5,399		$	3,875		$	6,935		$	19,980		$	141,646	$	141,687
Average interest rate		4.82	%		3.68	%		3.81	%		4.90	%		4.37	%		4.83	%
Fixed interest rate securities	$	16,309		$	11,802		$	3,542		$	1,187		$	498		$	11,233		$	44,571	$	45,119
Average interest rate		3.86	%		3.75	%		3.88	%		4.02	%		3.93	%		4.51	%
Variable Interest rate securities	$	3,891		$	1,489		$	1,474		$	1,273		$	1,222		$	8,975		$	18,324	$	14,082
Average interest rate		1.84	%		3.90	%		3.90	%		3.90	%		3.80	%		4.20	%
FHLB Stock	$	2,032																	$	2,032	$	2,032
Average interest rate		5.00	%
Total rate sensitive assets	$	207,562		$	68,850		$	58,291		$	52,352		$	51,439		$	85,742		$	524,236	$	497,898
Rate Sensitive Liabilities:
Interest-bearing checking	$	103,138																	$	103,138	$	98,410
Average interest rate		1.19	%
Savings	$	76,096																	$	76,096	$	72,229
Average interest rate		0.14	%
Time	$	137,061		$	59,128		$	29,174		$	25,499		$	5,781		$	166		$	256,809	$	247,047
Average interest rate		3.40	%		4.20	%		4.75	%		4.72	%		3.82	%		1.18	%
Short term borrowings	$	1,500																	$	1,500	$	1,500
Average interest rate		1.25	%
FHLB advances	$	2,726		$	6,028		$	5,030		$	33		$	35		$	855		$	14,707	$	14,475
Average interest rate		1.54	%		3.42	%		3.82	%		7.34	%		7.34	%		7.34	%
Subordinated debt	$	14,000																	$	14,000	$	13,860
Average interest rate		5.49	%
Note payable	$	1,000																	$	1,000	$	1,000
Average interest rate		4.75	%
Total rate sensitive liabilities	$	335,521		$	65,156		$	34,204		$	25,532		$	5,816		$	1,021		$	467,250	$	448,516

INTEREST RATE SENSITIVITY MANAGEMENT

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

An indicator of the interest rate sensitivity structure of a financial institution’s balance sheet is the difference between its interest rate sensitive assets and interest rate sensitive liabilities, and is referred to as “GAP”.

Table 15 sets forth the distribution of re-pricing of the Corporation’s earning assets and interest bearing liabilities as of December 31, 2008, the interest rate sensitivity GAP, as defined above, the cumulative interest rate sensitivity GAP, the interest rate sensitivity GAP ratio (i.e. interest rate sensitive assets divided by interest rate sensitive liabilities) and the cumulative sensitivity GAP ratio. The table also sets forth the time periods in which earning assets and liabilities will mature or may re-price in accordance with their contractual terms.

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TABLE 15

	Gap Analysis
	December 31, 2008
	Within			Three			One to			After
	Three			Months-			Five			Five
(000’s Omitted)	Months			One Year			Years			Years		Total
Securities	$	4,934		$	14,523		$	22,561		$	18,659	$	60,677
Loans		76,832			108,498			208,445			65,534		459,309
Loans Held for Sale		690			0			0			0		690
FHLB Stock		2,032			0			0			0		2,032
Total Earning Assets	$	84,488		$	123,021		$	231,006		$	84,193	$	522,708
Interest Bearing Liabilities:
Interest Bearing Demand Deposits	$	103,138		$	0		$	0		$	0	$	103,138
Savings Deposits		76,074			0			0			0		76,074
Time Deposits Less than $100,000		23,520			52,286			42,495			72		118,373
Time Deposits Greater than $100,000		15,152			46,097			77,089			98		138,436
Short-term Borrowings		1,500			0			0			0		1,500
FHLB Advances		1,000			1,726			11,126			855		14,707
Note Payable		1,000			0			0			0		1,000
Subordinated Debt		14,000			0			0			0		14,000
Total Interest Bearing Liabilities	$	235,384		$	100,109		$	130,710		$	1,025	$	467,228
Interest Rate Sensitivity GAP	$	(150,896	)	$	22,912		$	100,296		$	83,168	$	55,480
Cumulative Interest Rate Sensitivity GAP	$	(150,896	)	$	(127,984	)	$	(27,688	)	$	55,480
Interest Rate Sensitivity GAP		0.36			1.23			1.77			82.14
Cumulative Interest Rate Sensitivity GAP Ratio		0.36			0.62			0.94			1.12

As indicated in Table 15, the short-term (one year and less) cumulative interest rate sensitivity gap is negative. Accordingly, if market interest rates increase, this negative gap position could have a short- term negative impact on interest margin. Conversely, if market interest rates decrease, this negative gap position could have a short-term positive impact on interest margin. However, gap analysis is limited and may not provide an accurate indication of the impact of general interest rate movements on the net interest margin since the re-pricing of various categories of assets and liabilities is subject to the Corporation’s needs, competitive pressures, and the needs of the Corporation’s customers. In addition, various assets and liabilities indicated as re-pricing within the same period may in fact re-price at different times within such period and at different rate indices. The limitations of gap described above impacted financial performance in 2008. The Corporation’s gap position was negative, which indicates liability sensitivity to rate changes. In 2008 there were seven decreases in the Prime rate. In 2008, the loan portfolios shrank. The combination of the rate decreases and the shrinking loan portfolio contributed to the decline in interest income of $6,071,000 or 15.5% when compared to 2007. Liabilities, largely deposits, lagged market re-pricing due to the maturity dates on time deposits or balances not being re-priced by the same amount as assets due to competitive pressures. Declining deposits, particularly interest bearing deposits, accompanied by declining market rates, allowed the Corporation to reduce its interest expense in 2008 by $3,593,000 or 19.3% over 2007. Overall, net interest income decreased $2,478,000 or 12.0% over 2007. Certain asset products re-priced downward 4.00% with the movement of national prime rates in 2008. Other variable rate asset products, only re-priced downward a portion of the overall decline, as management has worked to instill interest rate floors on certain loan products. Most interest bearing deposits were already priced at 0.50% or lower and accordingly, had a much lesser level of re-pricing opportunity. The Corporation expects to continue to make strides in managing interest rate sensitivity.

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FORWARD LOOKING STATEMENTS

This discussion and analysis of financial condition and results of operations, and other sections of the Consolidated Financial Statements and this annual report, contain forward looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation itself. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “projects,” variations of such words and similar expressions are intended to identify such forward looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”), which are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecast in such forward looking statements. The Corporation undertakes no obligation to update, amend or clarify forward looking statements as a result of new information, future events, or otherwise.

Future factors that could cause a difference between an ultimate actual outcome and a preceding forward looking statement include, but are not limited to, changes in interest rate and interest rate relationships, demands for products and services, the degree of competition by traditional and non-traditional competitors, changes in banking laws or regulations, changes in tax laws, change in prices, the impact of technological advances, government and regulatory policy changes, the outcome of pending and future litigation and contingencies, trends in customer behavior as well as their ability to repay loans, and the local and national economy.

58

FENTURA FINANCIAL, INC. COMMON STOCK

The Corporation’s shares are quoted on the OTC Bulletin Board. Table 16 sets forth the high and low market information for each quarter of 2006 through 2008. These quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission and may not represent actual transactions. As of February 1, 2009, there were 786 shareholders of record, not including participants in the Corporation’s employee stock option program.

TABLE 16
Common Stock Data

		Market				Dividends
		Information				Paid
Years	Quarter	High		Low		Per Share
	First Quarter	$	31.55	$	29.77	$	0.230
2006	Second Quarter		33.41		31.14		0.230
	Third Quarter		33.64		30.00		0.230
	Fourth Quarter		34.00		32.55		0.250
						$	0.940
	First Quarter	$	34.00	$	29.25	$	0.250
2007	Second Quarter		31.50		29.50		0.250
	Third Quarter		31.50		26.05		0.250
	Fourth Quarter		26.05		21.05		0.250
						$	1.000
	First Quarter	$	23.00	$	17.75	$	0.000
2008	Second Quarter		19.75		11.50		0.000
	Third Quarter		11.50		6.60		0.000
	Fourth Quarter		11.50		6.75		0.000
						$	0.000

Note: Market and dividend per share figures have been adjusted to reflect a 10% stock dividend paid on August 4, 2006.

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SHAREHOLDER RETURN PERFORMANCE GRAPH

     The graph compares the cumulative total shareholder return on the Corporation’s common stock for the last five years with the cumulative total return of the Midwest Quadrant Pink Bank Index, published by SNL Financial L.C., and the Nasdaq Market Index assuming a $100 investment at the end of 2003. The Nasdaq Market Index is a broad equity market index. The Midwest Quadrant Pink Bank Index is composed of 101 banks and bank holding companies located in the Midwest and whose shares primarily trade on the Over-the-Counter Bulletin Board.

     Cumulative total return is measured by dividing (i) the sum of (A) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between the share price at the end and the beginning of the measurement period; by (ii) the share price at the beginning of the measurement period. The graph assumes the investment of $100 in the Corporation’s common stock, the Nasdaq Market Index, and the Midwest Quadrant Pink Bank Index at the market close on December 31, 2003 and the reinvestment of all dividends through the period ending December 31, 2008.

COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG FENTURA FINANCIAL, INC., NASDAQ MARKET INDEX,
AND MIDWEST QUADRANT PINK BANK INDEX

	Period Ending
Index	12/31/03		12/31/04		12/31/05		12/31/06		12/31/07		12/31/08
Fentura Financial, Inc.		100.00		119.75		109.75		123.57		86.35		26.80
NASDAQ Composite		100.00		108.59		110.08		120.56		132.39		78.72
SNL Midwest OTC-BB and Pink Banks		100.00		119.15		124.05		130.64		127.52		95.04
Fentura Financial Peer Group*		100.00		115.52		105.97		109.53		66.88		34.48

	Source: SNL Financial LC, Charlottesville, VA
*	Fentura Financial Peer Group consists of Banks in Michigan (MI)

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FENTURA FINANCIAL, INC.

175 N Leroy Street
PO Box 725
Fenton, MI 48430-0725
(810) 750-8725
shareholders@fentura.com

EX-14

Exhibit 14

FENTURA FINANCIAL, INC.
CODE OF ETHICS

In my role with Fentura Financial, Inc. and/or subsidiaries or affiliates (the “Company”), I certify to the Company and the Audit Committee of the Board of Directors of the Company, that I will adhere to and advocate the following principles and responsibilities governing my professional and ethical conduct to the best of my knowledge and ability:

1.	I will act with honesty and integrity, avoiding actual or apparent conflicts of interest in all personal and professional relationships.
2.	I will provide information that is accurate, complete, objective, relevant, timely and understandable.
3.	I will comply with the rules and regulations of federal, state, and local governments, and other appropriate private and public regulatory agencies.
4.	I will act in good faith, responsibly, and with due care. I will not misrepresent material facts or allow my independent judgment to be subordinated or otherwise compromised.
5.	I will respect and maintain the confidentiality of information reviewed or acquired in carrying out my duties except when authorized or otherwise legally obligated to disclose.
6.	I will share knowledge and maintain skills important and relevant to the needs of the Company.
7.	I will proactively practice and promote ethical behavior as a professional in my role with the Company.
8.	I will not solicit for myself or for a third party anything of value from anyone in return for any business, service or confidential information of the Company, nor will I accept anything of value from anyone (except for my wages and as otherwise permitted by law) in connection with the business of the Company, either before or after a transaction is discussed or completed.
9.	I will comply with and adhere to all of the Company’s policies and practices, including those policies governing accounting and financial reporting practices and corporate governance.
10.	I will respond honestly and candidly when dealing with the Company’s independent and internal auditors, regulators and attorneys.
11.	I will promptly disclose to an appropriate person or persons any transaction or relationship that reasonably could be expected to give rise to a conflict of interest, and/or violations of this Code.

(Signature) (Date)

EX-21.1

Exhibit 21.1
Subsidiaries of the Registrant

Company	Ownership			State of Incorporation
The State Bank		100	%	Michigan
Davison State Bank		100	%	Michigan
Community Bank Services, Inc.	100% by The State Bank			Michigan
Fentura Mortgage Company	100% by The State Bank			Michigan
West Michigan Community Bank		100	%	Michigan
West Michigan Mortgage, LLC	99.5% by West Michigan			Michigan
	Community Bank
	0.5% by Community Insurance
	Services, Inc.
Community Insurance Services, Inc.	100% by West Michigan Community Bank			Michigan

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We consent to the incorporation by reference in the Registration Statements of Fentura Financial, Inc. on Form S-3D (File No.333-120182) on Form S-8 (File No. 333-118085), on Form S-8 (File No. 333-137104) and on Form S-8 (File No. 333-137103) of our report dated March 18, 2009, which is incorporated by reference in the 2008 Annual Report on Form 10-K of Fentura Financial, Inc.

/s/ CROWE HORWATH LLP  

Grand Rapids, Michigan
March 18, 2009

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Donald L. Grill, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Fentura Financial, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 20, 2009

/s/Donald L. Grill  

Donald L. Grill 

Chief Executive Officer and President 

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Douglas J. Kelley, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Fentura Financial, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 20, 2009

/s/Douglas J. Kelley  

Douglas J. Kelley 

Chief Financial Officer 

EX-32.1

Exhibit 32.1

          Each of Donald L. Grill, Chief Executive Officer and President, and Douglas J. Kelley, Chief Financial Officer, of Fentura Financial, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 which this statement accompanies fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)	the information contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 fairly presents, in all material respects, the financial condition and results of operations of Fentura Financial, Inc.

Dated: March 20, 2009

/s/Donald L. Grill  

Donald L. Grill 

Chief Executive Officer and President 

/s/Douglas J. Kelley  

Douglas J. Kelley 

Chief Financial Officer