MBT FINANCIAL CORP - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - MBT FINANCIAL CORP	Financial_Report.xls
EX-32.2 - EXHIBIT 32.2 - MBT FINANCIAL CORP	v312124_ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - MBT FINANCIAL CORP	v312124_ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - MBT FINANCIAL CORP	v312124_ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - MBT FINANCIAL CORP	v312124_ex31-2.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2012

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 000-30973

MBT FINANCIAL CORP.

(Exact name of registrant as specified in its charter)

Michigan

38-3516922

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

102 E. Front Street

Monroe, Michigan 48161

(Address of principal executive offices)

(Zip Code)

(734) 241-3431

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

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 accelerated filer” in Rule 12b-2 of the Exchange Act (check one).

Large accelerated filer ¨ Accelerated Filer ¨

Non-accelerated filer ¨ 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 ¨ No þ

As of May 15, 2012, there were 17,315,600 shares of the Company’s Common Stock outstanding.

Part I Financial Information

Item 1. Financial Statements

MBT FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

	March 31, 2012
Dollars in thousands	(Unaudited)			December 31, 2011

ASSETS
Cash and Cash Equivalents
Cash and due from banks
Non-interest bearing	$	19,275		$	18,201
Interest bearing		85,304			57,794
Total cash and cash equivalents		104,579			75,995

Securities - Held to Maturity		35,788			35,364
Securities - Available for Sale		353,137			354,899
Federal Home Loan Bank stock - at cost		10,605			10,605

Loans held for sale		641			1,035

Loans		666,653			679,475
Allowance for Loan Losses		(20,481	)		(20,865	)
Loans - Net		646,172			658,610

Accrued interest receivable and other assets		8,179			7,700
Other Real Estate Owned		14,258			16,650
Bank Owned Life Insurance		48,023			47,653
Premises and Equipment - Net		29,067			29,516
Total assets	$	1,250,449		$	1,238,027

LIABILITIES
Deposits:
Non-interest bearing	$	164,459		$	164,852
Interest-bearing		871,091			857,458
Total deposits		1,035,550			1,022,310

Federal Home Loan Bank advances		107,000			107,000
Repurchase agreements		20,000			20,000
Interest payable and other liabilities		12,000			13,006
Total liabilities		1,174,550			1,162,316

STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized,
17,312,707 and 17,291,729 shares issued and outstanding)		2,129			2,099
Retained Earnings		73,952			72,735
Unearned Compensation		(67	)		(87	)
Accumulated other comprehensive income (loss)		(115	)		964
Total stockholders' equity		75,899			75,711
Total liabilities and stockholders' equity	$	1,250,449		$	1,238,027

The accompanying notes to consolidated financial statements are an integral part of these statements.

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MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

	Three Months Ended March 31,
Dollars in thousands, except per share data	2012			2011

Interest Income
Interest and fees on loans	$	9,139		$	10,352
Interest on investment securities-
Tax-exempt		380			372
Taxable		2,134			2,040
Interest on balances due from banks		43			38
Total interest income		11,696			12,802

Interest Expense
Interest on deposits		1,839			3,015
Interest on borrowed funds		929			1,018
Total interest expense		2,768			4,033

Net Interest Income		8,928			8,769
Provision For Loan Losses		2,250			5,750

Net Interest Income After
Provision For Loan Losses		6,678			3,019

Other Income
Income from wealth management services		968			987
Service charges and other fees		1,090			1,117
Net gain on sales of securities available for sale		1,100			67
Origination fees on mortgage loans sold		122			83
Bank owned life insurance income		370			412
Other		1,027			997
Total other income		4,677			3,663
Other Expenses
Salaries and employee benefits		5,106			4,849
Occupancy expense		725			777
Equipment expense		803			694
Marketing expense		198			246
Professional fees		588			699
Collection expenses		62			77
Net loss on other real estate owned		269			1,241
Other real estate owned expenses		469			308
FDIC Deposit Insurance Assessment		679			846
Other		1,113			987
Total other expenses		10,012			10,724

Income (Loss ) Before Income Taxes		1,343			(4,042	)
Income Tax Expense		126			-
Net Income (Loss)	$	1,217		$	(4,042	)

Other Comprehensive Income (Net of Tax)
Unrealized gains (losses) on securities		(1,131	)		498
Postretirement benefit liability		52			52
Comprehensive Income (Loss)	$	138		$	(3,492	)

Basic Earnings (Loss) Per Common Share	$	0.07		$	(0.23	)

Diluted Earnings (Loss) Per Common Share	$	0.07		$	(0.23	)

Common Stock Dividends Declared Per Share	$	-		$	-

The accompanying notes to consolidated financial statements are an integral part of these statements.

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MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED

								Accumulated
								Other
	Common		Retained		Unearned			Comprehensive
Dollars in thousands	Stock		Earnings		Compensation			Income (Loss)			Total
Balance - January 1, 2012	$	2,099	$	72,735	$	(87	)	$	964		$	75,711

Issuance of Common Stock (20,978 shares)		25		-		-			-			25
Equity Compensation		5		-		20			-			25

Comprehensive income:
Net income		-		1,217		-			-			1,217
Change in net unrealized gain (loss) on securities
available for sale - Net of tax effect of $209		-		-		-			(405	)		(405	)
Reclassification adjustment for gains included
in net income - Net of tax effect of $374		-		-		-			(726	)		(726	)
Change in postretirement benefit obligation
Net of tax effect of $(27)		-		-		-			52			52
Total Comprehensive Income		138

Balance - March 31, 2012	$	2,129	$	73,952	$	(67	)	$	(115	)	$	75,899

The accompanying notes to consolidated financial statements are an integral part of these statements.

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MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

	Three Months Ended March 31,
Dollars in thousands	2012			2011

Cash Flows from Operating Activities
Net Loss	$	1,217		$	(4,042	)
Adjustments to reconcile net loss to net cash from operating activities
Provision for loan losses		2,250			5,750
Depreciation		500			521
Net amortization of investment premium and discount		435			297
Writedowns of Other Real Estate Owned		515			1,092
Net increase (decrease) in interest payable and other liabilities		(445	)		652
Net decrease in interest receivable and other assets		(707	)		(5,402	)
Equity based compensation expense		40			45
Net gain on sale/settlement of securities		(1,100	)		(67	)
Increase in cash surrender value of life insurance		(370	)		(412	)
Net cash provided by (used for) operating activities	$	2,335		$	(1,566	)

Cash Flows from Investing Activities
Proceeds from maturities and redemptions of investment securities held to maturity	$	3,436		$	602
Proceeds from maturities and redemptions of investment securities available for sale		74,009			7,050
Proceeds from sales of investment securities held to maturity		-			5,068
Proceeds from sales of investment securities available for sale		15,198			-
Net decrease in loans		8,466			20,811
Proceeds from sales of other real estate owned		4,226			760
Proceeds from sales of other assets		56			169
Purchase of investment securities held to maturity		(3,860	)		-
Proceeds from surrender of Bank Owned Life Insurance		-			3,654
Purchase of investment securities available for sale		(88,494	)		(68,142	)
Purchase of bank premises and equipment		(53	)		(53	)
Net cash provided by (used for) investing activities	$	12,984		$	(30,081	)

Cash Flows from Financing Activities
Net increase in deposits	$	13,240		$	13,248
Proceeds from issuance of common stock		25			15
Net cash provided by financing activities	$	13,265		$	13,263

Net Increase (Decrease) In Cash and Cash Equivalents	$	28,584		$	(18,384	)

Cash and Cash Equivalents at Beginning Of Period		75,995			86,300
Cash And Cash Equivalents At End Of Period	$	104,579		$	67,916

Supplemental Cash Flow Information
Cash paid for interest	$	2,764		$	4,005
Cash paid for federal income taxes	$	-		$	-

Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	$	2,104		$	4,984
Transfer of loans to other assets	$	12		$	12

The accompanying notes to consolidated financial statements are an integral part of these statements.

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MBT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The unaudited consolidated financial statements include the accounts of MBT Financial Corp. (the “Company”) and its subsidiary, Monroe Bank & Trust (the “Bank”). The Bank includes the accounts of its wholly owned subsidiary, MB&T Financial Services, Inc. The Bank operates seventeen branches in Monroe County, Michigan, seven branches in Wayne County, Michigan, and a mortgage loan office in Monroe County. The Bank’s primary source of revenue is from providing loans to customers, who are predominantly small and middle-market businesses and middle-income individuals. The Company’s sole business segment is community banking.

The accounting and reporting policies of the Bank conform to practice within the banking industry and are in accordance with accounting principles generally accepted in the United States. Preparation of financial statements in conformity with generally accepted accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes in the near term are the determination of the allowance for loan losses, the valuation of other real estate owned, the deferred tax asset valuation allowance, and the fair value of investment securities.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of Management, necessary for fair statement of results for the interim periods.

The significant accounting policies are as follows:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and its subsidiary. All material intercompany transactions and balances have been eliminated.

COMPREHENSIVE INCOME

Accounting principles generally require that revenue, expenses, gains, and losses be included in net income. Certain changes in assets and liabilities, however, such as unrealized gains and losses on securities available for sale and amounts recognized related to postretirement benefit plans (gains and losses, prior service costs, and transition assets or obligations), are reported as a direct adjustment to the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income.

BUSINESS SEGMENTS

While the Company's chief decision makers monitor the revenue streams of various products and services, operations are managed and financial performance is evaluated on a company wide basis. Accordingly, all of the Company’s operations are considered by management to be aggregated in one reportable segment.

FAIR VALUE

The Corporation measures or monitors many of its assets and liabilities on a fair value basis. Fair value is used on a recurring basis for assets and liabilities that are elected to be accounted for under The Fair Value Option as well as for certain assets and liabilities in which fair value is the primary basis of accounting. Examples of these include derivative instruments and available for sale securities. Additionally, fair value is used on a non-recurring basis to evaluate assets or liabilities for impairment or for disclosure purposes. Examples of these non-recurring uses of fair value include certain loans held for sale accounted for on a lower of cost or market basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the nature of the asset or liability, the Corporation uses various valuation techniques and assumptions when estimating fair value.

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The Corporation applied the following fair value hierarchy:

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. The Corporation’s mutual fund investments where quoted prices are available in an active market generally are classified within Level 1 of the fair value hierarchy.

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. The Corporation’s borrowed funds and investments in U.S. government agency securities, government sponsored mortgage backed securities, and obligations of states and political subdivisions are generally classified in Level 2 of the fair value hierarchy. Fair values for these instruments are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Private equity investments and trust preferred collateralized debt obligations are classified within Level 3 of the fair value hierarchy. Fair values are initially valued based on transaction price and are adjusted to reflect exit values.

When determining the fair value measurements for assets and liabilities required or permitted to be recorded at and/or marked to fair value, the Corporation considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability. When possible, the Corporation looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Corporation looks to market observable data for similar assets or liabilities. Nevertheless, certain assets and liabilities are not actively traded in observable markets and the Corporation must use alternative valuation techniques to derive a fair value measurement.

ACCOUNTING PRONOUNCEMENTS

No recent accounting pronouncements are expected to have a significant impact on the Corporation’s financial statements.

In May 2011, the FASB issued Accounting Standards Update 2011-04, Fair Value Measurement (ASU 2011-04). ASU 2011-04 is the result of the work of the FASB and the IASB to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRSs. Disclosure of the fair value levels of our financial assets and financial liabilities was added to Note 7 upon adoption of this ASU in the first quarter of 2012.

In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 provides entities with the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income, along with a total for other comprehensive income, and a total amount for comprehensive income. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. This update applies retrospectively effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We adopted this statement in the first quarter of 2012, electing to present each component of other comprehensive income in a single continuous statement.

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2. EARNINGS PER SHARE

The calculations of earnings (loss) per common share are as follows:

	For the three months ended March 31,
	2012		2011
Basic
Net profit (loss)	$	1,217,000	$	(4,042,000	)
Net profit (loss) applicable to common stock	$	1,217,000	$	(4,042,000	)
Average common shares outstanding		17,304,781		17,256,472
Earnings (Loss) per common share - basic	$	0.07	$	(0.23	)

	2012		2011
Diluted
Net profit (loss)	$	1,217,000	$	(4,042,000	)
Net profit (loss) applicable to common stock	$	1,217,000	$	(4,042,000	)
Average common shares outstanding		17,304,781		17,256,472
Stock option adjustment		690		-
Average common shares outstanding - diluted		17,305,471		17,256,472
Profit (Loss) per common share - diluted	$	0.07	$	(0.23	)

3. STOCK BASED COMPENSATION

Stock Options - The following table summarizes the options that had been granted to certain key executives in accordance with the Long-Term Incentive Compensation Plan that was approved by shareholders at the Annual Meeting of Shareholders on April 6, 2000.

			Weighted Average
	Shares		Exercise Price
Options Outstanding, January 1, 2012		436,503	$	17.34
Granted		-		-
Exercised		-		-
Forfeited		22,168		13.85
Options Outstanding, March 31, 2012		414,335	$	17.53
Options Exercisable, March 31, 2012		414,335	$	17.34

Stock Only Stock Appreciation Rights (SOSARs) - On February 23, 2012, Stock Only Stock Appreciation Rights (SOSARs) were awarded to certain executives in accordance with the MBT 2008 Stock Incentive Plan that was approved by shareholders on May 1, 2008. The SOSARs have a term of ten years and vest in three equal annual installments beginning on December 31, 2012. SOSARs granted under the plan are structured as fixed grants with the exercise price equal to the market value of the underlying stock on the date of the grant.

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The fair value of $0.57 for the SOSARs was estimated at the date of the grant, using the Black-Scholes option pricing model, with the following assumptions: expected option lives of 7 years, expected volatility of 54.1%, a risk free rate of 1.34% and dividend yield of 0.00%. The following table summarizes the SOSARs that have been granted:

			Weighted Average
	Shares		Exercise Price
SOSARs Outstanding, January 1, 2012		320,000	$	4.08
Granted		109,000		1.85
Exercised		-		-
Forfeited		6,000		5.13
SOSARs Outstanding, March 31, 2012		423,000	$	3.49
SOSARs Exercisable, March 31, 2012		247,321	$	4.65

Restricted Stock Unit Awards – On February 23, 2012, performance restricted stock units were awarded to certain key executive officers in accordance with the MBT 2008 Stock Incentive Plan that was approved by shareholders on May 1, 2008. Each Restricted Stock Unit (RSU) is equivalent to one share of MBT Financial Corp. common stock. Stock will be issued to the participants following a two year performance period that ends on December 31, 2013. Up to 50% of the aggregate RSUs granted may be earned in each year of the performance period subject to satisfying weighted performance thresholds. Earned RSUs vest on December 31, 2014.

The total expense for equity based compensation was $40,000 in the first quarter of 2012 and $45,000 in the first quarter of 2011.

4. LOANS

The Bank makes commercial, consumer, and mortgage loans primarily to customers in Monroe County, Michigan, southern and western Wayne County, Michigan, and surrounding areas. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on the automotive, manufacturing, and real estate development economic sectors.

Loans consist of the following (000s omitted):

	March 31,		December 31,
	2012		2011
Residential real estate loans	$	249,983	$	255,555
Commercial and Construction real estate loans		323,850		330,498
Agriculture and agricultural real estate loans		15,093		15,931
Commercial and industrial loans		64,607		63,762
Loans to individuals for household, family,
and other personal expenditures		13,120		13,729
Total loans, gross		666,653		679,475
Less: Allowance for loan losses		20,481		20,865
		646,172		658,610

Loans are placed in a nonaccrual status when, in the opinion of Management, the collection of additional interest is doubtful. All loan relationships over $250,000 that are classified by Management as nonperforming as well as selected performing accounts and all renegotiated loans are reviewed for impairment each quarter. Allowances for loans determined to be impaired are included in the allowance for loan losses. All cash received on nonaccrual loans is applied to the principal balance. Nonperforming assets consist of nonaccrual loans, loans 90 days or more past due, restructured loans, nonaccrual investment securities, and other real estate owned. Other real estate owned includes real estate that has been acquired in full or partial satisfaction of loan obligations or upon foreclosure and real estate that the bank has purchased but no longer intends to use for bank premises.

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The following table summarizes nonperforming assets (000’s omitted):

	March 31,			December 31,
	2012			2011
Nonaccrual loans	$	45,436		$	50,717
Loans 90 days past due and accruing		2			20
Restructured loans		25,954			24,774
Total nonperforming loans	$	71,392		$	75,511
Other real estate owned		14,258			16,650
Other assets		20			61
Nonperforming investment securities		2,888			2,984
Total nonperforming assets	$	88,558		$	95,206
Nonperforming assets to total assets		7.08	%		7.69	%
Allowance for loan losses to
nonperforming loans		28.69	%		27.63	%

5. ALLOWANCE FOR LOAN LOSSES

The Company separates its loan portfolio into segments to perform the calculation and analysis of the allowance for loan losses. The six segments analyzed are Agriculture and Agricultural Real Estate, Commercial, Commercial Real Estate, Construction Real Estate, Residential Real Estate, and Consumer and Other. The Agriculture and Agricultural Real Estate segment includes all loans to finance agricultural production and all loans secured by agricultural real estate. This segment does not include loans to finance agriculture that are secured by residential real estate, which are included in the Residential Real Estate segment. The Commercial segment includes loans to finance commercial and industrial businesses that are not secured by real estate. The Commercial Real Estate segment includes loans secured by non-farm, non-residential real estate. The Construction Real Estate segment includes loans to finance construction and land development. This includes residential and commercial construction and land development. The Residential Real Estate segment includes all loans, other than construction loans, that are secured by single family and multi family residential real estate properties. The Consumer and Other segment includes all loans not included in any other segment. These are primarily loans to consumers for household, family, and other personal expenditures, such as autos, boats, and recreational vehicles.

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Activity in the allowance for loan losses during the three months ended March 31, 2012 was as follows (000’s omitted):

March 31, 2012	Agriculture and Agricultural Real Estate		Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total

Allowance for loan losses:
Beginning Balance	$	64	$	2,184		$	9,351		$	2,632		$	6,227		$	407		$	20,865
Charge-offs		-		(96	)		(1,573	)		(462	)		(654	)		(47	)		(2,832	)
Recoveries		-		66			9			37			50			36			198
Provision		5		586			1,519			113			7			20			2,250
Ending balance	$	69	$	2,740		$	9,306		$	2,320		$	5,630		$	416		$	20,481

Ending balance individually
evaluated for impairment	$	69	$	1,477		$	3,408		$	1,257		$	2,453		$	73		$	8,737
Ending balance collectively
evaluated for impairment		-		1,263			5,898			1,063			3,177			343			11,744
Ending balance	$	69	$	2,740		$	9,306		$	2,320		$	5,630		$	416		$	20,481

Loans:
Ending balance individually
evaluated for impairment	$	1,051	$	3,975		$	36,492		$	8,449		$	19,568		$	236		$	69,771
Ending balance collectively
evaluated for impairment		14,042		60,632			265,417			13,492			230,415			12,884			596,882
Ending balance	$	15,093	$	64,607		$	301,909		$	21,941		$	249,983		$	13,120		$	666,653

Activity in the allowance for loan losses during the three months ended March 31, 2011 was as follows (000’s omitted):

March 31, 2011	Agriculture and Agricultural Real Estate		Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total

Allowance for loan losses:
Beginning Balance	$	77	$	3,875		$	9,040		$	3,285		$	4,596		$	350		$	21,223
Charge-offs		-		(828	)		(2,298	)		(202	)		(705	)		(31	)		(4,064	)
Recoveries		-		93			7			10			302			106			518
Provision		16		(261	)		4,481			495			1,205			(186	)		5,750
Ending balance	$	93	$	2,879		$	11,230		$	3,588		$	5,398		$	239		$	23,427

Ending balance individually
evaluated for impairment	$	89	$	934		$	4,067		$	1,140		$	1,479		$	62		$	7,771
Ending balance collectively
evaluated for impairment		4		1,945			7,163			2,448			3,919			177			15,656
Ending balance	$	93	$	2,879		$	11,230		$	3,588		$	5,398		$	239		$	23,427

Loans:
Ending balance individually
evaluated for impairment	$	656	$	6,650		$	42,210		$	8,090		$	16,616		$	155		$	74,377
Ending balance collectively
evaluated for impairment		17,577		62,641			277,884			33,797			246,780			15,663			654,342
Ending balance	$	18,233	$	69,291		$	320,094		$	41,887		$	263,396		$	15,818		$	728,719

Each period the provision for loan losses in the income statement results from the combination of an estimate by Management of loan losses that occurred during the current period and the ongoing adjustment of prior estimates of losses occurring in prior periods.

The provision for loan losses increases the allowance for loan losses, a valuation account which appears on the consolidated balance sheets. As the specific customer and amount of a loan loss is confirmed by gathering additional information, taking collateral in full or partial settlement of the loan, bankruptcy of the borrower, etc., the loan is charged off, reducing the allowance for loan losses. If, subsequent to a charge off, the Bank is able to collect additional amounts from the customer or sell collateral worth more than earlier estimated, a recovery is recorded.

- 11 -

To serve as a basis for making this provision, the Bank maintains an extensive credit risk monitoring process that considers several factors including: current economic conditions affecting the Bank’s customers, the payment performance of individual loans and pools of homogeneous loans, portfolio seasoning, changes in collateral values, and detailed reviews of specific loan relationships.

The Company utilizes an internal loan grading system to assign a risk grade to all commercial loans, all renegotiated loans, and each commercial credit relationship. Grades 1 through 4 are considered “pass” credits and grades 5 through 9 are considered “watch” credits and are subject to greater scrutiny. Loans with grades 6 and higher are considered substandard and most are evaluated for impairment. A description of the general characteristics of each grade is as follows:

•

Grade 1 – Excellent – Loans secured by marketable collateral, with adequate margin, or supported by strong financial statements. Probability of serious financial deterioration is unlikely. Possess a sound repayment source and a secondary source. This classification will also include all loans secured by certificates of deposit or cash equivalents.

•

Grade 2 – Satisfactory – Loans that have less than average risk and clearly demonstrate adequate debt service coverage. These loans may have some vulnerability, but are sufficiently strong to have minimal deterioration if adverse factors are encountered, and are expected to be fully collectable.

•

Grade 3 – Average – Loans that have a reasonable amount of risk and may exhibit vulnerability to deterioration if adverse factors are encountered. These loans should demonstrate adequate debt service coverage but warrant a higher level of monitoring to ensure that weaknesses do not advance.

•

Grade 4 – Pass/Watch – Loans that are considered “pass credits” yet appear on the “watch list”. Credit deficiency or potential weakness may include a lack of current or complete financial information. The level of risk is considered acceptable so long as the loan is given additional management supervision.

•

Grade 5 – Watch – Loans that possess some credit deficiency or potential weakness that if not corrected, could increase risk in the future. The source of loan repayment is sufficient but may be considered inadequate by the Bank’s standards.

•

Grade 6 – Substandard – Loans that exhibit one or more of the following characteristics: (1) uncertainty of repayment from primary source and financial deterioration currently underway; (2) inadequate current net worth and paying capacity of the obligor; (3) reliance on secondary source of repayment such as collateral liquidation or guarantees; (4) distinct possibility the Bank will sustain loss if deficiencies are not corrected; (5) unusual courses of action are needed to maintain probability of repayment; (6) insufficient cash flow to repay principal but continuing to pay interest; (7) the Bank is subordinated or unsecured due to flaws in documentation; (8) loans are restructured or are on nonaccrual status due to concessions to the borrower when compared to normal terms; (9) the Bank is contemplating foreclosure or legal action due to deterioration in the loan; or (10) there is deterioration in conditions and the borrower is highly vulnerable to these conditions.

•

Grade 7 – Doubtful – Loans that exhibit one or more of the following characteristics: (1) loans with the weaknesses of Substandard loans and collection or liquidation is not probable to result in payment in full; (2) the primary source of repayment is gone and the quality of the secondary source is doubtful; or (3) the possibility of loss is high, but important pending factors may strengthen the loan.

•

Grades 8 & 9 - Loss – Loans are considered uncollectible and of such little value that carrying them on the Bank’s financial statements is not feasible.

The assessment of compensating factors may result in a rating plus or minus one grade from those listed above. These factors include, but are not limited to collateral, guarantors, environmental conditions, history, plan/projection reasonableness, quality of information, and payment delinquency.

- 12 -

The portfolio segments in each credit risk grade as of March 31, 2012 are as follows (000s omitted):

	Agriculture and Agricultural Real Estate		Commercial		Commercial Real Estate		Construction Real Estate		Residential Real Estate		Consumer and Other		Total
Not Rated	$	156	$	1,244	$	-	$	3,085	$	176,735	$	12,841	$	194,061
1		4		1,923		-		-		-		-		1,927
2		145		290		3,514		92		760		-		4,801
3		1,956		8,459		12,623		276		1,795		14		25,123
4		11,110		32,366		158,379		3,143		32,721		27		237,746
5		304		12,146		68,988		5,643		10,608		-		97,689
6		1,418		8,179		58,405		9,702		27,364		238		105,306
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	15,093	$	64,607	$	301,909	$	21,941	$	249,983	$	13,120	$	666,653

Performing	$	14,013	$	60,472	$	265,663	$	12,960	$	229,431	$	12,722	$	595,261
Nonperforming		1,080		4,135		36,246		8,981		20,552		398		71,392
Total	$	15,093	$	64,607	$	301,909	$	21,941	$	249,983	$	13,120	$	666,653

The portfolio segments in each credit risk grade as of March 31, 2011 are as follows (000s omitted):

	Agriculture and Agricultural Real Estate		Commercial		Commercial Real Estate		Construction Real Estate		Residential Real Estate		Consumer and Other		Total
Not Rated	$	33	$	1,016	$	173	$	4,709	$	197,629	$	15,593	$	219,153
1		-		1,746		-		-		-		-		1,746
2		201		315		5,109		105		1,101		-		6,831
3		5,919		6,341		15,369		1,008		2,488		35		31,160
4		10,611		38,746		160,663		13,913		24,789		30		248,752
5		512		10,670		62,481		8,466		12,226		-		94,355
6		957		10,457		76,299		13,686		25,163		160		126,722
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	18,233	$	69,291	$	320,094	$	41,887	$	263,396	$	15,818	$	728,719

Performing	$	17,577	$	62,742	$	278,685	$	33,182	$	240,417	$	15,380	$	647,983
Nonperforming		656		6,549		41,409		8,705		22,979		438		80,736
Total	$	18,233	$	69,291	$	320,094	$	41,887	$	263,396	$	15,818	$	728,719

Loans are considered past due when contractually required payment of interest or principal has not been received. The amount classified as past due is the entire principal balance outstanding of the loan, not just the amount of payments that are past due. The following is a summary of past due loans as of March 31, 2012 and 2011 (000s omitted):

March 31, 2012	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment >90 Days Past Due and Accruing

Agriculture and Agricultural Real Estate	$	92	$	-	$	375	$	467	$	14,626	$	15,093	$	-
Commercial		611		88		569		1,268		63,339		64,607		2
Commercial Real Estate		4,906		2,826		11,197		18,929		282,980		301,909		-
Construction Real Estate		209		79		2,141		2,429		19,512		21,941		-
Residential Real Estate		5,977		2,533		4,621		13,131		236,852		249,983		-
Consumer and Other		78		22		88		188		12,932		13,120		-
Total	$	11,873	$	5,548	$	18,991	$	36,412	$	630,241	$	666,653	$	2

- 13 -

March 31, 2011	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans		Recorded Investment >90 Days Past Due and Accruing

Agriculture and Agricultural Real Estate	$	98	$	-	$	343	$	441	$	17,792	$	18,233	$	-
Commercial		1,073		188		2,178		3,439		65,852		69,291		1
Commercial Real Estate		6,604		4,640		13,733		24,977		295,117		320,094		-
Construction Real Estate		1,327		197		3,973		5,497		36,390		41,887		-
Residential Real Estate		6,394		954		9,075		16,423		246,973		263,396		360
Consumer and Other		199		34		238		471		15,347		15,818		3
Total	$	15,695	$	6,013	$	29,540	$	51,248	$	677,471	$	728,719	$	364

Loans are placed on non-accrual status when, in the opinion of Management, the collection of additional interest is doubtful. Loans are automatically placed on non-accrual status upon becoming ninety days past due, however, loans may be placed on non-accrual status regardless of whether or not they are past due. All cash received on non-accrual loans is applied to the principal balance. Loans are considered for return to accrual status on an individual basis when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following is a summary of non-accrual loans as of March 31, 2012 and 2011 (000s omitted):

	3/31/2012		3/31/2011
Agriculture and Agricultural Real Estate	$	384	$	343
Commercial		2,613		6,315
Commercial Real Estate		22,568		33,326
Construction Real Estate		5,735		7,757
Residential Real Estate		13,908		17,565
Consumer and Other		228		291
Total	$	45,436	$	65,597

For loans deemed to be impaired due to an expectation that all contractual payments will probably not be received, impairment is measured by comparing the Bank’s recorded investment in the loan to the present value of expected cash flows discounted at the loan’s effective interest rate, the fair value of the collateral, or the loan’s observable market price.

- 14 -

The following is a summary of impaired loans as of March 31, 2012 and 2011 (000s omitted):

March 31, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized in the Three Months Ended

With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	430	$	978	$	-	$	478	$	17
Commercial		198		376		-		344		7
Commercial Real Estate		11,126		13,764		-		11,721		93
Construction Real Estate		730		1,039		-		762		6
Residential Real Estate		6,603		8,989		-		7,599		136
Consumer and Other		88		89		-		89		1

With an allowance recorded:
Agriculture and Agricultural Real Estate		621		621		69		618		1
Commercial		3,777		4,179		1,477		3,833		56
Commercial Real Estate		25,366		33,357		3,408		25,832		184
Construction Real Estate		7,719		11,469		1,257		8,337		80
Residential Real Estate		12,965		15,629		2,453		13,297		145
Consumer and Other		148		148		73		149		3

Total:
Agriculture and Agricultural Real Estate	$	1,051	$	1,599	$	69	$	1,096	$	18
Commercial		3,975		4,555		1,477		4,177		63
Commercial Real Estate		36,492		47,121		3,408		37,553		277
Construction Real Estate		8,449		12,508		1,257		9,099		86
Residential Real Estate		19,568		24,618		2,453		20,896		281
Consumer and Other		236		237		73		238		4

March 31, 2011	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized in the Year Ended

With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	-	$	-	$	-	$	-	$	-
Commercial		1,444		3,017		-		1,494		9
Commercial Real Estate		8,240		11,521		-		9,010		50
Construction Real Estate		601		799		-		617		10
Residential Real Estate		9,143		11,642		-		9,656		228
Consumer and Other		-		-		-		-		-

With an allowance recorded:
Agriculture and Agricultural Real Estate		656		656		89		655		2
Commercial		5,206		5,889		934		5,737		49
Commercial Real Estate		33,970		42,204		4,067		34,922		338
Construction Real Estate		7,489		12,537		1,140		7,995		12
Residential Real Estate		7,473		8,940		1,479		7,826		77
Consumer and Other		155		156		62		157		2

Total:
Agriculture and Agricultural Real Estate	$	656	$	656	$	89	$	655	$	2
Commercial		6,650		8,906		934		7,231		58
Commercial Real Estate		42,210		53,725		4,067		43,932		388
Construction Real Estate		8,090		13,336		1,140		8,612		22
Residential Real Estate		16,616		20,582		1,479		17,482		305
Consumer and Other		155		156		62		157		2

- 15 -

The Bank may agree to modify the terms of a loan in order to improve the Bank’s ability to collect amounts due. These modifications may include reduction of the interest rate, extension of the loan term, or in some cases, reduction of the principal balance. Modifications that are performed due to the debtor’s financial difficulties are considered Troubled Debt Restructurings (“TDRs”).

Loans that have been classified as TDRs during the three month period ended March 31, 2012 are as follows (000s omitted from dollar amounts):

	Three months ended
	March 31, 2012
	Number of Contracts		Pre-Modification Recorded Principal Balance		Post-Modification Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-	$	-
Commercial		6		782		433
Commercial Real Estate		8		2,969		1,884
Construction Real Estate		5		2,686		2,677
Residential Real Estate		3		515		515
Consumer and Other		2		27		26
Total		24	$	6,979	$	5,535

The Bank considers TDRs that become 90 days or more past due under the modified terms as defaulted. There were no loans that became TDRs during the three months ended March 31, 2012 that subsequently defaulted during the three months ended March 31, 2012.

6. INVESTMENT SECURITIES

The following is a summary of the Bank’s investment securities portfolio as of March 31, 2012 and December 31, 2011 (000’s omitted):

	Held to Maturity
	March 31, 2012
	Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political
Subdivisions	$	35,788	$	627	$	(192	)	$	36,223
	$	35,788	$	627	$	(192	)	$	36,223

- 16 -

	Available for Sale
	March 31, 2012
	Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government
Agencies	$	145,198	$	2,689	$	(373	)	$	147,514
Mortgage Backed Securities issued
by U.S. Government Agencies		168,264		3,632		(101	)		171,795
Obligations of States and Political
Subdivisions		15,595		594		(8	)		16,181
Trust Preferred CDO Securities		9,538		-		(4,310	)		5,228
Corporate Debt Securities		9,952		58		(165	)		9,845
Other Securities		2,567		156		(149	)		2,574
	$	351,114	$	7,129	$	(5,106	)	$	353,137

	Held to Maturity
	December 31, 2011
	Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political
Subdivisions	$	35,364	$	688	$	(240	)	$	35,812
	$	35,364	$	688	$	(240	)	$	35,812

	Available for Sale
	December 31, 2011
	Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government
Agencies	$	161,483	$	4,071	$	(22	)	$	165,532
Mortgage Backed Securities issued
by U.S. Government Agencies		156,883		3,320		(35	)		160,168
Obligations of States and Political
Subdivisions		14,616		567		(5	)		15,178
Trust Preferred CDO Securities		9,542		-		(4,075	)		5,467
Corporate Debt Securities		6,070		-		(91	)		5,979
Other Securities		2,567		156		(148	)		2,575
	$	351,161	$	8,114	$	(4,376	)	$	354,899

The investment securities portfolio is evaluated for impairment throughout the year. Impairment is recorded against individual securities, unless the decrease in fair value is attributable to interest rates or the lack of an active market, and Management determines that the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before a recovery of their amortized costs bases, which may be maturity. The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2012 and December 31, 2011.

- 17 -

March 31, 2012

	Less than 12 months				12 months or longer				Total
	Aggregate Fair Value		Gross Unrealized Losses		Aggregate Fair Value		Gross Unrealized Losses		Aggregate Fair Value		Gross Unrealized Losses
Obligations of United States
Government Agencies	$	55,941	$	373	$	-	$	-	$	55,941	$	373
Mortgage Backed Securities issued
by U.S. Government Agencies		30,982		101		-		-		30,982		101
Obligations of States and
Political Subdivisions		11,141		192		677		9		11,818		201
Trust Preferred CDO Securities		-		-		5,228		4,310		5,228		4,310
Corporate Debt Securities		3,835		165		-		-		3,835		165
Equity Securities		-		-		392		148		392		148
	$	101,899	$	831	$	6,297	$	4,467	$	108,196	$	5,298

December 31, 2011

	Less than 12 months				12 months or longer				Total
	Aggregate Fair Value		Gross Unrealized Losses		Aggregate Fair Value		Gross Unrealized Losses		Aggregate Fair Value		Gross Unrealized Losses
Obligations of United States
Government Agencies	$	14,729	$	22	$	-	$	-	$	14,729	$	22
Mortgage Backed Securities issued
by U.S. Government Agencies		26,453		35		-		-		26,453		35
Obligations of States and
Political Subdivisions		12,766		240		1,261		5		14,027		245
Trust Preferred CDO Securities		-		-		5,467		4,075		5,467		4,075
Corporate Debt Securities		5,979		91		-		-		5,979		91
Equity Securities		-		-		392		148		392		148
	$	59,927	$	388	$	7,120	$	4,228	$	67,047	$	4,616

The amount of investment securities issued by government agencies, states, and political subdivisions with unrealized losses and the amount of unrealized losses on those investment securities are primarily the result of market interest rates and not the result of the credit quality of the issuers of the securities. Because the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other than temporarily impaired at March 31, 2012.

The Trust Preferred CDO Securities are issued by companies in the financial services industry, including banks, thrifts, and insurance companies. Each of the three securities owned by the Company is in an unrealized loss position. The main reasons for the impairment are the overall decline in market values for financial industry securities and the lack of an active market for these types of securities in particular. In determining whether the impairment is not other-than-temporary, the Company analyzed each security’s expected cash flows. The assumptions used in the cash flow analysis were developed following a review of the financial condition of the individual obligors in the pools. The analysis concluded that disruption of our cash flows due to defaults by issuers was currently not expected to occur in one of the three securities owned. As a result of uncertainties in the market place affecting companies in the financial services industry, it is at least reasonably possible that a change in the estimate will occur in the near term. Because the Company does not intend to sell the investment and it is not more likely than not that the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, the Company does not consider this investment to be other than temporarily impaired at March 31, 2012.

- 18 -

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value, as defined in ASC Topic 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for market activities that are usual and customary for transactions involving such assets or liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and to determine fair value disclosures. Fair value is used on a recurring basis for Available for Sale Securities. Additionally, fair value is used on a non-recurring basis to evaluate assets or liabilities for impairment or for disclosure purposes. Examples of these non-recurring uses of fair value include certain loans held for sale accounted for on a lower of cost or market basis. Depending on the nature of the asset or liability, the Corporation uses various valuation techniques and assumptions when estimating fair value.

The Corporation applied the following fair value hierarchy:

- 19 -

The following tables present information about the Company’s assets measured at fair value on a recurring basis at March 31, 2012 and December 31, 2011, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
March 31, 2012	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	104,579	$	104,579	$	-	$	-	$	104,579
Securities - Held to Maturity
Obligations of States and Political Subdivisions		35,788		-		36,223		36,223
Securities - Available for Sale
Obligations of U.S. Government Agencies		147,514		-		147,514		-		147,514
MBS issued by U.S. Government Agencies		171,795		-		171,795		-		171,795
Obligations of States and Political Subdivisions		16,181		-		16,181		-		16,181
Trust Preferred CDO Securities		5,228		-		-		5,228		5,228
Corporate Debt Securities		9,845		-		9,845		-		9,845
Other Securities		2,574		2,182		392		-		2,574
Federal Home Loan Bank Stock		10,605		-		-		10,605		10,605
Loans Held for Sale		641		-		641		-		641
Loans, net		646,172		-		-		671,025		671,025
Accrued Interest Receivable		3,933		3,933		-		-		3,933
Financial Liabilities:
Demand, NOW, savings and money market
savings deposits		709,123		709,123		-		-		709,123
Other Time Deposits		326,427		-		334,198		-		334,198
Borrowed funds
FHLB Advances		107,000		-		-		109,365		109,365
Repurchase Agreements		20,000		-		-		22,547		22,547
Accrued Interest Payable		480		480		-		-		480

									Total
	Carrying								Estimated
December 31, 2011	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	75,995	$	75,995	$	75,995
Securities - Held to Maturity
Obligations of States and Political Subdivisions		35,364		-		35,812		35,812
Securities - Available for Sale
Obligations of U.S. Government Agencies		165,532		-		165,532		-		165,532
MBS issued by U.S. Government Agencies		160,168		-		160,168		-		160,168
Obligations of States and Political Subdivisions		15,178		-		15,178		-		15,178
Trust Preferred CDO Securities		5,467		-		-		5,467		5,467
Corporate Debt Securities		5,979		-		5,979		-		5,979
Other Securities		2,575		2,183		392		-		2,575
Federal Home Loan Bank Stock		10,605		-		-		10,605		10,605
Loans Held for Sale		1,035		-		1,035		-		1,035
Loans, net		658,610		-		-		684,007		684,007
Accrued Interest Receivable		3,582		3,582		-		-		3,582
Financial Liabilities:
Demand, NOW, savings and money market
savings deposits		689,421		689,421		-		-		689,421
Other Time Deposits		332,889		-		339,927		-		339,927
Borrowed funds
FHLB Advances		107,000		-		-		109,664		109,664
Repurchase Agreements		20,000		-		-		22,773		22,773
Accrued Interest Payable		477		477		-		-		477

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In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset.

The changes in Level 3 assets measured at fair value on a recurring basis were (000’s omitted):

Investment Securities - Available for Sale	2012			2011
Balance at January 1	$	5,467		$	5,188
Total realized and unrealized gains (losses) included in income		-			-
Total unrealized gains (losses) included in other comprehensive income		(239	)		279
Net purchases, sales, calls and maturities		-			-
Net transfers in/out of Level 3		-			-
Balance at March 31	$	5,228		$	5,467

Of the Level 3 assets that were held by the Company at March 31, 2012, the unrealized loss for the three months ended March 31, 2012 was $239,000, which is recognized in other comprehensive income in the consolidated statements of financial condition. The Company did not have any sales or purchases of Level 3 available for sale securities during the period.

Both observable and unobservable inputs may be used to determine the fair value of positions classified as Level 3 assets. As a result, the unrealized gains and losses for these assets presented in the tables above may include changes in fair value that were attributable to both observable and unobservable inputs.

The Company owns pooled Trust Preferred Securities (“TRUPs”) with a fair value of $5,228,000 as of March 31, 2012. Trading of these types of securities has increased recently but is primarily conducted on a distress sale or forced liquidation basis. As a result, the Company measures the fair values of these assets using Level 3 inputs, specifically discounted cash flow projections.

The Company also has assets that under certain conditions are subject to measurement at fair value on a nonrecurring basis. These assets include loans and Other Real Estate Owned. The Company estimated the fair values of these assets using Level 3 inputs, specifically discounted cash flow projections.

Assets measured at fair value on a nonrecurring basis are as follows (000’s omitted):

	Balance at March 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Impaired loans	$	69,771	$	-	$	-	$	69,771
Other Real Estate Owned	$	14,258	$	-	$	-	$	14,258

	Balance at December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Impaired loans	$	70,803	$	-	$	-	$	70,803
Other Real Estate Owned	$	16,650	$	-	$	-	$	16,650

Impaired loans categorized as Level 3 assets consist of non-homogenous loans that are considered impaired. The Company estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals). Other Real Estate Owned (OREO) consists of property received in full or partial satisfaction of a receivable. The Company utilizes independent appraisals to estimate the fair value of OREO properties.

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9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of condition.

The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for its other lending activities.

Financial instruments whose contractual amounts represent off-balance sheet credit risk were as follows (000s omitted):

	Contractual Amount
	March 31,		December 31,
	2012		2011
Commitments to extend credit:
Unused portion of commercial lines of credit	$	66,375	$	65,460
Unused portion of credit card lines of credit		2,704		2,756
Unused portion of home equity lines of credit		15,728		15,026
Standby letters of credit and financial guarantees written		4,267		4,461
All other off-balance sheet commitments		-		-

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Most commercial lines of credit are secured by real estate mortgages or other collateral, and generally have fixed expiration dates or other termination clauses. Since the lines of credit may expire without being drawn upon, the total committed amounts do not necessarily represent future cash requirements. Credit card lines of credit have various established expiration dates, but are fundable on demand. Home equity lines of credit are secured by real estate mortgages, a majority of which have ten year expiration dates, but are fundable on demand. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of the collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on Management’s credit evaluation of the counterparty.

Standby letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and other business transactions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

MBT Financial Corp. (the “Company) is a bank holding company with one subsidiary, Monroe Bank & Trust (“the Bank”). The Bank is a commercial bank with a wholly owned subsidiary, MB&T Financial Services. MB&T Financial Services is an insurance agency which sells insurance policies to the Bank. The Bank operates 17 branch offices in Monroe County, Michigan and 7 offices in Wayne County, Michigan. The Bank’s primary source of income is interest income on its loans and investments and its primary expense is interest expense on its deposits and borrowings.

The national economic recovery is continuing slowly, and conditions in southeast Michigan are also slowly improving. Local unemployment rates improved significantly over the past year, and are now comparable to the state and national averages, but remain above the historical norms. Commercial and residential development property values continue to show some stability with some areas improving slightly. Our total problem assets, which include nonperforming loans, other real estate owned, non accrual investments, and performing loans that are internally classified as potential problems, decreased $7.6 million, or 5.6% during the first quarter of 2012, allowing us to decrease our Allowance for Loan and Lease Losses (ALLL) from $20.9 million to $20.5 million. The loan portfolio decreased $12.8 million during the quarter, and the ALLL as a percent of loans was unchanged at 3.07%. Although local property values and the unemployment rate have stabilized over the past several quarters, we anticipate a slower than normal recovery in our local markets in 2012. We will continue to focus our efforts on improving asset quality, maintaining liquidity, strengthening capital, and controlling expenses.

Net Interest Income increased $159,000 compared to the first quarter of 2011 even though the average earning assets decreased $17.6 million, or 1.5% as the net interest margin increased from 3.11% to 3.18% and the quarter was one day longer. The provision for loan losses decreased from $5.75 million in the first quarter of 2011 to $2.25 million in the first quarter of 2012. Improvement in the risk ratings of loans, a decrease in the historical loss rates, and the decrease in the size of the loan portfolio decreased the amount of ALLL required. As a result, we were able to record a provision that was smaller than the net charge offs for the quarter. Non interest income increased $1.0 million, primarily due to an increase in gains on securities transactions. Non interest expenses decreased $712,000, or 6.6% due to lower losses on Other Real Estate Owned, and lower FIDC deposit insurance assessments. We continue to work to control costs, and we decreased several non interest expense categories. We expect credit related expenses, including the costs of carrying a high level of Other Real Estate Owned (OREO), to continue to improve, but still remain above normal levels, throughout 2012.

Critical Accounting Policies

The Company’s Allowance for Loan Losses, Deferred Tax Asset Valuation Allowance, Fair Value of Investment Securities, and Other Real Estate Owned are “critical accounting estimates” because they are estimates that are based on assumptions that are highly uncertain, and if different assumptions were used or if any of the assumptions used were to change, there could be a material impact on the presentation of the Company’s financial condition. These assumptions include, but are not limited to, collateral values, the effect of economic conditions on the financial condition of the borrowers, the Company, and the issuers of investment securities, market interest rates, and projected earnings for the Company.

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To determine the Allowance for Loan Losses, the Company estimates losses on all loans that are not classified as non accrual or renegotiated by applying historical loss rates, adjusted for current conditions, to those loans. In addition, all non accrual loan relationships over $250,000 that are classified by Management as nonperforming as well as selected performing accounts and all renegotiated loans are individually tested for impairment. Any amount of monetary impairment is included in the Allowance for Loan Losses.

Income tax accounting standards require companies to assess whether a valuation allowance should be established against deferred tax assets based on the consideration of all evidence using a “more likely than not” standard. We reviewed our deferred tax asset, considering both positive and negative evidence and analyzing changes in near term market conditions as well as other factors that may impact future operating results. Significant negative evidence is our net operating losses for the last three years, combined with a difficult economic environment and a slow economic recovery projected for southeast Michigan. Positive evidence includes our history of strong earnings prior to 2008, our third consecutive quarterly profit in the first quarter of 2012, our strong capital position, our steady net interest margin, our improving asset quality, and our non interest expense control initiatives. Based on our analysis of the evidence, we believed that it was appropriate to maintain a valuation allowance equal to the full amount of the deferred tax asset as of March 31, 2012.

To determine the fair value of investment securities, the Company utilizes quoted prices in active markets for identical assets, quoted prices for similar assets in active markets, or discounted cash flow calculations for investments where there is little, if any, market activity for the asset.

To determine the fair value of Other Real Estate Owned, the Company utilizes independent appraisals to estimate the fair value of the property.

Financial Condition

National economic conditions began to recover in the second half of 2009, but regional conditions remained weak until 2010. Local unemployment and property values have stabilized and the economic environment in southeast Michigan is continuing to slowly show improvement. Our nonperforming assets decreased 7.0% during the quarter, from $95.2 million to $88.6 million, and total problem assets decreased from $136.8 million to $129.1 million. Total loans decreased due to low loan demand, payments received in the ordinary course of business, and charge offs of existing loans. We continued to manage toward a decreased use of high cost wholesale funding, which, coupled with a decrease in non accrual loans, has helped improve our net interest margin. While the local economy is slowly recovering, lending opportunities are beginning to increase. We expect the slow recovery to continue in our market area in 2012. The Company expects low deposit growth and a slight reduction in total assets in 2012, and intends to continue to focus efforts on improved credit quality, capital management, and enterprise risk mitigation.

Since December 31, 2011, total loans decreased $12.8 million (2.0%) because the loan demand did not result in enough new loan activity to offset write downs recorded and payments received. At the same time, deposits increased $13.2 million, or 1.3% due to typical seasonal increases in municipal deposits. The reduction in loans and increase in deposits resulted in an increase of $12.4 million (1.0%) in total assets since the end of 2011. Total capital increased $188,000 or 0.2%, as the profit of $1.2 million was offset by the decrease of $1.1 million in the accumulated other comprehensive income (AOCI) due to a decrease in the value of our securities available for sale. The total assets increased at a faster rate than capital, causing the capital to assets ratio to decrease from 6.11% at December 31, 2011 to 6.07% at March 31, 2012.

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The amount of nonperforming assets (“NPAs”) decreased $6.6 million or 7.0% during the first quarter of 2012. NPAs include non performing loans, which decreased 5.5% from $75.5 million to $71.4 million, and Other Real Estate Owned and Other Assets (“OREO”), which decreased 14.6% from $16.7 million to $14.3 million. Total problem assets, which includes all NPAs and performing loans that are internally classified as substandard, decreased $7.6 million, or 5.6%. The Company’s Allowance for Loan and Lease Losses (“ALLL”) decreased $0.4 million since December 31, 2011, due to a decrease in the size of the portfolio and an improvement in the quality of the assets in the loan portfolio. The ALLL is now 3.07% of loans, unchanged compared to December 31, 2011 and down from 3.21% at March 31, 2011. The ALLL is 28.69% of nonperforming loans (“NPLs”), compared to 27.63% at year end and 29.02% at March 31, 2011. In light of current economic conditions, we believe that at this level the ALLL adequately estimates the potential losses in the loan portfolio.

Results of Operations – First Quarter 2012 vs. First Quarter 2011

Net Interest Income - A comparison of the income statements for the three months ended March 31, 2011 and 2012 shows an increase of $159,000, or 1.8%, in Net Interest Income. Interest income on loans decreased $1.2 million or 11.7% as the average loans outstanding decreased $71.7 million and the average yield on loans decreased from 5.64% to 5.46%. The interest income on investments, fed funds sold, and interest bearing balances due from banks increased $107,000 as the average amount of investments, fed funds sold, and interest bearing balances due from banks increased $54.0 million but the yield decreased from 2.37% to 2.17%. The yield on investments decreased because the Company is maintaining its strong liquidity position by keeping its excess funds in low yielding short term investments and deposits in the Federal Reserve Bank. A continued low overall level of interest rates and the maturity of some high cost borrowings and brokered certificates of deposit allowed funding costs to decrease more than asset yields. The interest expense on deposits decreased $1,176,000 or 39.0% as the average deposits decreased $17.1 million and the average cost of deposits decreased from 1.17% to 0.72%. The cost of borrowed funds decreased $89,000 as the average amount of borrowed funds decreased $16.5 million but the average cost of the borrowings increased from 2.87% to 2.94%.

Provision for Loan Losses - The Provision for Loan Losses decreased from $5.75 million in the first quarter of 2011 to $2.25 million in the first quarter of 2012. Net charge offs were $2.6 million during the first quarter of 2012, compared to $3.5 million in the first quarter of 2011. Each quarter, the Company conducts a review and analysis of its ALLL to determine its adequacy. This analysis involves specific allocations for impaired credits and a general allocation for losses expected based on historical experience adjusted for current conditions. Due to a decrease in the size of the portfolio, a decrease in the historical loss percentages, and a decrease in the specific allocations, we were able to maintain an adequate ALLL in the first quarter of 2012 even though we recorded a provision that was less than our net charge offs. The ALLL is 3.07% of loans as of March 31, 2012, and, in light of current economic conditions, we believe that at this level the ALLL adequately estimates the potential losses in our loan portfolio.

Other Income – Non interest income increased $1.0 million, or 27.7% compared to the first quarter of 2011, as gains on the sales of securities increased $1.0 million. Service charges and other fees on deposit accounts decreased $27,000, or 2.4%, primarily due to a decrease in overdraft fees on checking accounts. Origination fees on mortgage loan sold increased $39,000, or 47.0% due to higher mortgage loan origination volume in 2012. Income on Bank Owned Life Insurance policies decreased $42,000, or 10.2% due to a decrease in the yields on the policies this year. The gain on securities transactions was the result of some sales of federal agency securities. Securities were sold to rebalance the Bank’s interest rate risk. The sales had the additional benefit of producing the gain, which improved the bank’s capital ratios.

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Other Expenses – Total non interest expenses decreased $712,000, or 6.6% compared to the first quarter of 2011. Salaries and Employee Benefits increased $257,000, or 5.3%, due to increases in medical insurance, life insurance, and payroll tax expenses. Occupancy expense decreased $52,000 due to lower maintenance costs as a result of the mild winter weather. Marketing expense decreased $48,000, or 19.5% mainly due to the elimination of our debit card rewards program. Losses on Other Real Estate Owned (OREO) properties decreased $972,000 compared to the first quarter of 2011 as the property values stabilized in the second half of 2011. We conducted an auction of OREO properties in April, 2012, and the first quarter expense includes $204,000 to write down properties sold at the auction. The sales will close in the second quarter, but the losses were recognized as write downs of the property values in the first quarter. FDIC deposit insurance premium expense decreased $167,000, or 19.7%, due to a change in the assessment method in 2011.

As a result of the above activity, the Profit Before Income Taxes in the first quarter of 2012 was $1,343,000, an improvement of $5.4 million compared to the loss of $4.042 million in the first quarter of 2011. In the first quarter of 2012, we recorded a federal income tax expense of $126,000. The Corporation is currently being audited by the IRS, and the ultimate resolution of the exam is still uncertain. This accrual is to absorb the effect of an uncertain tax position that is being challenged by the IRS. The issue being challenged involves the timing of income recognition and would normally result in an increase in the deferred tax asset. However, the Corporation is maintaining a valuation allowance against 100% of its deferred tax asset, so the estimated tax adjustment must be expensed. No income tax benefit or expense was recorded in the first quarter of 2011 due to the net operating loss carry forwards and the uncertainty of our expected ability to utilize our existing deferred tax assets. The Net profit for the first quarter of 2012 was $1,217,000, compared to a net loss of $4,042,000 in the first quarter of 2011.

As part of its audit, the IRS is also reviewing loan charge-offs for partially worthless loans deducted in 2008 and 2009. Although the charge-offs were in compliance with state and federal bank regulatory agency guidelines, the IRS examining agent conducting the audit has called into question the deductibility of certain charge-offs for income tax purposes based on the facts and circumstances of a loan at the time of the charge-off. We believe that the charge-off deductions were proper when taken. The IRS agent has not yet proposed to disallow deduction of any specific amount of charge-offs. Moreover, any future disallowance by the IRS may only affect the timing of the deduction, rather than resulting in complete loss of the deduction. Presently, it is not yet possible to determine the amount or effect of any potential disallowance and therefore no income tax expense has been recorded to date.

Cash Flows

Cash flows provided by operating activities increased $3.9 million compared to the first quarter of 2011 as the net income increased due to the decrease in the provision for loan losses. Cash flows from investing activities increased $43.1 million in the first quarter of 2012 compared to the first quarter of 2011 due to increased sales and redemptions of investment securities. The amount of cash provided by financing activities was $13.3 million in the first three months of both 2011 and 2012 as the increase in deposits was the same both years. Total cash and cash equivalents increased $76.0 million in the first quarter of 2012.

Liquidity and Capital

The Company believes it has sufficient liquidity to fund its lending activity and allow for fluctuations in deposit levels. Internal sources of liquidity include the maturities of loans and securities in the ordinary course of business as well as our available for sale securities portfolio. External sources of liquidity include a line of credit with the Federal Home Loan Bank of Indianapolis, the Federal funds line that has been established with our correspondent bank, and Repurchase Agreements with money center banks that allow us to pledge securities as collateral for borrowings. As of March 31, 2012, the Bank utilized $107.0 million of its authorized limit of $265 million with the Federal Home Loan Bank of Indianapolis, none of its $10 million overdraft line of credit with the Federal Home Loan Bank of Indianapolis, and none of its $25 million of federal funds line with a correspondent bank.

The Company’s Funds Management Policy includes guidelines for desired amounts of liquidity and capital. The Funds Management Policy also includes contingency plans for liquidity and capital that specify actions to take if liquidity and capital ratios fall below the levels contained in the policy. Throughout the first three months of 2012 the Company was in compliance with its Funds Management Policy regarding liquidity and capital.

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Total stockholders’ equity of the Company was $75.9 million at March 31, 2012 and $75.7 million at December 31, 2011. The ratio of equity to assets was 6.07% at March 31, 2012 and 6.12% at December 31, 2011. Federal bank regulatory agencies have set capital adequacy standards for Total Risk Based Capital, Tier 1 Risk Based Capital, and Leverage Capital. These standards require banks to maintain Leverage and Tier 1 ratios of at least 4% and a Total Capital ratio of at least 8% to be adequately capitalized. The regulatory agencies consider a bank to be well capitalized if its Total Risk Based Capital is at least 10% of Risk Weighted Assets, Tier 1 Capital is at least 6% of Risk Weighted Assets, and the Leverage Capital Ratio is at least 5%.

The following table summarizes the capital ratios of the Company and the Bank:

	Actual					Minimum to Qualify as Well Capitalized
	Amount		Ratio			Amount		Ratio
As of March 31, 2012:
Total Capital to Risk-Weighted Assets
Consolidated	$	86,012		10.86	%	$	79,198		10	%
Monroe Bank & Trust		85,525		10.81	%		79,141		10	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		75,975		9.59	%		47,519		6	%
Monroe Bank & Trust		75,428		9.53	%		47,485		6	%
Tier 1 Capital to Average Assets
Consolidated		75,975		6.12	%		62,033		5	%
Monroe Bank & Trust		75,428		6.08	%		62,007		5	%

	Actual					Minimum to Qualify as Well Capitalized
	Amount		Ratio			Amount		Ratio
As of December 31, 2011:
Total Capital to Risk-Weighted Assets
Consolidated	$	84,970		10.48	%	$	81,084		10	%
Monroe Bank & Trust		84,441		10.42	%		81,033		10	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		74,695		9.21	%		48,650		6	%
Monroe Bank & Trust		74,106		9.15	%		48,620		6	%
Tier 1 Capital to Average Assets
Consolidated		74,695		6.07	%		61,505		5	%
Monroe Bank & Trust		74,106		6.03	%		61,481		5	%

On July 12, 2010, the Bank entered into a Consent Order with its state and federal regulators. While the Bank is under the Consent Order, it is classified as “adequately capitalized” even if its ratios meet the “well capitalized” guidelines.

Market risk for the Bank, as is typical for most banks, consists mainly of interest rate risk and market price risk. The Bank’s earnings and the economic value of its equity are exposed to interest rate risk and market price risk, and monitoring this risk is the responsibility of the Asset/Liability Management Committee (ALCO) of the Bank. The Bank’s market risk is monitored monthly and it has not changed significantly since year-end 2011.

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Forward-Looking Statements

Certain statements contained herein are not based on historical facts and are "forward-looking statements" within the meaning of Section 21A of the Securities Exchange Act of 1934. Forward-looking statements which are based on various assumptions (some of which are beyond the Company's control), may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate," "anticipate," "continue," or similar terms or variations on those terms, or the negative of these terms. Actual results could differ materially from those set forth in forward-looking statements, due to a variety of factors, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset/liability management, changes in the financial and securities markets, including changes with respect to the market value of our financial assets, the availability of and costs associated with sources of liquidity, and the ability of the Company to resolve or dispose of problem loans.

The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Bank faces market risk to the extent that the fair values of its financial instruments are affected by changes in interest rates. The Bank does not face market risk due to changes in foreign currency exchange rates, commodity prices, or equity prices. The asset and liability management process of the Bank seeks to monitor and manage the amount of interest rate risk. This is accomplished by analyzing the differences in repricing opportunities for assets and liabilities, by simulating operating results under varying interest rate scenarios, and by estimating the change in the net present value of the Bank’s assets and liabilities due to interest rate changes.

Each month, the Asset and Liability Committee (ALCO), which includes the senior management of the Bank, estimates the effect of interest rate changes on the projected net interest income of the Bank. The sensitivity of the Bank’s net interest income to changes in interest rates is measured by using a computer based simulation model to estimate the impact on earnings of both gradual and sudden increases or decreases of 100, 200, 300, and 400 basis points in the interest rates. The net interest income projections are compared to a base case projection, which assumes no changes in interest rates.

The Bank’s ALCO has established limits in the acceptable amount of interest rate risk, as measured by the change in the Bank’s projected net interest income, in its policy. Throughout the first three months of 2012, the Bank’s interest rate risk has remained within its policy limits.

The ALCO also monitors interest rate risk by estimating the effect of changes in interest rates on the economic value of the Bank’s equity each month. The economic value of the Bank’s equity is first determined by subtracting the fair value of the Bank’s liabilities from the fair value of the Bank’s assets. The Bank estimates the interest rate risk by calculating the effect of market interest rate changes on that economic value of its equity. For this analysis, the Bank assumes immediate parallel shifts of plus or minus 100, 200, and 300 basis points in interest rates. The discount rates used to determine the present values of the loans and deposits, as well as the prepayment rates for the loans, are based on Management’s expectations of the effect of the rate changes on the market for loans and deposits. In addition, each quarter, the Bank conducts additional analyses that utilize other rate scenarios, such as larger shifts in rates and changes in the shape of the yield curve, to assess the Bank’s exposure to interest rate risk in stress scenarios.

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The Bank’s interest rate risk, as measured by the net interest income and economic value of equity simulations, has not changed significantly from December 31, 2011.

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of March 31, 2012, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2012, in alerting them in a timely manner to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended March 31, 2012, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II Other Information

Item 1. Legal Proceedings

MBT Financial Corp. and its subsidiaries are not a party to, nor is any of their property the subject of any material legal proceedings other than ordinary routine litigation incidental to their respective businesses, nor are any such proceedings known to be contemplated by governmental authorities.

Item 1A. Risk Factors

Not applicable for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

No matters to be reported.

Item 6. Exhibits

The following exhibits are filed as a part of this report:

3.1

Articles of Incorporation of MBT Financial Corp. Previously filed as Exhibit 3.1 to MBT Financial Corp.’s Form 10-Q for its quarter ended June 30, 2011.

3.2

Amended and Restated Bylaws of MBT Financial Corp. Previously filed as Exhibit 3.2 to MBT Financial Corp.’s Form 10-Q for its quarter ended March 31, 2008.

31.1

Certification by Chief Executive Officer required by Securities and Exchange Commission Rule 13a-14.

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31.2

Certification by Chief Financial Officer required by Securities and Exchange Commission Rule 13a-14.

32.1

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Signatures

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

		MBT Financial Corp.
		(Registrant)


May 15, 2012		By /s/ H. Douglas Chaffin
Date		H. Douglas Chaffin
		President & Chief Executive Officer


May 15, 2012		By /s/ John L. Skibski
Date		John L. Skibski
		Executive Vice President and Chief Financial Officer

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Exhibit Index

Exhibit Number	Description of Exhibits

31.1	Certification by Chief Executive Officer required by Securities and Exchange Commission Rule 13a-14.

31.2	Certification by Chief Financial Officer required by Securities and Exchange Commission Rule 13a-14.

32.1	Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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