10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2013

Or

¨ 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 13, 2012, there were 17,905,853 shares of the Company’s Common Stock outstanding.

Part I Financial Information

Item 1. Financial Statements

MBT FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

	March 31, 2013
Dollars in thousands	(Unaudited)			December 31, 2012
ASSETS
Cash and Cash Equivalents
Cash and due from banks
Non-interest bearing	$	11,535		$	17,116
Interest bearing		106,503			95,391
Total cash and cash equivalents		118,038			112,507
Securities - Held to Maturity		38,513			38,786
Securities - Available for Sale		416,479			393,767
Federal Home Loan Bank stock - at cost		10,605			10,605
Loans held for sale		2,047			1,520
Loans		614,758			627,249
Allowance for Loan Losses		(17,899	)		(17,299	)
Loans - Net		596,859			609,950
Accrued interest receivable and other assets		11,224			10,037
Other Real Estate Owned		15,118			14,262
Bank Owned Life Insurance		49,501			49,111
Premises and Equipment - Net		27,762			28,050
Total assets	$	1,286,146		$	1,268,595
LIABILITIES
Deposits:
Non-interest bearing	$	186,220		$	183,016
Interest-bearing		876,245			865,814
Total deposits		1,062,465			1,048,830
Federal Home Loan Bank advances		107,000			107,000
Repurchase agreements		15,000			15,000
Interest payable and other liabilities		15,732			14,191
Total liabilities		1,200,197			1,185,021
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 17,903,656 and 17,396,179 shares issued and outstanding)		4,173			2,397
Retained earnings		82,394			81,280
Unearned compensation		(21	)		(27	)
Accumulated other comprehensive loss		(597	)		(76	)
Total stockholders' equity		85,949			83,574
Total liabilities and stockholders' equity	$	1,286,146		$	1,268,595

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

-2-

MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - UNAUDITED

	Three Months Ended March 31,
Dollars in thousands, except per share data	2013			2012
Interest Income
Interest and fees on loans	$	7,902		$	9,139
Interest on investment securities-
Tax-exempt		323			380
Taxable		1,767			2,134
Interest on balances due from banks		69			43
Total interest income		10,061			11,696
Interest Expense
Interest on deposits		1,213			1,839
Interest on borrowed funds		804			929
Total interest expense		2,017			2,768
Net Interest Income		8,044			8,928
Provision For Loan Losses		1,500			2,250
Net Interest Income After
Provision For Loan Losses		6,544			6,678
Other Income
Income from wealth management services		1,097			968
Service charges and other fees		1,042			1,090
Net gain on sales of securities available for sale		10			1,100
Origination fees on mortgage loans sold		289			122
Bank owned life insurance income		390			370
Other		1,160			1,027
Total other income		3,988			4,677
Other Expenses
Salaries and employee benefits		5,323			5,106
Occupancy expense		687			725
Equipment expense		700			803
Marketing expense		163			198
Professional fees		501			588
Collection expenses		46			62
Net (gain) loss on other real estate owned		(40	)		269
Other real estate owned expenses		374			469
FDIC Deposit Insurance Assessment		689			679
Other		975			1,113
Total other expenses		9,418			10,012
Income Before Income Taxes		1,114			1,343
Income Tax Expense		-			126
Net Income	$	1,114		$	1,217
Other Comprehensive Income (Net of Tax)
Unrealized gains (losses) on securities		(546	)		(405	)
Reclassification adjustment for gains included in net income		(6	)		(726	)
Postretirement benefit liability		31			52
Total Other Comprehensive Income (Net of Tax)		(521	)		(1,079	)
Comprehensive Income	$	593		$	138
Basic Earnings Per Common Share	$	0.06		$	0.07
Diluted Earnings Per Common Share	$	0.06		$	0.07
Common Stock Dividends Declared Per Share	$	-		$	-

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

-3-

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, 2013	$	2,397	$	81,280	$	(27	)	$	(76	)	$	83,574
Issuance of Common Stock
SOSARs exercised (674 shares)		4		-		-			-			4
Other stock issued (506,803 shares, net of costs of $15)		1,745		-		-			-			1,745
Equity Compensation		27		-		6			-			33
Comprehensive income:
Net income		-		1,114		-			-			1,114
Other comprehensive income - net of tax		-		-		-			(521	)		(521	)
Total Comprehensive Income												593
Balance - March 31, 2013	$	4,173	$	82,394	$	(21	)	$	(597	)	$	85,949

								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
Other comprehensive income - net of tax		-		-		-			(1,079	)		(1,079	)
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.

-4-

MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

	Three Months Ended March 31,
Dollars in thousands	2013			2012
Cash Flows from Operating Activities
Net Income	$	1,114		$	1,217
Adjustments to reconcile net income to net cash from operating activities
Provision for loan losses		1,500			2,250
Depreciation		488			500
Net amortization of investment premium and discount		493			435
Writedowns of Other Real Estate Owned		164			515
Net increase (decrease) in interest payable and other liabilities		1,552			(445	)
Net increase in interest receivable and other assets		(1,106	)		(707	)
Equity based compensation expense		69			40
Net gain on sale/settlement of securities		(10	)		(1,100	)
Increase in cash surrender value of life insurance		(390	)		(370	)
Net cash provided by operating activities	$	3,874		$	2,335
Cash Flows from Investing Activities
Proceeds from maturities and redemptions of investment securities held to maturity	$	273		$	3,436
Proceeds from maturities and redemptions of investment securities available for sale		24,611			74,009
Proceeds from sales of investment securities available for sale		5,180			15,198
Net decrease in loans		8,260			8,466
Proceeds from sales of other real estate owned		1,945			4,226
Proceeds from sales of other assets		18			56
Purchase of investment securities held to maturity		-			(3,860	)
Purchase of investment securities available for sale		(53,823	)		(88,494	)
Purchase of bank premises and equipment		(206	)		(53	)
Net cash provided by (used for) investing activities	$	(13,742	)	$	12,984
Cash Flows from Financing Activities
Net increase in deposits	$	13,635		$	13,240
Proceeds from issuance of common stock		1,764			25
Net cash provided by financing activities	$	15,399		$	13,265
Net Increase in Cash and Cash Equivalents	$	5,531		$	28,584
Cash and Cash Equivalents at Beginning of Period		112,507			75,995
Cash and Cash Equivalents at End of Period	$	118,038		$	104,579
Supplemental Cash Flow Information
Cash paid for interest	$	2,021		$	2,764
Cash paid for federal income taxes	$	-		$	-
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	$	2,761		$	2,104
Transfer of loans to other assets	$	43		$	12

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

-5-

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.

-6-

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.

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.

2. EARNINGS PER SHARE

The calculations of earnings per common share are as follows:

	For the three months ended March 31,
	2013		2012
Basic
Net profit	$	1,114,000	$	1,217,000
Average common shares outstanding		17,516,382		17,304,781
Earnings per common share - basic	$	0.06	$	0.07
Diluted
Net profit	$	1,114,000	$	1,217,000
Average common shares outstanding		17,516,382		17,304,781
Equity compensation		229,973		690
Average common shares outstanding - diluted		17,746,355		17,305,471
Earnings per common share – diluted	$	0.06	$	0.07

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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, 2013		396,835	$	17.57
Granted		-		-
Exercised		-		-
Forfeited		63,335		13.20
Options Outstanding, March 31, 2013		333,500	$	18.40
Options Exercisable, March 31, 2013		333,500	$	18.40

Stock Only Stock Appreciation Rights (SOSARs) - On January 2, 2013, 106,000 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, 2013. The fair value of $1.43 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 62.09%, a risk free interest rate of 1.25% and dividend yield of 0.00%.

On January 2, 2013, 6,369 SOSARs were issued to a director in exchange for $10,000 of his 2013 annual retainer. The SOSARs have a term of ten years and vest on December 31, 2013.

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.

The following table summarizes the SOSARs that have been granted:

			Weighted Average
	Shares		Exercise Price
SOSARs Outstanding, January 1, 2013		410,666	$	3.53
Granted		112,369		2.35
Exercised		1,998		1.85
Forfeited		-		-
SOSARs Outstanding, March 31, 2013		521,037	$	3.28
SOSARs Exercisable, March 31, 2013		317,632	$	4.02

Restricted Stock Unit Awards – On January 2, 2013, 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, 2014. 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, 2015.

The total expense for equity based compensation was $73,000 in the first quarter of 2013 and $40,000 in the first quarter of 2012.

-8-

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,
	2013		2012
Residential real estate loans	$	235,323	$	240,332
Commercial and Construction real estate loans		291,618		301,433
Agriculture and agricultural real estate loans		12,235		12,004
Commercial and industrial loans		61,066		58,194
Loans to individuals for household, family, and other personal expenditures		14,516		15,286
Total loans, gross	$	614,758	$	627,249
Less: Allowance for loan losses		17,899		17,299
	$	596,859	$	609,950

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.

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

	March 31,			December 31,
	2013			2012
Nonaccrual loans	$	31,558		$	31,343
Loans 90 days past due and accruing		314			1
Restructured loans		37,581			38,460
Total nonperforming loans	$	69,453		$	69,804
Other real estate owned		15,118			14,262
Other assets		59			32
Nonperforming investment securities		3,045			3,045
Total nonperforming assets	$	87,675		$	87,143
Nonperforming assets to total assets		6.82	%		6.87	%
Allowance for loan losses to nonperforming loans		25.77	%		24.78	%

-9-

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.

Activity in the allowance for loan losses during the three months ended March 31, 2013 was as follows (000s omitted):

	Agriculture and Agricultural Real Estate			Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the three months ended March 31, 2013
Beginning Balance	$	76		$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Charge-offs		-			(202	)		(813	)		(18	)		(433	)		(121	)		(1,587	)
Recoveries		-			236			64			274			80			33			687
Provision		(6	)		(105	)		1,106			(188	)		746			(53	)		1,500
Ending balance	$	70		$	2,153		$	7,908		$	2,469		$	5,108		$	191		$	17,899
Allowance for loan losses as of March 31, 2013
Ending balance individually evaluated for impairment	$	-		$	1,330		$	2,312		$	1,863		$	2,084		$	100		$	7,689
Ending balance collectively   evaluated for impairment		70			823			5,596			606			3,024			91			10,210
Ending balance	$	70		$	2,153		$	7,908		$	2,469		$	5,108		$	191		$	17,899
Loans as of March 31, 2013
Ending balance individually evaluated for impairment	$	420		$	4,193		$	35,960		$	6,225		$	18,668		$	346		$	65,812
Ending balance collectively   evaluated for impairment		11,815			56,873			238,580			10,853			216,655			14,170			548,946
Ending balance	$	12,235		$	61,066		$	274,540		$	17,078		$	235,323		$	14,516		$	614,758

-10-

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

	Agriculture and Agricultural Real Estate		Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the three months ended March 31, 2012
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
Allowance for loan losses as of March 31, 2012
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 as of March 31, 2012
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 year ended December 31, 2012 was as follows (000s omitted):

	Agriculture and Agricultural Real Estate			Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the year ended December 31, 2012
Beginning Balance	$	64		$	2,184		$	9,351		$	2,632		$	6,227		$	407		$	20,865
Charge-offs		(97	)		(499	)		(8,156	)		(1,036	)		(2,031	)		(196	)		(12,015	)
Recoveries		-			347			80			240			274			158			1,099
Provision		109			192			6,276			565			245			(37	)		7,350
Ending balance	$	76		$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Allowance for loan losses as of December 31, 2012
Ending balance individually evaluated for impairment	$	-		$	1,316		$	2,084		$	1,820		$	1,994		$	124		$	7,338
Ending balance collectively evaluated for impairment		76			908			5,467			581			2,721			208			9,961
Ending balance	$	76		$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Loans as of December 31, 2012
Ending balance individually evaluated for impairment	$	409		$	4,519		$	36,471		$	7,410		$	18,051		$	389		$	67,249
Ending balance collectively evaluated for impairment		11,595			53,675			246,543			11,009			222,281			14,897			560,000
Ending balance	$	12,004		$	58,194		$	283,014		$	18,419		$	240,332		$	15,286		$	627,249

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.

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.

-11-

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, 2013 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	$	162	$	729	$	-	$	2,985	$	151,673	$	10,094	$	165,643
1		-		3,453		-		-		-		-		3,453
2		48		103		1,784		-		697		-		2,632
3		864		5,020		9,497		147		1,764		4		17,296
4		10,232		37,508		166,200		3,106		42,172		1		259,219
5		315		5,943		43,183		4,210		12,106		4,093		69,850
6		614		8,310		53,876		6,630		26,911		324		96,665
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	12,235	$	61,066	$	274,540	$	17,078	$	235,323	$	14,516	$	614,758
Performing	$	11,731	$	56,651	$	238,419	$	10,629	$	213,906	$	13,969	$	545,305
Nonperforming		504		4,415		36,121		6,449		21,417		547		69,453
Total	$	12,235	$	61,066	$	274,540	$	17,078	$	235,323	$	14,516	$	614,758

The portfolio segments in each credit risk grade as of December 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	$	126	$	4,182	$	-	$	2,927	$	159,743	$	10,706	$	177,684
1		-		2,977		-		-		-		-		2,977
2		48		114		1,850		82		731		-		2,825
3		880		4,894		10,735		163		1,885		7		18,564
4		9,907		29,935		167,207		3,184		40,392		16		250,641
5		322		9,713		45,262		5,086		8,426		3,940		72,749
6		721		6,379		57,960		6,977		29,155		617		101,809
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	12,004	$	58,194	$	283,014	$	18,419	$	240,332	$	15,286	$	627,249
Performing	$	11,397	$	54,730	$	246,107	$	10,783	$	219,753	$	14,675	$	557,445
Nonperforming		607		3,464		36,907		7,636		20,579		611		69,804
Total	$	12,004	$	58,194	$	283,014	$	18,419	$	240,332	$	15,286	$	627,249

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, 2013 and December 31, 2012 (000s omitted):

March 31, 2013	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	$	201	$	-	$	80	$	281	$	11,954	$	12,235	$	-
Commercial		608		187		855		1,650		59,416		61,066		3
Commercial Real Estate		3,104		2,962		7,102		13,168		261,372		274,540		-
Construction Real Estate		955		782		1,564		3,301		13,777		17,078		-
Residential Real Estate		5,663		860		3,425		9,948		225,375		235,323		311
Consumer and Other		99		57		58		214		14,302		14,516		-
Total	$	10,630	$	4,848	$	13,084	$	28,562	$	586,196	$	614,758	$	314

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December 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	$	208	$	-	$	145	$	353	$	11,651	$	12,004	$	-
Commercial		927		19		1,100		2,046		56,148		58,194		1
Commercial Real Estate		1,789		930		11,350		14,069		268,945		283,014		-
Construction Real Estate		127		1,437		1,867		3,431		14,988		18,419		-
Residential Real Estate		5,738		978		3,121		9,837		230,495		240,332		-
Consumer and Other		222		61		164		447		14,839		15,286		-
Total	$	9,011	$	3,425	$	17,747	$	30,183	$	597,066	$	627,249	$	1

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, 2013 and December 31, 2012 (000s omitted):

	March 31, 2013		December 31, 2012
Agriculture and Agricultural Real Estate	$	84	$	198
Commercial		3,153		1,578
Commercial Real Estate		17,415		17,950
Construction Real Estate		2,496		3,438
Residential Real Estate		8,165		7,870
Consumer and Other		245		309
Total	$	31,558	$	31,343

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.

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The following is a summary of impaired loans as of March 31, 2013 and 2012 (000s omitted):

March 31, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		Interest Income Recognized in the Three Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	420	$	923	$	-	$	423	$	12
Commercial		682		752		-		775		9
Commercial Real Estate		17,383		22,113		-		18,234		191
Construction Real Estate		1,529		2,545		-		1,950		37
Residential Real Estate		9,186		10,478		-		10,376		128
Consumer and Other		-		-		-		-		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-
Commercial		3,511		3,894		1,330		3,513		44
Commercial Real Estate		18,577		24,502		2,312		20,045		160
Construction Real Estate		4,696		5,666		1,863		4,744		41
Residential Real Estate		9,482		10,108		2,084		9,705		85
Consumer and Other		346		341		100		346		5
Total:
Agriculture and Agricultural Real Estate	$	420	$	923	$	-	$	423	$	12
Commercial		4,193		4,646		1,330		4,288		53
Commercial Real Estate		35,960		46,615		2,312		38,279		351
Construction Real Estate		6,225		8,211		1,863		6,694		78
Residential Real Estate		18,668		20,586		2,084		20,081		213
Consumer and Other		346		341		100		346		5

March 31, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		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

-15-

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

December 31, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Year Ended		Interest Income Recognized in the Year Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	469	$	54
Commercial		2,540		2,961		-		2,968		220
Commercial Real Estate		17,153		21,317		-		18,313		924
Construction Real Estate		1,007		1,375		-		1,284		201
Residential Real Estate		9,013		10,390		-		10,213		373
Consumer and Other		-		-		-		-		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-
Commercial		1,979		2,157		1,316		2,032		88
Commercial Real Estate		19,318		26,508		2,084		22,119		918
Construction Real Estate		6,403		9,060		1,820		6,946		211
Residential Real Estate		9,038		9,520		1,994		9,189		413
Consumer and Other		389		383		124		393		26
Total:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	469	$	54
Commercial		4,519		5,118		1,316		5,000		308
Commercial Real Estate		36,471		47,825		2,084		40,432		1,842
Construction Real Estate		7,410		10,435		1,820		8,230		412
Residential Real Estate		18,051		19,910		1,994		19,402		786
Consumer and Other		389		383		124		393		26

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 periods ended March 31, 2013 and March 31, 2012 are as follows (000s omitted from dollar amounts):

	Three months ended						Three months ended
	March 31, 2013						March 31, 2012
	Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance		Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-	$	-		-	$	-	$	-
Commercial		3		173		172		6		782		433
Commercial Real Estate		3		1,461		1,449		8		2,969		1,884
Construction Real Estate		-		-		-		5		2,686		2,677
Residential Real Estate		11		986		944		3		515		515
Consumer and Other		2		249		13		2		27		26
Total		19	$	2,869	$	2,578		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 month periods ended March 31, 2013 and March 31, 2012 that subsequently defaulted during the three month periods ended March 31, 2013 and March 31, 2012, respectively.

-16-

6. INVESTMENT SECURITIES

The following is a summary of the Bank’s investment securities portfolio as of March 31, 2013 and December 31, 2012 (000’s omitted):

	Held to Maturity
	March 31, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	38,013	$	1,160	$	(44	)	$	39,129
Corporate Debt Securities		500		-		-			500
	$	38,513	$	1,160	$	(44	)	$	39,629

	Available for Sale
	March 31, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	255,500	$	3,192	$	(261	)	$	258,431
Mortgage Backed Securities issued by U.S. Government Agencies		118,650		2,401		(166	)		120,885
Obligations of States and Political Subdivisions		16,385		586		(20	)		16,951
Trust Preferred CDO Securities		9,521		-		(4,119	)		5,402
Corporate Debt Securities		11,963		218		-			12,181
Equity Securities		2,580		157		(108	)		2,629
	$	414,599	$	6,554	$	(4,674	)	$	416,479

	Held to Maturity
	December 31, 2012
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	38,286	$	1,380	$	(36	)	$	39,630
Corporate Debt Securities		500		-		-			500
	$	38,786	$	1,380	$	(36	)	$	40,130

-17-

	Available for Sale
	December 31, 2012
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	222,099	$	3,442	$	(90	)	$	225,451
Mortgage Backed Securities issued by U.S. Government Agencies		127,082		2,826		(90	)		129,818
Obligations of States and Political Subdivisions		17,804		630		(64	)		18,370
Trust Preferred CDO Securities		9,525		-		(4,119	)		5,406
Corporate Debt Securities		11,961		156		(40	)		12,077
Equity Securities		2,580		173		(108	)		2,645
	$	391,051	$	7,227	$	(4,511	)	$	393,767

The amortized cost and estimated market values of securities by contractual maturity as of March 31, 2013 are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Held to Maturity				Available for Sale
			Estimated				Estimated
	Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value
Contractual maturity in
1 year or less	$	15,170	$	15,188	$	1,696	$	1,698
After 1 year through five years		9,994		10,261		49,676		50,060
After 5 years through 10 years		8,834		9,269		226,258		229,525
After 10 years		4,515		4,911		15,739		11,682
Total		38,513		39,629		293,369		292,965
Mortgage Backed Securities		-		-		118,650		120,885
Securities with no stated maturity		-		-		2,580		2,629
Total	$	38,513	$	39,629	$	414,599	$	416,479

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, 2013 and December 31, 2012.

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	March 31, 2013
	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	$	64,069	$	261	$	-	$	-	$	64,069	$	261
Mortgage Backed Securities issued by U.S. Government Agencies		23,481		137		4,388		29		27,869		166
Obligations of States and Political Subdivisions		8,619		56		1,542		8		10,161		64
Trust Preferred CDO Securities		-		-		5,402		4,119		5,402		4,119
Corporate Debt Securities		-		-		-		-		-		-
Equity Securities		-		-		432		108		432		108
	$	96,169	$	454	$	11,764	$	4,264	$	107,933	$	4,718

	December 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	$	29,499	$	89	$	1,111	$	1	$	30,610	$	90
Mortgage Backed Securities issued by U.S. Government Agencies		22,217		90		-		-		22,217		90
Obligations of States and Political Subdivisions		7,801		90		1,540		10		9,341		100
Trust Preferred CDO Securities		-		-		5,406		4,119		5,406		4,119
Corporate Debt Securities		1,960		40		-		-		1,960		40
Equity Securities		-		-		432		108		432		108
	$	61,477	$	309	$	8,489	$	4,238	$	69,966	$	4,547

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, 2013.

The Trust Preferred CDO Securities consist of three pooled trust Preferred Collateralized Debt Obligations (CDOs). These CDOs are debt securities issued by special purpose entities that own trust preferred stock issued by banks and insurance companies. The trust preferred stock owned by the special purpose entities is the collateral that backs the debt securities we own. The three pooled CDOs that we own have each been in an unrealized loss position for more than 12 months. These securities have final maturity dates of 2033, 2035, and 2037. 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.

To determine whether or not the impairment is other-than-temporary, the Company utilizes a third party valuation service to conduct a fair value analysis of each individual security. The other-than-temporary-impairment analysis of each of the CDO securities owned by the Company is conducted by projecting the expected cash flows from the security, discounting the cash flows to determine the present value of the cash flows, and comparing the present value to the amortized cost to determine if there is impairment. The cash flow projection for each security is developed using estimated prepayment speeds, estimated rates at which payments will be deferred, estimated rates at which issuers will default, and the severity of the losses on the securities which default. Prepayment estimates are negatively impacted by the lack of an active market for issuers to refinance their trust preferred securities; however, prepayment of trust preferred securities is expected to increase due to recent restrictions on the treatment of trust preferred debt as regulatory capital.

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The size and creditworthiness of each institution in the CDO pool are the most significant pieces of evidence in estimating prepayment speeds. Deferral and default rates are the key drivers of the cash flow projections for each of the securities. Deferral of interest payments is allowed for up to five years, and estimates of deferral rates are determined by examining the current deferral status of the issuers, the current financial condition of the issuers, and the historical deferral levels of the issuers in each CDO pool. Key evidence examined includes whether or not an issuer has received TARP funding, the most recent credit ratings from outside services, stock price information, capitalization, asset quality, profitability, and liquidity. The most significant evidence in estimating deferrals is the comparison of key financial ratios to industry benchmarks. Near term (next 12 months) deferral rates are estimated for each security by analyzing the credit characteristics of each individual issuer in the pool. When an issuer is expected to defer interest payments, the analysis assumes that the deferral will continue for the entire five year period allowed and then, depending on the individual credit characteristics of that issuer, begin performing or move to default. Longer term annual default rates for each CDO are estimated using the credit analysis of each individual issuer compared industry benchmarks to modify the historical default rates of financial companies. Finally, loss severity is estimated using analytical research provided by Standard and Poor’s and Moody’s, which supports the assumption that a small percentage of defaulted trust preferred securities recover without loss. The projected cash flows are discounted using the contractual rate of each security.

In the Other-Than-Temporary-Impairment (OTTI) analysis of our CDO securities as of December 31, 2009, it was expected that there would be cash flow disruptions on two of the CDOs we own. These credit losses were recorded through a charge to earnings in 2009. In subsequent analyses in 2010, 2011, and 2012, the expectation of a disruption of cash flows diminished on both of these CDO securities, with one of the securities no longer expected to experience a disruption of cash flow. The present value of the expected cash flows is at least as great as the amortized costs bases following the charges to earnings recorded in 2009, so no additional charges to earnings have been recorded.

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.

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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.

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2013 and December 31, 2012, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
March 31, 2013	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	118,038	$	118,038	$	-	$	-	$	118,038
Securities - Held to Maturity
Obligations of States and Political Subdivisions		38,013		-		39,129		-		39,129
Corporate Debt Securities		500		-		500		-		500
Securities - Available for Sale
Obligations of U.S. Government Agencies		258,431		-		258,431		-		258,431
MBS issued by U.S. Government Agencies		120,885		-		120,885		-		120,885
Obligations of States and Political Subdivisions		16,951		-		16,951		-		16,951
Trust Preferred CDO Securities		5,402		-		-		5,402		5,402
Corporate Debt Securities		12,181		-		12,181		-		12,181
Other Securities		2,629		2,197		432		-		2,629
Federal Home Loan Bank Stock		10,605		-		10,605		-		10,605
Loans Held for Sale		2,047		-		-		2,047		2,047
Loans, net		596,859		-		-		611,801		611,801
Accrued Interest Receivable		3,923		-		3,923		-		3,923
Financial Liabilities:
Noninterest Bearing Deposits		186,220		186,220		-		-		186,220
Interest Bearings Deposits		876,245		-		881,699		-		881,699
Borrowed funds
FHLB Advances		107,000		-		107,321		-		107,321
Repurchase Agreements		15,000		-		16,964		-		16,964
Accrued Interest Payable		348		-		348		-		348

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									Total
	Carrying								Estimated
December 31, 2012	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	112,507	$	112,507	$	-	$	-	$	112,507
Securities - Held to Maturity
Obligations of States and Political Subdivisions		38,286		-		40,130		-		40,130
Corporate Debt Securities		500		-		500		-		500
Securities - Available for Sale
Obligations of U.S. Government Agencies		225,451		-		225,451		-		225,451
MBS issued by U.S. Government Agencies		129,818		-		129,818		-		129,818
Obligations of States and Political Subdivisions		18,370		-		18,370		-		18,370
Trust Preferred CDO Securities		5,406		-		-		5,406		5,406
Corporate Debt Securities		12,077		-		12,077		-		12,077
Other Securities		2,645		2,213		432		-		2,645
Federal Home Loan Bank Stock		10,605		-		10,605		-		10,605
Loans Held for Sale		1,520		-		-		1,520		1,520
Loans, net		609,950		-		-		627,171		627,171
Accrued Interest Receivable		3,457		-		3,457		-		3,457
Financial Liabilities:
Noninterest Bearing Deposits		183,016		183,016		-		-		183,016
Interest Bearings Deposits		865,814		-		872,070		-		872,070
Borrowed funds
FHLB Advances		107,000		-		107,785		-		107,785
Repurchase Agreements		15,000		-		17,141		-		17,141
Accrued Interest Payable		353		-		353		-		353

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	2013			2012
Balance at January 1	$	5,406		$	5,467
Total realized and unrealized gains (losses) included in income		(4	)		(4	)
Total unrealized gains (losses) included in other comprehensive income		-			(235	)
Net purchases, sales, calls and maturities		-			-
Net transfers in/out of Level 3		-			-
Balance at March 31	$	5,402		$	5,228

The Company did not recognize any unrealized losses on its Level 3 Available for Sale investment securities in other comprehensive income in the consolidated statements of financial condition for the three months ended March 31, 2013. 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 $5,402,000 as of March 31, 2013. 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.

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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, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	65,812	$	-	$	-	$	65,812
Other Real Estate Owned	$	15,118	$	-	$	-	$	15,118

	Balance at December 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	$	67,249	$	-	$	-	$	67,249
Other Real Estate Owned	$	14,262	$	-	$	-	$	14,262

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.

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.

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

	Contractual Amount
	March 31,		December 31,
	2013		2012
Commitments to extend credit:
Unused portion of commercial lines of credit	$	53,145	$	59,826
Unused portion of credit card lines of credit		3,081		3,048
Unused portion of home equity lines of credit		15,827		16,356
Standby letters of credit and financial guarantees written		3,680		3,730
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.

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 discussion and analysis should be read in conjunction with the accompanying consolidated statements and footnotes.

Executive Overview

The Bank is operated as a community bank, primarily providing loan, deposit, and wealth management products and services to the people, businesses, and communities in its market area. In addition to our commitment to our mission of serving the needs of our local communities, we are focused on improving asset quality, profitability, and capital.

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The national economic recovery is continuing slowly, and conditions in southeast Michigan are also slowly improving. Local unemployment rates improved significantly since 2011, 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, increased $0.3 million, or 0.2% during the first quarter of 2013, but decreased $3.7 million or 2.8% compared to a year ago. Although overall asset quality has improved over the past year and net charge offs were only $0.9 million in the first quarter of 2013, we increased our Allowance for Loan and Lease Losses (ALLL) from $17.3 million to $17.9 million in the first quarter. The increase in the ALLL was mainly due to an increase of $351,000 in specifically identified impairments. In addition, even though the size of the loan portfolio decreased during the quarter, an increase in some of the risk factors caused us to increase the general allocation in the ALLL by $249,000. The loan portfolio held for investment decreased $12.5 million during the quarter, and the ALLL as a percent of loans increased from 2.75% to 2.90%. Although local property values improved in the second half of 2012 and the unemployment rate stabilized over the past few quarters, we anticipate that the recovery in our local markets will continue at a slower than normal pace though 2013. We will continue to focus our efforts on improving asset quality, maintaining liquidity, strengthening capital, and controlling expenses.

Net Interest Income decreased $884,000 compared to the first quarter of 2012 even though the average earning assets increased $32.7 million, or 2.9% as the net interest margin decreased from 3.19% to 2.82%. The provision for loan losses decreased from $2.25 million in the first quarter of 2012 to $1.5 million in the first quarter of 2013. Decreases in the historical loss rates and in the amount of specific allocations compared to a year ago decreased the amount of ALLL required. Also, net charge offs were $0.9 million in the first quarter of 2013 compared to $2.6 million in the first quarter of 2012, allowing the reduction in the provision for loan losses. Non interest income decreased $689,000 or 14.7% due to higher than normal gains on securities transactions in the first quarter of 2012. Wealth management fees and mortgage loan origination income increased due to improvements in the financial and local real estate markets. Non interest expenses decreased $594,000, or 5.9% as occupancy, equipment, marketing, legal fees, losses on Other Real Estate Owned (OREO), and OREO carrying costs decreased. We expect credit related expenses to continue to improve, but still remain above normal levels, throughout 2013.

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.

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.

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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 years 2009 through 2011, combined with a difficult economic environment and the slow pace of the economic recovery in southeast Michigan. Positive evidence includes our history of strong earnings prior to 2008, our seventh consecutive quarterly profit in the first quarter of 2013, our strong capital position, our steady core earnings, our improving asset quality, our non interest expense control initiatives, and our projections for future taxable earnings. Based on our analysis of the evidence, we believed that it was appropriate to reduce our valuation allowance by $5 million in the fourth quarter of 2012. The valuation allowance is now $19.7 million, compared to the deferred tax asset of $24.7 million as of March 31, 2013. We will continue to assess the evidence and if the amount of positive evidence continues to increase, we may recognize additional tax benefits in late 2013.

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 through 2010. Local unemployment and property values stabilized during 2011 and began to improve in 2012. The economic environment in southeast Michigan is continuing to slowly improve, and we expect the slow recovery to continue in our market area throughout 2013. Management intends to continue to focus efforts on improving credit quality, managing capital, and mitigating enterprise risk.

With respect to credit quality, our nonperforming assets (“NPAs”) increased 0.6% during the quarter, from $87.1 million to $87.7 million, and total problem assets increased from $125.2 million to $125.5 million. Both of these measures were impacted by a small number of large credit relationships, and both still reflect improvement compared to the first quarter of 2012. Over the last twelve months, NPAs decreased $882,000, or 1.0%, with nonperforming loans decreasing 2.7% from $71.4 million to $69.5 million, and Other Real Estate Owned (“OREO”) increasing 6.3% from $14.3 million to $15.2 million. Total problem assets, which includes all NPAs and performing loans that are internally classified as substandard, decreased $3.7 million, or 2.8%. The Company’s Allowance for Loan and Lease Losses (“ALLL”) decreased $2.6 million over the last four quarters 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 2.90% of loans, down from 3.07% at March 31, 2012. The ALLL is 25.77% of nonperforming loans (“NPLs”), compared to 24.78% at year end and 28.69% at March 31, 2012. In light of current economic conditions, we believe that this level of ALLL adequately estimates the potential losses in the loan portfolio.

Since December 31, 2012, total loans decreased 2.0% because new loan activity was not sufficient to cover payments received and other reductions. Total loans held for investment decreased $12.5 million during the quarter as payments received in the ordinary course of business, transfers to OREO, and charge offs of existing loans exceeded new loan production. The decrease in loans caused an increase in lower yielding cash and investments, which, along with the prolonged historically low interest rate environment caused a decrease in our net interest margin. As the local economy is slowly recovering, lending opportunities and loan requests are beginning to increase.

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Since December 31, 2012, deposits increased $13.6 million, or 1.3% due to normal seasonal fluctuations in local deposit activity. The increase in deposits funded an increase of $17.6 million (1.4%) in total assets since the end of 2012. The Company expects low deposit growth and a reduction in total assets due to a reduction in non deposit funding in 2013.

Total capital increased $2.4 million, or 2.8%, due to the profit of $1.1 million and a private placement stock offering of $1.7 million, offset partially by the decrease of $521,000 in the accumulated other comprehensive income (AOCI). AOCI decreased mainly due to a decrease in the value of our securities available for sale. Even with the increase in total assets, the increase in capital caused the capital to assets ratio to increase from 6.59% at December 31, 2012 to 6.68% at March 31, 2013.

Results of Operations – First Quarter 2013 vs. First Quarter 2012

Net Interest Income - A comparison of the income statements for the three months ended March 31, 2012 and 2013 shows a decrease of $884,000, or 9.9%, in Net Interest Income. Interest income on loans decreased $1.2 million or 13.5% as the average loans outstanding decreased $50.5 million and the average yield on loans decreased from 5.46% to 5.15%. The interest income on investments, fed funds sold, and interest bearing balances due from banks decreased $398,000 as the average amount of investments, fed funds sold, and interest bearing balances due from banks increased $83.2 million but the yield decreased from 2.17% to 1.57%. 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 helped reduce the funding costs. The interest expense on deposits decreased $626,000 or 34.0% as the average deposits increased $26.9 million and the average cost of deposits decreased from 0.72% to 0.47%. The cost of borrowed funds decreased $125,000 as the average amount of borrowed funds decreased $5.0 million and the average cost of the borrowings decreased from 2.94% to 2.67%.

Provision for Loan Losses - The Provision for Loan Losses decreased from $2.25 million in the first quarter of 2012 to $1.5 million in the first quarter of 2013. Net charge offs were $0.9 million during the first quarter of 2013, compared to $2.6 million in the first quarter of 2012. 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, and a decrease in the historical loss percentages, the amount of provision required to maintain an adequate ALLL in the first quarter of 2013 decreased 33.3% compared to the amount required in the first quarter of 2012. The ALLL is 2.90% of loans as of March 31, 2013, 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 decreased $689,000, or 14.7% compared to the first quarter of 2012. The income in the first quarter of 2012 included gains on securities transactions that were the result of restructuring activity in the investment portfolio in that quarter. Excluding securities gains in both years, non interest income increased $401,000 or 11.2%. Wealth management income increased $129,000 due to an increase in the market value of assets managed and new business brought in to the bank. Origination fees on mortgage loans sold increased $167,000, or 136.9%, due to an increase in mortgage loan origination volume compared to 2012, and other non interest income increased $133,000 primarily due to commissions on brokerage and credit card services and check supplies.

Other Expenses – Total non interest expenses decreased $594,000, or 5.9% compared to the first quarter of 2012. Salaries and Employee Benefits increased $217,000, or 4.2%, as salaries increased due to an increase in the number of employees and annual merit increases. Equipment expense decreased $103,000 due to lower computer and data processing expenses. Losses on Other Real Estate Owned (OREO) properties decreased $309,000 compared to the first quarter of 2012 as the property values stabilized over the last year, requiring fewer write downs of properties owned, and some of the OREO property sales that closed during the quarter produced gains. Other OREO expenses decreased $95,000 due to lower property tax and maintenance costs.

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As a result of the above activity, the Profit Before Income Taxes in the first quarter of 2013 was $1,114,000, a decrease of $229,000 compared to the pre tax profit of $1,343,000 in the first quarter of 2012. Due to our net operating loss carry forward, we did not record a federal income tax expense in the first quarter of 2013. If we did not have the benefit of the NOL carry forward, we would have incurred a federal income tax expense of $155,000, for an effective tax rate of 13.9%. The income tax expense of $126,000 that was recorded in the first quarter of 2012 was to accrue for an audit adjustment. The Net profit for the first quarter of 2013 was $1,114,000, a decrease of 8.5% compared to the net profit of $1,217,000 in the first quarter of 2012.

Cash Flows

Cash flows provided by operating activities increased $1.5 million compared to the first three months of 2012 as the non cash charges for the provision for loan losses and write downs of Other Real Estate Owned that are included net income decreased $1.1 million. Cash flows from investing activities decreased $26.7 million in the first three months of 2013 compared to the first three months of 2012 as the amount of securities that were called or that matured decreased $52.6 million, and the amount of securities sold decreased $10.0 million due to a restructuring transaction in the first three months of 2012. This activity was partially offset by a decrease of $38.5 million in securities purchases. The amount of cash provided by financing activities increased $2.1 million in the first three months of 2013 compared to the first three months of 2012 mainly due to a larger amount of stock issued, which was the result of the $1.7 million private placement of common stock in the first three months of 2013. Total cash and cash equivalents increased $5.5 million in the first three months of 2013 compared to $28.6 million in the first three months 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, 2013, 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 2013 the Company was in compliance with its Funds Management Policy regarding liquidity and capital.

Total stockholders’ equity of the Company was $85.9 million at March 31, 2013 and $83.6 million at December 31, 2012. The ratio of equity to assets was 6.68% at March 31, 2013 and 6.59% at December 31, 2012. 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%.

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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, 2013:
Total Capital to Risk-Weighted Assets
Consolidated	$	92,667		11.96	%	$	77,472		10	%
Monroe Bank & Trust		91,694		11.85	%		77,395		10	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		82,855		10.69	%		46,483		6	%
Monroe Bank & Trust		81,843		10.57	%		46,437		6	%
Tier 1 Capital to Average Assets
Consolidated		82,855		6.50	%		63,699		5	%
Monroe Bank & Trust		81,843		6.43	%		63,662		5	%

	Actual					Minimum to Qualify as Well Capitalized
	Amount		Ratio			Amount		Ratio
As of December 31, 2012:
Total Capital to Risk-Weighted Assets
Consolidated	$	89,615		11.53	%	$	77,691		10	%
Monroe Bank & Trust		88,992		11.46	%		77,623		10	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		79,776		10.27	%		46,615		6	%
Monroe Bank & Trust		79,113		10.19	%		46,574		6	%
Tier 1 Capital to Average Assets
Consolidated		79,776		6.43	%		62,041		5	%
Monroe Bank & Trust		79,113		6.38	%		62,008		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 though its ratios meet the “well capitalized” guidelines. The Consent Order requires the Bank to raise its Tier 1 Leverage ratio to 9% and its Total Risk Based Capital Ratio to 12%. As of March 31, 2013, the Bank is not in compliance with the capital requirements of the Consent Order. The table below indicates the amount of capital the Bank needed to be in compliance with the Consent Order as of March 31, 2013:

	Actual Capital					Minimum Capital Required by Consent Order					Additional Capital Required to Comply with
	Amount		Ratio			Amount		Ratio			Consent Order
Total Capital to Risk-Weighted Assets	$	91,694		11.85	%	$	92,874		12	%	$	1,180
Tier 1 Capital to Average Assets	$	81,843		6.43	%	$	114,592		9	%	$	32,749

-29-

The Company increased its common shares authorized in 2011 and is continuing to monitor the capital market conditions. Currently, the Company does not believe that the market conditions are suitable for a bank holding company of our size located in the Midwest to conduct an offering large enough to generate the amount of capital required to comply with the Consent Order. Since the Consent Order was issued, the Company completed two private placement offerings, raising a total of $3.1 million, of which $2.5 million has been invested in the Bank. While we continue to monitor the capital market conditions, we are focusing our efforts to improve our capital position on generating capital by improving our earnings. We are also improving our capital ratios by reducing the size of our balance sheet by repaying our non deposit funding as it matures. This is expected to include the repayment of $95 million of Federal Home Loan Bank advances that are scheduled to mature in the second quarter of 2013.

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 2012.

Internal Revenue Service Audit

Since the fourth quarter of 2010, the Internal Revenue Service (IRS) has been conducting an audit of our tax returns for the 2004, 2005, 2007, 2008, 2009, and 2010 tax years. The IRS is nearing completion of the audit and has proposed adjustments to our taxable income, mainly challenging our treatment of interest on non accrual loans, OREO valuations, OREO carrying costs, and loan charge-offs. Although our loan 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 and certain differences between tax and financial accounting for charge-offs. We believe that the charge-off deductions were proper when taken, and our belief is supported by confirmation of our charge off methodology by our federal and state banking regulators.

According to ASC 740, Accounting for Uncertainty in Income Taxes, an entity is required to evaluate the validity of uncertain tax positions and determine if the relevant taxing authority would conclude that it is more likely than not (greater than fifty percent) that the position taken will be sustained, based upon technical merits, upon examination. We have reviewed our tax positions and have concluded that it is appropriate to record a liability for potential reimbursement to the IRS.

Since the audit began in 2010, the Company has incurred over $200,000 of professional fees expenses with its accountants and lawyers for assistance in resolution. In order to resolve the audit without incurring significant additional expenses, the Company offered a settlement proposal to the IRS in the the third quarter of 2012. The Company’s proposal resulted in a current tax liability of $2.0 million. The Company has concluded that its offer to settle of $2.0 million is the best estimate of potential liability at this time. The Company expects the audit to be resolved without incurring significant additional tax or professional fees expenses.

Although the timing of the resolution and/or closure of the audit remains highly uncertain, the Company believes it is reasonably possible that the IRS will conclude this audit within the next three months. Adjustments could be necessary in future periods to the estimated potential federal income tax payable noted above based on issues raised by the IRS. Management will re-evaluate the estimate quarterly based on current, relevant facts.

-30-

Forward-Looking Statements

Certain statements contained herein are not based on historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E 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 2013, 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.

-31-

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, 2012.

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, 2013, 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, 2013, 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, 2013, 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

On January 2, 2013, 6,369 Stock Only Stock Appreciation Rights (SOSARs) were issued to a director in exchange for $10,000 of his 2013 annual retainer, as permitted under the MBT Financial Corp. 2008 Stock Incentive Plan. The SOSARs have a term of ten years and vest on December 31, 2013. The per share purchase price of the SOSARs was determined using the Black-Scholes option pricing model, with the following assumptions: expected option lives of 7 years, expected volatility of 62.09%, a risk free interest rate of 1.25%, and a dividend yield of 0.00%. The closing price on the agreement date is set as the exercise price of the SOSARs. Upon exercise, the director will receive the number of shares of stock equal to the value of the increase in the stock price from the agreement date to the exercise date. The SOSARs were issued pursuant to the exemption from registration with the Securities and Exchange Commission found under Rule 506 of SEC Regulation D.

On March 18, 2013, MBT Financial Corp. completed a private placement of 500,000 shares of its common stock for an aggregate purchase price of $1,736,000. The shares were issued pursuant to the exemption from registration with the Securities and Exchange Commission found under Rule 506 of SEC Regulation D.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

-32-

Item 5. Other Information

No matters to be reported.

Item 6. Exhibits

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.

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.

101.INS XBRL Instance Document ⁽¹⁾

101.SCH XBRL Taxonomy Extension Schema Document ⁽¹⁾

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document⁽¹⁾

101.DEF XBRL Taxonomy Extension Definition Linkbase Document ⁽¹⁾

101.LAB XBRL Taxonomy Extension Label Linkbase Document ⁽¹⁾

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document ⁽¹⁾

(1) Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act”), or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

-33-

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 13, 2013	By	/s/ H. Douglas Chaffin
Date	H. Douglas Chaffin
	President &
	Chief Executive Officer

May 13, 2013	By	/s/ John L. Skibski
Date	John L. Skibski
	Executive Vice President and Chief Financial Officer

-34-

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.
101.INS	XBRL Instance Document(1)
101.SCH	XBRL Taxonomy Extension Schema Document(1)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document(1)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document(1)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document(1)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document(1)

(1) Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act”), or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

-35-

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, H. Douglas Chaffin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MBT Financial Corp.;

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 officer(s) 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 such 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 officer(s) 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: May 13, 2013	/s/ H. Douglas Chaffin
	H. Douglas Chaffin
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, John L. Skibski, certify that:

1. I have reviewed this quarterly report on Form 10-Q of MBT Financial Corp.;

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 officer(s) 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 such 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 officer(s) 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: May 13, 2013	/s/ John L. Skibski
	John L. Skibski
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MBT Financial Corp. (the "Company") on Form 10-Q for the period ending March 31, 2013 as filed with the Securities and Exchange Commission (the "Report"), I, H. Douglas Chaffin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)          The Report 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 Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ H. Douglas Chaffin

H. Douglas Chaffin

Chief Executive Officer

May 13, 2013

A signed original of this written statement required by Section 906 has been provided to MBT Financial Corp. and will be retained by MBT Financial Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MBT Financial Corp. (the "Company") on Form 10-Q for the period ending March 31, 2013 as filed with the Securities and Exchange Commission (the "Report"), I, John L. Skibski, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)          The Report 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 Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John L. Skibski

John L. Skibski

Chief Financial Officer

May 13, 2013

A signed original of this written statement required by Section 906 has been provided to MBT Financial Corp. and will be retained by MBT Financial Corp. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

INVESTMENT SECURITIES (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012
Less than 12 months, Aggregate Fair Value	$ 96,169	$ 61,477
Less than 12 months, Gross Unrealized Losses	454	309
12 months or longer, Aggregate Fair Value	11,764	8,489
12 months or longer, Gross Unrealized Losses	4,264	4,238
Aggregate Fair Value, Total	107,933	69,966
Gross Unrealized Losses, Total	4,718	4,547
Obligations of U.S. Government Agencies [Member]
Less than 12 months, Aggregate Fair Value	64,069	29,499
Less than 12 months, Gross Unrealized Losses	261	89
12 months or longer, Aggregate Fair Value	0	1,111
12 months or longer, Gross Unrealized Losses	0	1
Aggregate Fair Value, Total	64,069	225,451	225,451
Gross Unrealized Losses, Total	261	90
Mortgage Backed Securities issued by U.S. Government Agencies [Member]
Less than 12 months, Aggregate Fair Value	23,481	22,217
Less than 12 months, Gross Unrealized Losses	137	90
12 months or longer, Aggregate Fair Value	4,388	0
12 months or longer, Gross Unrealized Losses	29	0
Aggregate Fair Value, Total	120,885	129,818	129,818
Gross Unrealized Losses, Total	166	90
Obligations of States and Political Subdivisions [Member]
Less than 12 months, Aggregate Fair Value	8,619	7,801
Less than 12 months, Gross Unrealized Losses	56	90
12 months or longer, Aggregate Fair Value	1,542	1,540
12 months or longer, Gross Unrealized Losses	8	10
Aggregate Fair Value, Total	16,951	18,370	18,370
Gross Unrealized Losses, Total	64	100
Trust Preferred CDO Securities [Member]
Less than 12 months, Aggregate Fair Value	0	0
Less than 12 months, Gross Unrealized Losses	0	0
12 months or longer, Aggregate Fair Value	5,402	5,406
12 months or longer, Gross Unrealized Losses	4,119	4,119
Aggregate Fair Value, Total	5,402	5,406	5,406
Gross Unrealized Losses, Total	4,119	4,119
Corporate Debt Securities [Member]
Less than 12 months, Aggregate Fair Value	0	1,960
Less than 12 months, Gross Unrealized Losses	0	40
12 months or longer, Aggregate Fair Value	0	0
12 months or longer, Gross Unrealized Losses	0	0
Aggregate Fair Value, Total	12,181	12,077	12,077
Gross Unrealized Losses, Total	0	40
Equity Securities [Member]
Less than 12 months, Aggregate Fair Value	0	0
Less than 12 months, Gross Unrealized Losses	0	0
12 months or longer, Aggregate Fair Value	432	432
12 months or longer, Gross Unrealized Losses	108	108
Aggregate Fair Value, Total	432	432
Gross Unrealized Losses, Total	$ 108	$ 108

XML

ALLOWANCE FOR LOAN LOSSES (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
30-59 Days Past Due	$ 10,630	$ 9,011
60-89 Days Past Due	4,848	3,425
>90 Days Past Due	13,084	17,747
Total Past Due	28,562	30,183
Current	586,196	597,066
Total Loans	596,859	609,950
Recorded Investment >90 Days Past Due and Accruing	314	1
Agriculture and Agricultural Real Estate [Member]
30-59 Days Past Due	201	208
60-89 Days Past Due	0	0
>90 Days Past Due	80	145
Total Past Due	281	353
Current	11,954	11,651
Total Loans	12,235	12,004
Recorded Investment >90 Days Past Due and Accruing	0	0
Commercial [Member]
30-59 Days Past Due	608	927
60-89 Days Past Due	187	19
>90 Days Past Due	855	1,100
Total Past Due	1,650	2,046
Current	59,416	56,148
Total Loans	61,066	58,194
Recorded Investment >90 Days Past Due and Accruing	3	1
Commercial Real Estate [Member]
30-59 Days Past Due	3,104	1,789
60-89 Days Past Due	2,962	930
>90 Days Past Due	7,102	11,350
Total Past Due	13,168	14,069
Current	261,372	268,945
Total Loans	274,540	283,014
Recorded Investment >90 Days Past Due and Accruing	0	0
Construction Real Estate [Member]
30-59 Days Past Due	955	127
60-89 Days Past Due	782	1,437
>90 Days Past Due	1,564	1,867
Total Past Due	3,301	3,431
Current	13,777	14,988
Total Loans	17,078	18,419
Recorded Investment >90 Days Past Due and Accruing	0	0
Residential Real Estate [Member]
30-59 Days Past Due	5,663	5,738
60-89 Days Past Due	860	978
>90 Days Past Due	3,425	3,121
Total Past Due	9,948	9,837
Current	225,375	230,495
Total Loans	235,323	240,332
Recorded Investment >90 Days Past Due and Accruing	311	0
Consumer and Other [Member]
30-59 Days Past Due	99	222
60-89 Days Past Due	57	61
>90 Days Past Due	58	164
Total Past Due	214	447
Current	14,302	14,839
Total Loans	14,516	15,286
Recorded Investment >90 Days Past Due and Accruing	$ 0	$ 0

XML

STOCK BASED COMPENSATION (Details) (USD $)	3 Months Ended
	Mar. 31, 2013
Options Outstanding, January 1, Shares	396,835
Granted, Shares	0
Exercised, Shares	0
Forfeited/Expired, Shares	63,335
Options Outstanding, December 31, Shares	333,500
Options Exercisable, December 31, Shares	333,500
Options Outstanding, January 1, Weighted Average Exercise Price	$ 17.57
Granted, Weighted Average Exercise Price	$ 0
Exercised, Weighted Average Exercise Price	$ 0
Forfeited, Weighted Average Exercise Price	$ 13.20
Options Outstanding, December 31, Weighted Average Exercise Price	$ 18.40
Options Exercisable, December 31, Weighted Average Exercise Price	$ 18.40

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Impaired Loans Fair Value Disclosure Non Recurring	$ 65,812	$ 67,249
Other Real Estate Owned Fair Value Disclosure Non Recurring	15,118	14,262
Fair Value, Inputs, Level 1 [Member]
Impaired Loans Fair Value Disclosure Non Recurring	0	0
Other Real Estate Owned Fair Value Disclosure Non Recurring	0	0
Fair Value, Inputs, Level 2 [Member]
Impaired Loans Fair Value Disclosure Non Recurring	0	0
Other Real Estate Owned Fair Value Disclosure Non Recurring	0	0
Fair Value, Inputs, Level 3 [Member]
Impaired Loans Fair Value Disclosure Non Recurring	65,812	67,249
Other Real Estate Owned Fair Value Disclosure Non Recurring	$ 15,118	$ 14,262

XML

INVESTMENT SECURITIES (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Held to Maturity, Amortized Cost	$ 38,513	$ 38,786
Held to Maturity, Gross Unrealized Gains	1,160	1,380
Held to Maturity, Gross Unrealized Losses	(44)	(36)
Held to Maturity, Estimated Market Value	39,629	40,130
Available for Sale, Amortized Cost	414,599	391,051
Available for Sale, Gross Unrealized Gains	6,554	7,227
Available for Sale, Gross Unrealized Losses	(4,674)	(4,511)
Available For Sale, Estimated Market Value	416,479	393,767
Obligations of U.S. Government Agencies [Member]
Available for Sale, Amortized Cost	255,500	222,099
Available for Sale, Gross Unrealized Gains	3,192	3,442
Available for Sale, Gross Unrealized Losses	(261)	(90)
Available For Sale, Estimated Market Value	258,431	225,451
Mortgage Backed Securities issued by U.S. Government Agencies [Member]
Available for Sale, Amortized Cost	118,650	127,082
Available for Sale, Gross Unrealized Gains	2,401	2,826
Available for Sale, Gross Unrealized Losses	(166)	(90)
Available For Sale, Estimated Market Value	120,885	129,818
Obligations of States and Political Subdivisions [Member]
Held to Maturity, Amortized Cost	38,013	38,286
Held to Maturity, Gross Unrealized Gains	1,160	1,380
Held to Maturity, Gross Unrealized Losses	(44)	(36)
Held to Maturity, Estimated Market Value	39,129	39,630
Available for Sale, Amortized Cost	16,385	17,804
Available for Sale, Gross Unrealized Gains	586	630
Available for Sale, Gross Unrealized Losses	(20)	(64)
Available For Sale, Estimated Market Value	16,951	18,370
Trust Preferred CDO Securities [Member]
Available for Sale, Amortized Cost	9,521	9,525
Available for Sale, Gross Unrealized Gains	0	0
Available for Sale, Gross Unrealized Losses	(4,119)	(4,119)
Available For Sale, Estimated Market Value	5,402	5,406
Corporate Debt Securities [Member]
Held to Maturity, Amortized Cost	500	500
Held to Maturity, Gross Unrealized Gains	0	0
Held to Maturity, Gross Unrealized Losses	0	0
Held to Maturity, Estimated Market Value	500	500
Available for Sale, Amortized Cost	11,963	11,961
Available for Sale, Gross Unrealized Gains	218	156
Available for Sale, Gross Unrealized Losses	0	(40)
Available For Sale, Estimated Market Value	12,181	12,077
Equity Securities [Member]
Available for Sale, Amortized Cost	2,580	2,580
Available for Sale, Gross Unrealized Gains	157	173
Available for Sale, Gross Unrealized Losses	(108)	(108)
Available For Sale, Estimated Market Value	$ 2,629	$ 2,645

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

2. EARNINGS PER SHARE

The calculations of earnings per common share are as follows:

	For the three months ended March 31,
	2013		2012
Basic
Net profit	$	1,114,000	$	1,217,000
Average common shares outstanding		17,516,382		17,304,781
Earnings per common share - basic	$	0.06	$	0.07
Diluted
Net profit	$	1,114,000	$	1,217,000
Average common shares outstanding		17,516,382		17,304,781
Equity compensation		229,973		690
Average common shares outstanding - diluted		17,746,355		17,305,471
Earnings per common share – diluted	$	0.06	$	0.07

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Total unrealized gains (losses) included in other comprehensive income	$ 0	$ (235)
Trust Preferred Securities Fair Value Disclosure	$ 5,402,000

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LOANS (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012
Nonaccrual loans	$ 31,558	$ 31,343
Loans 90 days past due and accruing	314	1
Total nonperforming loans	614,758	627,249	666,653
Other real estate owned	15,118	14,262
Total nonperforming assets	1,286,146	1,268,595
Non Performing Assets [Member]
Nonaccrual loans	31,558	31,343
Loans 90 days past due and accruing	314	1
Restructured loans	37,581	38,460
Total nonperforming loans	69,453	69,804
Other real estate owned	15,118	14,262
Other assets	59	32
Nonperforming investment securities	3,045	3,045
Total nonperforming assets	$ 87,675	$ 87,143
Nonperforming assets to total assets	6.82%	6.87%
Allowance for loan losses to nonperforming loans	25.77%	24.78%

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LOANS (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Total loans, gross	$ 614,758	$ 627,249	$ 666,653
Less: Allowance for loan losses	17,899	17,299	20,481	20,865
Loans - Net	596,859	609,950
Residential real estate loans [Member]
Total loans, gross	235,323	240,332
Commercial and Construction real estate loans [Member]
Total loans, gross	291,618	301,433
Agriculture and agricultural real estate loans [Member]
Total loans, gross	12,235	12,004
Commercial and industrial loans [Member]
Total loans, gross	61,066	58,194
Loans to individuals for household, family, and other personal expenditures [Member]
Total loans, gross	$ 14,516	$ 15,286

XML

FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Commitments to extend credit:
Standby letters of credit and financial guarantees written	$ 3,680	$ 3,730
All other off-balance sheet commitments	0	0
Commercial Line Of Credit [Member]
Commitments to extend credit:
Unused portion of home equity lines of credit	53,145	59,826
Credit Card Line Of Credit [Member]
Commitments to extend credit:
Unused portion of home equity lines of credit	3,081	3,048
Home Equity Lines Of Credit [Member]
Commitments to extend credit:
Unused portion of home equity lines of credit	$ 15,827	$ 16,356

XML

LOANS (Details Textual) (USD $)	Mar. 31, 2013
Loans and Leases Receivable, Related Parties	$ 250,000

XML

ALLOWANCE FOR LOAN LOSSES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012	Dec. 31, 2011
Allowance for loan losses:
Beginning Balance	$ 17,299	$ 20,865	$ 20,865
Charge-offs	(1,587)	(2,832)	(12,015)
Recoveries	687	198	1,099
Provision	1,500	2,250	7,350
Ending balance	17,899	20,481	17,299
Ending balance individually evaluated for impairment	7,689	8,737	7,338
Ending balance collectively evaluated for impairment	10,210	11,744	9,961
Ending balance	17,899	20,481	17,299
Loans:
Ending balance individually evaluated for impairment	65,812	69,771	67,249
Ending balance collectively evaluated for impairment	548,946	596,882	560,000
Ending balance	614,758	666,653	627,249
Agriculture and Agricultural Real Estate [Member]
Allowance for loan losses:
Beginning Balance	76	64	64
Charge-offs	0	0	(97)
Recoveries	0	0	0
Provision	(6)	5	109
Ending balance	70	69	76
Ending balance individually evaluated for impairment	0	69	0	69
Ending balance collectively evaluated for impairment	70	0	76	0
Ending balance	70	69	76
Loans:
Ending balance individually evaluated for impairment	420	1,051	409	1,051
Ending balance collectively evaluated for impairment	11,815	14,042	11,595	14,042
Ending balance	12,235	15,093	12,004	58,983
Commercial [Member]
Allowance for loan losses:
Beginning Balance	2,224	2,184	2,184
Charge-offs	(202)	(96)	(499)
Recoveries	236	66	347
Provision	(105)	586	192
Ending balance	2,153	2,740	2,224
Ending balance individually evaluated for impairment	1,330	1,477	1,316
Ending balance collectively evaluated for impairment	823	1,263	908
Ending balance	2,153	2,740	2,224
Loans:
Ending balance individually evaluated for impairment	4,193	3,975	4,519
Ending balance collectively evaluated for impairment	56,873	60,632	53,675
Ending balance	61,066	64,607	58,194
Commercial Real Estate [Member]
Allowance for loan losses:
Beginning Balance	7,551	9,351	9,351
Charge-offs	(813)	(1,573)	(8,156)
Recoveries	64	9	80
Provision	1,106	1,519	6,276
Ending balance	7,908	9,306	7,551
Ending balance individually evaluated for impairment	2,312	3,408	2,084
Ending balance collectively evaluated for impairment	5,596	5,898	5,467
Ending balance	7,908	9,306	7,551
Loans:
Ending balance individually evaluated for impairment	35,960	36,492	36,471
Ending balance collectively evaluated for impairment	238,580	265,417	246,543
Ending balance	274,540	293,270	283,014
Construction Real Estate [Member]
Allowance for loan losses:
Beginning Balance	2,401	2,632	2,632
Charge-offs	(18)	(462)	(1,036)
Recoveries	274	37	240
Provision	(188)	113	565
Ending balance	2,469	2,320	2,401
Ending balance individually evaluated for impairment	1,863	1,257	1,820
Ending balance collectively evaluated for impairment	606	1,063	581
Ending balance	2,469	2,320	2,401
Loans:
Ending balance individually evaluated for impairment	6,225	8,449	7,410
Ending balance collectively evaluated for impairment	10,853	13,492	11,009
Ending balance	17,078	18,499	18,419
Residential Real Estate [Member]
Allowance for loan losses:
Beginning Balance	4,715	6,227	6,227
Charge-offs	(433)	(654)	(2,031)
Recoveries	80	50	274
Provision	746	7	245
Ending balance	5,108	5,630	4,715
Ending balance individually evaluated for impairment	2,084	2,453	1,994
Ending balance collectively evaluated for impairment	3,024	3,177	2,721
Ending balance	5,108	5,630	4,715
Loans:
Ending balance individually evaluated for impairment	18,668	19,568	18,051
Ending balance collectively evaluated for impairment	216,655	230,415	222,281
Ending balance	235,323	248,155	240,332
Consumer and Other [Member]
Allowance for loan losses:
Beginning Balance	332	407	407
Charge-offs	(121)	(47)	(196)
Recoveries	33	36	158
Provision	(53)	20	(37)
Ending balance	191	416	332
Ending balance individually evaluated for impairment	100	73	124
Ending balance collectively evaluated for impairment	91	343	208
Ending balance	191	416	332
Loans:
Ending balance individually evaluated for impairment	346	236	389
Ending balance collectively evaluated for impairment	14,170	12,884	14,897
Ending balance	$ 14,516	$ 16,060	$ 15,286

XML

BASIS OF PRESENTATION AND ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

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.

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.

XML

ALLOWANCE FOR LOAN LOSSES (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Total loans, gross	$ 614,758	$ 627,249	$ 666,653
Performing [Member]
Total loans, gross	545,305	557,445
Nonperforming [Member]
Total loans, gross	69,453	69,804
Not Rated [Member]
Total loans, gross	165,643	177,684
Risk Grade Rating 1 [Member]
Total loans, gross	3,453	2,977
Risk Grade Rating 2 [Member]
Total loans, gross	2,632	2,825
Risk Grade Rating 3 [Member]
Total loans, gross	17,296	18,564
Risk Grade Rating 4 [Member]
Total loans, gross	259,219	250,641
Risk Grade Rating 5 [Member]
Total loans, gross	69,850	72,749
Risk Grade Rating 6 [Member]
Total loans, gross	96,665	101,809
Risk Grade Rating 7 [Member]
Total loans, gross	0	0
Risk Grade Rating 8 [Member]
Total loans, gross	0	0
Risk Grade Rating 9 [Member]
Total loans, gross	0	0
Agriculture and Agricultural Real Estate [Member]
Total loans, gross	12,235	12,004	15,093	58,983
Agriculture and Agricultural Real Estate [Member] | Performing [Member]
Total loans, gross	11,731	11,397
Agriculture and Agricultural Real Estate [Member] | Nonperforming [Member]
Total loans, gross	504	607
Agriculture and Agricultural Real Estate [Member] | Not Rated [Member]
Total loans, gross	162	126
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 1 [Member]
Total loans, gross	0	0
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 2 [Member]
Total loans, gross	48	48
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 3 [Member]
Total loans, gross	864	880
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 4 [Member]
Total loans, gross	10,232	9,907
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 5 [Member]
Total loans, gross	315	322
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 6 [Member]
Total loans, gross	614	721
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 7 [Member]
Total loans, gross	0	0
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 8 [Member]
Total loans, gross	0	0
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 9 [Member]
Total loans, gross	0	0
Commercial [Member]
Total loans, gross	61,066	58,194	64,607
Commercial [Member] | Performing [Member]
Total loans, gross	56,551	54,730
Commercial [Member] | Nonperforming [Member]
Total loans, gross	4,415	3,464
Commercial [Member] | Not Rated [Member]
Total loans, gross	729	4,182
Commercial [Member] | Risk Grade Rating 1 [Member]
Total loans, gross	3,453	2,977
Commercial [Member] | Risk Grade Rating 2 [Member]
Total loans, gross	103	114
Commercial [Member] | Risk Grade Rating 3 [Member]
Total loans, gross	5,020	4,894
Commercial [Member] | Risk Grade Rating 4 [Member]
Total loans, gross	37,508	29,935
Commercial [Member] | Risk Grade Rating 5 [Member]
Total loans, gross	5,943	9,713
Commercial [Member] | Risk Grade Rating 6 [Member]
Total loans, gross	8,310	6,379
Commercial [Member] | Risk Grade Rating 7 [Member]
Total loans, gross	0	0
Commercial [Member] | Risk Grade Rating 8 [Member]
Total loans, gross	0	0
Commercial [Member] | Risk Grade Rating 9 [Member]
Total loans, gross	0	0
Commercial Real Estate [Member]
Total loans, gross	274,540	283,014	293,270
Commercial Real Estate [Member] | Performing [Member]
Total loans, gross	238,419	246,107
Commercial Real Estate [Member] | Nonperforming [Member]
Total loans, gross	36,121	36,907
Commercial Real Estate [Member] | Not Rated [Member]
Total loans, gross	0	0
Commercial Real Estate [Member] | Risk Grade Rating 1 [Member]
Total loans, gross	0	0
Commercial Real Estate [Member] | Risk Grade Rating 2 [Member]
Total loans, gross	1,784	1,850
Commercial Real Estate [Member] | Risk Grade Rating 3 [Member]
Total loans, gross	9,497	10,735
Commercial Real Estate [Member] | Risk Grade Rating 4 [Member]
Total loans, gross	166,200	167,207
Commercial Real Estate [Member] | Risk Grade Rating 5 [Member]
Total loans, gross	43,183	45,262
Commercial Real Estate [Member] | Risk Grade Rating 6 [Member]
Total loans, gross	53,876	57,960
Commercial Real Estate [Member] | Risk Grade Rating 7 [Member]
Total loans, gross	0	0
Commercial Real Estate [Member] | Risk Grade Rating 8 [Member]
Total loans, gross	0	0
Commercial Real Estate [Member] | Risk Grade Rating 9 [Member]
Total loans, gross	0	0
Construction Real Estate [Member]
Total loans, gross	17,078	18,419	18,499
Construction Real Estate [Member] | Performing [Member]
Total loans, gross	10,629	10,783
Construction Real Estate [Member] | Nonperforming [Member]
Total loans, gross	6,449	7,636
Construction Real Estate [Member] | Not Rated [Member]
Total loans, gross	2,985	2,927
Construction Real Estate [Member] | Risk Grade Rating 1 [Member]
Total loans, gross	0	0
Construction Real Estate [Member] | Risk Grade Rating 2 [Member]
Total loans, gross	0	82
Construction Real Estate [Member] | Risk Grade Rating 3 [Member]
Total loans, gross	147	163
Construction Real Estate [Member] | Risk Grade Rating 4 [Member]
Total loans, gross	3,106	3,184
Construction Real Estate [Member] | Risk Grade Rating 5 [Member]
Total loans, gross	4,210	5,086
Construction Real Estate [Member] | Risk Grade Rating 6 [Member]
Total loans, gross	6,630	6,977
Construction Real Estate [Member] | Risk Grade Rating 7 [Member]
Total loans, gross	0	0
Construction Real Estate [Member] | Risk Grade Rating 8 [Member]
Total loans, gross	0	0
Construction Real Estate [Member] | Risk Grade Rating 9 [Member]
Total loans, gross	0	0
Residential Real Estate [Member]
Total loans, gross	235,323	240,332	248,155
Residential Real Estate [Member] | Performing [Member]
Total loans, gross	213,906	219,753
Residential Real Estate [Member] | Nonperforming [Member]
Total loans, gross	21,417	20,579
Residential Real Estate [Member] | Not Rated [Member]
Total loans, gross	151,673	159,743
Residential Real Estate [Member] | Risk Grade Rating 1 [Member]
Total loans, gross	0	0
Residential Real Estate [Member] | Risk Grade Rating 2 [Member]
Total loans, gross	697	731
Residential Real Estate [Member] | Risk Grade Rating 3 [Member]
Total loans, gross	1,764	1,885
Residential Real Estate [Member] | Risk Grade Rating 4 [Member]
Total loans, gross	42,172	40,392
Residential Real Estate [Member] | Risk Grade Rating 5 [Member]
Total loans, gross	12,106	8,426
Residential Real Estate [Member] | Risk Grade Rating 6 [Member]
Total loans, gross	26,911	29,155
Residential Real Estate [Member] | Risk Grade Rating 7 [Member]
Total loans, gross	0	0
Residential Real Estate [Member] | Risk Grade Rating 8 [Member]
Total loans, gross	0	0
Residential Real Estate [Member] | Risk Grade Rating 9 [Member]
Total loans, gross	0	0
Consumer and Other [Member]
Total loans, gross	14,516	15,286	16,060
Consumer and Other [Member] | Performing [Member]
Total loans, gross	13,969	14,675
Consumer and Other [Member] | Nonperforming [Member]
Total loans, gross	547	611
Consumer and Other [Member] | Not Rated [Member]
Total loans, gross	10,094	10,706
Consumer and Other [Member] | Risk Grade Rating 1 [Member]
Total loans, gross	0	0
Consumer and Other [Member] | Risk Grade Rating 2 [Member]
Total loans, gross	0	0
Consumer and Other [Member] | Risk Grade Rating 3 [Member]
Total loans, gross	4	7
Consumer and Other [Member] | Risk Grade Rating 4 [Member]
Total loans, gross	1	16
Consumer and Other [Member] | Risk Grade Rating 5 [Member]
Total loans, gross	4,093	3,940
Consumer and Other [Member] | Risk Grade Rating 6 [Member]
Total loans, gross	324	617
Consumer and Other [Member] | Risk Grade Rating 7 [Member]
Total loans, gross	0	0
Consumer and Other [Member] | Risk Grade Rating 8 [Member]
Total loans, gross	0	0
Consumer and Other [Member] | Risk Grade Rating 9 [Member]
Total loans, gross	$ 0	$ 0

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Financial Assets:
Cash and due from banks	$ 118,038	$ 112,507	$ 104,579	$ 75,995
Securities - Held to Maturity	38,513	38,786
Securities - Available for Sale	416,479	393,767
Federal Home Loan Bank Stock	10,605	10,605
Loans held for sale	2,047	1,520
Loans - Net	596,859	609,950
Accrued Interest Receivable	11,224	10,037
Cash and Cash Equivalents, Fair Value Disclosure	118,038	112,507
Securities - Available for Sale, Fair Value Disclosure	107,933	69,966
Federal Home Loan Bank Stock, Fair Value Disclosure	10,605	10,605
Loans Held for Sale, Fair Value Disclosure	2,047	1,520
Loans Receivable, Fair Value Disclosure	611,801	627,171
Accrued Interest Receivable, Fair Value Disclosure	3,923	3,457
Financial Liabilities:
Non-interest bearing	186,220	183,016
Interest Bearings Deposits	876,245	865,814
Accrued Interest Payable	348	353
Noninterest Bearing Deposits, Fair Value Disclosure	186,220	183,016
Interest Bearings Deposits, Fair Value Disclosure	881,699	872,070
Accrued Interest Payable Fair Value Disclosure	348	353
Obligations Of U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale	258,431	225,451
Securities - Available for Sale, Fair Value Disclosure	64,069	225,451	225,451
Mortgage Backed Securities Issued By U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale	120,885	129,818
Securities - Available for Sale, Fair Value Disclosure	120,885	129,818	129,818
Obligations Of States and Political Subdivisions [Member]
Financial Assets:
Securities - Held to Maturity	38,013	38,286
Securities - Available for Sale	16,951	18,370
Securities - Held to Maturity, Fair Value Disclosure	39,129	40,130
Securities - Available for Sale, Fair Value Disclosure	16,951	18,370	18,370
Trust Preferred CDO Securities [Member]
Financial Assets:
Securities - Available for Sale	5,402
Securities - Held to Maturity, Fair Value Disclosure		5,406
Securities - Available for Sale, Fair Value Disclosure	5,402	5,406	5,406
Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity	500	500
Securities - Available for Sale	12,181	12,077
Securities - Held to Maturity, Fair Value Disclosure	500	500
Securities - Available for Sale, Fair Value Disclosure	12,181	12,077	12,077
Other Securities [Member]
Financial Assets:
Securities - Available for Sale	2,629	2,645
Securities - Available for Sale, Fair Value Disclosure	2,629	2,645
Fhlb Advances [Member]
Financial Liabilities:
Borrowed Funds	107,000	107,000
Borrowed Funds Fair Value Disclosure	107,321	107,785
Repurchase Agreements [Member]
Financial Liabilities:
Borrowed Funds	15,000	15,000
Borrowed Funds Fair Value Disclosure	16,964	17,141
Fair Value, Inputs, Level 1 [Member]
Financial Assets:
Cash and Cash Equivalents, Fair Value Disclosure	118,038	112,507
Federal Home Loan Bank Stock, Fair Value Disclosure	0	0
Loans Held for Sale, Fair Value Disclosure	0	0
Loans Receivable, Fair Value Disclosure	0	0
Accrued Interest Receivable, Fair Value Disclosure	0	0
Financial Liabilities:
Noninterest Bearing Deposits, Fair Value Disclosure	186,220	183,016
Interest Bearings Deposits, Fair Value Disclosure	0	0
Accrued Interest Payable Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Obligations Of U.S. Government Agencies [Member]
Financial Assets:
Securities - Held to Maturity, Fair Value Disclosure	0
Securities - Available for Sale, Fair Value Disclosure		0
Fair Value, Inputs, Level 1 [Member] | Mortgage Backed Securities Issued By U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Obligations Of States and Political Subdivisions [Member]
Financial Assets:
Securities - Held to Maturity, Fair Value Disclosure	0	0
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Trust Preferred CDO Securities [Member]
Financial Assets:
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity, Fair Value Disclosure	0	0
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Other Securities [Member]
Financial Assets:
Securities - Available for Sale, Fair Value Disclosure	2,197	2,213
Fair Value, Inputs, Level 1 [Member] | Fhlb Advances [Member]
Financial Liabilities:
Borrowed Funds Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Repurchase Agreements [Member]
Financial Liabilities:
Borrowed Funds Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Cash and Cash Equivalents, Fair Value Disclosure	0	0
Federal Home Loan Bank Stock, Fair Value Disclosure	10,605	10,605
Loans Held for Sale, Fair Value Disclosure	0	0
Loans Receivable, Fair Value Disclosure	0	0
Accrued Interest Receivable, Fair Value Disclosure	3,923	3,457
Financial Liabilities:
Noninterest Bearing Deposits, Fair Value Disclosure	0	0
Interest Bearings Deposits, Fair Value Disclosure	881,699	872,070
Accrued Interest Payable Fair Value Disclosure	348	353
Fair Value, Inputs, Level 2 [Member] | Obligations Of U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale	258,431	225,451
Securities - Held to Maturity, Fair Value Disclosure	39,129
Securities - Available for Sale, Fair Value Disclosure		225,451
Fair Value, Inputs, Level 2 [Member] | Mortgage Backed Securities Issued By U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale, Fair Value Disclosure	120,885	129,818
Fair Value, Inputs, Level 2 [Member] | Obligations Of States and Political Subdivisions [Member]
Financial Assets:
Securities - Held to Maturity, Fair Value Disclosure	39,129	40,130
Securities - Available for Sale, Fair Value Disclosure	16,951	18,370
Fair Value, Inputs, Level 2 [Member] | Trust Preferred CDO Securities [Member]
Financial Assets:
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity, Fair Value Disclosure	500	500
Securities - Available for Sale, Fair Value Disclosure	12,181	12,077
Fair Value, Inputs, Level 2 [Member] | Other Securities [Member]
Financial Assets:
Securities - Available for Sale, Fair Value Disclosure	432	432
Fair Value, Inputs, Level 2 [Member] | Fhlb Advances [Member]
Financial Liabilities:
Borrowed Funds Fair Value Disclosure	107,321	107,785
Fair Value, Inputs, Level 2 [Member] | Repurchase Agreements [Member]
Financial Liabilities:
Borrowed Funds Fair Value Disclosure	16,964	17,141
Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Cash and Cash Equivalents, Fair Value Disclosure	0	0
Federal Home Loan Bank Stock, Fair Value Disclosure	0	0
Loans Held for Sale, Fair Value Disclosure	2,047	1,520
Loans Receivable, Fair Value Disclosure	611,801	627,171
Accrued Interest Receivable, Fair Value Disclosure	0	0
Financial Liabilities:
Noninterest Bearing Deposits, Fair Value Disclosure	0	0
Interest Bearings Deposits, Fair Value Disclosure	0	0
Accrued Interest Payable Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Obligations Of U.S. Government Agencies [Member]
Financial Assets:
Securities - Held to Maturity, Fair Value Disclosure	0	0
Securities - Available for Sale, Fair Value Disclosure		0
Fair Value, Inputs, Level 3 [Member] | Mortgage Backed Securities Issued By U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Obligations Of States and Political Subdivisions [Member]
Financial Assets:
Securities - Held to Maturity, Fair Value Disclosure	0	0
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Trust Preferred CDO Securities [Member]
Financial Assets:
Securities - Available for Sale, Fair Value Disclosure	5,402	5,406
Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity, Fair Value Disclosure	0	0
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Other Securities [Member]
Financial Assets:
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Fhlb Advances [Member]
Financial Liabilities:
Borrowed Funds Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Repurchase Agreements [Member]
Financial Liabilities:
Borrowed Funds Fair Value Disclosure	$ 0	$ 0

XML

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
ASSETS
Non-interest bearing	$ 11,535	$ 17,116
Interest bearing	106,503	95,391
Total cash and cash equivalents	118,038	112,507
Securities - Held to Maturity	38,513	38,786
Securities - Available for Sale	416,479	393,767
Federal Home Loan Bank stock - at cost	10,605	10,605
Loans held for sale	2,047	1,520
Loans	614,758	627,249
Allowance for Loan Losses	(17,899)	(17,299)
Loans - Net	596,859	609,950
Accrued interest receivable and other assets	11,224	10,037
Other Real Estate Owned	15,118	14,262
Bank Owned Life Insurance	49,501	49,111
Premises and Equipment - Net	27,762	28,050
Total assets	1,286,146	1,268,595
LIABILITIES
Non-interest bearing	186,220	183,016
Interest-bearing	876,245	865,814
Total deposits	1,062,465	1,048,830
Federal Home Loan Bank advances	107,000	107,000
Repurchase agreements	15,000	15,000
Interest payable and other liabilities	15,732	14,191
Total liabilities	1,200,197	1,185,021
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 17,903,656 and 17,396,179 shares issued and outstanding)	4,173	2,397
Retained earnings	82,394	81,280
Unearned compensation	(21)	(27)
Accumulated other comprehensive loss	(597)	(76)
Total stockholders' equity	85,949	83,574
Total liabilities and stockholders' equity	$ 1,286,146	$ 1,268,595

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY [Parenthetical] (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Issuance of Common Stock (in shares)		20,978
Other stock issued (In Shares)	506,803
Net of Cost (in dollars)	$ 15
SOSARs exercised, (in shares)	674

XML

ALLOWANCE FOR LOAN LOSSES (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Agriculture and Agricultural Real Estate [Member]
With no related allowance recorded, Recorded Investment	$ 420	$ 430	$ 409
With no related allowance recorded, Unpaid Principal Balance	923	978	923
With no related allowance recorded, Average Recorded Investment	423	478	469
With no related allowance recorded, Interest Income Recognized	12	17	54
With an allowance recorded, Recorded Investment	0	621	0
With an allowance recorded, Unpaid Principal Balance	0	621	0
With an allowance recorded, Related Allowance	0	69	0
With an allowance recorded, Average Recorded Investment	0	618	0
With an allowance recorded, Interest Income Recognized	0	1	0
Total, Recorded Investment	420	1,051	409
Total, Unpaid Principal Balance	923	1,599	923
Total, Related Allowance	0	69	0
Total, Average Recorded Investment	423	1,096	469
Total, Interest Income Recognized	12	18	54
Commercial [Member]
With no related allowance recorded, Recorded Investment	682	198	2,540
With no related allowance recorded, Unpaid Principal Balance	752	376	2,961
With no related allowance recorded, Average Recorded Investment	775	344	2,968
With no related allowance recorded, Interest Income Recognized	9	7	220
With an allowance recorded, Recorded Investment	3,511	3,777	1,979
With an allowance recorded, Unpaid Principal Balance	3,894	4,179	2,157
With an allowance recorded, Related Allowance	1,330	1,477	1,316
With an allowance recorded, Average Recorded Investment	3,513	3,833	2,032
With an allowance recorded, Interest Income Recognized	44	56	88
Total, Recorded Investment	4,193	3,975	4,519
Total, Unpaid Principal Balance	4,646	4,555	5,118
Total, Related Allowance	1,330	1,477	1,316
Total, Average Recorded Investment	4,288	4,177	5,000
Total, Interest Income Recognized	53	63	308
Commercial Real Estate [Member]
With no related allowance recorded, Recorded Investment	17,383	11,126	17,153
With no related allowance recorded, Unpaid Principal Balance	22,113	13,764	21,317
With no related allowance recorded, Average Recorded Investment	18,234	11,721	18,313
With no related allowance recorded, Interest Income Recognized	191	93	924
With an allowance recorded, Recorded Investment	18,577	25,366	19,318
With an allowance recorded, Unpaid Principal Balance	24,502	33,357	26,508
With an allowance recorded, Related Allowance	2,312	3,408	2,084
With an allowance recorded, Average Recorded Investment	20,045	25,832	22,119
With an allowance recorded, Interest Income Recognized	160	184	918
Total, Recorded Investment	35,960	36,492	36,471
Total, Unpaid Principal Balance	46,615	47,121	47,825
Total, Related Allowance	2,312	3,408	2,084
Total, Average Recorded Investment	38,279	37,553	40,432
Total, Interest Income Recognized	351	277	1,842
Construction Real Estate [Member]
With no related allowance recorded, Recorded Investment	1,529	730	1,007
With no related allowance recorded, Unpaid Principal Balance	2,545	1,039	1,375
With no related allowance recorded, Average Recorded Investment	1,950	762	1,284
With no related allowance recorded, Interest Income Recognized	37	6	201
With an allowance recorded, Recorded Investment	4,696	7,719	6,403
With an allowance recorded, Unpaid Principal Balance	5,666	11,469	9,060
With an allowance recorded, Related Allowance	1,863	1,257	1,820
With an allowance recorded, Average Recorded Investment	4,744	8,337	6,946
With an allowance recorded, Interest Income Recognized	41	80	211
Total, Recorded Investment	6,225	8,449	7,410
Total, Unpaid Principal Balance	8,211	12,508	10,435
Total, Related Allowance	1,863	1,257	1,820
Total, Average Recorded Investment	6,694	9,099	8,230
Total, Interest Income Recognized	78	86	412
Residential Real Estate [Member]
With no related allowance recorded, Recorded Investment	9,186	6,603	9,013
With no related allowance recorded, Unpaid Principal Balance	10,478	8,989	10,390
With no related allowance recorded, Average Recorded Investment	10,376	7,599	10,213
With no related allowance recorded, Interest Income Recognized	128	136	373
With an allowance recorded, Recorded Investment	9,482	12,965	9,038
With an allowance recorded, Unpaid Principal Balance	10,108	15,629	9,520
With an allowance recorded, Related Allowance	2,084	2,453	1,994
With an allowance recorded, Average Recorded Investment	9,705	13,297	9,189
With an allowance recorded, Interest Income Recognized	85	145	413
Total, Recorded Investment	18,668	19,568	18,051
Total, Unpaid Principal Balance	20,586	24,618	19,910
Total, Related Allowance	2,084	2,453	1,994
Total, Average Recorded Investment	20,081	20,896	19,402
Total, Interest Income Recognized	213	281	786
Consumer and Other [Member]
With no related allowance recorded, Recorded Investment	0	88	0
With no related allowance recorded, Unpaid Principal Balance	0	89	0
With no related allowance recorded, Average Recorded Investment	0	89	0
With no related allowance recorded, Interest Income Recognized	0	1	0
With an allowance recorded, Recorded Investment	346	148	389
With an allowance recorded, Unpaid Principal Balance	341	148	383
With an allowance recorded, Related Allowance	100	73	124
With an allowance recorded, Average Recorded Investment	346	149	393
With an allowance recorded, Interest Income Recognized	5	3	26
Total, Recorded Investment	346	236	389
Total, Unpaid Principal Balance	341	237	383
Total, Related Allowance	100	73	124
Total, Average Recorded Investment	346	238	393
Total, Interest Income Recognized	$ 5	$ 4	$ 26

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2013 and December 31, 2012, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
March 31, 2013	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	118,038	$	118,038	$	-	$	-	$	118,038
Securities - Held to Maturity
Obligations of States and Political Subdivisions		38,013		-		39,129		-		39,129
Corporate Debt Securities		500		-		500		-		500
Securities - Available for Sale
Obligations of U.S. Government Agencies		258,431		-		258,431		-		258,431
MBS issued by U.S. Government Agencies		120,885		-		120,885		-		120,885
Obligations of States and Political Subdivisions		16,951		-		16,951		-		16,951
Trust Preferred CDO Securities		5,402		-		-		5,402		5,402
Corporate Debt Securities		12,181		-		12,181		-		12,181
Other Securities		2,629		2,197		432		-		2,629
Federal Home Loan Bank Stock		10,605		-		10,605		-		10,605
Loans Held for Sale		2,047		-		-		2,047		2,047
Loans, net		596,859		-		-		611,801		611,801
Accrued Interest Receivable		3,923		-		3,923		-		3,923
Financial Liabilities:
Noninterest Bearing Deposits		186,220		186,220		-		-		186,220
Interest Bearings Deposits		876,245		-		881,699		-		881,699
Borrowed funds
FHLB Advances		107,000		-		107,321		-		107,321
Repurchase Agreements		15,000		-		16,964		-		16,964
Accrued Interest Payable		348		-		348		-		348

									Total
	Carrying								Estimated
December 31, 2012	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	112,507	$	112,507	$	-	$	-	$	112,507
Securities - Held to Maturity
Obligations of States and Political Subdivisions		38,286		-		40,130		-		40,130
Corporate Debt Securities		500		-		500		-		500
Securities - Available for Sale
Obligations of U.S. Government Agencies		225,451		-		225,451		-		225,451
MBS issued by U.S. Government Agencies		129,818		-		129,818		-		129,818
Obligations of States and Political Subdivisions		18,370		-		18,370		-		18,370
Trust Preferred CDO Securities		5,406		-		-		5,406		5,406
Corporate Debt Securities		12,077		-		12,077		-		12,077
Other Securities		2,645		2,213		432		-		2,645
Federal Home Loan Bank Stock		10,605		-		10,605		-		10,605
Loans Held for Sale		1,520		-		-		1,520		1,520
Loans, net		609,950		-		-		627,171		627,171
Accrued Interest Receivable		3,457		-		3,457		-		3,457
Financial Liabilities:
Noninterest Bearing Deposits		183,016		183,016		-		-		183,016
Interest Bearings Deposits		865,814		-		872,070		-		872,070
Borrowed funds
FHLB Advances		107,000		-		107,785		-		107,785
Repurchase Agreements		15,000		-		17,141		-		17,141
Accrued Interest Payable		353		-		353		-		353

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

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

Investment Securities - Available for Sale	2013			2012
Balance at January 1	$	5,406		$	5,467
Total realized and unrealized gains (losses) included in income		(4	)		(4	)
Total unrealized gains (losses) included in other comprehensive income		-			(235	)
Net purchases, sales, calls and maturities		-			-
Net transfers in/out of Level 3		-			-
Balance at March 31	$	5,402		$	5,228

Fair Value Assets Measured On Nonrecurring Basis [Table Text Block]

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

	Balance at March 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	65,812	$	-	$	-	$	65,812
Other Real Estate Owned	$	15,118	$	-	$	-	$	15,118

	Balance at December 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	$	67,249	$	-	$	-	$	67,249
Other Real Estate Owned	$	14,262	$	-	$	-	$	14,262

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ALLOWANCE FOR LOAN LOSSES (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Number of Contracts	19	24
Pre-Modification Recorded Principal Balance	$ 2,869	$ 6,979
Post-Modification Recorded Principal Balance	2,578	5,535
Agriculture and Agricultural Real Estate [Member]
Number of Contracts	0	0
Pre-Modification Recorded Principal Balance	0	0
Post-Modification Recorded Principal Balance	0	0
Commercial [Member]
Number of Contracts	3	6
Pre-Modification Recorded Principal Balance	173	782
Post-Modification Recorded Principal Balance	172	433
Commercial Real Estate [Member]
Number of Contracts	3	8
Pre-Modification Recorded Principal Balance	1,461	2,969
Post-Modification Recorded Principal Balance	1,449	1,884
Construction Real Estate [Member]
Number of Contracts	0	5
Pre-Modification Recorded Principal Balance	0	2,686
Post-Modification Recorded Principal Balance	0	2,677
Residential Real Estate [Member]
Number of Contracts	11	3
Pre-Modification Recorded Principal Balance	986	515
Post-Modification Recorded Principal Balance	944	515
Consumer and Other [Member]
Number of Contracts	2	2
Pre-Modification Recorded Principal Balance	249	27
Post-Modification Recorded Principal Balance	$ 13	$ 26

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EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Basic
Net profit	$ 1,114	$ 1,217
Average common shares outstanding	17,516,382	17,304,781
Earnings per common share - basic	$ 0.06	$ 0.07
Diluted
Net profit	$ 1,114	$ 1,217
Average common shares outstanding	17,516,382	17,304,781
Equity compensation	229,973	690
Average common shares outstanding - diluted	17,746,355	17,305,471
Earnings per common share - diluted	$ 0.06	$ 0.07

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash Flows from Operating Activities
Net Income	$ 1,114	$ 1,217
Adjustments to reconcile net income to net cash from operating activities
Provision for loan losses	1,500	2,250
Depreciation	488	500
Net amortization of investment premium and discount	493	435
Writedowns of Other Real Estate Owned	164	515
Net increase (decrease) in interest payable and other liabilities	1,552	(445)
Net increase in interest receivable and other assets	(1,106)	(707)
Equity based compensation expense	69	40
Net gain on sale/settlement of securities	(10)	(1,100)
Increase in cash surrender value of life insurance	(390)	(370)
Net cash provided by operating activities	3,874	2,335
Cash Flows from Investing Activities
Proceeds from maturities and redemptions of investment securities held to maturity	273	3,436
Proceeds from maturities and redemptions of investment securities available for sale	24,611	74,009
Proceeds from sales of investment securities available for sale	5,180	15,198
Net decrease in loans	8,260	8,466
Proceeds from sales of other real estate owned	1,945	4,226
Proceeds from sales of other assets	18	56
Purchase of investment securities held to maturity	0	(3,860)
Purchase of investment securities available for sale	(53,823)	(88,494)
Purchase of bank premises and equipment	(206)	(53)
Net cash provided by (used for) investing activities	(13,742)	12,984
Cash Flows from Financing Activities
Net increase in deposits	13,635	13,240
Proceeds from issuance of common stock	1,764	25
Net cash provided by financing activities	15,399	13,265
Net Increase in Cash and Cash Equivalents	5,531	28,584
Cash and Cash Equivalents at Beginning of Period	112,507	75,995
Cash and Cash Equivalents at End of Period	118,038	104,579
Supplemental Cash Flow Information
Cash paid for interest	2,021	2,764
Cash paid for federal income taxes	0	0
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	2,761	2,104
Transfer of loans to other assets	$ 43	$ 12

XML

CONSOLIDATED BALANCE SHEETS [Parenthetical]	Mar. 31, 2013	Dec. 31, 2012
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	17,903,656	17,396,179
Common stock, shares outstanding	17,903,656	17,396,179

XML

EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The calculations of earnings per common share are as follows:

	For the three months ended March 31,
	2013		2012
Basic
Net profit	$	1,114,000	$	1,217,000
Average common shares outstanding		17,516,382		17,304,781
Earnings per common share - basic	$	0.06	$	0.07
Diluted
Net profit	$	1,114,000	$	1,217,000
Average common shares outstanding		17,516,382		17,304,781
Equity compensation		229,973		690
Average common shares outstanding - diluted		17,746,355		17,305,471
Earnings per common share – diluted	$	0.06	$	0.07

XML

DOCUMENT AND ENTITY INFORMATION	3 Months Ended
	Mar. 31, 2013	May 13, 2012
Entity Registrant Name	MBT FINANCIAL CORP
Entity Central Index Key	0001118237
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	mbtf
Entity Common Stock, Shares Outstanding		17,905,853
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2013
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013

XML

STOCK BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options and Stock Appreciation Rights Award Activity [Table Text Block]

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, 2013		396,835	$	17.57
Granted		-		-
Exercised		-		-
Forfeited		63,335		13.20
Options Outstanding, March 31, 2013		333,500	$	18.40
Options Exercisable, March 31, 2013		333,500	$	18.40

Schedule of Share-based Compensation, Stock Appreciation Rights Award Activity [Table Text Block]

The following table summarizes the SOSARs that have been granted:

			Weighted Average
	Shares		Exercise Price
SOSARs Outstanding, January 1, 2013		410,666	$	3.53
Granted		112,369		2.35
Exercised		1,998		1.85
Forfeited		-		-
SOSARs Outstanding, March 31, 2013		521,037	$	3.28
SOSARs Exercisable, March 31, 2013		317,632	$	4.02

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Interest Income
Interest and fees on loans	$ 7,902	$ 9,139
Interest on investment securities-
Tax-exempt	323	380
Taxable	1,767	2,134
Interest on balances due from banks	69	43
Total interest income	10,061	11,696
Interest Expense
Interest on deposits	1,213	1,839
Interest on borrowed funds	804	929
Total interest expense	2,017	2,768
Net Interest Income	8,044	8,928
Provision For Loan Losses	1,500	2,250
Net Interest Income After Provision For Loan Losses	6,544	6,678
Other Income
Income from wealth management services	1,097	968
Service charges and other fees	1,042	1,090
Net gain on sales of securities available for sale	10	1,100
Origination fees on mortgage loans sold	289	122
Bank owned life insurance income	390	370
Other	1,160	1,027
Total other income	3,988	4,677
Other Expenses
Salaries and employee benefits	5,323	5,106
Occupancy expense	687	725
Equipment expense	700	803
Marketing expense	163	198
Professional fees	501	588
Collection expenses	46	62
Net (gain) loss on other real estate owned	(40)	269
Other real estate owned expenses	374	469
FDIC Deposit Insurance Assessment	689	679
Other	975	1,113
Total other expenses	9,418	10,012
Income Before Income Taxes	1,114	1,343
Income Tax Expense	0	126
Net Income	1,114	1,217
Other Comprehensive Income (Net of Tax)
Unrealized gains (losses) on securities	(546)	(405)
Reclassification adjustment for gains included in net income	(6)	(726)
Postretirement benefit liability	31	52
Total Other Comprehensive Income (Net of Tax)	(521)	(1,079)
Comprehensive Income	$ 593	$ 138
Basic Earnings Per Common Share	$ 0.06	$ 0.07
Diluted Earnings Per Common Share	$ 0.06	$ 0.07
Common Stock Dividends Declared Per Share	$ 0	$ 0

XML

ALLOWANCE FOR LOAN LOSSES

3 Months Ended

Mar. 31, 2013

Allowance For Loan Losses [Abstract]

Allowance For Loan Losses [Text Block]

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.

Activity in the allowance for loan losses during the three months ended March 31, 2013 was as follows (000s omitted):

	Agriculture and Agricultural Real Estate			Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the three months ended March 31, 2013
Beginning Balance	$	76		$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Charge-offs		-			(202	)		(813	)		(18	)		(433	)		(121	)		(1,587	)
Recoveries		-			236			64			274			80			33			687
Provision		(6	)		(105	)		1,106			(188	)		746			(53	)		1,500
Ending balance	$	70		$	2,153		$	7,908		$	2,469		$	5,108		$	191		$	17,899
Allowance for loan losses as of March 31, 2013
Ending balance individually evaluated for impairment	$	-		$	1,330		$	2,312		$	1,863		$	2,084		$	100		$	7,689
Ending balance collectively   evaluated for impairment		70			823			5,596			606			3,024			91			10,210
Ending balance	$	70		$	2,153		$	7,908		$	2,469		$	5,108		$	191		$	17,899
Loans as of March 31, 2013
Ending balance individually evaluated for impairment	$	420		$	4,193		$	35,960		$	6,225		$	18,668		$	346		$	65,812
Ending balance collectively   evaluated for impairment		11,815			56,873			238,580			10,853			216,655			14,170			548,946
Ending balance	$	12,235		$	61,066		$	274,540		$	17,078		$	235,323		$	14,516		$	614,758

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

	Agriculture and Agricultural Real Estate		Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the three months ended March 31, 2012
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
Allowance for loan losses as of March 31, 2012
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 as of March 31, 2012
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 year ended December 31, 2012 was as follows (000s omitted):

	Agriculture and Agricultural Real Estate			Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the year ended December 31, 2012
Beginning Balance	$	64		$	2,184		$	9,351		$	2,632		$	6,227		$	407		$	20,865
Charge-offs		(97	)		(499	)		(8,156	)		(1,036	)		(2,031	)		(196	)		(12,015	)
Recoveries		-			347			80			240			274			158			1,099
Provision		109			192			6,276			565			245			(37	)		7,350
Ending balance	$	76		$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Allowance for loan losses as of December 31, 2012
Ending balance individually evaluated for impairment	$	-		$	1,316		$	2,084		$	1,820		$	1,994		$	124		$	7,338
Ending balance collectively evaluated for impairment		76			908			5,467			581			2,721			208			9,961
Ending balance	$	76		$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Loans as of December 31, 2012
Ending balance individually evaluated for impairment	$	409		$	4,519		$	36,471		$	7,410		$	18,051		$	389		$	67,249
Ending balance collectively evaluated for impairment		11,595			53,675			246,543			11,009			222,281			14,897			560,000
Ending balance	$	12,004		$	58,194		$	283,014		$	18,419		$	240,332		$	15,286		$	627,249

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.

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.

The portfolio segments in each credit risk grade as of March 31, 2013 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	$	162	$	729	$	-	$	2,985	$	151,673	$	10,094	$	165,643
1		-		3,453		-		-		-		-		3,453
2		48		103		1,784		-		697		-		2,632
3		864		5,020		9,497		147		1,764		4		17,296
4		10,232		37,508		166,200		3,106		42,172		1		259,219
5		315		5,943		43,183		4,210		12,106		4,093		69,850
6		614		8,310		53,876		6,630		26,911		324		96,665
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	12,235	$	61,066	$	274,540	$	17,078	$	235,323	$	14,516	$	614,758
Performing	$	11,731	$	56,651	$	238,419	$	10,629	$	213,906	$	13,969	$	545,305
Nonperforming		504		4,415		36,121		6,449		21,417		547		69,453
Total	$	12,235	$	61,066	$	274,540	$	17,078	$	235,323	$	14,516	$	614,758

The portfolio segments in each credit risk grade as of December 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	$	126	$	4,182	$	-	$	2,927	$	159,743	$	10,706	$	177,684
1		-		2,977		-		-		-		-		2,977
2		48		114		1,850		82		731		-		2,825
3		880		4,894		10,735		163		1,885		7		18,564
4		9,907		29,935		167,207		3,184		40,392		16		250,641
5		322		9,713		45,262		5,086		8,426		3,940		72,749
6		721		6,379		57,960		6,977		29,155		617		101,809
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	12,004	$	58,194	$	283,014	$	18,419	$	240,332	$	15,286	$	627,249
Performing	$	11,397	$	54,730	$	246,107	$	10,783	$	219,753	$	14,675	$	557,445
Nonperforming		607		3,464		36,907		7,636		20,579		611		69,804
Total	$	12,004	$	58,194	$	283,014	$	18,419	$	240,332	$	15,286	$	627,249

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, 2013 and December 31, 2012 (000s omitted):

March 31, 2013	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	$	201	$	-	$	80	$	281	$	11,954	$	12,235	$	-
Commercial		608		187		855		1,650		59,416		61,066		3
Commercial Real Estate		3,104		2,962		7,102		13,168		261,372		274,540		-
Construction Real Estate		955		782		1,564		3,301		13,777		17,078		-
Residential Real Estate		5,663		860		3,425		9,948		225,375		235,323		311
Consumer and Other		99		57		58		214		14,302		14,516		-
Total	$	10,630	$	4,848	$	13,084	$	28,562	$	586,196	$	614,758	$	314

December 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	$	208	$	-	$	145	$	353	$	11,651	$	12,004	$	-
Commercial		927		19		1,100		2,046		56,148		58,194		1
Commercial Real Estate		1,789		930		11,350		14,069		268,945		283,014		-
Construction Real Estate		127		1,437		1,867		3,431		14,988		18,419		-
Residential Real Estate		5,738		978		3,121		9,837		230,495		240,332		-
Consumer and Other		222		61		164		447		14,839		15,286		-
Total	$	9,011	$	3,425	$	17,747	$	30,183	$	597,066	$	627,249	$	1

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, 2013 and December 31, 2012 (000s omitted):

	March 31, 2013		December 31, 2012
Agriculture and Agricultural Real Estate	$	84	$	198
Commercial		3,153		1,578
Commercial Real Estate		17,415		17,950
Construction Real Estate		2,496		3,438
Residential Real Estate		8,165		7,870
Consumer and Other		245		309
Total	$	31,558	$	31,343

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.

The following is a summary of impaired loans as of March 31, 2013 and 2012 (000s omitted):

March 31, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		Interest Income Recognized in the Three Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	420	$	923	$	-	$	423	$	12
Commercial		682		752		-		775		9
Commercial Real Estate		17,383		22,113		-		18,234		191
Construction Real Estate		1,529		2,545		-		1,950		37
Residential Real Estate		9,186		10,478		-		10,376		128
Consumer and Other		-		-		-		-		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-
Commercial		3,511		3,894		1,330		3,513		44
Commercial Real Estate		18,577		24,502		2,312		20,045		160
Construction Real Estate		4,696		5,666		1,863		4,744		41
Residential Real Estate		9,482		10,108		2,084		9,705		85
Consumer and Other		346		341		100		346		5
Total:
Agriculture and Agricultural Real Estate	$	420	$	923	$	-	$	423	$	12
Commercial		4,193		4,646		1,330		4,288		53
Commercial Real Estate		35,960		46,615		2,312		38,279		351
Construction Real Estate		6,225		8,211		1,863		6,694		78
Residential Real Estate		18,668		20,586		2,084		20,081		213
Consumer and Other		346		341		100		346		5

March 31, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		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

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

December 31, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Year Ended		Interest Income Recognized in the Year Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	469	$	54
Commercial		2,540		2,961		-		2,968		220
Commercial Real Estate		17,153		21,317		-		18,313		924
Construction Real Estate		1,007		1,375		-		1,284		201
Residential Real Estate		9,013		10,390		-		10,213		373
Consumer and Other		-		-		-		-		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-
Commercial		1,979		2,157		1,316		2,032		88
Commercial Real Estate		19,318		26,508		2,084		22,119		918
Construction Real Estate		6,403		9,060		1,820		6,946		211
Residential Real Estate		9,038		9,520		1,994		9,189		413
Consumer and Other		389		383		124		393		26
Total:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	469	$	54
Commercial		4,519		5,118		1,316		5,000		308
Commercial Real Estate		36,471		47,825		2,084		40,432		1,842
Construction Real Estate		7,410		10,435		1,820		8,230		412
Residential Real Estate		18,051		19,910		1,994		19,402		786
Consumer and Other		389		383		124		393		26

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 periods ended March 31, 2013 and March 31, 2012 are as follows (000s omitted from dollar amounts):

	Three months ended						Three months ended
	March 31, 2013						March 31, 2012
	Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance		Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-	$	-		-	$	-	$	-
Commercial		3		173		172		6		782		433
Commercial Real Estate		3		1,461		1,449		8		2,969		1,884
Construction Real Estate		-		-		-		5		2,686		2,677
Residential Real Estate		11		986		944		3		515		515
Consumer and Other		2		249		13		2		27		26
Total		19	$	2,869	$	2,578		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 month periods ended March 31, 2013 and March 31, 2012 that subsequently defaulted during the three month periods ended March 31, 2013 and March 31, 2012, respectively.

XML

LOANS

3 Months Ended

Mar. 31, 2013

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Accounts, Notes, Loans and Financing Receivable Disclosure [Text Block]

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,
	2013		2012
Residential real estate loans	$	235,323	$	240,332
Commercial and Construction real estate loans		291,618		301,433
Agriculture and agricultural real estate loans		12,235		12,004
Commercial and industrial loans		61,066		58,194
Loans to individuals for household, family, and other personal expenditures		14,516		15,286
Total loans, gross	$	614,758	$	627,249
Less: Allowance for loan losses		17,899		17,299
	$	596,859	$	609,950

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.

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

	March 31,			December 31,
	2013			2012
Nonaccrual loans	$	31,558		$	31,343
Loans 90 days past due and accruing		314			1
Restructured loans		37,581			38,460
Total nonperforming loans	$	69,453		$	69,804
Other real estate owned		15,118			14,262
Other assets		59			32
Nonperforming investment securities		3,045			3,045
Total nonperforming assets	$	87,675		$	87,143
Nonperforming assets to total assets		6.82	%		6.87	%
Allowance for loan losses to nonperforming loans		25.77	%		24.78	%

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value Off Balance Sheet Risk [Abstract]

Schedule of Fair Value, Off-balance Sheet Risks [Table Text Block]

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

	Contractual Amount
	March 31,		December 31,
	2013		2012
Commitments to extend credit:
Unused portion of commercial lines of credit	$	53,145	$	59,826
Unused portion of credit card lines of credit		3,081		3,048
Unused portion of home equity lines of credit		15,827		16,356
Standby letters of credit and financial guarantees written		3,680		3,730
All other off-balance sheet commitments		-		-

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LOANS (Tables)

3 Months Ended

Mar. 31, 2013

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Loans consist of the following (000s omitted):

	March 31,		December 31,
	2013		2012
Residential real estate loans	$	235,323	$	240,332
Commercial and Construction real estate loans		291,618		301,433
Agriculture and agricultural real estate loans		12,235		12,004
Commercial and industrial loans		61,066		58,194
Loans to individuals for household, family, and other personal expenditures		14,516		15,286
Total loans, gross	$	614,758	$	627,249
Less: Allowance for loan losses		17,899		17,299
	$	596,859	$	609,950

Schedule Of Non Performing Assets [Table Text Block]

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

	March 31,			December 31,
	2013			2012
Nonaccrual loans	$	31,558		$	31,343
Loans 90 days past due and accruing		314			1
Restructured loans		37,581			38,460
Total nonperforming loans	$	69,453		$	69,804
Other real estate owned		15,118			14,262
Other assets		59			32
Nonperforming investment securities		3,045			3,045
Total nonperforming assets	$	87,675		$	87,143
Nonperforming assets to total assets		6.82	%		6.87	%
Allowance for loan losses to nonperforming loans		25.77	%		24.78	%

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

3 Months Ended

Mar. 31, 2013

Fair Value Off Balance Sheet Risk [Abstract]

Financial Instruments With Off - Balance Sheet Risk [Text Block]

8. 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,
	2013		2012
Commitments to extend credit:
Unused portion of commercial lines of credit	$	53,145	$	59,826
Unused portion of credit card lines of credit		3,081		3,048
Unused portion of home equity lines of credit		15,827		16,356
Standby letters of credit and financial guarantees written		3,680		3,730
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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INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

6. INVESTMENT SECURITIES

The following is a summary of the Bank’s investment securities portfolio as of March 31, 2013 and December 31, 2012 (000’s omitted):

	Held to Maturity
	March 31, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	38,013	$	1,160	$	(44	)	$	39,129
Corporate Debt Securities		500		-		-			500
	$	38,513	$	1,160	$	(44	)	$	39,629

	Available for Sale
	March 31, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	255,500	$	3,192	$	(261	)	$	258,431
Mortgage Backed Securities issued by U.S. Government Agencies		118,650		2,401		(166	)		120,885
Obligations of States and Political Subdivisions		16,385		586		(20	)		16,951
Trust Preferred CDO Securities		9,521		-		(4,119	)		5,402
Corporate Debt Securities		11,963		218		-			12,181
Equity Securities		2,580		157		(108	)		2,629
	$	414,599	$	6,554	$	(4,674	)	$	416,479

	Held to Maturity
	December 31, 2012
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	38,286	$	1,380	$	(36	)	$	39,630
Corporate Debt Securities		500		-		-			500
	$	38,786	$	1,380	$	(36	)	$	40,130

	Available for Sale
	December 31, 2012
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	222,099	$	3,442	$	(90	)	$	225,451
Mortgage Backed Securities issued by U.S. Government Agencies		127,082		2,826		(90	)		129,818
Obligations of States and Political Subdivisions		17,804		630		(64	)		18,370
Trust Preferred CDO Securities		9,525		-		(4,119	)		5,406
Corporate Debt Securities		11,961		156		(40	)		12,077
Equity Securities		2,580		173		(108	)		2,645
	$	391,051	$	7,227	$	(4,511	)	$	393,767

The amortized cost and estimated market values of securities by contractual maturity as of March 31, 2013 are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Held to Maturity				Available for Sale
			Estimated				Estimated
	Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value
Contractual maturity in
1 year or less	$	15,170	$	15,188	$	1,696	$	1,698
After 1 year through five years		9,994		10,261		49,676		50,060
After 5 years through 10 years		8,834		9,269		226,258		229,525
After 10 years		4,515		4,911		15,739		11,682
Total		38,513		39,629		293,369		292,965
Mortgage Backed Securities		-		-		118,650		120,885
Securities with no stated maturity		-		-		2,580		2,629
Total	$	38,513	$	39,629	$	414,599	$	416,479

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, 2013 and December 31, 2012.

	March 31, 2013
	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	$	64,069	$	261	$	-	$	-	$	64,069	$	261
Mortgage Backed Securities issued by U.S. Government Agencies		23,481		137		4,388		29		27,869		166
Obligations of States and Political Subdivisions		8,619		56		1,542		8		10,161		64
Trust Preferred CDO Securities		-		-		5,402		4,119		5,402		4,119
Corporate Debt Securities		-		-		-		-		-		-
Equity Securities		-		-		432		108		432		108
	$	96,169	$	454	$	11,764	$	4,264	$	107,933	$	4,718

	December 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	$	29,499	$	89	$	1,111	$	1	$	30,610	$	90
Mortgage Backed Securities issued by U.S. Government Agencies		22,217		90		-		-		22,217		90
Obligations of States and Political Subdivisions		7,801		90		1,540		10		9,341		100
Trust Preferred CDO Securities		-		-		5,406		4,119		5,406		4,119
Corporate Debt Securities		1,960		40		-		-		1,960		40
Equity Securities		-		-		432		108		432		108
	$	61,477	$	309	$	8,489	$	4,238	$	69,966	$	4,547

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, 2013.

The Trust Preferred CDO Securities consist of three pooled trust Preferred Collateralized Debt Obligations (CDOs). These CDOs are debt securities issued by special purpose entities that own trust preferred stock issued by banks and insurance companies. The trust preferred stock owned by the special purpose entities is the collateral that backs the debt securities we own. The three pooled CDOs that we own have each been in an unrealized loss position for more than 12 months. These securities have final maturity dates of 2033, 2035, and 2037. 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.

To determine whether or not the impairment is other-than-temporary, the Company utilizes a third party valuation service to conduct a fair value analysis of each individual security. The other-than-temporary-impairment analysis of each of the CDO securities owned by the Company is conducted by projecting the expected cash flows from the security, discounting the cash flows to determine the present value of the cash flows, and comparing the present value to the amortized cost to determine if there is impairment. The cash flow projection for each security is developed using estimated prepayment speeds, estimated rates at which payments will be deferred, estimated rates at which issuers will default, and the severity of the losses on the securities which default. Prepayment estimates are negatively impacted by the lack of an active market for issuers to refinance their trust preferred securities; however, prepayment of trust preferred securities is expected to increase due to recent restrictions on the treatment of trust preferred debt as regulatory capital.

The size and creditworthiness of each institution in the CDO pool are the most significant pieces of evidence in estimating prepayment speeds. Deferral and default rates are the key drivers of the cash flow projections for each of the securities. Deferral of interest payments is allowed for up to five years, and estimates of deferral rates are determined by examining the current deferral status of the issuers, the current financial condition of the issuers, and the historical deferral levels of the issuers in each CDO pool. Key evidence examined includes whether or not an issuer has received TARP funding, the most recent credit ratings from outside services, stock price information, capitalization, asset quality, profitability, and liquidity. The most significant evidence in estimating deferrals is the comparison of key financial ratios to industry benchmarks. Near term (next 12 months) deferral rates are estimated for each security by analyzing the credit characteristics of each individual issuer in the pool. When an issuer is expected to defer interest payments, the analysis assumes that the deferral will continue for the entire five year period allowed and then, depending on the individual credit characteristics of that issuer, begin performing or move to default. Longer term annual default rates for each CDO are estimated using the credit analysis of each individual issuer compared industry benchmarks to modify the historical default rates of financial companies. Finally, loss severity is estimated using analytical research provided by Standard and Poor’s and Moody’s, which supports the assumption that a small percentage of defaulted trust preferred securities recover without loss. The projected cash flows are discounted using the contractual rate of each security.

In the Other-Than-Temporary-Impairment (OTTI) analysis of our CDO securities as of December 31, 2009, it was expected that there would be cash flow disruptions on two of the CDOs we own. These credit losses were recorded through a charge to earnings in 2009. In subsequent analyses in 2010, 2011, and 2012, the expectation of a disruption of cash flows diminished on both of these CDO securities, with one of the securities no longer expected to experience a disruption of cash flow. The present value of the expected cash flows is at least as great as the amortized costs bases following the charges to earnings recorded in 2009, so no additional charges to earnings have been recorded.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurement Inputs [Text Block]

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:

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.

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2013 and December 31, 2012, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
March 31, 2013	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	118,038	$	118,038	$	-	$	-	$	118,038
Securities - Held to Maturity
Obligations of States and Political Subdivisions		38,013		-		39,129		-		39,129
Corporate Debt Securities		500		-		500		-		500
Securities - Available for Sale
Obligations of U.S. Government Agencies		258,431		-		258,431		-		258,431
MBS issued by U.S. Government Agencies		120,885		-		120,885		-		120,885
Obligations of States and Political Subdivisions		16,951		-		16,951		-		16,951
Trust Preferred CDO Securities		5,402		-		-		5,402		5,402
Corporate Debt Securities		12,181		-		12,181		-		12,181
Other Securities		2,629		2,197		432		-		2,629
Federal Home Loan Bank Stock		10,605		-		10,605		-		10,605
Loans Held for Sale		2,047		-		-		2,047		2,047
Loans, net		596,859		-		-		611,801		611,801
Accrued Interest Receivable		3,923		-		3,923		-		3,923
Financial Liabilities:
Noninterest Bearing Deposits		186,220		186,220		-		-		186,220
Interest Bearings Deposits		876,245		-		881,699		-		881,699
Borrowed funds
FHLB Advances		107,000		-		107,321		-		107,321
Repurchase Agreements		15,000		-		16,964		-		16,964
Accrued Interest Payable		348		-		348		-		348

									Total
	Carrying								Estimated
December 31, 2012	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	112,507	$	112,507	$	-	$	-	$	112,507
Securities - Held to Maturity
Obligations of States and Political Subdivisions		38,286		-		40,130		-		40,130
Corporate Debt Securities		500		-		500		-		500
Securities - Available for Sale
Obligations of U.S. Government Agencies		225,451		-		225,451		-		225,451
MBS issued by U.S. Government Agencies		129,818		-		129,818		-		129,818
Obligations of States and Political Subdivisions		18,370		-		18,370		-		18,370
Trust Preferred CDO Securities		5,406		-		-		5,406		5,406
Corporate Debt Securities		12,077		-		12,077		-		12,077
Other Securities		2,645		2,213		432		-		2,645
Federal Home Loan Bank Stock		10,605		-		10,605		-		10,605
Loans Held for Sale		1,520		-		-		1,520		1,520
Loans, net		609,950		-		-		627,171		627,171
Accrued Interest Receivable		3,457		-		3,457		-		3,457
Financial Liabilities:
Noninterest Bearing Deposits		183,016		183,016		-		-		183,016
Interest Bearings Deposits		865,814		-		872,070		-		872,070
Borrowed funds
FHLB Advances		107,000		-		107,785		-		107,785
Repurchase Agreements		15,000		-		17,141		-		17,141
Accrued Interest Payable		353		-		353		-		353

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	2013			2012
Balance at January 1	$	5,406		$	5,467
Total realized and unrealized gains (losses) included in income		(4	)		(4	)
Total unrealized gains (losses) included in other comprehensive income		-			(235	)
Net purchases, sales, calls and maturities		-			-
Net transfers in/out of Level 3		-			-
Balance at March 31	$	5,402		$	5,228

The Company did not recognize any unrealized losses on its Level 3 Available for Sale investment securities in other comprehensive income in the consolidated statements of financial condition for the three months ended March 31, 2013. 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 $5,402,000 as of March 31, 2013. 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, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	65,812	$	-	$	-	$	65,812
Other Real Estate Owned	$	15,118	$	-	$	-	$	15,118

	Balance at December 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	$	67,249	$	-	$	-	$	67,249
Other Real Estate Owned	$	14,262	$	-	$	-	$	14,262

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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BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2013

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

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 Policy [Policy Text Block]

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.

Segment Reporting, Policy [Policy Text Block]

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 Measurement Policy [Policy Text Block]

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.

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.

New Accounting Pronouncements Policy [Policy Text Block]

ACCOUNTING PRONOUNCEMENTS

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

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ALLOWANCE FOR LOAN LOSSES (Details 3) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Non accrual loans	$ 31,558	$ 31,343
Agriculture and Agricultural Real Estate [Member]
Non accrual loans	84	198
Commercial [Member]
Non accrual loans	3,153	1,578
Commercial Real Estate [Member]
Non accrual loans	17,415	17,950
Construction Real Estate [Member]
Non accrual loans	2,496	3,438
Residential Real Estate [Member]
Non accrual loans	8,165	7,870
Consumer and Other [Member]
Non accrual loans	$ 245	$ 309

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INVESTMENT SECURITIES (Tables)

3 Months Ended

Mar. 31, 2013

Investments, Debt and Equity Securities [Abstract]

Schedule Of Investment Securities Portfolio [Table Text Block]

The following is a summary of the Bank’s investment securities portfolio as of March 31, 2013 and December 31, 2012 (000’s omitted):

	Held to Maturity
	March 31, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	38,013	$	1,160	$	(44	)	$	39,129
Corporate Debt Securities		500		-		-			500
	$	38,513	$	1,160	$	(44	)	$	39,629

	Available for Sale
	March 31, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	255,500	$	3,192	$	(261	)	$	258,431
Mortgage Backed Securities issued by U.S. Government Agencies		118,650		2,401		(166	)		120,885
Obligations of States and Political Subdivisions		16,385		586		(20	)		16,951
Trust Preferred CDO Securities		9,521		-		(4,119	)		5,402
Corporate Debt Securities		11,963		218		-			12,181
Equity Securities		2,580		157		(108	)		2,629
	$	414,599	$	6,554	$	(4,674	)	$	416,479

	Held to Maturity
	December 31, 2012
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	38,286	$	1,380	$	(36	)	$	39,630
Corporate Debt Securities		500		-		-			500
	$	38,786	$	1,380	$	(36	)	$	40,130

	Available for Sale
	December 31, 2012
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	222,099	$	3,442	$	(90	)	$	225,451
Mortgage Backed Securities issued by U.S. Government Agencies		127,082		2,826		(90	)		129,818
Obligations of States and Political Subdivisions		17,804		630		(64	)		18,370
Trust Preferred CDO Securities		9,525		-		(4,119	)		5,406
Corporate Debt Securities		11,961		156		(40	)		12,077
Equity Securities		2,580		173		(108	)		2,645
	$	391,051	$	7,227	$	(4,511	)	$	393,767

Expected Maturities Of Amortized Cost and Estimated Market Value [Table Text Block]

The amortized cost and estimated market values of securities by contractual maturity as of March 31, 2013 are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Held to Maturity				Available for Sale
			Estimated				Estimated
	Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value
Contractual maturity in
1 year or less	$	15,170	$	15,188	$	1,696	$	1,698
After 1 year through five years		9,994		10,261		49,676		50,060
After 5 years through 10 years		8,834		9,269		226,258		229,525
After 10 years		4,515		4,911		15,739		11,682
Total		38,513		39,629		293,369		292,965
Mortgage Backed Securities		-		-		118,650		120,885
Securities with no stated maturity		-		-		2,580		2,629
Total	$	38,513	$	39,629	$	414,599	$	416,479

Schedule Of Gross Unrealized Losses and Fair Value Of Investments With Unrealized Losses [Table Text Block]

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, 2013 and December 31, 2012.

	March 31, 2013
	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	$	64,069	$	261	$	-	$	-	$	64,069	$	261
Mortgage Backed Securities issued by U.S. Government Agencies		23,481		137		4,388		29		27,869		166
Obligations of States and Political Subdivisions		8,619		56		1,542		8		10,161		64
Trust Preferred CDO Securities		-		-		5,402		4,119		5,402		4,119
Corporate Debt Securities		-		-		-		-		-		-
Equity Securities		-		-		432		108		432		108
	$	96,169	$	454	$	11,764	$	4,264	$	107,933	$	4,718

	December 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	$	29,499	$	89	$	1,111	$	1	$	30,610	$	90
Mortgage Backed Securities issued by U.S. Government Agencies		22,217		90		-		-		22,217		90
Obligations of States and Political Subdivisions		7,801		90		1,540		10		9,341		100
Trust Preferred CDO Securities		-		-		5,406		4,119		5,406		4,119
Corporate Debt Securities		1,960		40		-		-		1,960		40
Equity Securities		-		-		432		108		432		108
	$	61,477	$	309	$	8,489	$	4,238	$	69,966	$	4,547

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STOCK BASED COMPENSATION (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2013
SOSARs Outstanding, January 1, Shares	410,666
Granted, Shares	112,369
Exercised, Shares	1,998
Forfeited, Shares	0
SOSARs Outstanding, March 31, Shares	521,037
Share Based Compensation Arrangement By Share Based Payment Award, Equity Instruments Other Than Options, Exercisable Number	317,632
SOSARs Outstanding, January 1, Weighted Average Exercise Price	$ 3.53
Granted, Weighted Average Exercise Price	$ 2.35
Exercised , Weighted Average Exercise Price	$ 1.85
Forfeited, Weighted Average Exercise Price	$ 0
SOSARs Outstanding, March 31, Weighted Average Exercise Price	$ 3.28
SOSARs Exercisable, March 31, Weighted Average Exercise Price	$ 4.02

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Balance at January 1	$ 5,406	$ 5,467
Total realized and unrealized gains (losses) included in income	(4)	(4)
Total unrealized gains (losses) included in other comprehensive income	0	(235)
Net purchases, sales, calls and maturities	0	0
Net transfers in/out of Level 3	0	0
Balance at March 31	$ 5,402	$ 5,228

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	Common Stock [Member]	Retained Earnings [Member]	Unearned Compensation [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at Dec. 31, 2011	$ 2,099	$ 72,735	$ (87)	$ 964	$ 75,711
Issuance of Common Stock	25	0	0	0	25
Equity compensation	5	0	20	0	25
Comprehensive income:
Net Income	0	1,217	0	0	1,217
Other comprehensive income - net of tax	0	0	0	(1,079)	(1,079)
Total Comprehensive Income					138
Balance at Mar. 31, 2012	2,129	73,952	(67)	(115)	75,899
Balance at Dec. 31, 2012	2,397	81,280	(27)	(76)	83,574
SOSARs exercised	4	0	0	0	4
Other stock issued	1,745	0	0	0	1,745
Equity compensation	27	0	6	0	33
Comprehensive income:
Net Income	0	1,114	0	0	1,114
Other comprehensive income - net of tax	0	0	0	(521)	(521)
Total Comprehensive Income					593
Balance at Mar. 31, 2013	$ 4,173	$ 82,394	$ (21)	$ (597)	$ 85,949

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STOCK BASED COMPENSATION

3 Months Ended

Mar. 31, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

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, 2013		396,835	$	17.57
Granted		-		-
Exercised		-		-
Forfeited		63,335		13.20
Options Outstanding, March 31, 2013		333,500	$	18.40
Options Exercisable, March 31, 2013		333,500	$	18.40

Stock Only Stock Appreciation Rights (SOSARs) - On January 2, 2013, 106,000 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, 2013. The fair value of $1.43 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 62.09%, a risk free interest rate of 1.25% and dividend yield of 0.00%.

On January 2, 2013, 6,369 SOSARs were issued to a director in exchange for $10,000 of his 2013 annual retainer. The SOSARs have a term of ten years and vest on December 31, 2013.

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.

The following table summarizes the SOSARs that have been granted:

			Weighted Average
	Shares		Exercise Price
SOSARs Outstanding, January 1, 2013		410,666	$	3.53
Granted		112,369		2.35
Exercised		1,998		1.85
Forfeited		-		-
SOSARs Outstanding, March 31, 2013		521,037	$	3.28
SOSARs Exercisable, March 31, 2013		317,632	$	4.02

Restricted Stock Unit Awards– On January 2, 2013, 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, 2014. 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, 2015.

The total expense for equity based compensation was $73,000 in the first quarter of 2013 and $40,000 in the first quarter of 2012.

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STOCK BASED COMPENSATION (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		1 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Jan. 31, 2013 Executive Officer [Member] Stock Incentive Plan 2008 [Member]	Jan. 31, 2013 Director [Member]
Granted, Shares	112,369		106,000	6,369
Granted, Weighted Average Exercise Price	$ 2.35		$ 1.43
Vested, Shares	0			10,000
Share Based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions Expected Term 1	7 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate	62.09%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	1.25%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	0.00%
Restricted Stock or Unit Expense	$ 73,000	$ 40,000

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INVESTMENT SECURITIES (Details 1) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013
Available for Sale Amortized Cost 1 year or less	$ 1,696
Available for Sale Amortized Cost After 1 year through five years	49,676
Available for Sale Amortized Cost After 5 years through 10 years	226,258
Available for Sale Amortized Cost After 10 years	15,739
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis	293,369
Available For Sale Securities Debt Maturities Mortgage Backed Securities Amortized Cost	118,650
Available for Sale Amortized Cost Securities with no stated maturity	2,580
Available-for-sale Securities, Debt Maturities, Remainder of Fiscal Year, Amortized Cost Basis	414,599
Available-for-sale Securities, Debt Maturities, Next Rolling Twelve Months, Fair Value	1,698
Available-for-sale Securities, Debt Maturities, Rolling Year Two Through Five, Fair Value	50,060
Available-for-sale Securities, Debt Maturities, Rolling Year Six Through Ten, Fair Value	229,525
Available-for-sale Securities, Debt Maturities, Rolling after Year Ten, Fair Value	11,682
Available For Sale Securities Debt Maturities Total	292,965
Available For Sale Securities Debt Maturities Mortagage Backed Securities Fair Value	120,885
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value	2,629
Available-for-sale Securities, Debt Maturities, Remainder of Fiscal Year, Fair Value	416,479
Held To Maturity Securities Debt Maturities Next Rolling Twelve Months Amortized Cost	15,170
Held To Maturity Securities Debt Maturities Next Rolling Year Two Through Five Amortized Cost	9,994
Held To Maturity Securities Debt Maturities Next Rolling Year Six Through Ten Amortized Cost	8,834
Held To Maturity Securities Debt Maturities Next Rolling Year After Ten Years Amortized Cost	4,515
Held To Maturity Debt Maturities Amortized Cost Total	38,513
Held To Maturity Securities Mortagage Debt Maturities Amortized Cost	0
Held To Maturity Securities Debt Maturities Without Single Maturity Date Amortized Cost	0
Held To Maturity Securities Amortized Cost Total	38,513
Held-to-maturity Securities, Debt Maturities, Next Rolling Twelve Months, Fair Value	15,188
Held-to-maturity Securities, Debt Maturities, Rolling Year Two Through Five, Fair Value	10,261
Held-to-maturity Securities, Debt Maturities, Rolling Year Six Through Ten, Fair Value	9,269
Held-to-maturity Securities, Debt Maturities, Rolling after Ten Years, Fair Value	4,911
Held To Maturity Debt Maturities Total	39,629
Held To Maturity Securities Debt Maturities Mortagage Backed Securities Fair Value	0
Held-to-maturity Securities, Debt Maturities, without Single Maturity Date, Fair Value	0
Held-to-maturity Securities, Debt Maturities, Fair Value	$ 39,629

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ALLOWANCE FOR LOAN LOSSES (Tables)

3 Months Ended

Mar. 31, 2013

Allowance For Loan Losses [Abstract]

Allowance for Credit Losses on Financing Receivables [Table Text Block]

Activity in the allowance for loan losses during the three months ended March 31, 2013 was as follows (000s omitted):

	Agriculture and Agricultural Real Estate			Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the three months ended March 31, 2013
Beginning Balance	$	76		$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Charge-offs		-			(202	)		(813	)		(18	)		(433	)		(121	)		(1,587	)
Recoveries		-			236			64			274			80			33			687
Provision		(6	)		(105	)		1,106			(188	)		746			(53	)		1,500
Ending balance	$	70		$	2,153		$	7,908		$	2,469		$	5,108		$	191		$	17,899
Allowance for loan losses as of March 31, 2013
Ending balance individually evaluated for impairment	$	-		$	1,330		$	2,312		$	1,863		$	2,084		$	100		$	7,689
Ending balance collectively   evaluated for impairment		70			823			5,596			606			3,024			91			10,210
Ending balance	$	70		$	2,153		$	7,908		$	2,469		$	5,108		$	191		$	17,899
Loans as of March 31, 2013
Ending balance individually evaluated for impairment	$	420		$	4,193		$	35,960		$	6,225		$	18,668		$	346		$	65,812
Ending balance collectively   evaluated for impairment		11,815			56,873			238,580			10,853			216,655			14,170			548,946
Ending balance	$	12,235		$	61,066		$	274,540		$	17,078		$	235,323		$	14,516		$	614,758

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

	Agriculture and Agricultural Real Estate		Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the three months ended March 31, 2012
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
Allowance for loan losses as of March 31, 2012
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 as of March 31, 2012
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 year ended December 31, 2012 was as follows (000s omitted):

	Agriculture and Agricultural Real Estate			Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the year ended December 31, 2012
Beginning Balance	$	64		$	2,184		$	9,351		$	2,632		$	6,227		$	407		$	20,865
Charge-offs		(97	)		(499	)		(8,156	)		(1,036	)		(2,031	)		(196	)		(12,015	)
Recoveries		-			347			80			240			274			158			1,099
Provision		109			192			6,276			565			245			(37	)		7,350
Ending balance	$	76		$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Allowance for loan losses as of December 31, 2012
Ending balance individually evaluated for impairment	$	-		$	1,316		$	2,084		$	1,820		$	1,994		$	124		$	7,338
Ending balance collectively evaluated for impairment		76			908			5,467			581			2,721			208			9,961
Ending balance	$	76		$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Loans as of December 31, 2012
Ending balance individually evaluated for impairment	$	409		$	4,519		$	36,471		$	7,410		$	18,051		$	389		$	67,249
Ending balance collectively evaluated for impairment		11,595			53,675			246,543			11,009			222,281			14,897			560,000
Ending balance	$	12,004		$	58,194		$	283,014		$	18,419		$	240,332		$	15,286		$	627,249

Financing Receivable Credit Quality Indicators [Table Text Block]

The portfolio segments in each credit risk grade as of March 31, 2013 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	$	162	$	729	$	-	$	2,985	$	151,673	$	10,094	$	165,643
1		-		3,453		-		-		-		-		3,453
2		48		103		1,784		-		697		-		2,632
3		864		5,020		9,497		147		1,764		4		17,296
4		10,232		37,508		166,200		3,106		42,172		1		259,219
5		315		5,943		43,183		4,210		12,106		4,093		69,850
6		614		8,310		53,876		6,630		26,911		324		96,665
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	12,235	$	61,066	$	274,540	$	17,078	$	235,323	$	14,516	$	614,758
Performing	$	11,731	$	56,651	$	238,419	$	10,629	$	213,906	$	13,969	$	545,305
Nonperforming		504		4,415		36,121		6,449		21,417		547		69,453
Total	$	12,235	$	61,066	$	274,540	$	17,078	$	235,323	$	14,516	$	614,758

The portfolio segments in each credit risk grade as of December 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	$	126	$	4,182	$	-	$	2,927	$	159,743	$	10,706	$	177,684
1		-		2,977		-		-		-		-		2,977
2		48		114		1,850		82		731		-		2,825
3		880		4,894		10,735		163		1,885		7		18,564
4		9,907		29,935		167,207		3,184		40,392		16		250,641
5		322		9,713		45,262		5,086		8,426		3,940		72,749
6		721		6,379		57,960		6,977		29,155		617		101,809
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	12,004	$	58,194	$	283,014	$	18,419	$	240,332	$	15,286	$	627,249
Performing	$	11,397	$	54,730	$	246,107	$	10,783	$	219,753	$	14,675	$	557,445
Nonperforming		607		3,464		36,907		7,636		20,579		611		69,804
Total	$	12,004	$	58,194	$	283,014	$	18,419	$	240,332	$	15,286	$	627,249

Past Due Financing Receivables [Table Text Block]

The following is a summary of past due loans as of March 31, 2013 and December 31, 2012 (000s omitted):

March 31, 2013	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	$	201	$	-	$	80	$	281	$	11,954	$	12,235	$	-
Commercial		608		187		855		1,650		59,416		61,066		3
Commercial Real Estate		3,104		2,962		7,102		13,168		261,372		274,540		-
Construction Real Estate		955		782		1,564		3,301		13,777		17,078		-
Residential Real Estate		5,663		860		3,425		9,948		225,375		235,323		311
Consumer and Other		99		57		58		214		14,302		14,516		-
Total	$	10,630	$	4,848	$	13,084	$	28,562	$	586,196	$	614,758	$	314

December 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	$	208	$	-	$	145	$	353	$	11,651	$	12,004	$	-
Commercial		927		19		1,100		2,046		56,148		58,194		1
Commercial Real Estate		1,789		930		11,350		14,069		268,945		283,014		-
Construction Real Estate		127		1,437		1,867		3,431		14,988		18,419		-
Residential Real Estate		5,738		978		3,121		9,837		230,495		240,332		-
Consumer and Other		222		61		164		447		14,839		15,286		-
Total	$	9,011	$	3,425	$	17,747	$	30,183	$	597,066	$	627,249	$	1

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

The following is a summary of non-accrual loans as of March 31, 2013 and December 31, 2012 (000s omitted):

	March 31, 2013		December 31, 2012
Agriculture and Agricultural Real Estate	$	84	$	198
Commercial		3,153		1,578
Commercial Real Estate		17,415		17,950
Construction Real Estate		2,496		3,438
Residential Real Estate		8,165		7,870
Consumer and Other		245		309
Total	$	31,558	$	31,343

Impaired Financing Receivables [Table Text Block]

The following is a summary of impaired loans as of March 31, 2013 and 2012 (000s omitted):

March 31, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		Interest Income Recognized in the Three Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	420	$	923	$	-	$	423	$	12
Commercial		682		752		-		775		9
Commercial Real Estate		17,383		22,113		-		18,234		191
Construction Real Estate		1,529		2,545		-		1,950		37
Residential Real Estate		9,186		10,478		-		10,376		128
Consumer and Other		-		-		-		-		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-
Commercial		3,511		3,894		1,330		3,513		44
Commercial Real Estate		18,577		24,502		2,312		20,045		160
Construction Real Estate		4,696		5,666		1,863		4,744		41
Residential Real Estate		9,482		10,108		2,084		9,705		85
Consumer and Other		346		341		100		346		5
Total:
Agriculture and Agricultural Real Estate	$	420	$	923	$	-	$	423	$	12
Commercial		4,193		4,646		1,330		4,288		53
Commercial Real Estate		35,960		46,615		2,312		38,279		351
Construction Real Estate		6,225		8,211		1,863		6,694		78
Residential Real Estate		18,668		20,586		2,084		20,081		213
Consumer and Other		346		341		100		346		5

March 31, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		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

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

December 31, 2012	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Year Ended		Interest Income Recognized in the Year Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	469	$	54
Commercial		2,540		2,961		-		2,968		220
Commercial Real Estate		17,153		21,317		-		18,313		924
Construction Real Estate		1,007		1,375		-		1,284		201
Residential Real Estate		9,013		10,390		-		10,213		373
Consumer and Other		-		-		-		-		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-
Commercial		1,979		2,157		1,316		2,032		88
Commercial Real Estate		19,318		26,508		2,084		22,119		918
Construction Real Estate		6,403		9,060		1,820		6,946		211
Residential Real Estate		9,038		9,520		1,994		9,189		413
Consumer and Other		389		383		124		393		26
Total:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	469	$	54
Commercial		4,519		5,118		1,316		5,000		308
Commercial Real Estate		36,471		47,825		2,084		40,432		1,842
Construction Real Estate		7,410		10,435		1,820		8,230		412
Residential Real Estate		18,051		19,910		1,994		19,402		786
Consumer and Other		389		383		124		393		26

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

Loans that have been classified as TDRs during the three month periods ended March 31, 2013 and March 31, 2012 are as follows (000s omitted from dollar amounts):

	Three months ended						Three months ended
	March 31, 2013						March 31, 2012
	Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance		Number of Contracts		Pre- Modification Recorded Principal Balance		Post- Modification Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-	$	-		-	$	-	$	-
Commercial		3		173		172		6		782		433
Commercial Real Estate		3		1,461		1,449		8		2,969		1,884
Construction Real Estate		-		-		-		5		2,686		2,677
Residential Real Estate		11		986		944		3		515		515
Consumer and Other		2		249		13		2		27		26
Total		19	$	2,869	$	2,578		24	$	6,979	$	5,535