10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 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 August 14, 2013, there were 17,913,162 shares of the Company’s Common Stock outstanding.

Part I Financial Information

Item 1. Financial Statements

MBT FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

	June 30, 2013
Dollars in thousands	(Unaudited)			December 31, 2012
ASSETS
Cash and Cash Equivalents
Cash and due from banks
Non-interest bearing	$	17,852		$	17,116
Interest bearing		17,632			95,391
Total cash and cash equivalents		35,484			112,507
Securities - Held to Maturity		36,719			38,786
Securities - Available for Sale		377,078			393,767
Federal Home Loan Bank stock - at cost		10,605			10,605
Loans held for sale		457			1,520
Loans		615,371			627,249
Allowance for Loan Losses		(17,195	)		(17,299	)
Loans – Net		598,176			609,950
Accrued interest receivable and other assets		15,392			10,037
Other Real Estate Owned		11,438			14,262
Bank Owned Life Insurance		49,780			49,111
Premises and Equipment - Net		27,543			28,050
Total assets	$	1,162,672		$	1,268,595
LIABILITIES
Deposits:
Non-interest bearing	$	186,276		$	183,016
Interest-bearing		854,584			865,814
Total deposits		1,040,860			1,048,830
Federal Home Loan Bank advances		12,000			107,000
Repurchase agreements		15,000			15,000
Interest payable and other liabilities		15,737			14,191
Total liabilities		1,083,597			1,185,021
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 17,909,898 and 17,396,179 shares issued and outstanding)		4,223			2,397
Retained earnings		83,890			81,280
Unearned compensation		(15	)		(27	)
Accumulated other comprehensive loss		(9,023	)		(76	)
Total stockholders' equity		79,075			83,574
Total liabilities and stockholders' equity	$	1,162,672		$	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 June 30,						Six Months Ended June 30,
Dollars in thousands, except per share data	2013			2012			2013			2012
Interest Income
Interest and fees on loans	$	7,599		$	8,938		$	15,501		$	18,077
Interest on investment securities-
Tax-exempt		310			355			633			735
Taxable		1,795			1,995			3,562			4,129
Interest on balances due from banks		37			46			106			89
Total interest income		9,741			11,334			19,802			23,030
Interest Expense
Interest on deposits		1,115			1,637			2,328			3,476
Interest on borrowed funds		537			913			1,341			1,842
Total interest expense		1,652			2,550			3,669			5,318
Net Interest Income		8,089			8,784			16,133			17,712
Provision For Loan Losses		400			1,050			1,900			3,300
Net Interest Income After
Provision For Loan Losses		7,689			7,734			14,233			14,412
Other Income
Income from wealth management services		1,081			828			2,178			1,796
Service charges and other fees		1,058			1,125			2,100			2,215
Debit card income		530			514			1,008			1,000
Net gain on sales of securities available for sale		154			40			164			1,140
Origination fees on mortgage loans sold		184			204			473			326
Bank owned life insurance income		364			333			754			703
Other		618			520			1,300			1,061
Total other income		3,989			3,564			7,977			8,241
Other Expenses
Salaries and employee benefits		5,214			4,953			10,537			10,059
Occupancy expense		722			626			1,409			1,351
Equipment expense		674			746			1,374			1,549
Marketing expense		205			175			368			373
Professional fees		550			524			1,051			1,112
Collection expenses		56			98			102			160
Net loss on other real estate owned		747			230			707			499
Other real estate owned expenses		293			439			667			908
FDIC Deposit Insurance Assessment		694			694			1,383			1,373
Other		1,027			1,137			2,002			2,250
Total other expenses		10,182			9,622			19,600			19,634
Income Before Income Taxes		1,496			1,676			2,610			3,019
Income Tax Expense		-			1,423			-			1,549
Net Income	$	1,496		$	253		$	2,610		$	1,470
Other Comprehensive Income (Loss) - Net of Tax
Unrealized gains (losses) on securities		(8,354	)		559			(8,900	)		154
Reclassification adjustment for gains included in net income		(102	)		(26	)		(108	)		(752	)
Postretirement benefit liability		30			52			61			104
Total Other Comprehensive Income (Loss) - Net of Tax		(8,426	)		585			(8,947	)		(494	)
Comprehensive Income (Loss)	$	(6,930	)	$	838		$	(6,337	)	$	976
Basic Earnings Per Common Share	$	0.08		$	0.01		$	0.15		$	0.08
Diluted Earnings Per Common Share	$	0.08		$	0.01		$	0.15		$	0.08
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 (513,045 shares, net of costs of $18)		1,767		-		-			-			1,767
Equity Compensation		55		-		12			-			67
Comprehensive income:
Net income		-		2,610		-			-			2,610
Other comprehensive loss - net of tax		-		-		-			(8,947	)		(8,947	)
Total Comprehensive Loss												(6,337	)
Balance - June 30, 2013	$	4,223	$	83,890	$	(15	)	$	(9,023	)	$	79,075

								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 (26,424 shares)		39		-		-			-			39
Equity Compensation		18		-		40			-			58
Comprehensive income:
Net income		-		1,470		-			-			1,470
Other comprehensive loss - net of tax		-		-		-			(494	)		(494	)
Total Comprehensive Income												976
Balance - June 30, 2012	$	2,156	$	74,205	$	(47	)	$	470		$	76,784

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

-4-

MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

	Six Months Ended June 30,
Dollars in thousands	2013			2012
Cash Flows from Operating Activities
Net Income	$	2,610		$	1,470
Adjustments to reconcile net income to net cash from operating activities
Provision for loan losses		1,900			3,300
Depreciation		965			990
Net amortization of investment premium and discount		978			967
Writedowns of Other Real Estate Owned		909			861
Net increase in interest payable and other liabilities		1,702			1,359
Net increase in interest receivable and other assets		(943	)		(632	)
Equity based compensation expense		139			90
Net gain on sale/settlement of securities		(164	)		(1,140	)
Increase in cash surrender value of life insurance		(669	)		(703	)
Net cash provided by operating activities	$	7,427		$	6,562
Cash Flows from Investing Activities
Proceeds from maturities and redemptions of investment securities held to maturity	$	10,132		$	8,656
Proceeds from maturities and redemptions of investment securities available for sale		56,804			145,582
Proceeds from sales of investment securities available for sale		32,920			15,184
Net decrease in loans		7,741			3,139
Proceeds from sales of other real estate owned		5,250			7,418
Proceeds from sales of other assets		64			99
Purchase of investment securities held to maturity		(8,065	)		(3,860	)
Purchase of investment securities available for sale		(87,498	)		(167,926	)
Purchase of bank premises and equipment		(464	)		(287	)
Net cash provided by investing activities	$	16,884		$	8,005
Cash Flows from Financing Activities
Net decrease in deposits	$	(7,970	)	$	(4,808	)
Repayment of long term debt		(135	)		-
Repayment of Federal Home Loan Bank borrowings		(95,000	)		-
Proceeds from issuance of common stock		1,771			39
Net cash used for financing activities	$	(101,334	)	$	(4,769	)
Net Increase (Decrease) in Cash and Cash Equivalents	$	(77,023	)	$	9,798
Cash and Cash Equivalents at Beginning of Period		112,507			75,995
Cash and Cash Equivalents at End of Period	$	35,484		$	85,793
Supplemental Cash Flow Information
Cash paid for interest	$	3,817		$	5,378
Cash paid for federal income taxes	$	-		$	-
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	$	3,117		$	4,031
Transfer of loans to other assets	$	79		$	57

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 June 30,				For the six months ended June 30,
	2013		2012		2013		2012
Basic
Net profit	$	1,496,000	$	253,000	$	2,610,000	$	1,470,000
Average common shares outstanding		17,906,085		17,315,696		17,712,310		17,310,239
Earnings per common share - basic	$	0.08	$	0.01	$	0.15	$	0.08
Diluted
Net profit	$	1,496,000	$	253,000	$	2,610,000	$	1,470,000
Average common shares outstanding		17,906,085		17,315,696		17,712,310		17,310,239
Equity compensation		260,135		66,723		246,259		30,052
Average common shares outstanding - diluted		18,166,220		17,382,419		17,958,569		17,340,291
Earnings per common share - diluted	$	0.08	$	0.01	$	0.15	$	0.08

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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, June 30, 2013		333,500	$	18.40
Options Exercisable, June 30, 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, June 30, 2013		521,037	$	3.28
SOSARs Exercisable, June 30, 2013		323,966	$	3.98

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 $72,000 in the second quarter of 2013 and $50,000 in the second quarter of 2012. The total expense for equity based compensation was $145,000 in the first six months of 2013 and $90,000 in the first six months 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):

	June 30,		December 31,
	2013		2012
Residential real estate loans	$	227,719	$	240,332
Commercial and Construction real estate loans		285,406		301,433
Agriculture and agricultural real estate loans		14,844		12,004
Commercial and industrial loans		72,077		58,194
Loans to individuals for household, family, and other personal expenditures		15,325		15,286
Total loans, gross	$	615,371	$	627,249
Less: Allowance for loan losses		17,195		17,299
	$	598,176	$	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):

	June 30,			December 31,
	2013			2012
Nonaccrual loans	$	32,051		$	31,343
Loans 90 days past due and accruing		12			1
Restructured loans		32,192			38,460
Total nonperforming loans	$	64,255		$	69,804
Other real estate owned		11,438			14,262
Other assets		31			32
Nonperforming investment securities		3,144			3,045
Total nonperforming assets	$	78,868		$	87,143
Nonperforming assets to total assets		6.78	%		6.87	%
Allowance for loan losses to nonperforming loans		26.76	%		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 and six months ended June 30, 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 June 30, 2013
Beginning Balance	$	70	$	2,153		$	7,908		$	2,469		$	5,108		$	191		$	17,899
Charge-offs		-		(199	)		(1,056	)		(19	)		(383	)		(16	)		(1,673	)
Recoveries		-		27			226			14			239			63			569
Provision		39		461			478			(575	)		(177	)		174			400
Ending balance	$	109	$	2,442		$	7,556		$	1,889		$	4,787		$	412		$	17,195
Allowance for loan losses: For the six months ended June 30, 2013
Beginning Balance	$	76	$	2,224		$	7,551		$	2,401		$	4,715		$	332		$	17,299
Charge-offs		-		(402	)		(1,868	)		(37	)		(816	)		(137	)		(3,260	)
Recoveries		-		263			290			288			319			96			1,256
Provision		33		357			1,583			(763	)		569			121			1,900
Ending balance	$	109	$	2,442		$	7,556		$	1,889		$	4,787		$	412		$	17,195
Allowance for loan losses as of June 30, 2013
Ending balance individually evaluated for impairment	$	-	$	1,237		$	2,648		$	1,434		$	2,005		$	108		$	7,432
Ending balance collectively   evaluated for impairment		109		1,205			4,908			455			2,782			304			9,763
Ending balance	$	109	$	2,442		$	7,556		$	1,889		$	4,787		$	412		$	17,195
Loans as of June 30, 2013
Ending balance individually evaluated for impairment	$	423	$	5,735		$	39,176		$	6,671		$	15,826		$	362		$	68,193
Ending balance collectively   evaluated for impairment		14,421		66,342			229,600			9,959			211,893			14,963			547,178
Ending balance	$	14,844	$	72,077		$	268,776		$	16,630		$	227,719		$	15,325		$	615,371

-10-

Activity in the allowance for loan losses during the three and six months ended June 30, 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 June 30, 2012
Beginning Balance	$	69		$	2,740		$	9,306		$	2,320		$	5,630		$	416		$	20,481
Charge-offs		-			(166	)		(1,490	)		(140	)		(540	)		(34	)		(2,370	)
Recoveries		-			104			12			105			53			51			325
Provision		(69	)		103			909			(274	)		500			(119	)		1,050
Ending balance	$	-		$	2,781		$	8,737		$	2,011		$	5,643		$	314		$	19,486
Allowance for loan losses: For the six months ended June 30, 2012
Beginning Balance	$	64		$	2,184		$	9,351		$	2,632		$	6,227		$	407		$	20,865
Charge-offs		-			(262	)		(3,063	)		(602	)		(1,194	)		(81	)		(5,202	)
Recoveries		-			170			21			142			103			87			523
Provision		(64	)		689			2,428			(161	)		507			(99	)		3,300
Ending balance	$	-		$	2,781		$	8,737		$	2,011		$	5,643		$	314		$	19,486
Allowance for loan losses as of June 30, 2012
Ending balance individually evaluated for impairment	$	-		$	1,614		$	2,476		$	1,264		$	2,478		$	71		$	7,903
Ending balance collectively   evaluated for impairment		-			1,167			6,261			747			3,165			243			11,583
Ending balance	$	-		$	2,781		$	8,737		$	2,011		$	5,643		$	314		$	19,486
Loans as of June 30, 2012
Ending balance individually evaluated for impairment	$	801		$	3,833		$	32,496		$	7,936		$	18,432		$	223		$	63,721
Ending balance collectively  evaluated for impairment		15,369			61,138			266,765			11,817			235,984			12,434			603,507
Ending balance	$	16,170		$	64,971		$	299,261		$	19,753		$	254,416		$	12,657		$	667,228

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.

-11-

• 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 June 30, 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	$	198	$	3,911	$	-	$	2,858	$	147,143	$	10,782	$	164,892
1		-		4,221		-		-		-		194		4,415
2		78		60		990		-		148		-		1,276
3		865		7,085		8,969		129		1,889		-		18,937
4		12,055		37,647		165,893		3,151		43,701		56		262,503
5		1,039		8,135		43,347		3,952		8,060		4,022		68,555
6		609		11,018		49,577		6,540		26,778		271		94,793
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	14,844	$	72,077	$	268,776	$	16,630	$	227,719	$	15,325	$	615,371
Performing	$	14,337	$	67,538	$	234,818	$	9,729	$	209,886	$	14,808	$	551,116
Nonperforming		507		4,539		33,958		6,901		17,833		517		64,255
Total	$	14,844	$	72,077	$	268,776	$	16,630	$	227,719	$	15,325	$	615,371

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 June 30, 2013 and December 31, 2012 (000s omitted):

June 30, 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	$	511	$	-	$	84	$	595	$	14,249	$	14,844	$	-
Commercial		829		15		674		1,518		70,559		72,077		12
Commercial Real Estate		1,601		1,399		8,386		11,386		257,390		268,776		-
Construction Real Estate		356		34		1,937		2,327		14,303		16,630		-
Residential Real Estate		3,878		524		3,553		7,955		219,764		227,719		-
Consumer and Other		21		114		54		189		15,136		15,325		-
Total	$	7,196	$	2,086	$	14,688	$	23,970	$	591,401	$	615,371	$	12

-13-

December 31, 2012	30-59 Days  PastDue		60-89 Days PastDue		>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 June 30, 2013 and December 31, 2012 (000s omitted):

	June 30, 2013		December 31, 2012
Agriculture and Agricultural Real Estate	$	84	$	198
Commercial		3,029		1,578
Commercial Real Estate		16,233		17,950
Construction Real Estate		3,132		3,438
Residential Real Estate		9,361		7,870
Consumer and Other		212		309
Total	$	32,051	$	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.

-14-

The following is a summary of impaired loans as of June 30, 2013 and 2012 (000s omitted):

June 30, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for  the Three Months Ended		Interest Income Recognized in  the Three Months Ended		Average Recorded Investment for the Six Months Ended		Interest Income Recognized in the Six Months  Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	423	$	923	$	-	$	423	$	12	$	423	$	23
Commercial		670		844		-		788		9		807		16
Commercial Real Estate		17,438		21,549		-		18,556		167		18,798		359
Construction Real Estate		1,649		2,824		-		2,104		12		2,109		47
Residential Real Estate		6,672		7,418		-		6,856		84		6,991		168
Consumer and Other		1		1		-		1		-		1		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-		-		-
Commercial		5,065		5,212		1,237		4,900		54		4,882		116
Commercial Real Estate		21,738		28,543		2,648		23,510		253		23,646		490
Construction Real Estate		5,022		5,871		1,434		5,103		68		5,187		122
Residential Real Estate		9,154		9,773		2,005		9,459		87		9,646		185
Consumer and Other		361		361		108		359		5		364		11
Total:
Agriculture and Agricultural Real Estate	$	423	$	923	$	-	$	423	$	12	$	423	$	23
Commercial		5,735		6,056		1,237		5,688		63		5,689		132
Commercial Real Estate		39,176		50,092		2,648		42,066		420		42,444		849
Construction Real Estate		6,671		8,695		1,434		7,207		80		7,296		169
Residential Real Estate		15,826		17,191		2,005		16,315		171		16,637		353
Consumer and Other		362		362		108		360		5		365		11

	Recorded Investment as of December 31, 2012		Unpaid Principal Balance as of December 31, 2012		Related Allowance as  of December 31, 2012		Average Recorded Investment for  the Three Months Ended  June 30, 2012		Interest Income Recognized in  the Three Months Ended June 30, 2012		Average Recorded Investment for  the Six Months Ended  June 30, 2012		Interest Income Recognized in  the Six Months Ended June 30, 2012
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	832	$	12	$	835	$	29
Commercial		2,540		2,961		-		222		4		222		11
Commercial Real Estate		17,153		21,317		-		16,951		240		16,278		333
Construction Real Estate		1,007		1,375		-		1,124		20		1,106		26
Residential Real Estate		9,013		10,390		-		8,846		116		8,595		252
Consumer and Other		-		-		-		-		-		-		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-		-		-
Commercial		1,979		2,157		1,316		3,953		53		3,942		109
Commercial Real Estate		19,318		26,508		2,084		18,910		186		18,989		370
Construction Real Estate		6,403		9,060		1,820		7,533		45		7,509		125
Residential Real Estate		9,038		9,520		1,994		11,767		126		11,699		271
Consumer and Other		389		383		124		227		4		225		7
Total:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	832	$	12	$	835	$	29
Commercial		4,519		5,118		1,316		4,175		57		4,164		120
Commercial Real Estate		36,471		47,825		2,084		35,861		426		35,267		703
Construction Real Estate		7,410		10,435		1,820		8,657		65		8,615		151
Residential Real Estate		18,051		19,910		1,994		20,613		242		20,294		523
Consumer and Other		389		383		124		227		4		225		7

-15-

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

Loans that have been classified as TDRs during the three and six month periods ended June 30, 2013 and June 30, 2012 are as follows (000s omitted from dollar amounts):

	Three months ended						Six months ended
	June 30, 2013						June 30, 2013
	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		4		181		139		7		354		311
Commercial Real Estate		4		586		575		7		2,047		1,988
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		5		460		297		16		1,446		1,155
Consumer and Other		2		17		13		4		266		25
Total		15	$	1,244	$	1,024		34	$	4,113	$	3,479

	Three months ended						Six months ended
	June 30, 2012						June 30, 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		-		-		-		6		782		412
Commercial Real Estate		2		264		264		9		2,403		2,091
Construction Real Estate		-		-		-		5		2,686		2,631
Residential Real Estate		11		1,964		1,964		14		2,479		1,678
Consumer and Other		-		-		13		2		27		26
Total		13	$	2,228	$	2,241		36	$	8,377	$	6,838

The Bank considers TDRs that become past due under the modified terms as defaulted. There were no loans that became TDRs during the six month periods ended June 30, 2013 and June 30, 2012 that subsequently defaulted during the three month periods ended June 30, 2013 and June 30, 2012, respectively.

The Company has allocated $5,731,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings at June 30, 2013. In addition, there are no commitments to lend additional amounts to borrowers that are classified as troubled debt restructurings as of June 30, 2013 and June 30, 2012.

-16-

6. INVESTMENT SECURITIES

The following is a summary of the Bank’s investment securities portfolio as of June 30, 2013 and December 31, 2012 (000’s omitted):

	Held to Maturity
	June 30, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	36,219	$	628	$	(340	)	$	36,507
Corporate Debt Securities		500		-		-			500
	$	36,719	$	628	$	(340	)	$	37,007

	Available for Sale
	June 30, 2013
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	242,472	$	1,702	$	(9,029	)	$	235,145
Mortgage Backed Securities issued by U.S. Government Agencies		105,935		1,112		(1,044	)		106,003
Obligations of States and Political Subdivisions		15,542		346		(124	)		15,764
Trust Preferred CDO Securities		9,517		-		(4,002	)		5,515
Corporate Debt Securities		11,965		183		(57	)		12,091
Equity Securities		2,580		88		(108	)		2,560
	$	388,011	$	3,431	$	(14,364	)	$	377,078

	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

-17-

The amortized cost and estimated market values of securities by contractual maturity as of June 30, 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	$	8,005	$	8,044	$	1,404	$	1,411
After 1 year through five years		14,466		14,645		49,327		48,930
After 5 years through 10 years		10,143		10,186		210,973		204,788
After 10 years		4,105		4,132		17,792		13,386
Total		36,719		37,007		279,496		268,515
Mortgage Backed Securities		-		-		105,935		106,003
Securities with no stated maturity		-		-		2,580		2,560
Total	$	36,719	$	37,007	$	388,011	$	377,078

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 June 30, 2013 and December 31, 2012.

June 30, 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	$	211,678	$	9,029	$	-	$	-	$	211,678	$	9,029
Mortgage Backed Securities issued by U.S. Government Agencies		49,348		935		7,785		109		57,133		1,044
Obligations of States and Political Subdivisions		13,787		378		3,794		86		17,581		464
Trust Preferred CDO Securities		-		-		5,515		4,002		5,515		4,002
Corporate Debt Securities		1,945		57		-		-		1,945		57
Equity Securities		-		-		432		108		432		108
	$	276,758	$	10,399	$	17,526	$	4,305	$	294,284	$	14,704

-18-

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 June 30, 2013. As of June 30, 2013 and December 31, 2012, there were 163 and 42 securities in an unrealized loss position, respectively.

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 to 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, 2012, and 2013 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.

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.

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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 June 30, 2013 and December 31, 2012, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
June 30, 2013	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	35,484	$	35,484	$	-	$	-	$	35,484
Securities - Held to Maturity
Obligations of States and Political Subdivisions		36,219		-		36,507		-		36,507
Corporate Debt Securities		500		-		500		-		500
Securities - Available for Sale
Obligations of U.S. Government Agencies		235,145		-		235,145		-		235,145
MBS issued by U.S. Government Agencies		106,003		-		106,003		-		106,003
Obligations of States and Political Subdivisions		15,764		-		15,764		-		15,764
Trust Preferred CDO Securities		5,515		-		-		5,515		5,515
Corporate Debt Securities		12,091		-		12,091		-		12,091
Other Securities		2,560		2,128		432		-		2,560
Federal Home Loan Bank Stock		10,605		-		10,605		-		10,605
Loans Held for Sale		457		-		-		457		457
Loans, net		598,176		-		-		612,346		612,346
Accrued Interest Receivable		3,502		-		3,502		-		3,502
Financial Liabilities:
Noninterest Bearing Deposits		186,276		186,276		-		-		186,276
Interest Bearings Deposits		854,584		-		859,186		-		859,186
Borrowed funds
FHLB Advances		12,000		-		12,227		-		12,227
Repurchase Agreements		15,000		-		16,849		-		16,849
Accrued Interest Payable		205		-		205		-		205

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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		(8	)		(8	)
Total unrealized gains (losses) included in other comprehensive income		117			(378	)
Net purchases, sales, calls and maturities		-			-
Net transfers in/out of Level 3		-			-
Balance at June 30	$	5,515		$	5,081

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 six months ended June 30, 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 $5,515,000 as of June 30, 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 June 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	68,193	$	-	$	-	$	68,193
Other Real Estate Owned	$	11,438	$	-	$	-	$	11,438

	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.

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

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	Contractual Amount
	June 30,		December 31,
	2013		2012
Commitments to extend credit:
Unused portion of commercial lines of credit	$	52,564	$	59,826
Unused portion of credit card lines of credit		3,131		3,048
Unused portion of home equity lines of credit		15,631		16,356
Standby letters of credit and financial guarantees written		3,685		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 the recovery in southeast Michigan is gaining strength. Local unemployment rates improved significantly since 2011, and while they are now comparable to the state and national averages, they remain above the historical norms. Commercial and residential development property values are beginning to improve slightly, but remain below pre-recession levels. 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, improved significantly during the second quarter of 2013. Problem assets went down $9.8 million, or 7.8% during the second quarter of 2013, and decreased $11.1 million or 8.7% compared to a year ago. Overall asset quality has improved over the past year and net charge offs were only $1.1 million in the second quarter of 2013, enabling us to decrease our Allowance for Loan and Lease Losses (ALLL) from $17.9 million to $17.2 million in the second quarter. The decrease in the ALLL was mainly due to a decrease of $0.4 million in the general allocation. The smaller general allocation was caused by improving economic conditions, improving historical loss ratios, and the decrease in the amount of the portfolio subject to the general allocation. The specifically identified impairments decreased $0.3 million. The loan portfolio held for investment decreased $1.0 million during the quarter, and the ALLL as a percent of loans decreased slightly from 2.90% to 2.79%. We anticipate that the recovery in our local markets will continue at a slow pace though 2013, which may result in increased lending activity and problem asset reductions. We will continue to focus our efforts on improving asset quality, maintaining liquidity, strengthening capital, and controlling expenses.

Net Interest Income decreased $695,000 compared to the second quarter of 2012 as the average earning assets decreased $12.7 million, or 1.1% and the net interest margin decreased from 3.15% to 2.92%. The provision for loan losses decreased from $1.05 million in the second quarter of 2012 to $0.4 million in the second quarter of 2013. Decreases in the historical loss rates and in the amount of loans compared to a year ago decreased the amount of ALLL required. Also, net charge offs were $1.1 million in the second quarter of 2013 compared to $2.0 million in the second quarter of 2012, allowing the reduction in the provision for loan losses. Non interest income for the quarter increased $425,000 or 11.9%, primarily due to an increase in wealth management fees. Non interest expenses increased $560,000, or 5.8%, as salaries and employee benefits increased and losses on sales of other real estate owned (OREO) increased. The increase in OREO losses was due to the liquidation of several properties at an auction, and we expect credit related expenses to improve in the second half of 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.

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 eighth consecutive quarterly profit in the second 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 $19.4 million, compared to the deferred tax asset of $24.4 million as of June 30, 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 2013.

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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”) decreased 10.0% during the quarter, from $87.7 million to $78.9 million, and total problem assets decreased from $125.5 million to $115.7 million. Both of these measures were impacted by a small number of large credit relationships, and both reflect improvement compared to a year ago. Over the last twelve months, NPAs decreased $3.0 million, or 3.7%, with nonperforming loans decreasing 3.0% from $66.3 million to $64.3 million, and Other Real Estate Owned (“OREO”) decreasing 10.2% from $12.8 million to $11.5 million. Total problem assets, which includes all NPAs and performing loans that are internally classified as substandard, decreased $11.1 million, or 8.7%. The Company’s Allowance for Loan and Lease Losses (“ALLL”) decreased $2.3 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 2.79% of loans, down from 2.91% at June 30, 2012. The ALLL is 26.76% of nonperforming loans (“NPLs”), compared to 24.78% at year end and 29.4% at June 30, 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 held for investment decreased 1.9% because new loan activity was not sufficient to cover payments received and other reductions. New loan production increased in the second quarter of 2013, but payoffs of some large problem credit relationships during the quarter resulted in a net reduction of total loans held for investment. As local economic activity increases, the amount of loans in our pipeline is increasing, and new loan production may exceed run off, resulting in an increase in loans outstanding.

Since December 31, 2012, deposits decreased $8.0 million, or 0.8% due to normal seasonal fluctuations in local deposit activity. We also repaid $95.0 million of borrowings from the Federal Home Loan Bank of Indianapolis in the second quarter of 2013. This reduction in funding was offset by a reduction in cash and investment securities, causing our total assets to decrease $105.9 million, or 8.3% since the end of 2012. The cost of the non deposit funding exceeded the yield on the assets utilized to pay off the debt, so this reduction in assets is expected to improve net interest income in the second half of 2013. The Company also expects deposit funding to be relatively stable for the remainder of 2013.

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Total capital decreased $4.5 million, or 5.4%, during the first six months of 2013 as the profit of $2.6 million and a private placement stock offering of $1.7 million were exceeded by the decrease of $8.9 million 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 decrease in capital, the decrease in total assets caused the capital to assets ratio to increase from 6.59% at December 31, 2012 to 6.80% at June 30, 2013.

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

Net Interest Income - A comparison of the income statements for the three months ended June 30, 2012 and 2013 shows a decrease of $695,000, or 7.9%, in Net Interest Income. Interest income on loans decreased $1.3 million or 15.0% as the average loans outstanding decreased $50.7 million and the average yield on loans decreased from 5.38% to 4.93%. The interest income on investments, fed funds sold, and interest bearing balances due from banks decreased $254,000 as the average amount of investments, fed funds sold, and interest bearing balances due from banks increased $38.0 million but the yield decreased from 2.04% to 1.69%. 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 helped reduce the funding costs. The interest expense on deposits decreased $522,000 or 31.9% even though the average deposits increased $25.1 million because the average cost of deposits decreased from 0.65% to 0.43%. The cost of borrowed funds decreased $376,000 as the average amount of borrowed funds decreased $49.3 million and the average cost of the borrowings decreased from 2.89% to 2.77%.

Provision for Loan Losses - The Provision for Loan Losses decreased from $1.05 million in the second quarter of 2012 to $0.4 million in the second quarter of 2013. Net charge offs were $1.1 million during the second quarter of 2013, compared to $2.0 million in the second 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, an improvement in portfolio risk indicators, and a decrease in the historical loss percentages, the amount of provision required to maintain an adequate ALLL in the second quarter of 2013 decreased 61.9% compared to the amount required in the second quarter of 2012. The ALLL is 2.79% of loans as of June 30, 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 increased $425,000, or 11.9% compared to the second quarter of 2012. Wealth management income increased $253,000 due to a one time fee refund of $172,000 in the second quarter of 2012. The wealth management income also increased due to an increase in the market value of assets managed and new business brought in to the bank. Securities gains increased $114,000 as the Bank sold available for sale securities in the second quarter of 2013 in order to pay off maturing debt. Other non interest income increased $98,000 primarily due to higher income from brokerage services and rental income on OREO properties.

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Other Expenses – Total non interest expenses increased $560,000, or 5.8% compared to the second quarter of 2012. Salaries and Employee Benefits increased $261,000, or 5.3%, as salaries increased due to an increase in the number of employees and annual merit increases. Occupancy expense increased $96,000 due to higher utilities and maintenance costs. Equipment expense decreased $72,000 due to lower computer and data processing expenses. Losses on Other Real Estate Owned (OREO) properties increased $517,000 compared to the second quarter of 2012 as several properties were liquidated at losses in an auction in the second quarter of 2013. Other OREO expenses decreased $146,000 as property tax and maintenance costs decreased due to the reduction in the number of properties owned.

As a result of the above activity, the Profit Before Income Taxes in the second quarter of 2013 was $1,496,000, a decrease of $180,000 compared to the pre tax profit of $1,676,000 in the second quarter of 2012. Due to our net operating loss carry forward, we did not record a federal income tax expense in the second 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 $297,000, for an effective tax rate of 19.9%. The income tax expense of $1,423,000 that was recorded in the second quarter of 2012 was to accrue for an IRS audit adjustment. The Net profit for the second quarter of 2013 was $1,496,000, an increase of 491.3% compared to the net profit of $253,000 in the second quarter of 2012.

Results of Operations – Six months ended June 30, 2013 vs. Six months ended June 30, 2012

Net Interest Income - A comparison of the income statements for the six months ended June 30, 2012 and 2013 shows a decrease of $1,579,000, or 8.9%, in Net Interest Income. Interest income on loans decreased $2.6 million or 14.3% as the average loans outstanding decreased $50.6 million and the average yield on loans decreased from 5.42% to 5.04%. The interest income on investments, fed funds sold, and interest bearing balances due from banks decreased $652,000 as the average amount of investments, fed funds sold, and interest bearing balances due from banks increased $60.4 million but the yield decreased from 2.11% to 1.63%. 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 $1,148,000 or 33.0% even though the average deposits increased $27.5 million because the average cost of deposits decreased from 0.68% to 0.45%. The cost of borrowed funds decreased $501,000 as the average amount of borrowed funds decreased $27.3 million and the average cost of the borrowings decreased from 2.91% to 2.71%.

Provision for Loan Losses - The Provision for Loan Losses decreased from $3.3 million in the first six months of 2012 to $1.9 million in the first six months of 2013. Net charge offs were $2.0 million during the first six months of 2013, compared to $4.7 million in the first six months 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, an improvement in portfolio risk indicators, and a decrease in the historical loss percentages, the amount of provision required to maintain an adequate ALLL in the first six months of 2013 decreased 42.4% compared to the amount required in the first six months of 2012. The ALLL is 2.79% of loans as of June 30, 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 $264,000, or 3.2% compared to the first six months of 2012. The income in the first six months of 2012 included gains on securities transactions that were the result of restructuring activity in the investment portfolio. Excluding securities gains in both years, non interest income increased $712,000 or 10.0%. Wealth management income increased $202,000 due to an increase in the market value of assets managed, new business brought in to the bank, and a reversal of previously recorded income in the first six months of 2012. Origination fees on mortgage loans sold increased $147,000, or 45.1%, due to an increase in mortgage loan origination volume compared to 2012, and other non interest income increased $239,000 primarily due to income on brokerage services and rental income on OREO properties.

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Other Expenses – Total non interest expenses decreased $34,000, or 0.3% compared to the first six months of 2012. Salaries and Employee Benefits increased $478,000, or 4.8%, as salaries increased due to an increase in the number of employees and annual merit increases. Equipment expense decreased $175,000 due to lower computer and data processing expenses. Losses on Other Real Estate Owned (OREO) properties increased $208,000 compared to the first six months of 2012. Although property values stabilized over the last year, requiring fewer write downs of properties owned and producing some gains on the sales of select OREO property sales, we liquidated some large properties at losses in 2013. Other OREO expenses decreased $241,000 as property tax and maintenance costs were lower due to the decrease in the number of properties owned.

As a result of the above activity, the Profit Before Income Taxes in the first six months of 2013 was $2,610,000, a decrease of $409,000 compared to the pre tax profit of $3,019,000 in the first six months of 2012. Due to our net operating loss carry forward, we did not record a federal income tax expense in the first six months of 2013. If we did not have the benefit of the NOL carry forward, we would have incurred a federal income tax expense of $452,000, for an effective tax rate of 17.3%. The income tax expense of $1,549,000 that was recorded in 2012 was to accrue for an audit adjustment. The Net profit for the first six months of 2013 was $2,610,000, an increase of 77.6% compared to the net profit of $1,470,000 in the first six months of 2012.

Cash Flows

Cash flows provided by operating activities increased $0.9 million compared to the first six months of 2012 as the non cash charge for the provision for loan losses that is included net income decreased $1.4 million. Cash flows from investing activities increased $8.9 million in the first six months of 2013 compared to the first six months of 2012 as the amount of securities available for sale that were sold increased $17.7 million as the Bank sold investments to generate cash to pay off maturing debt. The decrease of $87.3 million in maturities and redemptions of securities caused a decrease of $76.2 million in securities purchases. The amount of cash used for financing activities increased $96.6 million due to the repayment of $95.0 million of maturing Federal Home Loan Bank advances in the first six months of 2013. The Company also issued $1.7 million of common stock in a private placement in the first six months of 2013. Total cash and cash equivalents decreased $77.0 million in the first six months of 2013 compared to the increase if $9.8 million in the first six 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 June 30, 2013, the Bank utilized $12 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 six months of 2013 the Company was in compliance with its Funds Management Policy regarding liquidity and capital.

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Total stockholders’ equity of the Company was $79.1 million at June 30, 2013 and $83.6 million at December 31, 2012. Longer term market interest rates increased sharply late in the second quarter of 2013, causing a decrease in the value of our securities that are classified as Available For Sale. The unrealized loss on AFS securities in the second quarter of 2013 exceeded our profit and caused the decrease in the amount of capital. However, total assets decreased and the ratio of equity to assets increased to 6.80% at June 30, 2013 from 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%.

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 June 30, 2013:
Total Capital to Risk-Weighted Assets
Consolidated	$	94,371		12.19	%	$	77,410		10	%
Monroe Bank & Trust		93,497		12.09	%		77,333		10	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		84,598		10.93	%		46,446		6	%
Monroe Bank & Trust		83,693		10.82	%		46,400		6	%
Tier 1 Capital to Average Assets
Consolidated		84,598		6.93	%		61,021		5	%
Monroe Bank & Trust		83,693		6.86	%		60,982		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	%

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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 June 30, 2013, the Bank is in compliance with the Total Risk Based Capital Ratio requirement but not in compliance with the Tier 1 Leverage Ratio requirement 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 June 30, 2013:

	Actual Capital					Minimum Capital Required by Consent Order					Additional Capital Required to Comply with
	Amount		Ratio			Amount		Ratio			Consent Order
Tier 1 Capital to Average Assets	$	83,693		6.86	%	$	109,838		9	%	$	26,145

The Company increased its common shares authorized in 2011 and is continuing to monitor the capital market conditions. Since the date that the Consent Order was issued and up through the end of the most recent fiscal year, the Company has not believed that the market conditions were 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. While under the Consent Order, 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. Conditions in the capital markets have improved somewhat recently, and we continue our efforts to improve our capital position by generating capital by improving our earnings and reducing the size of our balance sheet by repaying our non deposit funding as it matures.

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 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.

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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.

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 six months of 2013, the Bank’s interest rate risk has remained within its policy limits.

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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.

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 June 30, 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 June 30, 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 June 30, 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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

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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.

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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)
August 14, 2013	By	/s/ H. Douglas Chaffin
Date	H. Douglas Chaffin
	President &
	Chief Executive Officer
August 14, 2013	By	/s/ John L. Skibski
Date	John L. Skibski
	Executive Vice President and
	Chief Financial Officer

-35-

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.

-36-

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:  August 14, 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:  August 14, 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 June 30, 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

August 14, 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 June 30, 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

August 14, 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

EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 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  June 30,				For the six months ended June 30,
	2013		2012		2013		2012
Basic
Net profit	$	1,496,000	$	253,000	$	2,610,000	$	1,470,000
Average common shares outstanding		17,906,085		17,315,696		17,712,310		17,310,239
Earnings per common share - basic	$	0.08	$	0.01	$	0.15	$	0.08
Diluted
Net profit	$	1,496,000	$	253,000	$	2,610,000	$	1,470,000
Average common shares outstanding		17,906,085		17,315,696		17,712,310		17,310,239
Equity compensation		260,135		66,723		246,259		30,052
Average common shares outstanding - diluted		18,166,220		17,382,419		17,958,569		17,340,291
Earnings per common share – diluted	$	0.08	$	0.01	$	0.15	$	0.08

XML

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Interest Income
Interest and fees on loans	$ 7,599	$ 8,938	$ 15,501	$ 18,077
Interest on investment securities-
Tax-exempt	310	355	633	735
Taxable	1,795	1,995	3,562	4,129
Interest on balances due from banks	37	46	106	89
Total interest income	9,741	11,334	19,802	23,030
Interest Expense
Interest on deposits	1,115	1,637	2,328	3,476
Interest on borrowed funds	537	913	1,341	1,842
Total interest expense	1,652	2,550	3,669	5,318
Net Interest Income	8,089	8,784	16,133	17,712
Provision For Loan Losses	400	1,050	1,900	3,300
Net Interest Income After Provision For Loan Losses	7,689	7,734	14,233	14,412
Other Income
Income from wealth management services	1,081	828	2,178	1,796
Service charges and other fees	1,058	1,125	2,100	2,215
Debit card income	530	514	1,008	1,000
Net gain on sales of securities available for sale	154	40	164	1,140
Origination fees on mortgage loans sold	184	204	473	326
Bank owned life insurance income	364	333	754	703
Other	618	520	1,300	1,061
Total other income	3,989	3,564	7,977	8,241
Other Expenses
Salaries and employee benefits	5,214	4,953	10,537	10,059
Occupancy expense	722	626	1,409	1,351
Equipment expense	674	746	1,374	1,549
Marketing expense	205	175	368	373
Professional fees	550	524	1,051	1,112
Collection expenses	56	98	102	160
Net loss on other real estate owned	747	230	707	499
Other real estate owned expenses	293	439	667	908
FDIC Deposit Insurance Assessment	694	694	1,383	1,373
Other	1,027	1,137	2,002	2,250
Total other expenses	10,182	9,622	19,600	19,634
Income Before Income Taxes	1,496	1,676	2,610	3,019
Income Tax Expense	0	1,423	0	1,549
Net Income	1,496	253	2,610	1,470
Other Comprehensive Income (Loss) - Net of Tax
Unrealized gains (losses) on securities	(8,354)	559	(8,900)	154
Reclassification adjustment for gains included in net income	(102)	(26)	(108)	(752)
Postretirement benefit liability	30	52	61	104
Total Other Comprehensive Income (Loss) - Net of Tax	(8,426)	585	(8,947)	(494)
Comprehensive Income (Loss)	$ (6,930)	$ 838	$ (6,337)	$ 976
Basic Earnings Per Common Share (in dollars per share)	$ 0.08	$ 0.01	$ 0.15	$ 0.08
Diluted Earnings Per Common Share (in dollars per share)	$ 0.08	$ 0.01	$ 0.15	$ 0.08
Common Stock Dividends Declared Per Share (in dollars per share)	$ 0	$ 0	$ 0	$ 0

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STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 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, June 30, 2013		333,500	$	18.40
Options Exercisable, June 30, 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, June 30, 2013		521,037	$	3.28
SOSARs Exercisable, June 30, 2013		323,966	$	3.98

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 $72,000 in the  second quarter of 2013 and $50,000 in the  second quarter of 2012. The total expense for equity based compensation was $145,000 in the first six months of 2013 and $90,000 in the first six months of 2012.

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EARNINGS PER SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Basic
Net profit	$ 1,496	$ 253	$ 2,610	$ 1,470
Average common shares outstanding	17,906,085	17,315,696	17,712,310	17,310,239
Earnings per common share - basic	$ 0.08	$ 0.01	$ 0.15	$ 0.08
Diluted
Net profit	$ 1,496	$ 253	$ 2,610	$ 1,470
Average common shares outstanding	17,906,085	17,315,696	17,712,310	17,310,239
Equity compensation	260,135	66,723	246,259	30,052
Average common shares outstanding - diluted	18,166,220	17,382,419	17,958,569	17,340,291
Earnings per common share - diluted	$ 0.08	$ 0.01	$ 0.15	$ 0.08

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STOCK BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 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, June 30, 2013		333,500	$	18.40
Options Exercisable, June 30, 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, June 30, 2013		521,037	$	3.28
SOSARs Exercisable, June 30, 2013		323,966	$	3.98

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INVESTMENT SECURITIES (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Investment Holdings [Line Items]
Held to Maturity, Amortized Cost	$ 36,719	$ 38,786
Held-to-maturity Securities, Unrecognized Holding Gain	628	1,380
Held-to-maturity Securities, Unrecognized Holding Loss	(340)	(36)
Held to Maturity, Estimated Market Value	37,007	40,130
Available for Sale, Amortized Cost	388,011	391,051
Available-for-sale Securities, Gross Unrealized Gain, Total	3,431	7,227
Available-for-sale Securities, Gross Unrealized Loss, Total	(14,364)	(4,511)
Available For Sale, Estimated Market Value	377,078	393,767
Obligations of U.S. Government Agencies [Member]
Investment Holdings [Line Items]
Available for Sale, Amortized Cost	242,472	222,099
Available-for-sale Securities, Gross Unrealized Gain, Total	1,702	3,442
Available-for-sale Securities, Gross Unrealized Loss, Total	(9,029)	(90)
Available For Sale, Estimated Market Value	235,145	225,451
Mortgage Backed Securities issued by U.S. Government Agencies [Member]
Investment Holdings [Line Items]
Available for Sale, Amortized Cost	105,935	127,082
Available-for-sale Securities, Gross Unrealized Gain, Total	1,112	2,826
Available-for-sale Securities, Gross Unrealized Loss, Total	(1,044)	(90)
Available For Sale, Estimated Market Value	106,003	129,818
Obligations of States and Political Subdivisions [Member]
Investment Holdings [Line Items]
Held to Maturity, Amortized Cost	36,219	38,286
Held-to-maturity Securities, Unrecognized Holding Gain	628	1,380
Held-to-maturity Securities, Unrecognized Holding Loss	(340)	(36)
Held to Maturity, Estimated Market Value	36,507	39,630
Available for Sale, Amortized Cost	15,542	17,804
Available-for-sale Securities, Gross Unrealized Gain, Total	346	630
Available-for-sale Securities, Gross Unrealized Loss, Total	(124)	(64)
Available For Sale, Estimated Market Value	15,764	18,370
Trust Preferred CDO Securities [Member]
Investment Holdings [Line Items]
Available for Sale, Amortized Cost	9,517	9,525
Available-for-sale Securities, Gross Unrealized Gain, Total	0	0
Available-for-sale Securities, Gross Unrealized Loss, Total	(4,002)	(4,119)
Available For Sale, Estimated Market Value	5,515	5,406
Corporate Debt Securities [Member]
Investment Holdings [Line Items]
Held to Maturity, Amortized Cost	500	500
Held-to-maturity Securities, Unrecognized Holding Gain	0	0
Held-to-maturity Securities, Unrecognized Holding Loss	0	0
Held to Maturity, Estimated Market Value	500	500
Available for Sale, Amortized Cost	11,965	11,961
Available-for-sale Securities, Gross Unrealized Gain, Total	183	156
Available-for-sale Securities, Gross Unrealized Loss, Total	(57)	(40)
Available For Sale, Estimated Market Value	12,091	12,077
Equity Securities [Member]
Investment Holdings [Line Items]
Available for Sale, Amortized Cost	2,580	2,580
Available-for-sale Securities, Gross Unrealized Gain, Total	88	173
Available-for-sale Securities, Gross Unrealized Loss, Total	(108)	(108)
Available For Sale, Estimated Market Value	$ 2,560	$ 2,645

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STOCK BASED COMPENSATION (Details Textual) (USD $)	3 Months Ended		6 Months Ended		1 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jan. 31, 2013 Executive Officer [Member] Stock Incentive Plan 2008 [Member]	Jan. 31, 2013 Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Granted, Shares			112,369		106,000	6,369
Granted, Weighted Average Exercise Price			$ 2.35		$ 1.43
Stock issued during period value ,new issues				$ 39,000		$ 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	$ 72,000	$ 50,000	$ 145,000	$ 90,000

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STOCK BASED COMPENSATION (Details 1) (USD $)	6 Months Ended
	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
SOSARs Outstanding, January 1, Shares	410,666
Granted, Shares	112,369
Exercised, Shares	1,998
Forfeited, Shares	0
SOSARs Outstanding, June 30, 2013, Shares	521,037
SOSARs Exercisable, June 30, 2013, Shares	323,966
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, June 30, 2013, Weighted Average Exercise Price	$ 3.28
SOSARs Exercisable, June 30, 2013, Weighted Average Exercise Price	$ 3.98

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Commitments to extend credit:
Standby letters of credit and financial guarantees written	$ 3,685	$ 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	52,564	59,826
Credit Card Line Of Credit [Member]
Commitments to extend credit:
Unused portion of home equity lines of credit	3,131	3,048
Home Equity Lines Of Credit [Member]
Commitments to extend credit:
Unused portion of home equity lines of credit	$ 15,631	$ 16,356

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ALLOWANCE FOR LOAN LOSSES (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Allowance For Loan Losses [Line Items]
Non accrual loans	$ 32,051	$ 31,343
Agriculture and Agricultural Real Estate [Member]
Allowance For Loan Losses [Line Items]
Non accrual loans	84	198
Commercial [Member]
Allowance For Loan Losses [Line Items]
Non accrual loans	3,029	1,578
Commercial Real Estate [Member]
Allowance For Loan Losses [Line Items]
Non accrual loans	16,233	17,950
Construction Real Estate [Member]
Allowance For Loan Losses [Line Items]
Non accrual loans	3,132	3,438
Residential Real Estate [Member]
Allowance For Loan Losses [Line Items]
Non accrual loans	9,361	7,870
Consumer and Other [Member]
Allowance For Loan Losses [Line Items]
Non accrual loans	$ 212	$ 309

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INVESTMENT SECURITIES (Details 2) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Investment Holdings [Line Items]
Less than 12 months, Aggregate Fair Value	$ 276,758	$ 61,477
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	10,399	309
12 months or longer, Aggregate Fair Value	17,526	8,489
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	4,305	4,238
Aggregate Fair Value, Total	294,284	69,966
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss, Total	14,704	4,547
Obligations of U.S. Government Agencies [Member]
Investment Holdings [Line Items]
Less than 12 months, Aggregate Fair Value	211,678	29,499
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	9,029	89
12 months or longer, Aggregate Fair Value	0	1,111
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	0	1
Aggregate Fair Value, Total	211,678	30,610
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss, Total	9,029	90
Mortgage Backed Securities issued by U.S. Government Agencies [Member]
Investment Holdings [Line Items]
Less than 12 months, Aggregate Fair Value	49,348	22,217
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	935	90
12 months or longer, Aggregate Fair Value	7,785	0
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	109	0
Aggregate Fair Value, Total	57,133	22,217
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss, Total	1,044	90
Obligations of States and Political Subdivisions [Member]
Investment Holdings [Line Items]
Less than 12 months, Aggregate Fair Value	13,787	7,801
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	378	90
12 months or longer, Aggregate Fair Value	3,794	1,540
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	86	10
Aggregate Fair Value, Total	17,581	9,341
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss, Total	464	100
Trust Preferred CDO Securities [Member]
Investment Holdings [Line Items]
Less than 12 months, Aggregate Fair Value	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	0	0
12 months or longer, Aggregate Fair Value	5,515	5,406
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	4,002	4,119
Aggregate Fair Value, Total	5,515	5,406
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss, Total	4,002	4,119
Corporate Debt Securities [Member]
Investment Holdings [Line Items]
Less than 12 months, Aggregate Fair Value	1,945	1,960
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	57	40
12 months or longer, Aggregate Fair Value	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	0	0
Aggregate Fair Value, Total	1,945	1,960
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss, Total	57	40
Equity Securities [Member]
Investment Holdings [Line Items]
Less than 12 months, Aggregate Fair Value	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Loss	0	0
12 months or longer, Aggregate Fair Value	432	432
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Loss	108	108
Aggregate Fair Value, Total	432	432
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Loss, Total	$ 108	$ 108

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ALLOWANCE FOR LOAN LOSSES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Allowance for loan losses:
Beginning Balance	$ 17,899	$ 20,481	$ 17,299	$ 20,865
Charge-offs	(1,673)	(2,370)	(3,260)	(5,202)
Recoveries	569	325	1,256	523
Provision	400	1,050	1,900	3,300
Ending balance	17,195	19,486	17,195	19,486
Ending balance individually evaluated for impairment	7,432	7,903	7,432	7,903
Ending balance collectively evaluated for impairment	9,763	11,583	9,763	11,583
Ending balance	17,195	19,486	17,195	19,486
Loans:
Ending balance individually evaluated for impairment	68,193	63,721	68,193	63,721
Ending balance collectively evaluated for impairment	547,178	603,507	547,178	603,507
Ending balance	615,371	667,228	615,371	667,228	627,249
Agriculture and Agricultural Real Estate [Member]
Allowance for loan losses:
Beginning Balance	70	69	76	64
Charge-offs	0	0	0	0
Recoveries	0	0	0	0
Provision	39	(69)	33	(64)
Ending balance	109	0	109	0
Ending balance individually evaluated for impairment	0	0	0	0
Ending balance collectively evaluated for impairment	109	0	109	0
Ending balance	109	0	109	0
Loans:
Ending balance individually evaluated for impairment	423	801	423	801
Ending balance collectively evaluated for impairment	14,421	15,369	14,421	15,369
Ending balance	14,844	16,170	14,844	16,170	12,004
Commercial [Member]
Allowance for loan losses:
Beginning Balance	2,153	2,740	2,224	2,184
Charge-offs	(199)	(166)	(402)	(262)
Recoveries	27	104	263	170
Provision	461	103	357	689
Ending balance	2,442	2,781	2,442	2,781
Ending balance individually evaluated for impairment	1,237	1,614	1,237	1,614
Ending balance collectively evaluated for impairment	1,205	1,167	1,205	1,167
Ending balance	2,442	2,781	2,442	2,781
Loans:
Ending balance individually evaluated for impairment	5,735	3,833	5,735	3,833
Ending balance collectively evaluated for impairment	66,342	61,138	66,342	61,138
Ending balance	72,077	64,971	72,077	64,971	58,194
Commercial Real Estate [Member]
Allowance for loan losses:
Beginning Balance	7,908	9,306	7,551	9,351
Charge-offs	(1,056)	(1,490)	(1,868)	(3,063)
Recoveries	226	12	290	21
Provision	478	909	1,583	2,428
Ending balance	7,556	8,737	7,556	8,737
Ending balance individually evaluated for impairment	2,648	2,476	2,648	2,476
Ending balance collectively evaluated for impairment	4,908	6,261	4,908	6,261
Ending balance	7,556	8,737	7,556	8,737
Loans:
Ending balance individually evaluated for impairment	39,176	32,496	39,176	32,496
Ending balance collectively evaluated for impairment	229,600	266,765	229,600	266,765
Ending balance	268,776	299,261	268,776	299,261	283,014
Construction Real Estate [Member]
Allowance for loan losses:
Beginning Balance	2,469	2,320	2,401	2,632
Charge-offs	(19)	(140)	(37)	(602)
Recoveries	14	105	288	142
Provision	(575)	(274)	(763)	(161)
Ending balance	1,889	2,011	1,889	2,011
Ending balance individually evaluated for impairment	1,434	1,264	1,434	1,264
Ending balance collectively evaluated for impairment	455	747	455	747
Ending balance	1,889	2,011	1,889	2,011
Loans:
Ending balance individually evaluated for impairment	6,671	7,936	6,671	7,936
Ending balance collectively evaluated for impairment	9,959	11,817	9,959	11,817
Ending balance	16,630	19,753	16,630	19,753	18,419
Residential Real Estate [Member]
Allowance for loan losses:
Beginning Balance	5,108	5,630	4,715	6,227
Charge-offs	(383)	(540)	(816)	(1,194)
Recoveries	239	53	319	103
Provision	(177)	500	569	507
Ending balance	4,787	5,643	4,787	5,643
Ending balance individually evaluated for impairment	2,005	2,478	2,005	2,478
Ending balance collectively evaluated for impairment	2,782	3,165	2,782	3,165
Ending balance	4,787	5,643	4,787	5,643
Loans:
Ending balance individually evaluated for impairment	15,826	18,432	15,826	18,432
Ending balance collectively evaluated for impairment	211,893	235,984	211,893	235,984
Ending balance	227,719	254,416	227,719	254,416	240,332
Consumer and Other [Member]
Allowance for loan losses:
Beginning Balance	191	416	332	407
Charge-offs	(16)	(34)	(137)	(81)
Recoveries	63	51	96	87
Provision	174	(119)	121	(99)
Ending balance	412	314	412	314
Ending balance individually evaluated for impairment	108	71	108	71
Ending balance collectively evaluated for impairment	304	243	304	243
Ending balance	412	314	412	314
Loans:
Ending balance individually evaluated for impairment	362	223	362	223
Ending balance collectively evaluated for impairment	14,963	12,434	14,963	12,434
Ending balance	$ 15,325	$ 12,657	$ 15,325	$ 12,657	$ 15,286

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 1) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Derivatives, Fair Value [Line Items]
Balance at January 1	$ 5,406	$ 5,467
Total realized and unrealized gains (losses) included in income	(8)	(8)
Total unrealized gains (losses) included in other comprehensive income	117	(378)
Net purchases, sales, calls and maturities	0	0
Net transfers in/out of Level 3	0	0
Balance at June 30	$ 5,515	$ 5,081

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STOCK BASED COMPENSATION (Details) (USD $)	6 Months Ended
	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options Outstanding, January 1, Shares	396,835
Granted, Shares	0
Exercised, Shares	0
Forfeited/Expired, Shares	63,335
Options Outstanding, June 30, 2013, Shares	333,500
Options Exercisable, June 30, 2013, 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, June 30, Weighted Average Exercise Price	$ 18.40
Options Exercisable, June 30, Weighted Average Exercise Price	$ 18.40

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY [Parenthetical] (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Issuance of Common Stock (in shares)		26,424
Other stock issued (In Shares)	513,045	26,424
Net of Cost (in dollars)	$ 18
SOSARs exercised, (in shares)	674

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BASIS OF PRESENTATION AND ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 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.

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LOANS

6 Months Ended

Jun. 30, 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):

	June 30,		December 31,
	2013		2012
Residential real estate loans	$	227,719	$	240,332
Commercial and Construction real estate loans		285,406		301,433
Agriculture and agricultural real estate loans		14,844		12,004
Commercial and industrial loans		72,077		58,194
Loans to individuals for household, family, and other personal expenditures		15,325		15,286
Total loans, gross	$	615,371	$	627,249
Less: Allowance for loan losses		17,195		17,299
	$	598,176	$	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):

	June 30,			December 31,
	2013			2012
Nonaccrual loans	$	32,051		$	31,343
Loans 90 days past due and accruing		12			1
Restructured loans		32,192			38,460
Total nonperforming loans	$	64,255		$	69,804
Other real estate owned		11,438			14,262
Other assets		31			32
Nonperforming investment securities		3,144			3,045
Total nonperforming assets	$	78,868		$	87,143
Nonperforming assets to total assets		6.78	%		6.87	%
Allowance for loan losses to nonperforming loans		26.76	%		24.78	%

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 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  June 30,				For the six months ended June 30,
	2013		2012		2013		2012
Basic
Net profit	$	1,496,000	$	253,000	$	2,610,000	$	1,470,000
Average common shares outstanding		17,906,085		17,315,696		17,712,310		17,310,239
Earnings per common share - basic	$	0.08	$	0.01	$	0.15	$	0.08
Diluted
Net profit	$	1,496,000	$	253,000	$	2,610,000	$	1,470,000
Average common shares outstanding		17,906,085		17,315,696		17,712,310		17,310,239
Equity compensation		260,135		66,723		246,259		30,052
Average common shares outstanding - diluted		18,166,220		17,382,419		17,958,569		17,340,291
Earnings per common share – diluted	$	0.08	$	0.01	$	0.15	$	0.08

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INVESTMENT SECURITIES (Details Textual)	Jun. 30, 2013	Dec. 31, 2012
Investment Holdings [Line Items]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Total	163	42

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LOANS (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans, gross	$ 615,371		$ 627,249	$ 667,228
Less: Allowance for loan losses	17,195	17,899	17,299	19,486	20,481	20,865
Loans - Net	598,176		609,950
Residential real estate loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans, gross	227,719		240,332
Commercial and Construction real estate loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans, gross	285,406		301,433
Agriculture and agricultural real estate loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans, gross	14,844		12,004
Commercial and industrial loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans, gross	72,077		58,194
Loans to individuals for household, family, and other personal expenditures [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans, gross	$ 15,325		$ 15,286

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ALLOWANCE FOR LOAN LOSSES (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Allowance For Loan Losses [Line Items]
Total loans, gross	$ 615,371	$ 627,249	$ 667,228
Performing [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	551,116	557,445
Nonperforming [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	64,255	69,804
Not Rated [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	164,892	177,684
Risk Grade Rating 1 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	4,415	2,977
Risk Grade Rating 2 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	1,276	2,825
Risk Grade Rating 3 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	18,937	18,564
Risk Grade Rating 4 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	262,503	250,641
Risk Grade Rating 5 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	68,555	72,749
Risk Grade Rating 6 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	94,793	101,809
Risk Grade Rating 7 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Risk Grade Rating 8 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Risk Grade Rating 9 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Agriculture and Agricultural Real Estate [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	14,844	12,004	16,170
Agriculture and Agricultural Real Estate [Member] | Performing [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	14,337	11,397
Agriculture and Agricultural Real Estate [Member] | Nonperforming [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	507	607
Agriculture and Agricultural Real Estate [Member] | Not Rated [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	198	126
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 1 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 2 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	78	48
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 3 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	865	880
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 4 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	12,055	9,907
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 5 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	1,039	322
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 6 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	609	721
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 7 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 8 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Agriculture and Agricultural Real Estate [Member] | Risk Grade Rating 9 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Commercial [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	72,077	58,194	64,971
Commercial [Member] | Performing [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	67,538	54,730
Commercial [Member] | Nonperforming [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	4,539	3,464
Commercial [Member] | Not Rated [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	3,911	4,182
Commercial [Member] | Risk Grade Rating 1 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	4,221	2,977
Commercial [Member] | Risk Grade Rating 2 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	60	114
Commercial [Member] | Risk Grade Rating 3 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	7,085	4,894
Commercial [Member] | Risk Grade Rating 4 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	37,647	29,935
Commercial [Member] | Risk Grade Rating 5 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	8,135	9,713
Commercial [Member] | Risk Grade Rating 6 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	11,018	6,379
Commercial [Member] | Risk Grade Rating 7 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Commercial [Member] | Risk Grade Rating 8 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Commercial [Member] | Risk Grade Rating 9 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Commercial Real Estate [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	268,776	283,014	299,261
Commercial Real Estate [Member] | Performing [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	234,818	246,107
Commercial Real Estate [Member] | Nonperforming [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	33,958	36,907
Commercial Real Estate [Member] | Not Rated [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Commercial Real Estate [Member] | Risk Grade Rating 1 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Commercial Real Estate [Member] | Risk Grade Rating 2 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	990	1,850
Commercial Real Estate [Member] | Risk Grade Rating 3 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	8,969	10,735
Commercial Real Estate [Member] | Risk Grade Rating 4 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	165,893	167,207
Commercial Real Estate [Member] | Risk Grade Rating 5 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	43,347	45,262
Commercial Real Estate [Member] | Risk Grade Rating 6 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	49,577	57,960
Commercial Real Estate [Member] | Risk Grade Rating 7 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Commercial Real Estate [Member] | Risk Grade Rating 8 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Commercial Real Estate [Member] | Risk Grade Rating 9 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Construction Real Estate [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	16,630	18,419	19,753
Construction Real Estate [Member] | Performing [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	9,729	10,783
Construction Real Estate [Member] | Nonperforming [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	6,901	7,636
Construction Real Estate [Member] | Not Rated [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	2,858	2,927
Construction Real Estate [Member] | Risk Grade Rating 1 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Construction Real Estate [Member] | Risk Grade Rating 2 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	82
Construction Real Estate [Member] | Risk Grade Rating 3 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	129	163
Construction Real Estate [Member] | Risk Grade Rating 4 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	3,151	3,184
Construction Real Estate [Member] | Risk Grade Rating 5 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	3,952	5,086
Construction Real Estate [Member] | Risk Grade Rating 6 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	6,540	6,977
Construction Real Estate [Member] | Risk Grade Rating 7 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Construction Real Estate [Member] | Risk Grade Rating 8 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Construction Real Estate [Member] | Risk Grade Rating 9 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Residential Real Estate [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	227,719	240,332	254,416
Residential Real Estate [Member] | Performing [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	209,886	219,753
Residential Real Estate [Member] | Nonperforming [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	17,833	20,579
Residential Real Estate [Member] | Not Rated [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	147,143	159,743
Residential Real Estate [Member] | Risk Grade Rating 1 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Residential Real Estate [Member] | Risk Grade Rating 2 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	148	731
Residential Real Estate [Member] | Risk Grade Rating 3 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	1,889	1,885
Residential Real Estate [Member] | Risk Grade Rating 4 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	43,701	40,392
Residential Real Estate [Member] | Risk Grade Rating 5 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	8,060	8,426
Residential Real Estate [Member] | Risk Grade Rating 6 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	26,778	29,155
Residential Real Estate [Member] | Risk Grade Rating 7 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Residential Real Estate [Member] | Risk Grade Rating 8 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Residential Real Estate [Member] | Risk Grade Rating 9 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Consumer and Other [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	15,325	15,286	12,657
Consumer and Other [Member] | Performing [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	14,808	14,675
Consumer and Other [Member] | Nonperforming [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	517	611
Consumer and Other [Member] | Not Rated [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	10,782	10,706
Consumer and Other [Member] | Risk Grade Rating 1 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	194	0
Consumer and Other [Member] | Risk Grade Rating 2 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Consumer and Other [Member] | Risk Grade Rating 3 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	7
Consumer and Other [Member] | Risk Grade Rating 4 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	56	16
Consumer and Other [Member] | Risk Grade Rating 5 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	4,022	3,940
Consumer and Other [Member] | Risk Grade Rating 6 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	271	617
Consumer and Other [Member] | Risk Grade Rating 7 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Consumer and Other [Member] | Risk Grade Rating 8 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	0	0
Consumer and Other [Member] | Risk Grade Rating 9 [Member]
Allowance For Loan Losses [Line Items]
Total loans, gross	$ 0	$ 0

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ALLOWANCE FOR LOAN LOSSES (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2013
Allowance For Loan Losses [Line Items]
Financing Receivable, Modifications, Pre-Modification Recorded Investment	$ 5,731,000

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details Textual) (USD $)	Jun. 30, 2013
Derivatives, Fair Value [Line Items]
Trust Preferred Securities Fair Value Disclosure	$ 5,515,000

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CONSOLIDATED BALANCE SHEETS [Parenthetical]	Jun. 30, 2013	Dec. 31, 2012
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	17,909,898	17,396,179
Common stock, shares outstanding	17,909,898	17,396,179

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FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 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 June 30, 2013 and December 31, 2012, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
June 30, 2013	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	35,484	$	35,484	$	-	$	-	$	35,484
Securities - Held to Maturity
Obligations of States and Political Subdivisions		36,219		-		36,507		-		36,507
Corporate Debt Securities		500		-		500		-		500
Securities - Available for Sale
Obligations of U.S. Government Agencies		235,145		-		235,145		-		235,145
MBS issued by U.S. Government Agencies		106,003		-		106,003		-		106,003
Obligations of States and Political Subdivisions		15,764		-		15,764		-		15,764
Trust Preferred CDO Securities		5,515		-		-		5,515		5,515
Corporate Debt Securities		12,091		-		12,091		-		12,091
Other Securities		2,560		2,128		432		-		2,560
Federal Home Loan Bank Stock		10,605		-		10,605		-		10,605
Loans Held for Sale		457		-		-		457		457
Loans, net		598,176		-		-		612,346		612,346
Accrued Interest Receivable		3,502		-		3,502		-		3,502
Financial Liabilities:
Noninterest Bearing Deposits		186,276		186,276		-		-		186,276
Interest Bearings Deposits		854,584		-		859,186		-		859,186
Borrowed funds
FHLB Advances		12,000		-		12,227		-		12,227
Repurchase Agreements		15,000		-		16,849		-		16,849
Accrued Interest Payable		205		-		205		-		205

									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		(8)		(8)
Total unrealized gains (losses) included in other comprehensive income		117		(378)
Net purchases, sales, calls and maturities		-		-
Net transfers in/out of Level 3		-		-
Balance at June 30	$	5,515	$	5,081

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 six months ended June 30, 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 $5,515,000 as of June 30, 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 June 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	68,193	$	-	$	-	$	68,193
Other Real Estate Owned	$	11,438	$	-	$	-	$	11,438

	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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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (USD $)	Total	Common Stock [Member]	Retained Earnings [Member]	Unearned Compensation [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance at Dec. 31, 2011	$ 75,711,000	$ 2,099,000	$ 72,735,000	$ (87,000)	$ 964,000
Issuance of Common Stock	39,000	39,000	0	0	0
Equity compensation	58,000	18,000	0	40,000	0
Comprehensive income:
Net income	1,470,000	0	1,470,000	0	0
Other comprehensive loss - net of tax	(494,000)	0	0	0	(494,000)
Total Comprehensive Loss	976,000
Balance at Jun. 30, 2012	76,784,000	2,156,000	74,205,000	(47,000)	470,000
Balance at Dec. 31, 2012	83,574,000	2,397,000	81,280,000	(27,000)	(76,000)
SOSARs exercised	4,000	4,000	0	0	0
Other stock issued	1,767,000	1,767,000	0	0	0
Equity compensation	67,000	55,000	0	12,000	0
Comprehensive income:
Net income	2,610,000	0	2,610,000	0	0
Other comprehensive loss - net of tax	(8,947,000)	0	0	0	(8,947,000)
Total Comprehensive Loss	(6,337,000)
Balance at Jun. 30, 2013	$ 79,075,000	$ 4,223,000	$ 83,890,000	$ (15,000)	$ (9,023,000)

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
ASSETS
Non-interest bearing	$ 17,852	$ 17,116
Interest bearing	17,632	95,391
Total cash and cash equivalents	35,484	112,507
Securities - Held to Maturity	36,719	38,786
Securities - Available for Sale	377,078	393,767
Federal Home Loan Bank stock - at cost	10,605	10,605
Loans held for sale	457	1,520
Loans	615,371	627,249
Allowance for Loan Losses	(17,195)	(17,299)
Loans - Net	598,176	609,950
Accrued interest receivable and other assets	15,392	10,037
Other Real Estate Owned	11,438	14,262
Bank Owned Life Insurance	49,780	49,111
Premises and Equipment - Net	27,543	28,050
Total assets	1,162,672	1,268,595
LIABILITIES
Non-interest bearing	186,276	183,016
Interest-bearing	854,584	865,814
Total deposits	1,040,860	1,048,830
Federal Home Loan Bank advances	12,000	107,000
Repurchase agreements	15,000	15,000
Interest payable and other liabilities	15,737	14,191
Total liabilities	1,083,597	1,185,021
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 17,909,898 and 17,396,179 shares issued and outstanding)	4,223	2,397
Retained earnings	83,890	81,280
Unearned compensation	(15)	(27)
Accumulated other comprehensive loss	(9,023)	(76)
Total stockholders' equity	79,075	83,574
Total liabilities and stockholders' equity	$ 1,162,672	$ 1,268,595

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LOANS (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans	$ 32,051	$ 31,343
Loans 90 days past due and accruing	12	1
Total nonperforming loans	615,371	627,249	667,228
Other real estate owned	11,438	14,262
Total nonperforming assets	1,162,672	1,268,595
Non Performing Assets [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Nonaccrual loans	32,051	31,343
Loans 90 days past due and accruing	12	1
Restructured loans	32,192	38,460
Total nonperforming loans	64,255	69,804
Other real estate owned	11,438	14,262
Other assets	31	32
Nonperforming investment securities	3,144	3,045
Total nonperforming assets	$ 78,868	$ 87,143
Nonperforming assets to total assets	6.78%	6.87%
Allowance for loan losses to nonperforming loans	26.76%	24.78%

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (Tables)

6 Months Ended

Jun. 30, 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
	June 30,		December 31,
	2013		2012
Commitments to extend credit:
Unused portion of commercial lines of credit	$	52,564	$	59,826
Unused portion of credit card lines of credit		3,131		3,048
Unused portion of home equity lines of credit		15,631		16,356
Standby letters of credit and financial guarantees written		3,685		3,730
All other off-balance sheet commitments		-		-

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Derivatives, Fair Value [Line Items]
Impaired Loans Fair Value Disclosure Non Recurring	$ 68,193	$ 67,249
Other Real Estate Owned Fair Value Disclosure Non Recurring	11,438	14,262
Fair Value, Inputs, Level 1 [Member]
Derivatives, Fair Value [Line Items]
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]
Derivatives, Fair Value [Line Items]
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]
Derivatives, Fair Value [Line Items]
Impaired Loans Fair Value Disclosure Non Recurring	68,193	67,249
Other Real Estate Owned Fair Value Disclosure Non Recurring	$ 11,438	$ 14,262

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INVESTMENT SECURITIES (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Investment Holdings [Line Items]
Available for Sale Amortized Cost 1 year or less	$ 1,404
Available for Sale Amortized Cost After 1 year through five years	49,327
Available for Sale Amortized Cost After 5 years through 10 years	210,973
Available for Sale Amortized Cost After 10 years	17,792
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis	279,496
Available For Sale Securities Debt Maturities Mortgage Backed Securities Amortized Cost	105,935
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	388,011
Available-for-sale Securities, Debt Maturities, Next Rolling Twelve Months, Fair Value	1,411
Available-for-sale Securities, Debt Maturities, Rolling Year Two Through Five, Fair Value	48,930
Available-for-sale Securities, Debt Maturities, Rolling Year Six Through Ten, Fair Value	204,788
Available-for-sale Securities, Debt Maturities, Rolling after Year Ten, Fair Value	13,386
Available For Sale Securities Debt Maturities Total	268,515
Available For Sale Securities Debt Maturities Mortgage Backed Securities Fair Value	106,003
Available-for-sale Securities, Debt Maturities, without Single Maturity Date, Fair Value	2,560
Available-for-sale Securities, Debt Maturities, Remainder of Fiscal Year, Fair Value	377,078
Held To Maturity Securities Debt Maturities Next Rolling Twelve Months Amortized Cost	8,005
Held To Maturity Securities Debt Maturities Next Rolling Year Two Through Five Amortized Cost	14,466
Held To Maturity Securities Debt Maturities Next Rolling Year Six Through Ten Amortized Cost	10,143
Held To Maturity Securities Debt Maturities Next Rolling Year After Ten Years Amortized Cost	4,105
Held To Maturity Debt Maturities Amortized Cost Total	36,719
Held To Maturity Securities Mortgage 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	36,719
Held-to-maturity Securities, Debt Maturities, Next Rolling Twelve Months, Fair Value	8,044
Held-to-maturity Securities, Debt Maturities, Rolling Year Two Through Five, Fair Value	14,645
Held-to-maturity Securities, Debt Maturities, Rolling Year Six Through Ten, Fair Value	10,186
Held-to-maturity Securities, Debt Maturities, Rolling after Ten Years, Fair Value	4,132
Held To Maturity Debt Maturities Total	37,007
Held To Maturity Securities Debt Maturities Mortgage 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	$ 37,007	$ 40,130

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ALLOWANCE FOR LOAN LOSSES (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Agriculture and Agricultural Real Estate [Member]
Allowance For Loan Losses [Line Items]
With no related allowance recorded, Recorded Investment	$ 423	$ 409	$ 423	$ 409
With no related allowance recorded, Unpaid Principal Balance	923	923	923	923
With no related allowance recorded, Average Recorded Investment	423	832	423	835
With no related allowance recorded, Interest Income Recognized	12	12	23	29
With an allowance recorded, Recorded Investment	0	0	0	0
With an allowance recorded, Unpaid Principal Balance	0	0	0	0
With an allowance recorded, Related Allowance	0	0	0	0
With an allowance recorded, Average Recorded Investment	0	0	0	0
With an allowance recorded, Interest Income Recognized	0	0	0	0
Total, Recorded Investment	423	409	423	409
Total, Unpaid Principal Balance	923	923	923	923
Total, Related Allowance	0	0	0	0
Total, Average Recorded Investment	423	832	423	835
Total, Interest Income Recognized	12	12	23	29
Commercial [Member]
Allowance For Loan Losses [Line Items]
With no related allowance recorded, Recorded Investment	670	2,540	670	2,540
With no related allowance recorded, Unpaid Principal Balance	844	2,961	844	2,961
With no related allowance recorded, Average Recorded Investment	788	222	807	222
With no related allowance recorded, Interest Income Recognized	9	4	16	11
With an allowance recorded, Recorded Investment	5,065	1,979	5,065	1,979
With an allowance recorded, Unpaid Principal Balance	5,212	2,157	5,212	2,157
With an allowance recorded, Related Allowance	1,237	1,316	1,237	1,316
With an allowance recorded, Average Recorded Investment	4,900	3,953	4,882	3,942
With an allowance recorded, Interest Income Recognized	54	53	116	109
Total, Recorded Investment	5,735	4,519	5,735	4,519
Total, Unpaid Principal Balance	6,056	5,118	6,056	5,118
Total, Related Allowance	1,237	1,316	1,237	1,316
Total, Average Recorded Investment	5,688	4,175	5,689	4,164
Total, Interest Income Recognized	63	57	132	120
Commercial Real Estate [Member]
Allowance For Loan Losses [Line Items]
With no related allowance recorded, Recorded Investment	17,438	17,153	17,438	17,153
With no related allowance recorded, Unpaid Principal Balance	21,549	21,317	21,549	21,317
With no related allowance recorded, Average Recorded Investment	18,556	16,951	18,798	16,278
With no related allowance recorded, Interest Income Recognized	167	240	359	333
With an allowance recorded, Recorded Investment	21,738	19,318	21,738	19,318
With an allowance recorded, Unpaid Principal Balance	28,543	26,508	28,543	26,508
With an allowance recorded, Related Allowance	2,648	2,084	2,648	2,084
With an allowance recorded, Average Recorded Investment	23,510	18,910	23,646	18,989
With an allowance recorded, Interest Income Recognized	253	186	490	370
Total, Recorded Investment	39,176	36,471	39,176	36,471
Total, Unpaid Principal Balance	50,092	47,825	50,092	47,825
Total, Related Allowance	2,648	2,084	2,648	2,084
Total, Average Recorded Investment	42,066	35,861	42,444	35,267
Total, Interest Income Recognized	420	426	849	703
Construction Real Estate [Member]
Allowance For Loan Losses [Line Items]
With no related allowance recorded, Recorded Investment	1,649	1,007	1,649	1,007
With no related allowance recorded, Unpaid Principal Balance	2,824	1,375	2,824	1,375
With no related allowance recorded, Average Recorded Investment	2,104	1,124	2,109	1,106
With no related allowance recorded, Interest Income Recognized	12	20	47	26
With an allowance recorded, Recorded Investment	5,022	6,403	5,022	6,403
With an allowance recorded, Unpaid Principal Balance	5,871	9,060	5,871	9,060
With an allowance recorded, Related Allowance	1,434	1,820	1,434	1,820
With an allowance recorded, Average Recorded Investment	5,103	7,533	5,187	7,509
With an allowance recorded, Interest Income Recognized	68	45	122	125
Total, Recorded Investment	6,671	7,410	6,671	7,410
Total, Unpaid Principal Balance	8,695	10,435	8,695	10,435
Total, Related Allowance	1,434	1,820	1,434	1,820
Total, Average Recorded Investment	7,207	8,657	7,296	8,615
Total, Interest Income Recognized	80	65	169	151
Residential Real Estate [Member]
Allowance For Loan Losses [Line Items]
With no related allowance recorded, Recorded Investment	6,672	9,013	6,672	9,013
With no related allowance recorded, Unpaid Principal Balance	7,418	10,390	7,418	10,390
With no related allowance recorded, Average Recorded Investment	6,856	8,846	6,991	8,595
With no related allowance recorded, Interest Income Recognized	84	116	168	252
With an allowance recorded, Recorded Investment	9,154	9,038	9,154	9,038
With an allowance recorded, Unpaid Principal Balance	9,773	9,520	9,773	9,520
With an allowance recorded, Related Allowance	2,005	1,994	2,005	1,994
With an allowance recorded, Average Recorded Investment	9,459	11,767	9,646	11,699
With an allowance recorded, Interest Income Recognized	87	126	185	271
Total, Recorded Investment	15,826	18,051	15,826	18,051
Total, Unpaid Principal Balance	17,191	19,910	17,191	19,910
Total, Related Allowance	2,005	1,994	2,005	1,994
Total, Average Recorded Investment	16,315	20,613	16,637	20,294
Total, Interest Income Recognized	171	242	353	523
Consumer and Other [Member]
Allowance For Loan Losses [Line Items]
With no related allowance recorded, Recorded Investment	1	0	1	0
With no related allowance recorded, Unpaid Principal Balance	1	0	1	0
With no related allowance recorded, Average Recorded Investment	0	0	1	0
With no related allowance recorded, Interest Income Recognized	0	0	0	0
With an allowance recorded, Recorded Investment	361	389	361	389
With an allowance recorded, Unpaid Principal Balance	361	383	361	383
With an allowance recorded, Related Allowance	108	124	108	124
With an allowance recorded, Average Recorded Investment	359	227	364	225
With an allowance recorded, Interest Income Recognized	5	4	11	7
Total, Recorded Investment	362	389	362	389
Total, Unpaid Principal Balance	362	383	362	383
Total, Related Allowance	108	124	108	124
Total, Average Recorded Investment	360	227	365	225
Total, Interest Income Recognized	$ 5	$ 4	$ 11	$ 7

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ALLOWANCE FOR LOAN LOSSES (Details 5) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Allowance For Loan Losses [Line Items]
Number of Contracts	15	13	34	36
Pre-Modification Recorded Principal Balance	$ 1,244	$ 2,228	$ 4,113	$ 8,377
Post-Modification Recorded Principal Balance	1,024	2,241	3,479	6,838
Agriculture and Agricultural Real Estate [Member]
Allowance For Loan Losses [Line Items]
Number of Contracts	0	0	0	0
Pre-Modification Recorded Principal Balance	0	0	0	0
Post-Modification Recorded Principal Balance	0	0	0	0
Commercial [Member]
Allowance For Loan Losses [Line Items]
Number of Contracts	4	0	7	6
Pre-Modification Recorded Principal Balance	181	0	354	782
Post-Modification Recorded Principal Balance	139	0	311	412
Commercial Real Estate [Member]
Allowance For Loan Losses [Line Items]
Number of Contracts	4	2	7	9
Pre-Modification Recorded Principal Balance	586	264	2,047	2,403
Post-Modification Recorded Principal Balance	575	264	1,988	2,091
Construction Real Estate [Member]
Allowance For Loan Losses [Line Items]
Number of Contracts	0	0	0	5
Pre-Modification Recorded Principal Balance	0	0	0	2,686
Post-Modification Recorded Principal Balance	0	0	0	2,631
Residential Real Estate [Member]
Allowance For Loan Losses [Line Items]
Number of Contracts	5	11	16	14
Pre-Modification Recorded Principal Balance	460	1,964	1,446	2,479
Post-Modification Recorded Principal Balance	297	1,964	1,155	1,678
Consumer and Other [Member]
Allowance For Loan Losses [Line Items]
Number of Contracts	2	0	4	2
Pre-Modification Recorded Principal Balance	17	0	266	27
Post-Modification Recorded Principal Balance	$ 13	$ 13	$ 25	$ 26

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INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 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 June 30, 2013 and December 31, 2012 (000’s omitted):

	Held to Maturity
	June 30, 2013
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	36,219	$	628	$	(340)	$	36,507
Corporate Debt Securities		500		-		-		500
	$	36,719	$	628	$	(340)	$	37,007

	Available for Sale
	June 30, 2013
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Obligations of U.S. Government Agencies	$	242,472	$	1,702	$	(9,029)	$	235,145
Mortgage Backed Securities issued by U.S. Government Agencies		105,935		1,112		(1,044)		106,003
Obligations of States and Political Subdivisions		15,542		346		(124)		15,764
Trust Preferred CDO Securities		9,517		-		(4,002)		5,515
Corporate Debt Securities		11,965		183		(57)		12,091
Equity Securities		2,580		88		(108)		2,560
	$	388,011	$	3,431	$	(14,364)	$	377,078

	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 June 30, 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	$	8,005	$	8,044	$	1,404	$	1,411
After 1 year through five years		14,466		14,645		49,327		48,930
After 5 years through 10 years		10,143		10,186		210,973		204,788
After 10 years		4,105		4,132		17,792		13,386
Total		36,719		37,007		279,496		268,515
Mortgage Backed Securities		-		-		105,935		106,003
Securities with no stated maturity		-		-		2,580		2,560
Total	$	36,719	$	37,007	$	388,011	$	377,078

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 June 30, 2013 and December 31, 2012.

	June 30, 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	$	211,678	$	9,029	$	-	$	-	$	211,678	$	9,029
Mortgage Backed Securities issued by U.S. Government Agencies		49,348		935		7,785		109		57,133		1,044
Obligations of States and Political Subdivisions		13,787		378		3,794		86		17,581		464
Trust Preferred CDO Securities		-		-		5,515		4,002		5,515		4,002
Corporate Debt Securities		1,945		57		-		-		1,945		57
Equity Securities		-		-		432		108		432		108
	$	276,758	$	10,399	$	17,526	$	4,305	$	294,284	$	14,704

	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 June 30, 2013. As of June 30, 2013 and December 31, 2012, there were 163 and 42 securities in an unrealized loss position, respectively.

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 to 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, 2012, and 2013 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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LOANS (Details Textual) (USD $)	Jun. 30, 2013
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans and Leases Receivable, Related Parties	$ 250,000

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012	Dec. 31, 2011
Financial Assets:
Cash and due from banks	$ 35,484	$ 112,507	$ 85,793	$ 75,995
Securities - Held to Maturity	36,719	38,786
Securities - Available for Sale	377,078	393,767
Federal Home Loan Bank Stock	10,605	10,605
Loans held for sale	457	1,520
Loans - Net	598,176	609,950
Accrued Interest Receivable	3,502	3,457
Cash and Cash Equivalents, Fair Value Disclosure	35,484	112,507
Securities - Available for Sale, Fair Value Disclosure	377,078	393,767
Federal Home Loan Bank Stock, Fair Value Disclosure	10,605	10,605
Loans Held for Sale, Fair Value Disclosure	457	1,520
Loans Receivable, Fair Value Disclosure	612,346	627,171
Accrued Interest Receivable, Fair Value Disclosure	3,502	3,457
Financial Liabilities:
Non-interest bearing	186,276	183,016
Interest Bearings Deposits	854,584	865,814
Accrued Interest Payable	205	353
Noninterest Bearing Deposits, Fair Value Disclosure	186,276	183,016
Interest Bearings Deposits, Fair Value Disclosure	859,186	872,070
Accrued Interest Payable Fair Value Disclosure	205	353
Obligations Of U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale	235,145	225,451
Securities - Available for Sale, Fair Value Disclosure	235,145	225,451
Mortgage Backed Securities Issued By U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale	106,003	129,818
Securities - Available for Sale, Fair Value Disclosure	106,003	129,818
Obligations Of States and Political Subdivisions [Member]
Financial Assets:
Securities - Held to Maturity	36,219	38,286
Securities - Available for Sale	15,764	18,370
Securities - Held to Maturity, Fair Value Disclosure	36,507	40,130
Securities - Available for Sale, Fair Value Disclosure	15,764	18,370
Trust Preferred CDO Securities [Member]
Financial Assets:
Securities - Available for Sale	5,515	5,406
Securities - Available for Sale, Fair Value Disclosure	5,515	5,406
Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity	500	500
Securities - Available for Sale	12,091	12,077
Securities - Held to Maturity, Fair Value Disclosure	500	500
Securities - Available for Sale, Fair Value Disclosure	12,091	12,077
Other Securities [Member]
Financial Assets:
Securities - Available for Sale	2,560	2,645
Securities - Available for Sale, Fair Value Disclosure	2,560	2,645
Fhlb Advances [Member]
Financial Liabilities:
Borrowed Funds	12,000	107,000
Borrowed Funds Fair Value Disclosure	12,227	107,785
Repurchase Agreements [Member]
Financial Liabilities:
Borrowed Funds	15,000	15,000
Borrowed Funds Fair Value Disclosure	16,849	17,141
Fair Value, Inputs, Level 1 [Member]
Financial Assets:
Cash and Cash Equivalents, Fair Value Disclosure	35,484	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	186,276	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 - Available for Sale	0	0
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Mortgage Backed Securities Issued By U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale	0	0
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 - Available for Sale	0	0
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	0	0
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Available for Sale	0	0
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	2,128	2,213
Securities - Available for Sale, Fair Value Disclosure	2,128	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	3,502	3,457
Financial Liabilities:
Noninterest Bearing Deposits, Fair Value Disclosure	0	0
Interest Bearings Deposits, Fair Value Disclosure	859,186	872,070
Accrued Interest Payable Fair Value Disclosure	205	353
Fair Value, Inputs, Level 2 [Member] | Obligations Of U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale	235,145	225,451
Securities - Available for Sale, Fair Value Disclosure	235,145	225,451
Fair Value, Inputs, Level 2 [Member] | Mortgage Backed Securities Issued By U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale	106,003	129,818
Securities - Available for Sale, Fair Value Disclosure	106,003	129,818
Fair Value, Inputs, Level 2 [Member] | Obligations Of States and Political Subdivisions [Member]
Financial Assets:
Securities - Available for Sale	15,764	18,370
Securities - Held to Maturity, Fair Value Disclosure	36,507	40,130
Securities - Available for Sale, Fair Value Disclosure	15,764	18,370
Fair Value, Inputs, Level 2 [Member] | Trust Preferred CDO Securities [Member]
Financial Assets:
Securities - Available for Sale	0	0
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Available for Sale	12,091	12,077
Securities - Held to Maturity, Fair Value Disclosure	500	500
Securities - Available for Sale, Fair Value Disclosure	12,091	12,077
Fair Value, Inputs, Level 2 [Member] | Other Securities [Member]
Financial Assets:
Securities - Available for Sale	432	432
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	12,227	107,785
Fair Value, Inputs, Level 2 [Member] | Repurchase Agreements [Member]
Financial Liabilities:
Borrowed Funds Fair Value Disclosure	16,849	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	457	1,520
Loans Receivable, Fair Value Disclosure	612,346	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 - Available for Sale	0	0
Securities - Available for Sale, Fair Value Disclosure	0	0
Fair Value, Inputs, Level 3 [Member] | Mortgage Backed Securities Issued By U.S. Government Agencies [Member]
Financial Assets:
Securities - Available for Sale	0	0
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 - Available for Sale	0	0
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	5,515	5,406
Securities - Available for Sale, Fair Value Disclosure	5,515	5,406
Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Available for Sale	0	0
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	0	0
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

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BASIS OF PRESENTATION AND ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 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

6 Months Ended

Jun. 30, 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 and six months ended June 30, 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 June 30, 2013
Beginning Balance	$	70	$	2,153	$	7,908	$	2,469	$	5,108	$	191	$	17,899
Charge-offs		-		(199)		(1,056)		(19)		(383)		(16)		(1,673)
Recoveries		-		27		226		14		239		63		569
Provision		39		461		478		(575)		(177)		174		400
Ending balance	$	109	$	2,442	$	7,556	$	1,889	$	4,787	$	412	$	17,195
Allowance for loan losses: For the six months ended June 30, 2013
Beginning Balance	$	76	$	2,224	$	7,551	$	2,401	$	4,715	$	332	$	17,299
Charge-offs		-		(402)		(1,868)		(37)		(816)		(137)		(3,260)
Recoveries		-		263		290		288		319		96		1,256
Provision		33		357		1,583		(763)		569		121		1,900
Ending balance	$	109	$	2,442	$	7,556	$	1,889	$	4,787	$	412	$	17,195
Allowance for loan losses as of June 30, 2013
Ending balance individually evaluated for impairment	$	-	$	1,237	$	2,648	$	1,434	$	2,005	$	108	$	7,432
Ending balance collectively evaluated for impairment		109		1,205		4,908		455		2,782		304		9,763
Ending balance	$	109	$	2,442	$	7,556	$	1,889	$	4,787	$	412	$	17,195
Loans as of June 30, 2013
Ending balance individually evaluated for impairment	$	423	$	5,735	$	39,176	$	6,671	$	15,826	$	362	$	68,193
Ending balance collectively evaluated for impairment		14,421		66,342		229,600		9,959		211,893		14,963		547,178
Ending balance	$	14,844	$	72,077	$	268,776	$	16,630	$	227,719	$	15,325	$	615,371

Activity in the allowance for loan losses during the three and six months ended June 30, 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 June 30, 2012
Beginning Balance	$	69	$	2,740	$	9,306	$	2,320	$	5,630	$	416	$	20,481
Charge-offs		-		(166)		(1,490)		(140)		(540)		(34)		(2,370)
Recoveries		-		104		12		105		53		51		325
Provision		(69)		103		909		(274)		500		(119)		1,050
Ending balance	$	-	$	2,781	$	8,737	$	2,011	$	5,643	$	314	$	19,486
Allowance for loan losses: For the six months ended June 30, 2012
Beginning Balance	$	64	$	2,184	$	9,351	$	2,632	$	6,227	$	407	$	20,865
Charge-offs		-		(262)		(3,063)		(602)		(1,194)		(81)		(5,202)
Recoveries		-		170		21		142		103		87		523
Provision		(64)		689		2,428		(161)		507		(99)		3,300
Ending balance	$	-	$	2,781	$	8,737	$	2,011	$	5,643	$	314	$	19,486
Allowance for loan losses as of June 30, 2012
Ending balance individually evaluated for impairment	$	-	$	1,614	$	2,476	$	1,264	$	2,478	$	71	$	7,903
Ending balance collectively evaluated for impairment		-		1,167		6,261		747		3,165		243		11,583
Ending balance	$	-	$	2,781	$	8,737	$	2,011	$	5,643	$	314	$	19,486
Loans as of June 30, 2012
Ending balance individually evaluated for impairment	$	801	$	3,833	$	32,496	$	7,936	$	18,432	$	223	$	63,721
Ending balance collectively evaluated for impairment		15,369		61,138		266,765		11,817		235,984		12,434		603,507
Ending balance	$	16,170	$	64,971	$	299,261	$	19,753	$	254,416	$	12,657	$	667,228

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 June 30, 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	$	198	$	3,911	$	-	$	2,858	$	147,143	$	10,782	$	164,892
1		-		4,221		-		-		-		194		4,415
2		78		60		990		-		148		-		1,276
3		865		7,085		8,969		129		1,889		-		18,937
4		12,055		37,647		165,893		3,151		43,701		56		262,503
5		1,039		8,135		43,347		3,952		8,060		4,022		68,555
6		609		11,018		49,577		6,540		26,778		271		94,793
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	14,844	$	72,077	$	268,776	$	16,630	$	227,719	$	15,325	$	615,371
Performing	$	14,337	$	67,538	$	234,818	$	9,729	$	209,886	$	14,808	$	551,116
Nonperforming		507		4,539		33,958		6,901		17,833		517		64,255
Total	$	14,844	$	72,077	$	268,776	$	16,630	$	227,719	$	15,325	$	615,371

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 June 30, 2013 and December 31, 2012 (000s omitted):

June 30, 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	$	511	$	-	$	84	$	595	$	14,249	$	14,844	$	-
Commercial		829		15		674		1,518		70,559		72,077		12
Commercial Real Estate		1,601		1,399		8,386		11,386		257,390		268,776		-
Construction Real Estate		356		34		1,937		2,327		14,303		16,630		-
Residential Real Estate		3,878		524		3,553		7,955		219,764		227,719		-
Consumer and Other		21		114		54		189		15,136		15,325		-
Total	$	7,196	$	2,086	$	14,688	$	23,970	$	591,401	$	615,371	$	12

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 June 30, 2013 and December 31, 2012 (000s omitted):

	June 30, 2013		December 31, 2012
Agriculture and Agricultural Real Estate	$	84	$	198
Commercial		3,029		1,578
Commercial Real Estate		16,233		17,950
Construction Real Estate		3,132		3,438
Residential Real Estate		9,361		7,870
Consumer and Other		212		309
Total	$	32,051	$	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 June 30, 2013 and 2012 (000s omitted):

June 30, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		Interest Income Recognized in the Three Months Ended		Average Recorded Investment for the Six Months Ended		Interest Income Recognized in the Six Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	423	$	923	$	-	$	423	$	12	$	423	$	23
Commercial		670		844		-		788		9		807		16
Commercial Real Estate		17,438		21,549		-		18,556		167		18,798		359
Construction Real Estate		1,649		2,824		-		2,104		12		2,109		47
Residential Real Estate		6,672		7,418		-		6,856		84		6,991		168
Consumer and Other		1		1		-		-		-		1		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-		-		-
Commercial		5,065		5,212		1,237		4,900		54		4,882		116
Commercial Real Estate		21,738		28,543		2,648		23,510		253		23,646		490
Construction Real Estate		5,022		5,871		1,434		5,103		68		5,187		122
Residential Real Estate		9,154		9,773		2,005		9,459		87		9,646		185
Consumer and Other		361		361		108		359		5		364		11
Total:
Agriculture and Agricultural Real Estate	$	423	$	923	$	-	$	423	$	12	$	423	$	23
Commercial		5,735		6,056		1,237		5,688		63		5,689		132
Commercial Real Estate		39,176		50,092		2,648		42,066		420		42,444		849
Construction Real Estate		6,671		8,695		1,434		7,207		80		7,296		169
Residential Real Estate		15,826		17,191		2,005		16,315		171		16,637		353
Consumer and Other		362		362		108		360		5		365		11

	Recorded Investment as of December 31, 2012		Unpaid Principal Balance as of December 31, 2012		Related Allowance as of December 31, 2012		Average Recorded Investment for the Three Months Ended June 30, 2012		Interest Income Recognized in the Three Months Ended June 30, 2012		Average Recorded Investment for the Six Months Ended June 30, 2012		Interest Income Recognized in the Six Months Ended June 30, 2012
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	832	$	12	$	835	$	29
Commercial		2,540		2,961		-		222		4		222		11
Commercial Real Estate		17,153		21,317		-		16,951		240		16,278		333
Construction Real Estate		1,007		1,375		-		1,124		20		1,106		26
Residential Real Estate		9,013		10,390		-		8,846		116		8,595		252
Consumer and Other		-		-		-		-		-		-		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-		-		-
Commercial		1,979		2,157		1,316		3,953		53		3,942		109
Commercial Real Estate		19,318		26,508		2,084		18,910		186		18,989		370
Construction Real Estate		6,403		9,060		1,820		7,533		45		7,509		125
Residential Real Estate		9,038		9,520		1,994		11,767		126		11,699		271
Consumer and Other		389		383		124		227		4		225		7
Total:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	832	$	12	$	835	$	29
Commercial		4,519		5,118		1,316		4,175		57		4,164		120
Commercial Real Estate		36,471		47,825		2,084		35,861		426		35,267		703
Construction Real Estate		7,410		10,435		1,820		8,657		65		8,615		151
Residential Real Estate		18,051		19,910		1,994		20,613		242		20,294		523
Consumer and Other		389		383		124		227		4		225		7

 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 and six month periods ended June 30, 2013 and June 30, 2012 are as follows (000s omitted from dollar amounts):

	Three months ended						Six months ended
	June 30, 2013						June 30, 2013
	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		4		181		139		7		354		311
Commercial Real Estate		4		586		575		7		2,047		1,988
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		5		460		297		16		1,446		1,155
Consumer and Other		2		17		13		4		266		25
Total		15	$	1,244	$	1,024		34	$	4,113	$	3,479

	Three months ended						Six months ended
	June 30, 2012						June 30, 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		-		-		-		6		782		412
Commercial Real Estate		2		264		264		9		2,403		2,091
Construction Real Estate		-		-		-		5		2,686		2,631
Residential Real Estate		11		1,964		1,964		14		2,479		1,678
Consumer and Other		-		-		13		2		27		26
Total		13	$	2,228	$	2,241		36	$	8,377	$	6,838

The Bank considers TDRs that become past due under the modified terms as defaulted. There were no loans that became TDRs during the six month periods ended June 30, 2013 and June 30, 2012 that subsequently defaulted during the three month periods ended June 30, 2013 and June 30, 2012, respectively.

The Company has allocated $5,731,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings at June 30, 2013. In addition, there are no commitments to lend additional amounts to borrowers that are classified as troubled debt restructurings as of June 30, 2013 and June 30, 2012.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash Flows from Operating Activities
Net Income	$ 2,610	$ 1,470
Adjustments to reconcile net income to net cash from operating activities
Provision for loan losses	1,900	3,300
Depreciation	965	990
Net amortization of investment premium and discount	978	967
Writedowns of Other Real Estate Owned	909	861
Net increase in interest payable and other liabilities	1,702	1,359
Net increase in interest receivable and other assets	(943)	(632)
Equity based compensation expense	139	90
Net gain on sale/settlement of securities	(164)	(1,140)
Increase in cash surrender value of life insurance	(669)	(703)
Net cash provided by operating activities	7,427	6,562
Cash Flows from Investing Activities
Proceeds from maturities and redemptions of investment securities held to maturity	10,132	8,656
Proceeds from maturities and redemptions of investment securities available for sale	56,804	145,582
Proceeds from sales of investment securities available for sale	32,920	15,184
Net decrease in loans	7,741	3,139
Proceeds from sales of other real estate owned	5,250	7,418
Proceeds from sales of other assets	64	99
Purchase of investment securities held to maturity	(8,065)	(3,860)
Purchase of investment securities available for sale	(87,498)	(167,926)
Purchase of bank premises and equipment	(464)	(287)
Net cash provided by investing activities	16,884	8,005
Cash Flows from Financing Activities
Net decrease in deposits	(7,970)	(4,808)
Repayment of long term debt	(135)	0
Repayment of Federal Home Loan Bank borrowings	(95,000)	0
Proceeds from issuance of common stock	1,771	39
Net cash used for financing activities	(101,334)	(4,769)
Net Increase (Decrease) in Cash and Cash Equivalents	(77,023)	9,798
Cash and Cash Equivalents at Beginning of Period	112,507	75,995
Cash and Cash Equivalents at End of Period	35,484	85,793
Supplemental Cash Flow Information
Cash paid for interest	3,817	5,378
Cash paid for federal income taxes	0	0
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	3,117	4,031
Transfer of loans to other assets	$ 79	$ 57

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ALLOWANCE FOR LOAN LOSSES (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2012
Allowance For Loan Losses [Line Items]
30-59 Days Past Due	$ 7,196	$ 9,011
60-89 Days Past Due	2,086	3,425
>90 Days Past Due	14,688	17,747
Total Past Due	23,970	30,183
Current	591,401	597,066
Total nonperforming loans	615,371	627,249	667,228
Recorded Investment >90 Days Past Due and Accruing	12	1
Agriculture and Agricultural Real Estate [Member]
Allowance For Loan Losses [Line Items]
30-59 Days Past Due	511	208
60-89 Days Past Due	0	0
>90 Days Past Due	84	145
Total Past Due	595	353
Current	14,249	11,651
Total nonperforming loans	14,844	12,004	16,170
Recorded Investment >90 Days Past Due and Accruing	0	0
Commercial [Member]
Allowance For Loan Losses [Line Items]
30-59 Days Past Due	829	927
60-89 Days Past Due	15	19
>90 Days Past Due	674	1,100
Total Past Due	1,518	2,046
Current	70,559	56,148
Total nonperforming loans	72,077	58,194	64,971
Recorded Investment >90 Days Past Due and Accruing	12	1
Commercial Real Estate [Member]
Allowance For Loan Losses [Line Items]
30-59 Days Past Due	1,601	1,789
60-89 Days Past Due	1,399	930
>90 Days Past Due	8,386	11,350
Total Past Due	11,386	14,069
Current	257,390	268,945
Total nonperforming loans	268,776	283,014	299,261
Recorded Investment >90 Days Past Due and Accruing	0	0
Construction Real Estate [Member]
Allowance For Loan Losses [Line Items]
30-59 Days Past Due	356	127
60-89 Days Past Due	34	1,437
>90 Days Past Due	1,937	1,867
Total Past Due	2,327	3,431
Current	14,303	14,988
Total nonperforming loans	16,630	18,419	19,753
Recorded Investment >90 Days Past Due and Accruing	0	0
Residential Real Estate [Member]
Allowance For Loan Losses [Line Items]
30-59 Days Past Due	3,878	5,738
60-89 Days Past Due	524	978
>90 Days Past Due	3,553	3,121
Total Past Due	7,955	9,837
Current	219,764	230,495
Total nonperforming loans	227,719	240,332	254,416
Recorded Investment >90 Days Past Due and Accruing	0	0
Consumer and Other [Member]
Allowance For Loan Losses [Line Items]
30-59 Days Past Due	21	222
60-89 Days Past Due	114	61
>90 Days Past Due	54	164
Total Past Due	189	447
Current	15,136	14,839
Total nonperforming loans	15,325	15,286	12,657
Recorded Investment >90 Days Past Due and Accruing	$ 0	$ 0

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LOANS (Tables)

6 Months Ended

Jun. 30, 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):

	June 30,		December 31,
	2013		2012
Residential real estate loans	$	227,719	$	240,332
Commercial and Construction real estate loans		285,406		301,433
Agriculture and agricultural real estate loans		14,844		12,004
Commercial and industrial loans		72,077		58,194
Loans to individuals for household, family, and other personal expenditures		15,325		15,286
Total loans, gross	$	615,371	$	627,249
Less: Allowance for loan losses		17,195		17,299
	$	598,176	$	609,950

Schedule Of Non Performing Assets [Table Text Block]

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

	June 30,			December 31,
	2013			2012
Nonaccrual loans	$	32,051		$	31,343
Loans 90 days past due and accruing		12			1
Restructured loans		32,192			38,460
Total nonperforming loans	$	64,255		$	69,804
Other real estate owned		11,438			14,262
Other assets		31			32
Nonperforming investment securities		3,144			3,045
Total nonperforming assets	$	78,868		$	87,143
Nonperforming assets to total assets		6.78	%		6.87	%
Allowance for loan losses to nonperforming loans		26.76	%		24.78	%

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

6 Months Ended

Jun. 30, 2013

Fair Value Off Balance Sheet Risk [Abstract]

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

9. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

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

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

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

	Contractual Amount
	June 30,		December 31,
	2013		2012
Commitments to extend credit:
Unused portion of commercial lines of credit	$	52,564	$	59,826
Unused portion of credit card lines of credit		3,131		3,048
Unused portion of home equity lines of credit		15,631		16,356
Standby letters of credit and financial guarantees written		3,685		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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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2013 and December 31, 2012, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
June 30, 2013	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	35,484	$	35,484	$	-	$	-	$	35,484
Securities - Held to Maturity
Obligations of States and Political Subdivisions		36,219		-		36,507		-		36,507
Corporate Debt Securities		500		-		500		-		500
Securities - Available for Sale
Obligations of U.S. Government Agencies		235,145		-		235,145		-		235,145
MBS issued by U.S. Government Agencies		106,003		-		106,003		-		106,003
Obligations of States and Political Subdivisions		15,764		-		15,764		-		15,764
Trust Preferred CDO Securities		5,515		-		-		5,515		5,515
Corporate Debt Securities		12,091		-		12,091		-		12,091
Other Securities		2,560		2,128		432		-		2,560
Federal Home Loan Bank Stock		10,605		-		10,605		-		10,605
Loans Held for Sale		457		-		-		457		457
Loans, net		598,176		-		-		612,346		612,346
Accrued Interest Receivable		3,502		-		3,502		-		3,502
Financial Liabilities:
Noninterest Bearing Deposits		186,276		186,276		-		-		186,276
Interest Bearings Deposits		854,584		-		859,186		-		859,186
Borrowed funds
FHLB Advances		12,000		-		12,227		-		12,227
Repurchase Agreements		15,000		-		16,849		-		16,849
Accrued Interest Payable		205		-		205		-		205

									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		(8)		(8)
Total unrealized gains (losses) included in other comprehensive income		117		(378)
Net purchases, sales, calls and maturities		-		-
Net transfers in/out of Level 3		-		-
Balance at June 30	$	5,515	$	5,081

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 June 30, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Impaired loans	$	68,193	$	-	$	-	$	68,193
Other Real Estate Owned	$	11,438	$	-	$	-	$	11,438

	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

XML

ALLOWANCE FOR LOAN LOSSES (Tables)

6 Months Ended

Jun. 30, 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 and six months ended June 30, 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 June 30, 2013
Beginning Balance	$	70	$	2,153	$	7,908	$	2,469	$	5,108	$	191	$	17,899
Charge-offs		-		(199)		(1,056)		(19)		(383)		(16)		(1,673)
Recoveries		-		27		226		14		239		63		569
Provision		39		461		478		(575)		(177)		174		400
Ending balance	$	109	$	2,442	$	7,556	$	1,889	$	4,787	$	412	$	17,195
Allowance for loan losses: For the six months ended June 30, 2013
Beginning Balance	$	76	$	2,224	$	7,551	$	2,401	$	4,715	$	332	$	17,299
Charge-offs		-		(402)		(1,868)		(37)		(816)		(137)		(3,260)
Recoveries		-		263		290		288		319		96		1,256
Provision		33		357		1,583		(763)		569		121		1,900
Ending balance	$	109	$	2,442	$	7,556	$	1,889	$	4,787	$	412	$	17,195
Allowance for loan losses as of June 30, 2013
Ending balance individually evaluated for impairment	$	-	$	1,237	$	2,648	$	1,434	$	2,005	$	108	$	7,432
Ending balance collectively evaluated for impairment		109		1,205		4,908		455		2,782		304		9,763
Ending balance	$	109	$	2,442	$	7,556	$	1,889	$	4,787	$	412	$	17,195
Loans as of June 30, 2013
Ending balance individually evaluated for impairment	$	423	$	5,735	$	39,176	$	6,671	$	15,826	$	362	$	68,193
Ending balance collectively evaluated for impairment		14,421		66,342		229,600		9,959		211,893		14,963		547,178
Ending balance	$	14,844	$	72,077	$	268,776	$	16,630	$	227,719	$	15,325	$	615,371

Activity in the allowance for loan losses during the three and six months ended June 30, 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 June 30, 2012
Beginning Balance	$	69	$	2,740	$	9,306	$	2,320	$	5,630	$	416	$	20,481
Charge-offs		-		(166)		(1,490)		(140)		(540)		(34)		(2,370)
Recoveries		-		104		12		105		53		51		325
Provision		(69)		103		909		(274)		500		(119)		1,050
Ending balance	$	-	$	2,781	$	8,737	$	2,011	$	5,643	$	314	$	19,486
Allowance for loan losses: For the six months ended June 30, 2012
Beginning Balance	$	64	$	2,184	$	9,351	$	2,632	$	6,227	$	407	$	20,865
Charge-offs		-		(262)		(3,063)		(602)		(1,194)		(81)		(5,202)
Recoveries		-		170		21		142		103		87		523
Provision		(64)		689		2,428		(161)		507		(99)		3,300
Ending balance	$	-	$	2,781	$	8,737	$	2,011	$	5,643	$	314	$	19,486
Allowance for loan losses as of June 30, 2012
Ending balance individually evaluated for impairment	$	-	$	1,614	$	2,476	$	1,264	$	2,478	$	71	$	7,903
Ending balance collectively evaluated for impairment		-		1,167		6,261		747		3,165		243		11,583
Ending balance	$	-	$	2,781	$	8,737	$	2,011	$	5,643	$	314	$	19,486
Loans as of June 30, 2012
Ending balance individually evaluated for impairment	$	801	$	3,833	$	32,496	$	7,936	$	18,432	$	223	$	63,721
Ending balance collectively evaluated for impairment		15,369		61,138		266,765		11,817		235,984		12,434		603,507
Ending balance	$	16,170	$	64,971	$	299,261	$	19,753	$	254,416	$	12,657	$	667,228

Financing Receivable Credit Quality Indicators [Table Text Block]

The portfolio segments in each credit risk grade as of June 30, 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	$	198	$	3,911	$	-	$	2,858	$	147,143	$	10,782	$	164,892
1		-		4,221		-		-		-		194		4,415
2		78		60		990		-		148		-		1,276
3		865		7,085		8,969		129		1,889		-		18,937
4		12,055		37,647		165,893		3,151		43,701		56		262,503
5		1,039		8,135		43,347		3,952		8,060		4,022		68,555
6		609		11,018		49,577		6,540		26,778		271		94,793
7		-		-		-		-		-		-		-
8		-		-		-		-		-		-		-
9		-		-		-		-		-		-		-
Total	$	14,844	$	72,077	$	268,776	$	16,630	$	227,719	$	15,325	$	615,371
Performing	$	14,337	$	67,538	$	234,818	$	9,729	$	209,886	$	14,808	$	551,116
Nonperforming		507		4,539		33,958		6,901		17,833		517		64,255
Total	$	14,844	$	72,077	$	268,776	$	16,630	$	227,719	$	15,325	$	615,371

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 June 30, 2013 and December 31, 2012 (000s omitted):

June 30, 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	$	511	$	-	$	84	$	595	$	14,249	$	14,844	$	-
Commercial		829		15		674		1,518		70,559		72,077		12
Commercial Real Estate		1,601		1,399		8,386		11,386		257,390		268,776		-
Construction Real Estate		356		34		1,937		2,327		14,303		16,630		-
Residential Real Estate		3,878		524		3,553		7,955		219,764		227,719		-
Consumer and Other		21		114		54		189		15,136		15,325		-
Total	$	7,196	$	2,086	$	14,688	$	23,970	$	591,401	$	615,371	$	12

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 June 30, 2013 and December 31, 2012 (000s omitted):

	June 30, 2013		December 31, 2012
Agriculture and Agricultural Real Estate	$	84	$	198
Commercial		3,029		1,578
Commercial Real Estate		16,233		17,950
Construction Real Estate		3,132		3,438
Residential Real Estate		9,361		7,870
Consumer and Other		212		309
Total	$	32,051	$	31,343

Impaired Financing Receivables [Table Text Block]

The following is a summary of impaired loans as of June 30, 2013 and 2012 (000s omitted):

June 30, 2013	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		Interest Income Recognized in the Three Months Ended		Average Recorded Investment for the Six Months Ended		Interest Income Recognized in the Six Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	423	$	923	$	-	$	423	$	12	$	423	$	23
Commercial		670		844		-		788		9		807		16
Commercial Real Estate		17,438		21,549		-		18,556		167		18,798		359
Construction Real Estate		1,649		2,824		-		2,104		12		2,109		47
Residential Real Estate		6,672		7,418		-		6,856		84		6,991		168
Consumer and Other		1		1		-		-		-		1		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-		-		-
Commercial		5,065		5,212		1,237		4,900		54		4,882		116
Commercial Real Estate		21,738		28,543		2,648		23,510		253		23,646		490
Construction Real Estate		5,022		5,871		1,434		5,103		68		5,187		122
Residential Real Estate		9,154		9,773		2,005		9,459		87		9,646		185
Consumer and Other		361		361		108		359		5		364		11
Total:
Agriculture and Agricultural Real Estate	$	423	$	923	$	-	$	423	$	12	$	423	$	23
Commercial		5,735		6,056		1,237		5,688		63		5,689		132
Commercial Real Estate		39,176		50,092		2,648		42,066		420		42,444		849
Construction Real Estate		6,671		8,695		1,434		7,207		80		7,296		169
Residential Real Estate		15,826		17,191		2,005		16,315		171		16,637		353
Consumer and Other		362		362		108		360		5		365		11

	Recorded Investment as of December 31, 2012		Unpaid Principal Balance as of December 31, 2012		Related Allowance as of December 31, 2012		Average Recorded Investment for the Three Months Ended June 30, 2012		Interest Income Recognized in the Three Months Ended June 30, 2012		Average Recorded Investment for the Six Months Ended June 30, 2012		Interest Income Recognized in the Six Months Ended June 30, 2012
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	832	$	12	$	835	$	29
Commercial		2,540		2,961		-		222		4		222		11
Commercial Real Estate		17,153		21,317		-		16,951		240		16,278		333
Construction Real Estate		1,007		1,375		-		1,124		20		1,106		26
Residential Real Estate		9,013		10,390		-		8,846		116		8,595		252
Consumer and Other		-		-		-		-		-		-		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-		-		-
Commercial		1,979		2,157		1,316		3,953		53		3,942		109
Commercial Real Estate		19,318		26,508		2,084		18,910		186		18,989		370
Construction Real Estate		6,403		9,060		1,820		7,533		45		7,509		125
Residential Real Estate		9,038		9,520		1,994		11,767		126		11,699		271
Consumer and Other		389		383		124		227		4		225		7
Total:
Agriculture and Agricultural Real Estate	$	409	$	923	$	-	$	832	$	12	$	835	$	29
Commercial		4,519		5,118		1,316		4,175		57		4,164		120
Commercial Real Estate		36,471		47,825		2,084		35,861		426		35,267		703
Construction Real Estate		7,410		10,435		1,820		8,657		65		8,615		151
Residential Real Estate		18,051		19,910		1,994		20,613		242		20,294		523
Consumer and Other		389		383		124		227		4		225		7

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

Loans that have been classified as TDRs during the three and six month periods ended June 30, 2013 and June 30, 2012 are as follows (000s omitted from dollar amounts):

	Three months ended						Six months ended
	June 30, 2013						June 30, 2013
	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		4		181		139		7		354		311
Commercial Real Estate		4		586		575		7		2,047		1,988
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		5		460		297		16		1,446		1,155
Consumer and Other		2		17		13		4		266		25
Total		15	$	1,244	$	1,024		34	$	4,113	$	3,479

	Three months ended						Six months ended
	June 30, 2012						June 30, 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		-		-		-		6		782		412
Commercial Real Estate		2		264		264		9		2,403		2,091
Construction Real Estate		-		-		-		5		2,686		2,631
Residential Real Estate		11		1,964		1,964		14		2,479		1,678
Consumer and Other		-		-		13		2		27		26
Total		13	$	2,228	$	2,241		36	$	8,377	$	6,838

XML

Document And Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 14, 2013
Document Information [Line Items]
Entity Registrant Name	MBT FINANCIAL CORP
Entity Central Index Key	0001118237
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Trading Symbol	MBTF
Entity Common Stock, Shares Outstanding		17,913,162
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2013

XML

INVESTMENT SECURITIES (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2013 and December 31, 2012 (000’s omitted):

	Held to Maturity
	June 30, 2013
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	36,219	$	628	$	(340)	$	36,507
Corporate Debt Securities		500		-		-		500
	$	36,719	$	628	$	(340)	$	37,007

	Available for Sale
	June 30, 2013
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Obligations of U.S. Government Agencies	$	242,472	$	1,702	$	(9,029)	$	235,145
Mortgage Backed Securities issued by U.S. Government Agencies		105,935		1,112		(1,044)		106,003
Obligations of States and Political Subdivisions		15,542		346		(124)		15,764
Trust Preferred CDO Securities		9,517		-		(4,002)		5,515
Corporate Debt Securities		11,965		183		(57)		12,091
Equity Securities		2,580		88		(108)		2,560
	$	388,011	$	3,431	$	(14,364)	$	377,078

	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 June 30, 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	$	8,005	$	8,044	$	1,404	$	1,411
After 1 year through five years		14,466		14,645		49,327		48,930
After 5 years through 10 years		10,143		10,186		210,973		204,788
After 10 years		4,105		4,132		17,792		13,386
Total		36,719		37,007		279,496		268,515
Mortgage Backed Securities		-		-		105,935		106,003
Securities with no stated maturity		-		-		2,580		2,560
Total	$	36,719	$	37,007	$	388,011	$	377,078

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 June 30, 2013 and December 31, 2012.

	June 30, 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	$	211,678	$	9,029	$	-	$	-	$	211,678	$	9,029
Mortgage Backed Securities issued by U.S. Government Agencies		49,348		935		7,785		109		57,133		1,044
Obligations of States and Political Subdivisions		13,787		378		3,794		86		17,581		464
Trust Preferred CDO Securities		-		-		5,515		4,002		5,515		4,002
Corporate Debt Securities		1,945		57		-		-		1,945		57
Equity Securities		-		-		432		108		432		108
	$	276,758	$	10,399	$	17,526	$	4,305	$	294,284	$	14,704

	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