10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2017

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 ☑ 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 ☑ No ☐

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

Large accelerated filer ☐        Accelerated Filer ☑      

Non-accelerated filer ☐          Smaller reporting company ☐     Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐

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

As of August 9, 2017, there were 22,870,566 shares of the Company’s Common Stock outstanding.

Part I Financial Information

Item 1. Financial Statements

MBT FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

	June 30, 2017
Dollars in thousands	(Unaudited)			December 31, 2016
ASSETS
Cash and Cash Equivalents
Cash and due from banks
Non-interest bearing	$	22,425		$	18,183
Interest bearing		18,182			34,589
Total cash and cash equivalents		40,607			52,772
Interest Bearing Time Deposits in Other Banks		17,696			18,946
Securities - Held to Maturity		38,617			40,741
Securities - Available for Sale		439,612			488,067
Federal Home Loan Bank stock - at cost		4,148			4,148
Loans held for sale		899			611
Loans		682,749			652,337
Allowance for Loan Losses		(8,137	)		(8,458	)
Loans - Net		674,612			643,879
Accrued interest receivable and other assets		22,694			24,901
Other Real Estate Owned		1,502			1,634
Bank Owned Life Insurance		59,217			54,415
Premises and Equipment - Net		26,788			27,169
Total assets	$	1,326,392		$	1,357,283
LIABILITIES
Deposits:
Non-interest bearing	$	290,595		$	279,001
Interest-bearing		886,474			920,716
Total deposits		1,177,069			1,199,717
Interest payable and other liabilities		15,101			16,452
Total liabilities		1,192,170			1,216,169
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 22,870,082 and 22,777,882 shares issued and outstanding)		22,559			22,562
Retained earnings		115,453			126,079
Unearned compensation		(39	)		(4	)
Accumulated other comprehensive income (loss)		(3,751	)		(7,523	)
Total stockholders' equity		134,222			141,114
Total liabilities and stockholders' equity	$	1,326,392		$	1,357,283

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	2017			2016			2017			2016
Interest Income
Interest and fees on loans	$	7,709		$	7,179		$	15,073		$	14,214
Interest on investment securities-
Tax-exempt		306			303			616			608
Taxable		2,185			2,218			4,453			4,744
Interest on balances due from banks		101			162			210			279
Total interest income		10,301			9,862			20,352			19,845
Interest Expense
Interest on deposits		434			486			890			1,003
Interest on borrowed funds		3			132			3			308
Total interest expense		437			618			893			1,311
Net Interest Income		9,864			9,244			19,459			18,534
Provision For (Recovery Of) Loan Losses		-			(200	)		(200	)		(500	)
Net Interest Income After
Provision For Loan Losses		9,864			9,444			19,659			19,034
Other Income
Income from wealth management services		1,547			1,105			2,675			2,202
Service charges and other fees		1,046			1,016			2,060			2,024
Debit card income		748			735			1,428			1,409
Net gain on sales and redemptionsof securities available for sale		67			1,752			77			2,072
Net loss on sales of Other Real Estate Owned		(62	)		(1	)		(96	)		(57	)
Origination fees on mortgage loans sold		115			136			174			266
Bank owned life insurance income		412			362			753			717
Other		497			450			1,119			1,036
Total other income		4,370			5,555			8,190			9,669
Other Expenses
Salaries and employee benefits		5,273			5,399			10,707			11,017
Occupancy expense		682			633			1,430			1,334
Equipment expense		791			726			1,488			1,410
Marketing expense		302			286			586			545
Professional fees		620			556			1,209			1,208
EFT/ATM Expense		259			237			507			546
Other Real Estate Owned expenses		30			30			62			94
FDIC Deposit Insurance Assessment		107			191			214			360
Bonding and other insurance expense		125			214			247			336
Telephone expense		103			91			219			217
Other		716			509			1,401			1,288
Total other expenses		9,008			8,872			18,070			18,355
Income Before Income Taxes		5,226			6,127			9,779			10,348
Income Tax Expense		1,586			1,888			2,959			3,112
Net Income	$	3,640		$	4,239		$	6,820		$	7,236
Other Comprehensive Income - Net of Tax
Unrealized gains on securities		1,983			2,049			3,770			6,376
Reclassification adjustment for gains included in net income		(44	)		(1,156	)		(51	)		(1,367	)
Postretirement benefit liability		26			26			53			53
Total Other Comprehensive Income - Net of Tax		1,965			919			3,772			5,062
Comprehensive Income	$	5,605		$	5,158		$	10,592		$	12,298
Basic Earnings Per Common Share	$	0.16		$	0.19		$	0.30		$	0.32
Diluted Earnings Per Common Share	$	0.16		$	0.18		$	0.30		$	0.31
Dividends Declared Per Share of Common Stock	$	0.05		$	0.03		$	0.80		$	0.56

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 Stock					Retained			Unearned			Comprehensive
Dollars in thousands	Shares		Amount			Earnings			Compensation			Income (Loss)			Total
Balance - January 1, 2017		22,777,882	$	22,562		$	126,079		$	(4	)	$	(7,523	)	$	141,114
Repurchase of Common Stock		-		-			-			-			-			-
Issuance of Common Stock
SOSARs exercised, net of shares redeemed for taxes		63,677		(250	)		-			-			-			(250	)
Restricted stock awards, net of shares redeemed for taxes		6,000		65			-			(65	)		-			-
Employee Stock Purchase Plan and other stock issued		22,523		243			-			-			-			243
Tax benefit from exercise of options		-		-			824			-			-			824
Equity Compensation		-		263			-			30			-			293
Deferred Directors' Compensation		-		(324	)		-			-			-			(324	)
Dividends declared ($0.80 per share)		-		-			(18,270	)		-			.			(18,270	)
Net income		-		-			6,820			-			-			6,820
Other comprehensive income - net of tax		-		-			-			-			3,772			3,772
Balance - June 30, 2017		22,870,082	$	22,559		$	115,453		$	(39	)	$	(3,751	)	$	134,222

													Accumulated
													Other
	Common Stock						Retained			Unearned			Comprehensive
Dollars in thousands	Shares			Amount			Earnings			Compensation			Income (Loss)			Total
Balance - January 1, 2016		22,790,707		$	23,492		$	126,214		$	(13	)	$	(2,352	)	$	147,341
Repurchase of Common Stock		(192,080	)		(1,414	)		-			-			-			(1,414	)
Issuance of Common Stock
SOSARs exercised, net of shares redeemed for taxes		105,303			(212	)		-			-			-			(212	)
Restricted stock awards, net of shares redeemed for taxes		5,000			41			-			(41	)		-			-
Employee Stock Purchase Plan and other stock issued		19,628			156			-			-			-			156
Equity Compensation		-			252			-			19			-			271
Dividends declared ($0.56 per share)		-			-			(12,817	)		-			-			(12,817	)
Net income		-			-			7,236			-			-			7,236
Other comprehensive income - net of tax		-			-			-			-			5,062			5,062
Balance - June 30, 2016		22,728,558		$	22,315		$	120,633		$	(35	)	$	2,710		$	145,623

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	2017			2016
Cash Flows from Operating Activities
Net Income	$	6,820		$	7,236
Adjustments to reconcile net income to net cash from operating activities
Recovery of loan losses		(200	)		(500	)
Depreciation		806			797
Deferred tax expense		-			1,891
Net amortization of investment premium and discount		1,165			707
Writedowns of Other Real Estate Owned		56			69
Net decrease in interest payable and other liabilities		(720	)		(125	)
Net (increase) decrease in interest receivable and other assets		96			(763	)
Writedowns of Other Assets		37			-
Equity based compensation expense		293			271
Net gain on sale/settlement of securities		(77	)		(2,072	)
Increase in cash surrender value of life insurance		(754	)		(614	)
Net cash provided by operating activities	$	7,522		$	6,897
Cash Flows from Investing Activities
Proceeds from maturities of interest bearing time deposits in other banks	$	1,750		$	250
Proceeds from maturities and redemptions of investment securities held to maturity		6,542			6,182
Proceeds from maturities and redemptions of investment securities available for sale		18,964			240,900
Proceeds from sales of investment securities available for sale		73,918			-
Net increase in loans		(31,193	)		(21,338	)
Proceeds from sales of other real estate owned		367			918
Proceeds from sales of other assets		230			171
Purchase of time deposits in other banks		(500	)		(13,946	)
Purchase of investment securities held to maturity		(4,455	)		(4,259	)
Purchase of Bank Owned Life Insurance		(4,357	)		-
Proceeds from surrender of Bank Owned Life Insurance		309			-
Purchase of investment securities available for sale		(39,842	)		(164,098	)
Purchase of bank premises and equipment		(494	)		(793	)
Net cash provided by investing activities	$	21,239		$	43,987
Cash Flows from Financing Activities
Net decrease in deposits	$	(22,648	)	$	(1,975	)
Repayment of repurchase agreements		-			(15,000	)
Issuance of common stock		243			156
Stock redeemed for tax withholding - stock based compensation		(251	)		(212	)
Repurchase of common stock		-			(1,414	)
Dividends paid		(18,270	)		(12,817	)
Net cash used for financing activities	$	(40,926	)	$	(31,262	)
Net Increase (Decrease) in Cash and Cash Equivalents	$	(12,165	)	$	19,622
Cash and Cash Equivalents at Beginning of Period		52,772			79,550
Cash and Cash Equivalents at End of Period	$	40,607		$	99,172
Supplemental Cash Flow Information
Cash paid for interest	$	899		$	1,359
Cash paid for federal income taxes	$	2,106		$	1,220
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	$	332		$	397
Transfer of loans to other assets	$	40		$	34

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 fourteen branches in Monroe County, Michigan, six branches in Wayne County, Michigan, and one loan and wealth management office in Wayne 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 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 Company 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 Company uses various valuation techniques and assumptions when estimating fair value.

-6-

When determining the fair value measurements for assets and liabilities required or permitted to be recorded at and/or marked to fair value, the Company 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 Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to market observable data for similar assets or liabilities. Nevertheless, certain assets and liabilities are not actively traded in observable markets and the Company must use alternative valuation techniques to derive a fair value measurement.

ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09 (ASU 2014-09), “Revenue from Contracts with Customers (Topic 606)”. ASU 2014-09 adopts a standardized approach for revenue recognition and was a joint effort with the International Accounting Standards Board (IASB). The new revenue recognition standard is based on a core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 does not apply to financial instruments. ASU 2014-09 is effective for public entities for reporting periods beginning after December 15, 2017 (therefore, for the year ending December 31, 2018 for the Corporation). Early implementation is not allowed for public companies. Management does not expect the standard will have a significant effect on the Corporation’s consolidated financial statements, however the exact effect is still being determined.

In January 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU covers various changes to the accounting, measurement, and disclosures related to certain financial instruments, including requiring equity investments to be accounted for at fair value with changes recorded through earnings, the use of the exit price when measuring fair value, and disaggregation of financial assets and liabilities by category for disclosure purposes. The new guidance will be effective for the Company's year ending December 31, 2018. Early adoption is permitted as early as periods ending after December 31, 2017 with some additional options for early application. The Company does not believe adopting the provisions of ASU No. 2016-01 in the future will have a material impact on the consolidated financial statements. The Company has not yet quantified the impact of the change.

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The ASU includes increased disclosures and various changes to the accounting and measurement of financial assets including the Company’s loans and available-for-sale and held-to-maturity debt securities. Each financial asset presented on the balance sheet would have a unique allowance for credit losses valuation account that is deducted from the amortized cost basis to present the net carrying value at the amount expected to be collected on the financial asset. The amendments in this ASU also eliminate the probable initial recognition threshold in current GAAP and instead, reflect an entity’s current estimate of all expected credit losses using reasonable and supportable forecasts. The new credit loss guidance will be effective for the Company's year ending December 31, 2020. Upon adoption, the ASU will be applied using a modified retrospective transition method to the beginning of the first reporting period in which the guidance is effective. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Early adoption for all institutions is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The standard will likely have an effect on the Company's consolidated financial statements from a onetime adjustment to increase the ALLL upon adoption of the standard and due to increased provision expense at the time loans are originated.

-7-

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,
	2017		2016		2017		2016
Basic
Net income	$	3,640,000	$	4,239,000	$	6,820,000	$	7,236,000
Average common shares outstanding		22,865,529		22,884,350		22,843,523		22,869,453
Earnings per common share - basic	$	0.16	$	0.19	$	0.30	$	0.32
Diluted
Net income	$	3,640,000	$	4,239,000	$	6,820,000	$	7,236,000
Average common shares outstanding		22,865,529		22,884,350		22,843,523		22,869,453
Equity compensation		141,237		165,368		144,280		160,385
Average common shares outstanding - diluted		23,006,766		23,049,718		22,987,803		23,029,838
Earnings per common share - diluted	$	0.16	$	0.18	$	0.30	$	0.31

3. STOCK BASED COMPENSATION

Stock Only Stock Appreciation Rights (SOSARs) - On February 23, 2017, 94,500 Stock Only Stock Appreciation Rights (SOSARs) were awarded to certain officers in accordance with the MBT 2008 Stock Incentive Plan that was approved by shareholders on May 1, 2008 and amended by shareholders on May 7, 2015. The SOSARs have a term of ten years and vest in three equal annual installments beginning on December 31, 2017. The fair value of $3.37 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 33.54%, a risk free interest rate of 2.20% and dividend yield of 1.83%. The fair value of the Company’s common stock was $10.90 on the grant date.

SOSARs granted under the plan are structured as fixed grants with the base 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
	SOSARs			Base Price
SOSARs Outstanding, January 1, 2017		467,118		$	5.38
Granted		94,500			10.90
Exercised		(156,094	)		5.21
Forfeited		(9,773	)		6.96
Expired		-			-
SOSARs Outstanding, June 30, 2017		395,751		$	6.72
SOSARs Exercisable, June 30, 2017		202,148		$	4.53

The exercise of a SOSAR results in the issuance of a number of shares of common stock of the Company based on the appreciation of the market price of the stock over the base price of the SOSAR. The market value of the Company’s common stock on June 30, 2017 was $9.70. The value of the exercisable SOSARs that are in-the-money as of June 30, 2017 was $1,000,000, and exercise of those SOSARs on that date would have resulted in the issuance of 107,743 shares of common stock. The plan allows participants to elect to withhold shares from the exercise of SOSARs to cover their tax liability. This may affect the number of shares issued and the value of the common stock account on the balance sheet and the statement of changes in equity.

-8-

Restricted Stock Unit Awards – On February 23, 2017, 24,000 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 and amended by shareholders on May 7, 2015. 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, 2018 if the defined performance targets are achieved. The grant date fair value of the stock was $10.90 per share. Earned RSUs vest on December 15, 2019 and as of June 30, 2017 none of the RSUs were vested.

Restricted Stock Awards – On February 23, 2017, 6,000 restricted shares were awarded to certain non-executive members of the board of directors in accordance with the MBT 2008 Stock Incentive Plan that was approved by shareholders on May 1, 2008 and amended by shareholders on May 7, 2015. The restricted shares vest on December 31, 2017. The expense for the restricted stock is based on the grant date value of $10.90 and is recognized over the vesting period. The unrecognized cost related to the non-vested restricted stock awards was $39,000 as of June 30, 2017.

The total expense for equity based compensation was $162,000 in the second quarter of 2017 and $157,000 in the second quarter of 2016. The total expense for equity based compensation was $293,000 in the first six months of 2017 and $271,000 in the first six months of 2016. The unrecognized compensation expense for all equity based compensation plans is $873,000 as of June 30, 2017. The expense is expected to be recognized over a weighted average period of 1.72 years.

4. LOANS

The Bank makes commercial, consumer, and mortgage loans primarily to customers in Monroe County, Michigan, southern and western Wayne County, Michigan, Lenawee 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,
	2017		2016
Residential real estate loans	$	213,648	$	216,436
Commercial and Construction real estate loans		286,901		271,623
Agriculture and agricultural real estate loans		22,689		21,518
Commercial and industrial loans		120,050		96,761
Loans to individuals for household, family, and other personal expenditures		39,461		45,999
Total loans, gross	$	682,749	$	652,337
Less: Allowance for loan losses		8,137		8,458
Net Loans	$	674,612	$	643,879

-9-

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, other real estate owned, and other repossessed assets. Other real estate owned includes real estate that has been acquired in full or partial satisfaction of loan obligations or upon foreclosure.

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

	June 30,			December 31,
	2017			2016
Nonaccrual loans	$	4,143		$	4,656
Loans 90 days past due and accruing		3			10
Restructured loans		10,103			14,161
Total nonperforming loans	$	14,249		$	18,827
Other real estate owned		1,502			1,634
Other assets		40			-
Total nonperforming assets	$	15,791		$	20,461
Nonperforming assets to total assets		1.19	%		1.51	%
Allowance for loan losses to nonperforming loans		57.11	%		44.92	%

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. The majority of this segment is student loans, and it also includes loans for autos, boats, and recreational vehicles.

-10-

Activity in the allowance for loan losses during the three and six months ended June 30, 2017 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, 2017
Beginning Balance	$	200	$	1,579		$	3,438		$	534		$	1,570		$	1,013		$	8,334
Charge-offs		-		-			(384	)		-			-			(12	)		(396	)
Recoveries		-		42			37			13			92			15			199
Provision		120		(125	)		268			(6	)		(264	)		7			-
Ending balance	$	320	$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Allowance for loan losses: For the six months ended June 30, 2017
Beginning Balance	$	201	$	1,632		$	3,336		$	525		$	1,599		$	1,165		$	8,458
Charge-offs		-		-			(409	)		-			(50	)		(49	)		(508	)
Recoveries		3		98			74			26			146			40			387
Provision		116		(234	)		358			(10	)		(297	)		(133	)		(200	)
Ending balance	$	320	$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Allowance for loan losses as of June 30, 2017
Ending balance individually evaluated for impairment	$	-	$	143		$	44		$	374		$	221		$	181		$	963
Ending balance collectively evaluated for impairment		320		1,353			3,315			167			1,177			842			7,174
Ending balance	$	320	$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Loans as of June 30, 2017
Ending balance individually evaluated for impairment	$	1,209	$	286		$	3,025		$	1,689		$	6,101		$	442		$	12,752
Ending balance collectively evaluated for impairment		21,480		119,764			260,365			21,822			207,547			39,019			669,997
Ending balance	$	22,689	$	120,050		$	263,390		$	23,511		$	213,648		$	39,461		$	682,749

-11-

Activity in the allowance for loan losses during the three and six months ended June 30, 2016 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, 2016
Beginning Balance	$	487		$	1,597		$	5,018		$	475		$	1,920		$	1,040		$	10,537
Charge-offs		(221	)		(12	)		(296	)		-			(65	)		(24	)		(618	)
Recoveries		-			44			46			14			45			35			184
Provision		(66	)		(103	)		(298	)		(29	)		(109	)		405			(200	)
Ending balance	$	200		$	1,526		$	4,470		$	460		$	1,791		$	1,456		$	9,903
Allowance for loan losses: For the six months ended June 30, 2016
Beginning Balance	$	389		$	2,279		$	4,350		$	420		$	2,235		$	1,223		$	10,896
Charge-offs		(221	)		(12	)		(352	)		-			(156	)		(86	)		(827	)
Recoveries		-			77			69			27			103			58			334
Provision		32			(818	)		403			13			(391	)		261			(500	)
Ending balance	$	200		$	1,526		$	4,470		$	460		$	1,791		$	1,456		$	9,903
Allowance for loan losses as of June 30, 2016
Ending balance individually evaluated for impairment	$	1		$	468		$	447		$	262		$	309		$	188		$	1,675
Ending balance collectively evaluated for impairment		199			1,058			4,023			198			1,482			1,268			8,228
Ending balance	$	200		$	1,526		$	4,470		$	460		$	1,791		$	1,456		$	9,903
Loans as of June 30, 2016
Ending balance individually evaluated for impairment	$	1,366		$	823		$	10,805		$	1,779		$	7,212		$	496		$	22,481
Ending balance collectively evaluated for impairment		19,798			85,903			236,551			14,991			208,024			50,532			615,799
Ending balance	$	21,164		$	86,726		$	247,356		$	16,770		$	215,236		$	51,028		$	638,280

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 10 through 45 are considered “pass” credits, grades 50 through 55 are considered “watch” credits, and grade 60 is considered "substandard" credits. Grades 50 through 60 are subject to greater scrutiny. Loans with grades 70 through 90 and considered “doubtful” or “loss” and have generally been charged off. A description of the general characteristics of each grade is as follows:

• Grade 10– Excellent – Loans secured by marketable collateral, with adequate margin, or supported by strong financial statements, including substantial levels of tangible net worth. Probability of serious financial deterioration is unlikely. Possess a sound repayment source and a secondary source. This classification will also include individual loans backed by liquid personal assets, established history and unquestionable character. High liquidity, minimum risk, strong ratios, and low handling costs are common to these loans.

-12-

• Grade 20– Above Average – Loans that exhibit less than average risk and clearly demonstrate debt service coverage that is consistently above average as well as a strong capital base. These loans may have some deficiency or vulnerability, but with offsetting features and are considered to be fully collectable.

• Grade 30– Satisfactory – Loans that have an acceptable amount of risk but may exhibit vulnerability to deterioration if adverse circumstances are encountered. These loans should demonstrate adequate debt service coverage and adequate levels of capital support but warrant periodic monitoring to ensure that weaknesses do not materialize or advance.

• Grades 40 and 45 – Pass – Loans that are considered “pass credits” and typically demonstrate adequate debt service coverage. The level of risk is considered acceptable but these loans warrant ongoing monitoring to ensure that adverse trends or other credit deficiencies have not materialized or advanced. The level of risk is considered acceptable so long as the loan is given adequate and ongoing management supervision.

• Grades 50 and 55 – Watch – Loans that possess some credit deficiency or potential weakness that deserves close attention. The primary source of loan repayment is sufficient but may be considered inadequate by the Bank’s standards.

• Grade 60– Substandard – Loans that exhibit one or more of the following characteristics: (1) a defined credit weakness, financial deterioration is underway, and uncertainty about the likelihood that the loan will be paid from the primary source of repayment; (2) inadequately protected by the 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 a high 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 loan terms; (9) the Bank is contemplating foreclosure or legal action due to the apparent deterioration in the loan; or (10) there is deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

• Grade 70– Doubtful – Loans that exhibit one or more of the following characteristics: (1) loans with all 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 there is considerable doubt as to the quality of the secondary source of repayment; or (3) the possibility of loss is high, but certain important pending factors may strengthen the loan and loss classification is deferred.

• Grades 80 and 90 - Loss – Loans are considered uncollectible and of such little value that continuing to carry 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.

-13-

The portfolio segments in each credit risk grade as of June 30, 2017 are as follows (000s omitted):

Credit Quality Indicators as of June 30, 2017

Credit Risk by Internally Assigned Grade

	Agriculture and Agricultural Real Estate		Commercial		Commercial Real Estate		Construction Real Estate		Residential Real Estate		Consumer and Other		Total
Not Rated	$	1	$	1,757	$	188	$	13,663	$	131,120	$	33,011	$	179,740
10		-		5,742		-		-		-		-		5,742
20		424		304		400		-		-		-		1,128
30		600		32,915		7,528		-		826		4,174		46,043
40		15,181		71,915		213,775		4,578		68,307		2,171		375,927
45		1,552		2,564		12,076		3,032		5,497		-		24,721
50		2,072		2,946		21,792		369		2,521		9		29,709
55		1,807		1,406		3,184		1,555		1,189		-		9,141
60		1,052		501		4,126		314		4,188		96		10,277
7		-		-		-		-		-		-		-
80		-		-		321		-		-		-		321
90		-		-		-		-		-		-		-
Total	$	22,689	$	120,050	$	263,390	$	23,511	$	213,648	$	39,461	$	682,749
Performing	$	21,922	$	119,609	$	259,704	$	21,663	$	206,641	$	38,961	$	668,500
Nonperforming		767		441		3,686		1,848		7,007		500		14,249
Total	$	22,689	$	120,050	$	263,390	$	23,511	$	213,648	$	39,461	$	682,749

The portfolio segments in each credit risk grade as of December 31, 2016 are as follows (000s omitted):

Credit Quality Indicators as of December 31, 2016

Credit Risk by Internally Assigned Grade

	Agriculture and Agricultural Real Estate		Commercial		Commercial Real Estate		Construction Real Estate		Residential Real Estate		Consumer and Other		Total
Not Rated	$	2	$	1,768	$	214	$	9,960	$	132,144	$	39,114	$	183,202
10		-		5,787		-		-		-		-		5,787
20		293		348		447		-		-		145		1,233
30		645		17,373		8,128		-		218		-		26,364
40		15,827		63,687		198,416		4,211		70,275		6,626		359,042
45		1,507		2,142		16,227		2,974		4,513		-		27,363
50		1,769		4,090		16,828		448		3,393		12		26,540
55		263		927		4,081		1,574		989		-		7,834
60		1,212		639		7,828		287		4,904		102		14,972
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	21,518	$	96,761	$	252,169	$	19,454	$	216,436	$	45,999	$	652,337
Performing	$	20,834	$	96,240	$	244,816	$	17,734	$	208,458	$	45,428	$	633,510
Nonperforming		684		521		7,353		1,720		7,978		571		18,827
Total	$	21,518	$	96,761	$	252,169	$	19,454	$	216,436	$	45,999	$	652,337

-14-

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, 2017 and December 31, 2016 (000s omitted):

June 30, 2017	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	$	-	$	-	$	113	$	113	$	22,576	$	22,689	$	-
Commercial		204		5		48	$	257		119,793		120,050		3
Commercial Real Estate		681		719		824		2,224		261,166		263,390		-
Construction Real Estate		567		-		159		726		22,785		23,511		-
Residential Real Estate		1,103		117		1,377		2,597		211,051		213,648		-
Consumer and Other		35		88		3		126		39,335		39,461		-
Total	$	2,590	$	929	$	2,524	$	6,043	$	676,706	$	682,749	$	3

December 31, 2016	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	$	93	$	-	$	113	$	206	$	21,312	$	21,518	$	-
Commercial		77		46		23		146		96,615		96,761		10
Commercial Real Estate		708		363		828		1,899		250,270		252,169		-
Construction Real Estate		-		-		-		-		19,454		19,454		-
Residential Real Estate		1,523		192		1,558		3,273		213,163		216,436		-
Consumer and Other		149		46		-		195		45,804		45,999		-
Total	$	2,550	$	647	$	2,522	$	5,719	$	646,618	$	652,337	$	10

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, 2017 and December 31, 2016 (000s omitted):

	June 30, 2017		December 31, 2016
Agriculture and Agricultural Real Estate	$	199	$	113
Commercial		152		169
Commercial Real Estate		1,337		1,625
Construction Real Estate		181		31
Residential Real Estate		2,216		2,623
Consumer and Other		58		95
Total	$	4,143	$	4,656

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.

-15-

The following is a summary of impaired loans as of June 30, 2017 and June 30, and December 31, 2016 (000s omitted):

June 30, 2017	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	$	1,209	$	1,404	$	-	$	1,215	$	14	$	1,217	$	28
Commercial		61		61		-		62		1		64		1
Commercial Real Estate		1,270		1,530		-		1,278		-		1,288		19
Construction Real Estate		134		167		-		154		2		156		4
Residential Real Estate		4,336		4,524		-		4,540		47		4,570		107
Consumer and Other		1		1		-		1		-		1		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-		-		-
Commercial		225		225		143		253		2		272		5
Commercial Real Estate		1,755		1,774		44		1,776		18		1,787		37
Construction Real Estate		1,555		1,555		374		1,560		18		1,564		36
Residential Real Estate		1,765		1,828		221		1,802		18		1,809		35
Consumer and Other		441		441		181		445		5		449		10
Total:
Agriculture and Agricultural Real Estate	$	1,209	$	1,404	$	-	$	1,215	$	14	$	1,217	$	28
Commercial		286		286		143		315		3		336		6
Commercial Real Estate		3,025		3,304		44		3,054		18		3,075		56
Construction Real Estate		1,689		1,722		374		1,714		20		1,720		40
Residential Real Estate		6,101		6,352		221		6,342		65		6,379		142
Consumer and Other		442		442		181		446		5		450		10
Total	$	12,752	$	13,510	$	963	$	13,086	$	125	$	13,177	$	282

-16-

	Recorded Investment as of December 31, 2016		Unpaid Principal Balance as of December 31, 2016		Related Allowance as of December 31, 2016		Average Recorded Investment for the Three Months Ended June 30, 2016		Interest Income Recognized in the Three Months Ended June 30, 2016		Average Recorded Investment for the Six Months Ended June 30, 2016		Interest Income Recognized in the Six Months Ended June 30, 2016
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	966	$	1,164	$	-	$	1,026	$	10	$	1,028	$	25
Commercial		88		140		-		146		3		148		5
Commercial Real Estate		4,295		4,502		-		7,217		70		7,255		133
Construction Real Estate		144		177		-		127		2		130		4
Residential Real Estate		4,916		5,157		-		4,292		47		4,335		98
Consumer and Other		11		11		-		34		1		35		1
With an allowance recorded:
Agriculture and Agricultural Real Estate		246		246		5		352		3		417		3
Commercial		267		274		199		726		8		754		17
Commercial Real Estate		2,558		2,610		129		4,140		44		4,272		98
Construction Real Estate		1,573		1,573		388		1,676		19		1,681		38
Residential Real Estate		2,182		2,224		236		3,269		26		3,292		63
Consumer and Other		465		465		184		467		6		471		11
Total:
Agriculture and Agricultural Real Estate	$	1,212	$	1,410	$	5	$	1,378	$	13	$	1,445	$	28
Commercial		355		414		199		872		11		902		22
Commercial Real Estate		6,853		7,112		129		11,357		114		11,527		231
Construction Real Estate		1,717		1,750		388		1,803		21		1,811		42
Residential Real Estate		7,098		7,381		236		7,561		73		7,627		161
Consumer and Other		476		476		184		501		7		506		12
Total	$	17,711	$	18,543	$	1,141	$	23,472	$	239	$	23,818	$	496

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”).

-17-

Loans that have been classified as TDRs during the three and six month periods ended June 30, 2017 and June 30, 2016 are as follows (000s omitted from dollar amounts):

	Three months ended						Six months ended
	June 30, 2017						June 30, 2017
	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		-		-		-		2		29		29
Commercial Real Estate		1		280		279		3		353		332
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		-		-		-		3		212		180
Consumer and Other		-		-		-		1		1		-
Total		1	$	280	$	279		9	$	595	$	541

	Three months ended						Six months ended
	June 30, 2016						June 30, 2016
	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		1	$	362	$	362		1	$	362	$	362
Commercial		-		-		-		-		-		-
Commercial Real Estate		-		-		-		-		-		-
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		6		251		250		7		451		447
Consumer and Other		1		57		57		1		57		57
Total		8	$	670	$	669		9	$	870	$	866

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, 2017 and June 30, 2016 that subsequently defaulted during the six month periods ended June 30, 2017 and June 30, 2016, respectively.

The Company has allocated $963,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings at June 30, 2017. In addition, there were no commitments to lend additional amounts to borrowers that are classified as troubled debt restructurings as of June 30, 2017 and June 30, 2016.

6. INVESTMENT SECURITIES

The following is a summary of the Bank’s investment securities portfolio as of June 30, 2017 and December 31, 2016 (000s omitted):

	Held to Maturity
	June 30, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political
Subdivisions	$	38,117	$	1,044	$	(150	)	$	39,011
Corporate Debt Securities		500		1		-			501
	$	38,617	$	1,045	$	(150	)	$	39,512

-18-

	Available for Sale
	June 30, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	236,531	$	716	$	(3,859	)	$	233,388
Mortgage Backed Securities issued by U.S. Government Agencies		156,783		48		(1,773	)		155,058
Obligations of States and Political Subdivisions		28,153		96		(168	)		28,081
Corporate Debt Securities		20,608		382		(14	)		20,976
Equity Securities		2,044		65		-			2,109
	$	444,119	$	1,307	$	(5,814	)	$	439,612

	Held to Maturity
	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	40,241	$	701	$	(288	)	$	40,654
Corporate Debt Securities		500		2		-			502
	$	40,741	$	703	$	(288	)	$	41,156

	Available for Sale
	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	282,130	$	389	$	(7,519	)	$	275,000
Mortgage Backed Securities issued by U.S. Government Agencies		148,764		118		(2,673	)		146,209
Obligations of States and Political Subdivisions		30,909		109		(409	)		30,609
Corporate Debt Securities		34,363		135		(338	)		34,160
Equity Securities		2,044		45		-			2,089
	$	498,210	$	796	$	(10,939	)	$	488,067

-19-

The amortized cost and estimated market values of securities by contractual maturity as of June 30, 2017 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	$	9,134	$	9,171	$	3,586	$	3,588
After 1 year through five years		20,838		21,250		125,298		125,044
After 5 years through 10 years		7,466		7,923		146,841		144,290
After 10 years		1,179		1,168		9,567		9,523
Total		38,617		39,512		285,292		282,445
Mortgage Backed Securities		-		-		156,783		155,058
Securities with no stated maturity		-		-		2,044		2,109
Total	$	38,617	$	39,512	$	444,119	$	439,612

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, 2017 and December 31, 2016.

June 30, 2017

	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	$	167,460	$	3,859	$	-	$	-	$	167,460	$	3,859
Mortgage Backed Securities issued by U.S. Government Agencies		102,272		1,354		29,259		419		131,531		1,773
Obligations of States and Political Subdivisions		25,954		313		1,184		5		27,138		318
Corporate Debt Securities		2,022		14		-		-		2,022		14
	$	297,708	$	5,540	$	30,443	$	424	$	328,151	$	5,964

December 31, 2016

	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	$	242,212	$	7,519	$	-	$	-	$	242,212	$	7,519
Mortgage Backed Securities issued by U.S. Government Agencies		112,995		2,144		22,857		529		135,852		2,673
Obligations of States and Political Subdivisions		40,524		682		2,976		15		43,500		697
Corporate Debt Securities		24,025		338		-		-		24,025		338
	$	419,756	$	10,683	$	25,833	$	544	$	445,589	$	11,227

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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, 2017. As of June 30, 2017 and December 31, 2016, there were 163 and 230 securities in an unrealized loss position, respectively.

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 Company 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 Company uses various valuation techniques and assumptions when estimating fair value.

The Company 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 Company’s equity 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 Company’s borrowed funds and investments in U.S. government agency securities, government sponsored mortgage backed securities, corporate debt securities, bank certificates of deposit, 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. Certain municipal debt obligations and certificates of deposit 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.

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The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis at June 30, 2017 and December 31, 2016, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
June 30, 2017	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	40,607	$	40,607	$	-	$	-	$	40,607
Time Deposits in Other Banks		17,696		-		16,906		750		17,656
Securities - Held to Maturity
Obligations of States and Political Subdivisions		38,117		-		2,747		36,264		39,011
Corporate Debt Securities		500		-		501		-		501
Securities - Available for Sale
Obligations of U.S. Government Agencies		233,388		-		233,388		-		233,388
MBS issued by U.S. Government Agencies		155,058		-		155,058		-		155,058
Obligations of States and Political Subdivisions		28,081		-		28,081		-		28,081
Corporate Debt Securities		20,976		-		20,976		-		20,976
Equity Securities		2,109		2,109		-		-		2,109
Federal Home Loan Bank Stock		4,148		-		4,148		-		4,148
Loans Held for Sale		899		-		-		919		919
Loans, net		674,612		-		-		666,394		666,394
Accrued Interest Receivable		3,923		-		-		3,923		3,923
Financial Liabilities:
Noninterest Bearing Deposits		290,595		290,595		-		-		290,595
Interest Bearing Deposits		886,474		-		887,768		-		887,768
Accrued Interest Payable		52		-		-		52		52

									Total
	Carrying								Estimated
December 31, 2016	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	52,772	$	52,772	$	-	$	-	$	52,772
Time Deposits in Other Banks		18,946		-		18,940		-		18,940
Securities - Held to Maturity
Obligations of States and Political Subdivisions		40,241		-		3,153		37,501		40,654
Corporate Debt Securities		500		-		502		-		502
Securities - Available for Sale
Obligations of U.S. Government Agencies		275,000		-		275,000		-		275,000
MBS issued by U.S. Government Agencies		146,209		-		146,209		-		146,209
Obligations of States and Political Subdivisions		30,609		-		30,609		-		30,609
Corporate Debt Securities		34,160		-		34,160		-		34,160
Equity Securities		2,089		2,089		-		-		2,089
Federal Home Loan Bank Stock		4,148		-		4,148		-		4,148
Loans Held for Sale		611		-		-		623		623
Loans, net		643,879		-		-		642,908		642,908
Accrued Interest Receivable		4,335		-		-		4,335		4,335
Financial Liabilities:
Noninterest Bearing Deposits		279,001		279,001		-		-		279,001
Interest Bearing Deposits		920,716		-		922,187		-		922,187
Repurchase Agreements		-		-		-		-		-
Accrued Interest Payable		57		-		-		57		57

-22-

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 Company’s assets with Level 3 fair values are carried at their amortized cost values as of June 30, 2017 or December 31, 2016. 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 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.

-23-

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

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2017
Impaired loans	$	-	$	-	$	11,789
Other Real Estate Owned	$	-	$	-	$	1,502
December 31, 2016
Impaired loans	$	-	$	-	$	16,570
Other Real Estate Owned	$	-	$	-	$	1,634

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.

8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

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

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

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

	Contractual Amount
	June 30,		December 31,
	2017		2016
Commitments to extend credit:
Unused portion of commercial lines of credit	$	74,609	$	75,454
Unused portion of credit card lines of credit		5,486		4,983
Unused portion of home equity lines of credit		28,134		25,057
Standby letters of credit and financial guarantees written		1,281		1,582

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.

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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 commercial bank subsidiary, Monroe Bank & Trust (the “Bank”). The Bank operates 14 branch offices in Monroe County, Michigan and 6 branch offices in Wayne County, Michigan, and 1 loan and wealth management office in Wayne County, Michigan.

The Bank’s primary source of income is Net Interest Income (interest income on loans and investments less interest expense on deposits and borrowings), and its primary expense is the compensation of its employees. 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, increasing net interest income, and improving non-interest income and expenses.

The net profit of $6,820,000 for the first six months of 2017 was a decrease of $416,000 or 5.7% compared to the first six months of 2016. The decrease was the result of an increase of $300,000 in the provision for loan losses and a decrease of $1,995,000 in gains on securities transactions. The effect of these items was mitigated by an increase of $925,000 in net interest income and a decrease of $285,000 in non-interest expenses. The negative provision expense and gains on securities transactions are not ordinary occurrences. Excluding these items in both periods, and net of the tax effects thereon, the net profit for the six months ended June 30, 2017 would have been $6,638,000, an increase of $1,099,000, or 19.8% compared to the six months ended June 30, 2016.

The national economic recovery is continuing, and the recovery in southeast Michigan is getting stronger. State and local unemployment rates are now below the national average. Commercial and residential development property values continue to improve, with some values reaching or exceeding their pre-recession levels. Our total classified assets, which include internal watch list loans, other real estate owned, and nonperforming and watch list investment securities, have been improving steadily since 2014. Classified assets went down $4.5 million, or 26.9% during the first two quarters of 2017, and decreased $14.0 million or 53.6% compared to a year ago. Net charge offs were $121,000, or 0.04% of loans, annualized, in the first two quarters of 2017, compared to $493,000, or 0.16% in the first two quarters of 2016. Due to improving loan quality metrics and net recoveries, another reduction in our Allowance for Loan and Lease Losses (ALLL) was appropriate, and we recorded a $200,000 credit to the provision expense in the first two quarters of 2017. This reflected an increase of $300,000 when compared to the negative provision of $500,000 recorded in the first two quarters of 2016. The ALLL as a percent of loans decreased from 1.30% at the end of 2016 to 1.19%. We assess the adequacy of our ALLL each quarter, and adjust it as necessary by debiting or crediting the provision expense. The allowance includes $1.0 million of specific allocations on $12.8 million of loans evaluated for impairment and $7.1 million of general allocations on the remainder of the portfolio. The general allocation is based on the historical charge off experience of the previous 16 quarters. The improvement in the historical loss rates is slowing and loan growth is continuing, so we do not expect negative provisions to continue.

-25-

Net Interest Income increased $925,000, or 5.0% compared to the first two quarters of 2016, even though the period was one day shorter and average earning assets decreased $0.5 million, as the net interest margin increased from 3.09% to 3.26%. The net interest margin improved because the yield on earnings assets increased and the cost of interest bearing liabilities decreased. Non-interest income for the two quarters decreased $1,479,000, mainly due to large securities gains from callable bonds that were owned at discounts being redeemed at par in the first two quarters of 2016. Non-interest expenses decreased $285,000, as salaries, benefits, EFT and ATM expenses, Other Real Estate expenses, FDIC deposit insurance assessments, and other insurance expenses decreased. These decreases were partially offset by increases in occupancy expense, equipment expense, and marketing expense.

Critical Accounting Policies

The Company’s Allowance for Loan Losses and Fair Value of Investment Securities 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.

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.

Financial Condition

The regional economic recovery continued this quarter, with improving local unemployment and property values steadily increasing since 2014. Management efforts remain focused on improving asset quality, increasing net interest income, and improving non-interest income and expenses.

With respect to asset quality, our nonperforming assets (“NPAs”) decreased 5.4% during the quarter, from $16.7 million to $15.8 million, and total classified assets decreased 21.4% from $15.4 million to $12.1 million. Loan delinquencies increased slightly from $5,719,000 30 days or more past due as of December 31, 2016 to $6,043,000 as of June 30, 2017 and the delinquency percentage increased from 0.86% to 0.88% of the total loans. Over the last twelve months, NPAs decreased $10.3 million, or 39.5%, with nonperforming loans decreasing 41.6% from $24.3 million to $14.2 million, and Other Real Estate Owned (“OREO”) decreasing 16.7% from $1.8 million to $1.5 million. Total classified assets, which include internally classified watch list loans, other real estate, and watch list investment securities, decreased $14.0 million, or 53.6%. The amount required in the Allowance for Loan and Lease Losses (“ALLL”) decreased $1.8 million over the last four quarters because of the improvement in the quality of the assets in the loan portfolio and a decrease in the historical loss rates. The ALLL is now 1.19% of loans, down from 1.55% at June 30, 2016. The ALLL is 57.11% of nonperforming loans (“NPLs”), compared to 44.92% at year end and 40.81% at June 30, 2016. In light of current economic conditions, we believe that this level of ALLL adequately estimates the potential losses in the loan portfolio.

-26-

Since December 31, 2016, total loans held for investment increased $30.4 million as new loan activity exceeded payments received and other reductions in the period. Even with the increase in loans, our pipeline of loans in process remained steady, and we expect new loan production to continue to exceed run off, resulting in an increase in loans outstanding in the second half of 2017.

Since December 31, 2016, deposits decreased $22.6 million, other liabilities decreased $1.4 million, and capital decreased $6.9 million, and as a result our total assets decreased $30.9 million, or 2.3%. Deposits decreased during the second quarter of 2017 due to seasonal fluctuations. The Company expects a small amount of deposit funding growth in the third quarter of 2017, as we have adequate liquidity to fund our anticipated loan growth without needing to actively grow deposits. The composition of deposits continues to change as customers move funds from maturing interest bearing time deposit accounts to low or no cost non maturity deposit accounts due to the low interest rate environment. As of June 30, 2017, deposits consisted of $142.1 million in certificates of deposit and IRAs with an average cost of 0.63%, $229.1 million in savings deposits with an average cost of 0.02%, $238.9 million in Money Market Deposit Accounts with an average cost of 0.15%, $276.3 million in interest bearing demand deposits with an average cost of 0.17%, and $290.6 million in non-interest bearing demand deposits. We do not expect significant changes in our deposit funding, and our expected loan growth will continue to be funded by reductions in our cash and investments. The total capital decreased $6.9 million since December 31, 2016, mainly because dividends paid exceeded earnings by $11.5 million. This reduction was mitigated by an increase of $3.8 million in the Accumulated Other Comprehensive Income, which increased mainly due to the increase in the market value of securities available for sale. Capital decreased at a higher rate than assets, causing the capital to assets ratio to decrease from 10.40% at December 31, 2016 to 10.12% at June 30, 2017.

Results of Operations – Second Quarter 2017 vs. Second Quarter 2016

Net Interest Income - A comparison of the income statements for the three months ended June 30, 2017 and 2016 shows an increase of $620,000, or 6.7%, in Net Interest Income. Interest income on loans increased $530,000 or 7.4% as the average loans outstanding increased $47.4 million while the average yield on loans decreased from 4.62% to 4.60%. The average loans outstanding increased as demand increased due to improving economic conditions. The interest income on investments, fed funds sold, and interest bearing balances due from banks decreased $91,000 even though the investment portfolio yield increased from 1.82% to 1.92% because the average amount of investments, fed funds sold, and interest bearing balances due from banks decreased $50.6 million. The Company continues to maintain a high level of liquidity, but some of that liquidity is being used by redeploying earning assets from low yielding short term investments and deposits in the Federal Reserve Bank into higher yielding loans. The interest expense on deposits decreased $52,000 or 10.7% even though the average deposits increased $9.6 million because the average cost of deposits decreased from 0.17% to 0.15%. The average cost of deposits decreased because maturing time deposits are either resetting at lower rates or customers are moving the funds to non interest bearing demand deposit accounts or low cost non maturity deposits due to the low interest rate environment. The interest expense on borrowed funds decreased $129,000 as the final remaining long term borrowed funds were repaid in the second quarter of 2016.

-27-

Provision for Loan Losses - The Provision for Loan Losses increased $200,000 compared to the second quarter of 2016 as a $200,000 credit to provision expense was recorded in the second quarter of 2016, while no provision expense was recorded in the second quarter of 2017. We charged off $396,000 of principal while recovering $199,000 of previously charged off loans in the second quarter of 2017, for a net charge off total of $197,000, or 0.12% of loans, annualized. 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 an improvement in portfolio risk indicators and a decrease in the historical charge off percentages, the amount of ALLL required decreased from $8,334,000 at March 31, 2017 to $8,137,000 as of June 30, 2017. This allowed us to use $197,000 of the ALLL to cover the net charge offs without recording a provision expense. The allowance includes $1.0 million of specific allocations and $7.1 million of general allocations. The general allocation is based on the historical charge off experience of the previous 16 quarters. The historical charge off rate is not expected to continue to improve significantly, and if loan growth continues as expected, small provision expenses may be required.

Other Income – Non interest income decreased $1,185,000, or 21.3% compared to the second quarter of 2016. Gains on securities transactions decreased $1,685,000 due to large gains in the second quarter of 2016 that were the result of bonds owned at discounts being called at par. Fees for Wealth Management services are billed in arrears, and we previously recorded the income when it was collected. In order to properly reflect the receivable for earned but unbilled fees on our balance sheet, we accrued a receivable of $389,000 in June for the June fees that were billed and collected in July. Excluding this receivable adjustment, Wealth Management income increased $53,000, or 4.8%. Origination fees on mortgage loans sold decreased $21,000 or 15.4% due to a decrease in mortgage loans sold. Income from Bank Owned life Insurance (BOLI) increased $50,000 due to an increase in the BOLI investment and a restructuring of the BOLI portfolio to improve its yield.

Other Expenses – Total non-interest expenses increased $136,000, or 1.5% compared to the second quarter of 2016. Salaries and Employee Benefits decreased $126,000, or 2.3%. Salaries decreased due to an increase in loan originations, which caused an increase in the amount of salary expense deferred, and a decrease in the accrual for the incentive compensation plan. Occupancy expense increased $49,000, or 7.7% as maintenance and repairs increased. Equipment expense increased $65,000, or 9.0% due to higher maintenance expense. Professional fees expense increased $64,000 due to  increases in legal, accounting, and consulting fees. FDIC insurance assessments decreased $84,000 due to reductions in the FDIC assessment rate. Other insurance decreased $89,000, primarily due to a reclassification of life insurance expense for directors from salaries and employee benefits in the second quarter of 2016. The increase of $207,000 in Other expense occurred because the second quarter of 2016 expense included the reversal of $185,000 of over accrued interest on the settlement of an IRS audit, which is now closed.

As a result of the above activity, the Profit Before Income Taxes in the second quarter of 2017 was $5,226,000, a decrease of $901,000 compared to the pre-tax profit of $6,127,000 in the second quarter of 2016. The Company recorded a federal income tax expense of $1,586,000 in the second quarter of 2017, reflecting an effective tax rate of 30.3%, compared to the tax expense of $1,888,000 in the second quarter of 2016, which reflected an effective rate of 30.8%. The Net profit for the second quarter of 2017 was $3,640,000, a decrease of 14.1% compared to the net profit of $4,239,000 in the second quarter of 2016.

Results of Operations – First Two Quarters of 2017 vs. First Two Quarters of 2016

Net Interest Income - A comparison of the income statements for the six months ended June 30, 2017 and 2016 shows an increase of $925,000, or 5.0%, in Net Interest Income. Interest income on loans increased $859,000 or 6.0% as the average loans outstanding increased $42.0 million and the average yield on loans decreased from 4.59% to 4.57%. The average loans outstanding increased as demand increased due to improving economic conditions. The interest income on investments, fed funds sold, and interest bearing balances due from banks decreased $352,000 even though the yield increased from 1.89% to 1.91% because the average amount of investments, fed funds sold, and interest bearing balances due from banks decreased $42.5 million. The Company continues to maintain a high level of liquidity, but some of that liquidity is being used by redeploying earning assets from low yielding short term investments and deposits in the Federal Reserve Bank into higher yielding loans. The interest expense on deposits decreased $113,000 or 11.3% even though the average deposits increased $19.8 million because the average cost of deposits decreased from 0.17% to 0.15%. The average cost of deposits decreased because maturing time deposits are either resetting at lower rates or customers are moving the funds to non interest bearing demand deposit accounts or low cost non maturity deposits due to the low interest rate environment. The interest expense on borrowed funds decreased $305,000 as the final remaining long term borrowed funds were repaid in the second quarter of 2016.

-28-

Provision for Loan Losses - The Provision for Loan Losses increased $300,000 compared to the first two quarters of 2016 as a $200,000 credit to provision expense was recorded in the first six months of 2017, compared to a $500,000 credit to provision expense recorded in the first six months of 2016. We charged off $508,000 of principal while recovering $387,000 of previously charged off loans in the first two quarters of 2017, for a net charge off total of $121,000, or 0.04% of loans, annualized. This is an improvement compared to the net charge offs of $493,000, or 0.16% of loans, annualized, in the first two quarters of 2016. Each quarter, the Company conducts a review and analysis of its ALLL to determine its adequacy, and necessary adjustments to the ALLL are made through the provision for loan losses expense. 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 the growth in the loan portfolio, and limited potential for future recoveries and improvements in the historical charge off percentages, further negative provisions are not likely to occur.

Other Income – Non interest income decreased $1,479,000, or 15.3% compared to the first two quarters of 2016. Gains on securities transactions decreased $1,995,000 due to large gains in the first two quarters of 2016 that were the result of bonds owned at substantial discounts being redeemed early at par. Wealth Management fees increased $473,000 primarily due to the establishment of a receivable for earned but uncollected fees in 2017. Origination fees on mortgage loans sold decreased $92,000 or 34.6% due to lower sales activity.

Other Expenses – Total non-interest expenses decreased $285,000, or 1.6% compared to the first two quarters of 2016. Salaries and Employee Benefits decreased $310,000, or 2.8%. Salaries decreased due to a decrease in the number of full time equivalent employees, an increase in loan originations, which caused an increase in the amount of salary expense deferred, and a decrease in the incentive compensation accrual. Benefits expense decreased due to lower life and health insurance expenses. Occupancy expense increased $96,000, or 7.2% as maintenance and repairs increased. FDIC insurance assessments decreased $146,000 due to reductions in the FDIC assessment rate. Other insurance decreased $89,000, primarily due to a reclassification adjustment to the life insurance expense for directors in the second quarter of 2016. Other expense increased $113,000, partly due to the reversal of $185,000 of over accrued interest on the settlement of our IRS audit in 2016.

As a result of the above activity, the Profit Before Income Taxes in the first two quarters of 2017 was $9,779,000, a decrease of $569,000 compared to the pre-tax profit of $10,348,000 in the first two quarters of 2016. The Company recorded a federal income tax expense of $2,959,000 in the first two quarters of 2017, reflecting an effective tax rate of 30.3%, compared to the tax expense of $3,112,000 in the first two quarters of 2016, which reflected an effective rate of 30.1%. The Net profit for the first two quarters of 2017 was $6,820,000, a decrease of 5.7% compared to the net profit of $7,236,000 in the first two quarters of 2016.

-29-

Cash Flows

Cash flows provided by operating activities increased $625,000 compared to the first six months of 2016 even though net income was $416,000 lower because the net income included more non-cash or non-operating items in 2017. The cash flow from investing activities decreased $22.7 million from $44.0 million provided in the first half of 2016 to $21.2 million provided in the first half of 2017. This was the result of a decrease in the amount of investment securities called prior to maturity and an increase in the investment in loans, mitigated by an increase in investment securities sold and a decrease in the investment securities purchased. The bank is purchasing less callable securities, and the increase in market rates has also decreased the amount of call activity. The decrease in early redemptions of investment securities also caused a decrease in the amount of investments purchased, and the bank also sold securities in the first quarter of 2017 to fund the increase in loans. The amount of cash used for financing activities was $9.7 million higher in the first six months of 2017 than it was in the first six months of 2016 because the amount of cash used to fund deposit withdrawals increased $20.7 million. The amount of cash used to fund repayment of debt decreased $15.0 million as the last of our repurchase agreement debt was paid off in 2016. Also, the amount used to pay dividends was $5.5 million higher as the per share dividend was increased from $0.56 in the first six months of 2016 to $0.80 in the first six months of 2017. In the first two quarters of 2017, the cash used for financing activities exceeded the cash provided by operating and investing activities, and the amount of cash and cash equivalents decreased by $12.2 million during the period. In the first two quarters of 2016, the cash provided by operations and investing activities exceeded the cash used for financing activities, resulting in an increase of $19.6 million in cash and cash equivalents during the six months. We expect cash flows from redemptions of callable investment securities to remain low through the remainder of 2017, and we plan to use the proceeds from maturities and sales of investment securities to fund our expected loan growth. We anticipate that we will maintain our current level of cash and cash equivalents through the end of the year.

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, 2017, the Bank was not utilizing any of its authorized limit of $255 million with the Federal Home Loan Bank of Indianapolis, or its $20 million overdraft line of credit with the Federal Home Loan Bank of Indianapolis, or its $25 million federal funds line with a correspondent bank. The Company periodically draws on its overdraft and fed funds lines to ensure that funding will be available if needed.

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 2017 the Company was in compliance with its Funds Management Policy regarding liquidity and capital.

-30-

Total stockholders’ equity of the Company was $134.2 million at June 30, 2017 and $141.1 million at December 31, 2016. Retained earnings decreased $10.6 million as the year to date profit was exceeded by the payment of cash dividends on the common stock, and the Accumulated Other Comprehensive Income (AOCI) increased due to an increase in the value of our securities that are classified as Available For Sale. Total equity decreased $6.9 million while total assets decreased $30.9 million, so the ratio of equity to assets decreased from 10.4% at December 31, 2016 to 10.12% at June 30, 2017.

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 8% of Risk Weighted Assets, and the Leverage Capital Ratio is at least 5%. The Basel III capital requirements that began to be phased in the first quarter of 2015 increased the well capitalized requirement for the Tier 1 Capital as a percent of Risk Weighted Assets from 6% to 8%. Basel III also implemented the new Common Equity Tier 1 Capital to Risk Weighted Assets ratio, with a minimum of 6.5% required to be considered well capitalized.

-31-

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, 2017:
Total Capital to Risk-Weighted Assets
Consolidated	$	142,950		16.85	%	$	84,835		10.0	%
Monroe Bank & Trust		141,066		16.63	%		84,835		10.0	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		134,449		15.85	%		67,868		8.0	%
Monroe Bank & Trust		132,565		15.63	%		67,868		8.0	%
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated		134,449		15.85	%		55,142		6.5	%
Monroe Bank & Trust		132,565		15.63	%		55,142		6.5	%
Tier 1 Capital to Average Assets
Consolidated		134,449		10.09	%		66,626		5.0	%
Monroe Bank & Trust		132,565		9.95	%		66,614		5.0	%

	Actual					Minimum to Qualify as Well Capitalized
	Amount		Ratio			Amount		Ratio
As of December 31, 2016:
Total Capital to Risk-Weighted Assets
Consolidated	$	153,957		18.35	%	$	83,923		10.0	%
Monroe Bank & Trust		151,936		18.12	%		83,831		10.0	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		145,144		17.30	%		67,138		8.0	%
Monroe Bank & Trust		143,123		17.07	%		67,064		8.0	%
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated		145,144		17.30	%		54,550		6.5	%
Monroe Bank & Trust		143,123		17.07	%		54,490		6.5	%
Tier 1 Capital to Average Assets
Consolidated		145,144		10.89	%		66,645		5.0	%
Monroe Bank & Trust		143,123		10.75	%		66,579		5.0	%

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 quarterly and it has not changed significantly since year-end 2016.

-32-

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 quarter, the Asset and Liability Committee (ALCO), which includes the senior management of the Bank and a non executive member of the board of directors, 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 increases of 100, 200, 300, and 400 basis points and decreases of 100 and 200 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 two quarters of 2017, the Bank’s interest rate risk has remained within its policy limits.

The ALCO also monitors interest rate risk by estimating the effect of changes in interest rates on the economic value of the Bank’s equity each quarter. 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 100, 200, 300, and 400 basis points and minus 100 and 200 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, 2016.

-33-

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, 2017, 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, 2017, 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, 2017, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

-34-

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

There have been no material changes in the risk factors disclosed by the Company in its Report on Form 10-K for the fiscal year ended December 31, 2016.

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

The Company has a stock repurchase program which it publicly announced on January 28, 2016. On that date, the Board of Directors authorized the repurchase of 2 million of the Company’s common shares, which authorization commenced on February 1, 2016 and will expire on January 31, 2018. The following table summarizes the open-market and privately negotiated stock repurchase activity of the Company during the three months ended June 30, 2017:

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2017 - April 30, 2017		-	$	-		-		1,807,920
May 1, 2017 - May 31, 2017		-	$	-		-		1,807,920
June 1, 2017 - June 30, 2017		-	$	-		-		1,807,920
Total		-	$	-		-

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

-35-

Item 6. Exhibits

3.1 Amended and Restated 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, 2016.

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

101.SCH        XBRL Taxonomy Extension Schema Document

101.CAL        XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF        XBRL Taxonomy Extension Definition Linkbase Document

101.LAB        XBRL Taxonomy Extension Label Linkbase Document

101.PRE        XBRL Taxonomy Extension Presentation Linkbase Document

-36-

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 9, 2017	By /s/ H. Douglas Chaffin
Date	H. Douglas Chaffin
	President &
	Chief Executive Officer
August 9, 2017	By /s/ John L. Skibski
Date	John L. Skibski
	Executive Vice President and
	Chief Financial Officer

-37-

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
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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 9, 2017	/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 9, 2017	/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, 2017 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 9, 2017

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, 2017 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 9, 2017

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

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 09, 2017
Document Information [Line Items]
Entity Registrant Name	MBT Financial Corp
Entity Central Index Key	0001118237
Trading Symbol	mbtf
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		22,870,566
Document Type	10-Q
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Cash and due from banks
Non-interest bearing	$ 22,425	$ 18,183
Interest bearing	18,182	34,589
Total cash and cash equivalents	40,607	52,772
Interest Bearing Time Deposits in Other Banks	17,696	18,946
Securities - Held to Maturity	38,617	40,741
Securities - Available for Sale	439,612	488,067
Federal Home Loan Bank stock - at cost	4,148	4,148
Loans held for sale	899	611
Loans	682,749	652,337
Allowance for Loan Losses	(8,137)	(8,458)
Loans - Net	674,612	643,879
Accrued interest receivable and other assets	22,694	24,901
Other real estate owned	1,502	1,634
Bank Owned Life Insurance	59,217	54,415
Premises and Equipment - Net	26,788	27,169
Total assets	1,326,392	1,357,283
Deposits:
Non-interest bearing	290,595	279,001
Interest-bearing	886,474	920,716
Total deposits	1,177,069	1,199,717
Interest payable and other liabilities	15,101	16,452
Total liabilities	1,192,170	1,216,169
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 22,870,082 and 22,777,882 shares issued and outstanding)	22,559	22,562
Retained earnings	115,453	126,079
Unearned compensation	(39)	(4)
Accumulated other comprehensive income (loss)	(3,751)	(7,523)
Total stockholders' equity	134,222	141,114
Total liabilities and stockholders' equity	$ 1,326,392	$ 1,357,283

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares $ / shares in Thousands	Jun. 30, 2017	Dec. 31, 2016
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	22,870,082	22,777,882
Common stock, shares outstanding (in shares)	22,870,082	22,777,882

XML

Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Interest Income
Interest and fees on loans	$ 7,709	$ 7,179	$ 15,073	$ 14,214
Interest on investment securities-
Tax-exempt	306	303	616	608
Taxable	2,185	2,218	4,453	4,744
Interest on balances due from banks	101	162	210	279
Total interest income	10,301	9,862	20,352	19,845
Interest Expense
Interest on deposits	434	486	890	1,003
Interest on borrowed funds	3	132	3	308
Total interest expense	437	618	893	1,311
Net Interest Income	9,864	9,244	19,459	18,534
Provision For (Recovery Of) Loan Losses		(200)	(200)	(500)
Net Interest Income After Provision For Loan Losses	9,864	9,444	19,659	19,034
Other Income
Income from wealth management services	1,547	1,105	2,675	2,202
Service charges and other fees	1,046	1,016	2,060	2,024
Debit card income	748	735	1,428	1,409
Net gain on sales and redemptionsof securities available for sale	67	1,752	77	2,072
Net loss on sales of Other Real Estate Owned	(62)	(1)	(96)	(57)
Origination fees on mortgage loans sold	115	136	174	266
Bank owned life insurance income	412	362	753	717
Other	497	450	1,119	1,036
Total other income	4,370	5,555	8,190	9,669
Other Expenses
Salaries and employee benefits	5,273	5,399	10,707	11,017
Occupancy expense	682	633	1,430	1,334
Equipment expense	791	726	1,488	1,410
Marketing expense	302	286	586	545
Professional fees	620	556	1,209	1,208
EFT/ATM Expense	259	237	507	546
Other Real Estate Owned expenses	30	30	62	94
FDIC Deposit Insurance Assessment	107	191	214	360
Bonding and other insurance expense	125	214	247	336
Telephone expense	103	91	219	217
Other	716	509	1,401	1,288
Total other expenses	9,008	8,872	18,070	18,355
Income Before Income Taxes	5,226	6,127	9,779	10,348
Income Tax Expense	1,586	1,888	2,959	3,112
Net Income	3,640	4,239	6,820	7,236
Other Comprehensive Income - Net of Tax
Unrealized gains on securities	1,983	2,049	3,770	6,376
Reclassification adjustment for gains included in net income	(44)	(1,156)	(51)	(1,367)
Postretirement benefit liability	26	26	53	53
Total Other Comprehensive Income - Net of Tax	1,965	919	3,772	5,062
Comprehensive Income	$ 5,605	$ 5,158	$ 10,592	$ 12,298
Basic Earnings Per Common Share (in dollars per share)	$ 0.16	$ 0.19	$ 0.30	$ 0.32
Diluted Earnings Per Common Share (in dollars per share)	0.16	0.18	0.30	0.31
Dividends declared per declared (in dollars per share)	$ 0.05	$ 0.03	$ 0.80	$ 0.56

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Retained Earnings [Member]	Deferred Compensation, Share-based Payments [Member]	AOCI Attributable to Parent [Member]	Total
Balance at Jun. 30, 2016	$ 22,315	$ 120,633	$ (35)	$ 2,710	$ 145,623
Balance (in shares) at Dec. 31, 2015	22,790,707
Balance at Dec. 31, 2015	$ 23,492	126,214	(13)	(2,352)	147,341
Repurchase of Common Stock (in shares)	(192,080)
Repurchase of Common Stock	$ (1,414)				(1,414)
SOSARs exercised, net of shares redeemed for taxes (in shares)	105,303
SOSARs exercised, net of shares redeemed for taxes	$ (212)				(212)
Restricted stock awards, net of shares redeemed for taxes (in shares)	5,000
Restricted stock awards, net of shares redeemed for taxes	$ 41		(41)
Employee Stock Purchase Plan and other stock issued (in shares)	19,628
Employee Stock Purchase Plan and other stock issued	$ 156				156
Equity Compensation	$ 252		19		271
Dividends declared		(12,817)			(12,817)
Net Income		7,236			7,236
Other comprehensive income - net of tax				5,062	5,062
Balance (in shares) at Jun. 30, 2016	22,728,558
Balance at Jun. 30, 2017	$ 22,559	115,453	(39)	(3,751)	134,222
Balance (in shares) at Dec. 31, 2016	22,777,882
Balance at Dec. 31, 2016	$ 22,562	126,079	(4)	(7,523)	141,114
Repurchase of Common Stock (in shares)
Repurchase of Common Stock
SOSARs exercised, net of shares redeemed for taxes (in shares)	63,677
SOSARs exercised, net of shares redeemed for taxes	$ (250)				(250)
Restricted stock awards, net of shares redeemed for taxes (in shares)	6,000
Restricted stock awards, net of shares redeemed for taxes	$ 65		(65)
Employee Stock Purchase Plan and other stock issued (in shares)	22,523
Employee Stock Purchase Plan and other stock issued	$ 243				243
Tax benefit from exercise of options		824			824
Equity Compensation	263		$ 30		293
Deferred Directors' Compensation	$ (324)				(324)
Dividends declared		(18,270)			(18,270)
Net Income		$ 6,820			6,820
Other comprehensive income - net of tax				$ 3,772	$ 3,772
Balance (in shares) at Jun. 30, 2017	22,870,082

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Retained Earnings [Member]
Dividends declared per declared (in dollars per share)	$ 0.80	$ 0.56
Dividends declared per declared (in dollars per share)	$ 0.80	$ 0.56

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash Flows from Operating Activities
Net Income	$ 6,820	$ 7,236
Adjustments to reconcile net income to net cash from operating activities
Provision For (Recovery Of) Loan Losses	(200)	(500)
Depreciation	806	797
Deferred tax expense		1,891
Net amortization of investment premium and discount	1,165	707
Writedowns of Other Real Estate Owned	56	69
Net decrease in interest payable and other liabilities	(720)	(125)
Net (increase) decrease in interest receivable and other assets	96	(763)
Writedowns of Other Assets	37
Equity based compensation expense	293	271
Net gain on sale/settlement of securities	(77)	(2,072)
Increase in cash surrender value of life insurance	(754)	(614)
Net cash provided by operating activities	7,522	6,897
Cash Flows from Investing Activities
Proceeds from maturities of interest bearing time deposits in other banks	1,750	250
Proceeds from maturities and redemptions of investment securities held to maturity	6,542	6,182
Proceeds from maturities and redemptions of investment securities available for sale	18,964	240,900
Proceeds from sales of investment securities available for sale	73,918
Net increase in loans	(31,193)	(21,338)
Proceeds from sales of other real estate owned	367	918
Proceeds from sales of other assets	230	171
Purchase of time deposits in other banks	(500)	(13,946)
Purchase of investment securities held to maturity	(4,455)	(4,259)
Purchase of Bank Owned Life Insurance	(4,357)
Proceeds from surrender of Bank Owned Life Insurance	309
Purchase of investment securities available for sale	(39,842)	(164,098)
Purchase of bank premises and equipment	(494)	(793)
Net cash provided by investing activities	21,239	43,987
Cash Flows from Financing Activities
Net decrease in deposits	(22,648)	(1,975)
Repayment of repurchase agreements		(15,000)
Issuance of common stock	243	156
Stock redeemed for tax withholding - stock based compensation	(251)	(212)
Repurchase of common stock		(1,414)
Dividends paid	(18,270)	(12,817)
Net cash used for financing activities	(40,926)	(31,262)
Net Increase (Decrease) in Cash and Cash Equivalents	(12,165)	19,622
Cash and Cash Equivalents at Beginning of Period	52,772	79,550
Cash and Cash Equivalents at End of Period	40,607	99,172
Supplemental Cash Flow Information
Cash paid for interest	899	1,359
Cash paid for federal income taxes	2,106	1,220
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	332	397
Transfer of loans to other assets	$ 40	$ 34

XML

Note 1 - Basis of Presentation and Accounting Policies

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

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

fourteen

branches in Monroe County, Michigan,

six

branches in Wayne County, Michigan, and

one

loan and wealth management office in Wayne 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 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

Company 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 Company uses various valuation techniques and assumptions when estimating fair value.

When determining the fair value measurements for assets and liabilities required or permitted to be recorded at and/or marked to fair value, the

Company 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 Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are

not

traded in active markets, the Company looks to market observable data for similar assets or liabilities. Nevertheless, certain assets and liabilities are

not

actively traded in observable markets and the Company must use alternative valuation techniques to derive a fair value measurement.

ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update

2014

-

09

(ASU

2014

-

09

), “Revenue from Contracts with Customers (Topic

606

)”. ASU

2014

-

09

adopts a standardized approach for revenue recognition and was a joint effort with the International Accounting Standards Board (IASB). The new revenue recognition standard is based on a core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU

2014

-

09

does

not

apply to financial instruments. ASU

2014

-

09

is effective for public entities for reporting periods beginning after

December 15,

2017

(therefore, for the year ending

December 31, 2018

for the Corporation). Early implementation is

not

allowed for public companies. Management does

not

expect the standard will have a significant effect on the Corporation’s consolidated financial statements, however the exact effect is still being determined.

In

January 2016,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

No.

2016

-

01,

Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU covers various changes to the accounting, measurement, and disclosures related to certain financial instruments, including requiring equity investments to be accounted for at fair value with changes recorded through earnings, the use of the exit price when measuring fair value, and disaggregation of financial assets and liabilities by category for disclosure purposes. The new guidance will be effective for the Company's year ending

December 31, 2018.

Early adoption is permitted as early as periods ending after

December 31, 2017

with some additional options for early application. The Company does

not

believe adopting the provisions of ASU

No.

2016

-

01

in the future will have a material impact on the consolidated financial statements. The Company has

not

yet quantified the impact of the change.

In

June 2016,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

No.

2016

-

13,

Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The ASU includes increased disclosures and various changes to the accounting and measurement of financial assets including the Company

’s loans and available-for-sale and held-to-maturity debt securities. Each financial asset presented on the balance sheet would have a unique allowance for credit losses valuation account that is deducted from the amortized cost basis to present the net carrying value at the amount expected to be collected on the financial asset. The amendments in this ASU also eliminate the probable initial recognition threshold in current GAAP and instead, reflect an entity’s current estimate of all expected credit losses using reasonable and supportable forecasts. The new credit loss guidance will be effective for the Company's year ending

December 31, 2020.

Upon adoption, the ASU will be applied using a modified retrospective transition method to the beginning of the

first

reporting period in which the guidance is effective. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Early adoption for all institutions is permitted for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years.

The standard will likely have an effect on the Company's consolidated financial statements from a onetime adjustment to increase the ALLL upon adoption of the standard and due to increased provision expense at the time loans are originated.

XML

Note 2 - Earnings Per Share

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Earnings Per Share [Text Block]

2.

EARNINGS PER SHARE

The calculation

s of earnings per common share are as follows:

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
Basic
Net income	$	3,640,000	$	4,239,000	$	6,820,000	$	7,236,000
Average common shares outstanding		22,865,529		22,884,350		22,843,523		22,869,453
Earnings per common share - basic	$	0.16	$	0.19	$	0.30	$	0.32
Diluted
Net income	$	3,640,000	$	4,239,000	$	6,820,000	$	7,236,000
Average common shares outstanding		22,865,529		22,884,350		22,843,523		22,869,453
Equity compensation		141,237		165,368		144,280		160,385
Average common shares outstanding - diluted		23,006,766		23,049,718		22,987,803		23,029,838
Earnings per common share - diluted	$	0.16	$	0.18	$	0.30	$	0.31

XML

Note 3 - Stock Based Compensation

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

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

3.

STOCK BASED COMPENSATION

Stock Only Stock Appreciation Rights (SOSARs)

- On

February 23, 2017,

94,500

Stock Only Stock Appreciation Rights (SOSARs) were awarded to certain officers in accordance with the MBT

2008

Stock Incentive Plan that was approved by shareholders on

May 1, 2008

and amended by shareholders on

May 7, 2015.

The SOSARs have a term of

ten

years and vest in

three

equal annual installments beginning on

December 31, 2017.

The fair value of

$3.37

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

33.54%,

a risk free interest rate of

2.20%

and dividend yield of

1.83%.

The fair value of the Company’s common stock was

$10.90

on the grant date.

SOSARs granted under the plan are structured as fixed grants with the

base 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
	SOSARs			Base Price
SOSARs Outstanding, January 1, 2017		467,118		$	5.38
Granted		94,500			10.90
Exercised		(156,094	)		5.21
Forfeited		(9,773	)		6.96
Expired		-			-
SOSARs Outstanding, June 30, 2017		395,751		$	6.72
SOSARs Exercisable, June 30, 2017		202,148		$	4.53

The exercise of a SOSAR results in the issuance of a number of shares of common stock of the Company based on the appreciation of the market price of the stock over the

base price of the SOSAR. The market value of the Company’s common stock on

June 30, 2017

was

$9.70.

The value of the exercisable SOSARs that are in-the-money as of

June 30, 2017

was

$1,000,000,

and exercise of those SOSARs on that date would have resulted in the issuance of

107,743

shares of common stock. The plan allows participants to elect to withhold shares from the exercise of SOSARs to cover their tax liability. This

may

affect the number of shares issued and the value of the common stock account on the balance sheet and the statement of changes in equity.

Restricted Stock Unit Awards

– On

February 23, 2017,

24,000

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

and amended by shareholders on

May 7, 2015.

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, 2018

if the defined performance targets are achieved.The grant date fair value of the stock was

$10.90

per share. Earned RSUs vest on

December 15, 2019

and as of

June 30, 2017

none

of the RSUs were vested.

Restricted Stock Awards

– On

February 23, 2017,

6,000

restricted shares were awarded to certain non-executive members of the board of directors in accordance with the MBT

2008

Stock Incentive Plan that was approved by shareholders on

May 1, 2008

and amended by shareholders on

May 7, 2015.

The restricted shares vest on

December 31, 2017.

The expense for the restricted stock is based on the grant date value of

$10.90

and is recognized over the vesting period. The unrecognized cost related to the non-vested restricted stock awards was

$39,000

as of

June 30, 2017.

The total expense for equity based compensation was $

162,000

in the

second

quarter of

2017

and

$157,000

in the

second

quarter of

2016.

The total expense for equity based compensation was

$293,000

in the

first

six

months of

2017

and

$271,000

in the

first

six

months of

2016.

The unrecognized compensation expense for all equity based compensation plans is

$873,000

as of

June 30, 2017.

The expense is expected to be recognized over a weighted average period of

1.72

years.

XML

Note 4 - Loans

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables, Excluding Allowance for Credit Losses [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,

Lenawee 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,
	2017		2016
Residential real estate loans	$	213,648	$	216,436
Commercial and Construction real estate loans		286,901		271,623
Agriculture and agricultural real estate loans		22,689		21,518
Commercial and industrial loans		120,050		96,761
Loans to individuals for household, family, and other personal expenditures		39,461		45,999
Total loans, gross	$	682,749	$	652,337
Less: Allowance for loan losses		8,137		8,458
Net Loans	$	674,612	$	643,879

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, other real estate owned

, and other repossessed assets. Other real estate owned includes real estate that has been acquired in full or partial satisfaction of loan obligations or upon foreclosure.

The following table summarizes nonperforming assets (

000s

omitted):

	June 30,			December 31,
	2017			2016
Nonaccrual loans	$	4,143		$	4,656
Loans 90 days past due and accruing		3			10
Restructured loans		10,103			14,161
Total nonperforming loans	$	14,249		$	18,827
Other real estate owned		1,502			1,634
Other assets		40			-
Total nonperforming assets	$	15,791		$	20,461
Nonperforming assets to total assets		1.19	%		1.51	%
Allowance for loan losses to nonperforming loans		57.11	%		44.92	%

XML

Note 5 - Allowance For Loan Losses

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Financing Receivables [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

. The majority of this segment is student loans, and it also includes loans for autos, boats, and recreational vehicles.

Activity in the allowance f

or loan losses during the

three

and

six

months ended

June 30, 2017

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, 2017
Beginning Balance	$	200	$	1,579		$	3,438		$	534		$	1,570		$	1,013		$	8,334
Charge-offs		-		-			(384	)		-			-			(12	)		(396	)
Recoveries		-		42			37			13			92			15			199
Provision		120		(125	)		268			(6	)		(264	)		7			-
Ending balance	$	320	$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Allowance for loan losses: For the six months ended June 30, 2017
Beginning Balance	$	201	$	1,632		$	3,336		$	525		$	1,599		$	1,165		$	8,458
Charge-offs		-		-			(409	)		-			(50	)		(49	)		(508	)
Recoveries		3		98			74			26			146			40			387
Provision		116		(234	)		358			(10	)		(297	)		(133	)		(200	)
Ending balance	$	320	$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Allowance for loan losses as of June 30, 2017
Ending balance individually evaluated for impairment	$	-	$	143		$	44		$	374		$	221		$	181		$	963
Ending balance collectively evaluated for impairment		320		1,353			3,315			167			1,177			842			7,174
Ending balance	$	320	$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Loans as of June 30, 2017
Ending balance individually evaluated for impairment	$	1,209	$	286		$	3,025		$	1,689		$	6,101		$	442		$	12,752
Ending balance collectively evaluated for impairment		21,480		119,764			260,365			21,822			207,547			39,019			669,997
Ending balance	$	22,689	$	120,050		$	263,390		$	23,511		$	213,648		$	39,461		$	682,749

Activity in the allowance for loan losses during the

three

and

six

months ended

June 30, 2016

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, 2016
Beginning Balance	$	487		$	1,597		$	5,018		$	475		$	1,920		$	1,040		$	10,537
Charge-offs		(221	)		(12	)		(296	)		-			(65	)		(24	)		(618	)
Recoveries		-			44			46			14			45			35			184
Provision		(66	)		(103	)		(298	)		(29	)		(109	)		405			(200	)
Ending balance	$	200		$	1,526		$	4,470		$	460		$	1,791		$	1,456		$	9,903
Allowance for loan losses: For the six months ended June 30, 2016
Beginning Balance	$	389		$	2,279		$	4,350		$	420		$	2,235		$	1,223		$	10,896
Charge-offs		(221	)		(12	)		(352	)		-			(156	)		(86	)		(827	)
Recoveries		-			77			69			27			103			58			334
Provision		32			(818	)		403			13			(391	)		261			(500	)
Ending balance	$	200		$	1,526		$	4,470		$	460		$	1,791		$	1,456		$	9,903
Allowance for loan losses as of June 30, 2016
Ending balance individually evaluated for impairment	$	1		$	468		$	447		$	262		$	309		$	188		$	1,675
Ending balance collectively evaluated for impairment		199			1,058			4,023			198			1,482			1,268			8,228
Ending balance	$	200		$	1,526		$	4,470		$	460		$	1,791		$	1,456		$	9,903
Loans as of June 30, 2016
Ending balance individually evaluated for impairment	$	1,366		$	823		$	10,805		$	1,779		$	7,212		$	496		$	22,481
Ending balance collectively evaluated for impairment		19,798			85,903			236,551			14,991			208,024			50,532			615,799
Ending balance	$	21,164		$	86,726		$	247,356		$	16,770		$	215,236		$	51,028		$	638,280

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

0

through

45

are considered “pass” credits, grades

50

through 

55

are considered “watch” credits, and grade

60

 is considered "substandard" credits. Grades

50

through

60

are subject to greater scrutiny. Loans with grades

70

through

90

and considered “doubtful” or “loss” and have generally been charged off. A description of the general characteristics of each grade is as follows:

• Grade 10– Excellent – Loans secured by marketable collateral, with adequate margin, or supported by strong financial statements, including substantial levels of tangible net worth. Probability of serious financial deterioration is unlikely. Possess a sound repayment source and a secondary source. This classification will also include individual loans backed by liquid personal assets, established history and unquestionable character. High liquidity, minimum risk, strong ratios, and low handling costs are common to these loans.

• Grade 20– Above Average – Loans that exhibit less than average risk and clearly demonstrate debt service coverage that is consistently above average as well as a strong capital base. These loans may have some deficiency or vulnerability, but with offsetting features and are considered to be fully collectable.

• Grade 30– Satisfactory – Loans that have an acceptable amount of risk but may exhibit vulnerability to deterioration if adverse circumstances are encountered. These loans should demonstrate adequate debt service coverage and adequate levels of capital support but warrant periodic monitoring to ensure that weaknesses do not materialize or advance.

• Grades 40 and 45 – Pass – Loans that are considered “pass credits” and typically demonstrate adequate debt service coverage. The level of risk is considered acceptable but these loans warrant ongoing monitoring to ensure that adverse trends or other credit deficiencies have not materialized or advanced. The level of risk is considered acceptable so long as the loan is given adequate and ongoing management supervision.

• Grades 50 and 55 – Watch – Loans that possess some credit deficiency or potential weakness that deserves close attention. The primary source of loan repayment is sufficient but may be considered inadequate by the Bank’s standards.

• Grade 60– Substandard – Loans that exhibit one or more of the following characteristics: ( 1 ) a defined credit weakness, financial deterioration is underway, and uncertainty about the likelihood that the loan will be paid from the primary source of repayment; ( 2 ) inadequately protected by the 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 a high 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 loan terms; ( 9 ) the Bank is contemplating foreclosure or legal action due to the apparent deterioration in the loan; or ( 10 ) there is deterioration in the market conditions and the borrower is highly vulnerable to these conditions.

• Grade 70– Doubtful – Loans that exhibit one or more of the following characteristics: ( 1 ) loans with all 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 there is considerable doubt as to the quality of the secondary source of repayment; or ( 3 ) the possibility of loss is high, but certain important pending factors may strengthen the loan and loss classification is deferred.

• Grades 80 and 90 - Loss – Loans are considered uncollectible and of such little value that continuing to carry 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, 2017

are as follows (

000s

omitted):

Credit Quality Indicators as of

June 30, 2017

Credit Risk by Internally Assigned Grade

	Agriculture and Agricultural Real Estate		Commercial		Commercial Real Estate		Construction Real Estate		Residential Real Estate		Consumer and Other		Total
Not Rated	$	1	$	1,757	$	188	$	13,663	$	131,120	$	33,011	$	179,740
10		-		5,742		-		-		-		-		5,742
20		424		304		400		-		-		-		1,128
30		600		32,915		7,528		-		826		4,174		46,043
40		15,181		71,915		213,775		4,578		68,307		2,171		375,927
45		1,552		2,564		12,076		3,032		5,497		-		24,721
50		2,072		2,946		21,792		369		2,521		9		29,709
55		1,807		1,406		3,184		1,555		1,189		-		9,141
60		1,052		501		4,126		314		4,188		96		10,277
7		-		-		-		-		-		-		-
80		-		-		321		-		-		-		321
90		-		-		-		-		-		-		-
Total	$	22,689	$	120,050	$	263,390	$	23,511	$	213,648	$	39,461	$	682,749
Performing	$	21,922	$	119,609	$	259,704	$	21,663	$	206,641	$	38,961	$	668,500
Nonperforming		767		441		3,686		1,848		7,007		500		14,249
Total	$	22,689	$	120,050	$	263,390	$	23,511	$	213,648	$	39,461	$	682,749

The portfolio segments in each credit risk grade as of

December 31, 2016

are as follows (

000s

omitted):

Credit Quality Indicators as of

December 31, 2016

Credit Risk by Internally Assigned Grade

	Agriculture and Agricultural Real Estate		Commercial		Commercial Real Estate		Construction Real Estate		Residential Real Estate		Consumer and Other		Total
Not Rated	$	2	$	1,768	$	214	$	9,960	$	132,144	$	39,114	$	183,202
10		-		5,787		-		-		-		-		5,787
20		293		348		447		-		-		145		1,233
30		645		17,373		8,128		-		218		-		26,364
40		15,827		63,687		198,416		4,211		70,275		6,626		359,042
45		1,507		2,142		16,227		2,974		4,513		-		27,363
50		1,769		4,090		16,828		448		3,393		12		26,540
55		263		927		4,081		1,574		989		-		7,834
60		1,212		639		7,828		287		4,904		102		14,972
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	21,518	$	96,761	$	252,169	$	19,454	$	216,436	$	45,999	$	652,337
Performing	$	20,834	$	96,240	$	244,816	$	17,734	$	208,458	$	45,428	$	633,510
Nonperforming		684		521		7,353		1,720		7,978		571		18,827
Total	$	21,518	$	96,761	$	252,169	$	19,454	$	216,436	$	45,999	$	652,337

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, 2017

and

December 31, 2016 (

000s

omitted):

June 30, 2017	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	$	-	$	-	$	113	$	113	$	22,576	$	22,689	$	-
Commercial		204		5		48	$	257		119,793		120,050		3
Commercial Real Estate		681		719		824		2,224		261,166		263,390		-
Construction Real Estate		567		-		159		726		22,785		23,511		-
Residential Real Estate		1,103		117		1,377		2,597		211,051		213,648		-
Consumer and Other		35		88		3		126		39,335		39,461		-
Total	$	2,590	$	929	$	2,524	$	6,043	$	676,706	$	682,749	$	3

December 31, 2016	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	$	93	$	-	$	113	$	206	$	21,312	$	21,518	$	-
Commercial		77		46		23		146		96,615		96,761		10
Commercial Real Estate		708		363		828		1,899		250,270		252,169		-
Construction Real Estate		-		-		-		-		19,454		19,454		-
Residential Real Estate		1,523		192		1,558		3,273		213,163		216,436		-
Consumer and Other		149		46		-		195		45,804		45,999		-
Total	$	2,550	$	647	$	2,522	$	5,719	$	646,618	$	652,337	$	10

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, 2017

and

December 31, 2016 (

000s

omitted):

	June 30, 2017		December 31, 2016
Agriculture and Agricultural Real Estate	$	199	$	113
Commercial		152		169
Commercial Real Estate		1,337		1,625
Construction Real Estate		181		31
Residential Real Estate		2,216		2,623
Consumer and Other		58		95
Total	$	4,143	$	4,656

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, 2017

and

June 30,

and

December 31, 2016 (

000s

omitted):

June 30, 2017	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	$	1,209	$	1,404	$	-	$	1,215	$	14	$	1,217	$	28
Commercial		61		61		-		62		1		64		1
Commercial Real Estate		1,270		1,530		-		1,278		-		1,288		19
Construction Real Estate		134		167		-		154		2		156		4
Residential Real Estate		4,336		4,524		-		4,540		47		4,570		107
Consumer and Other		1		1		-		1		-		1		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-		-		-
Commercial		225		225		143		253		2		272		5
Commercial Real Estate		1,755		1,774		44		1,776		18		1,787		37
Construction Real Estate		1,555		1,555		374		1,560		18		1,564		36
Residential Real Estate		1,765		1,828		221		1,802		18		1,809		35
Consumer and Other		441		441		181		445		5		449		10
Total:
Agriculture and Agricultural Real Estate	$	1,209	$	1,404	$	-	$	1,215	$	14	$	1,217	$	28
Commercial		286		286		143		315		3		336		6
Commercial Real Estate		3,025		3,304		44		3,054		18		3,075		56
Construction Real Estate		1,689		1,722		374		1,714		20		1,720		40
Residential Real Estate		6,101		6,352		221		6,342		65		6,379		142
Consumer and Other		442		442		181		446		5		450		10
Total	$	12,752	$	13,510	$	963	$	13,086	$	125	$	13,177	$	282

	Recorded Investment as of December 31, 2016		Unpaid Principal Balance as of December 31, 2016		Related Allowance as of December 31, 2016		Average Recorded Investment for the Three Months Ended June 30, 2016		Interest Income Recognized in the Three Months Ended June 30, 2016		Average Recorded Investment for the Six Months Ended June 30, 2016		Interest Income Recognized in the Six Months Ended June 30, 2016
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	966	$	1,164	$	-	$	1,026	$	10	$	1,028	$	25
Commercial		88		140		-		146		3		148		5
Commercial Real Estate		4,295		4,502		-		7,217		70		7,255		133
Construction Real Estate		144		177		-		127		2		130		4
Residential Real Estate		4,916		5,157		-		4,292		47		4,335		98
Consumer and Other		11		11		-		34		1		35		1
With an allowance recorded:
Agriculture and Agricultural Real Estate		246		246		5		352		3		417		3
Commercial		267		274		199		726		8		754		17
Commercial Real Estate		2,558		2,610		129		4,140		44		4,272		98
Construction Real Estate		1,573		1,573		388		1,676		19		1,681		38
Residential Real Estate		2,182		2,224		236		3,269		26		3,292		63
Consumer and Other		465		465		184		467		6		471		11
Total:
Agriculture and Agricultural Real Estate	$	1,212	$	1,410	$	5	$	1,378	$	13	$	1,445	$	28
Commercial		355		414		199		872		11		902		22
Commercial Real Estate		6,853		7,112		129		11,357		114		11,527		231
Construction Real Estate		1,717		1,750		388		1,803		21		1,811		42
Residential Real Estate		7,098		7,381		236		7,561		73		7,627		161
Consumer and Other		476		476		184		501		7		506		12
Total	$	17,711	$	18,543	$	1,141	$	23,472	$	239	$	23,818	$	496

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 clas

sified as TDRs during the

three

and

six

month periods ended

June 30, 2017

and

June 30, 2016

are as follows (

000s

omitted from dollar amounts):

	Three months ended						Six months ended
	June 30, 2017						June 30, 2017
	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		-		-		-		2		29		29
Commercial Real Estate		1		280		279		3		353		332
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		-		-		-		3		212		180
Consumer and Other		-		-		-		1		1		-
Total		1	$	280	$	279		9	$	595	$	541

	Three months ended						Six months ended
	June 30, 2016						June 30, 2016
	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		1	$	362	$	362		1	$	362	$	362
Commercial		-		-		-		-		-		-
Commercial Real Estate		-		-		-		-		-		-
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		6		251		250		7		451		447
Consumer and Other		1		57		57		1		57		57
Total		8	$	670	$	669		9	$	870	$	866

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, 2017

and

June 30, 2016

that subsequently defaulted during the

six

month periods ended

June 30, 2017

and

June 30, 2016,

respectively.

The Company has allocated $

963,000

of specific reserves to customers whose loan terms have been modified in troubled debt restructurings at

June 30, 2017.

In addition, there were

no

commitments to lend additional amounts to borrowers that are classified as troubled debt restructurings as of

June 30, 2017

and

June 30, 2016.

XML

Note 6 - Investment Securities

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

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, 2017

and

December 31, 2016 (

000s

omitted):

	Held to Maturity
	June 30, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political
Subdivisions	$	38,117	$	1,044	$	(150	)	$	39,011
Corporate Debt Securities		500		1		-			501
	$	38,617	$	1,045	$	(150	)	$	39,512

	Available for Sale
	June 30, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	236,531	$	716	$	(3,859	)	$	233,388
Mortgage Backed Securities issued by U.S. Government Agencies		156,783		48		(1,773	)		155,058
Obligations of States and Political Subdivisions		28,153		96		(168	)		28,081
Corporate Debt Securities		20,608		382		(14	)		20,976
Equity Securities		2,044		65		-			2,109
	$	444,119	$	1,307	$	(5,814	)	$	439,612

	Held to Maturity
	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	40,241	$	701	$	(288	)	$	40,654
Corporate Debt Securities		500		2		-			502
	$	40,741	$	703	$	(288	)	$	41,156

	Available for Sale
	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	282,130	$	389	$	(7,519	)	$	275,000
Mortgage Backed Securities issued by U.S. Government Agencies		148,764		118		(2,673	)		146,209
Obligations of States and Political Subdivisions		30,909		109		(409	)		30,609
Corporate Debt Securities		34,363		135		(338	)		34,160
Equity Securities		2,044		45		-			2,089
	$	498,210	$	796	$	(10,939	)	$	488,067

The amortized cost and estimated market values of securities by contractual maturity as of

June 30, 2017

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	$	9,134	$	9,171	$	3,586	$	3,588
After 1 year through five years		20,838		21,250		125,298		125,044
After 5 years through 10 years		7,466		7,923		146,841		144,290
After 10 years		1,179		1,168		9,567		9,523
Total		38,617		39,512		285,292		282,445
Mortgage Backed Securities		-		-		156,783		155,058
Securities with no stated maturity		-		-		2,044		2,109
Total	$	38,617	$	39,512	$	444,119	$	439,612

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, 2017

and

December 31, 2016.

June 30, 2017

	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	$	167,460	$	3,859	$	-	$	-	$	167,460	$	3,859
Mortgage Backed Securities issued by U.S. Government Agencies		102,272		1,354		29,259		419		131,531		1,773
Obligations of States and Political Subdivisions		25,954		313		1,184		5		27,138		318
Corporate Debt Securities		2,022		14		-		-		2,022		14
	$	297,708	$	5,540	$	30,443	$	424	$	328,151	$	5,964

December 31, 2016

	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	$	242,212	$	7,519	$	-	$	-	$	242,212	$	7,519
Mortgage Backed Securities issued by U.S. Government Agencies		112,995		2,144		22,857		529		135,852		2,673
Obligations of States and Political Subdivisions		40,524		682		2,976		15		43,500		697
Corporate Debt Securities		24,025		338		-		-		24,025		338
	$	419,756	$	10,683	$	25,833	$	544	$	445,589	$	11,227

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, 2017.

As of

June 30, 2017

and

December 31, 2016,

there were

163

and

230

securities in an unrealized loss position, respectively.

XML

Note 7 - Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Fair Value Disclosures [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

Company 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 Company uses various valuation techniques and assumptions when estimating fair value.

The

Company 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 Company’s equity 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 Company’s borrowed funds and investments in U.S. government agency securities, government sponsored mortgage backed securities, corporate debt securities, bank certificates of deposit, 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. Certain municipal debt obligations and certificates of deposit 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, 2017

and

December 31, 2016,

and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
June 30, 2017	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	40,607	$	40,607	$	-	$	-	$	40,607
Time Deposits in Other Banks		17,696		-		16,906		750		17,656
Securities - Held to Maturity
Obligations of States and Political Subdivisions		38,117		-		2,747		36,264		39,011
Corporate Debt Securities		500		-		501		-		501
Securities - Available for Sale
Obligations of U.S. Government Agencies		233,388		-		233,388		-		233,388
MBS issued by U.S. Government Agencies		155,058		-		155,058		-		155,058
Obligations of States and Political Subdivisions		28,081		-		28,081		-		28,081
Corporate Debt Securities		20,976		-		20,976		-		20,976
Equity Securities		2,109		2,109		-		-		2,109
Federal Home Loan Bank Stock		4,148		-		4,148		-		4,148
Loans Held for Sale		899		-		-		919		919
Loans, net		674,612		-		-		666,394		666,394
Accrued Interest Receivable		3,923		-		-		3,923		3,923
Financial Liabilities:
Noninterest Bearing Deposits		290,595		290,595		-		-		290,595
Interest Bearing Deposits		886,474		-		887,768		-		887,768
Accrued Interest Payable		52		-		-		52		52

									Total
	Carrying								Estimated
December 31, 2016	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	52,772	$	52,772	$	-	$	-	$	52,772
Time Deposits in Other Banks		18,946		-		18,940		-		18,940
Securities - Held to Maturity
Obligations of States and Political Subdivisions		40,241		-		3,153		37,501		40,654
Corporate Debt Securities		500		-		502		-		502
Securities - Available for Sale
Obligations of U.S. Government Agencies		275,000		-		275,000		-		275,000
MBS issued by U.S. Government Agencies		146,209		-		146,209		-		146,209
Obligations of States and Political Subdivisions		30,609		-		30,609		-		30,609
Corporate Debt Securities		34,160		-		34,160		-		34,160
Equity Securities		2,089		2,089		-		-		2,089
Federal Home Loan Bank Stock		4,148		-		4,148		-		4,148
Loans Held for Sale		611		-		-		623		623
Loans, net		643,879		-		-		642,908		642,908
Accrued Interest Receivable		4,335		-		-		4,335		4,335
Financial Liabilities:
Noninterest Bearing Deposits		279,001		279,001		-		-		279,001
Interest Bearing Deposits		920,716		-		922,187		-		922,187
Repurchase Agreements		-		-		-		-		-
Accrued Interest Payable		57		-		-		57		57

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

Company’s assets with Level

3

fair values are carried at their amortized cost values as of

June 30, 2017

or

December 31, 2016.

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 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 (

000s

omitted):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2017
Impaired loans	$	-	$	-	$	11,789
Other Real Estate Owned	$	-	$	-	$	1,502
December 31, 2016
Impaired loans	$	-	$	-	$	16,570
Other Real Estate Owned	$	-	$	-	$	1,634

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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Note 8 - Financial Instruments With Off-balance Sheet Risk

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Fair Value of Off-Balance Sheet Risks Disclosure [Text Block]

8

. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

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

The Bank

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

Financial instruments whose contractual amounts represent off-balance sheet credit risk were as follows (

000s

omitted):

	Contractual Amount
	June 30,		December 31,
	2017		2016
Commitments to extend credit:
Unused portion of commercial lines of credit	$	74,609	$	75,454
Unused portion of credit card lines of credit		5,486		4,983
Unused portion of home equity lines of credit		28,134		25,057
Standby letters of credit and financial guarantees written		1,281		1,582

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.

XML

Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

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

Company 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 Company uses various valuation techniques and assumptions when estimating fair value.

When determining the fair value measurements for assets and liabilities required or permitted to be recorded at and/or marked to fair value, the

Company 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 Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are

not

traded in active markets, the Company looks to market observable data for similar assets or liabilities. Nevertheless, certain assets and liabilities are

not

actively traded in observable markets and the Company must use alternative valuation techniques to derive a fair value measurement.

New Accounting Pronouncements, Policy [Policy Text Block]

ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update

2014

-

09

(ASU

2014

-

09

), “Revenue from Contracts with Customers (Topic

606

)”. ASU

2014

-

09

adopts a standardized approach for revenue recognition and was a joint effort with the International Accounting Standards Board (IASB). The new revenue recognition standard is based on a core principle of recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU

2014

-

09

does

not

apply to financial instruments. ASU

2014

-

09

is effective for public entities for reporting periods beginning after

December 15,

2017

(therefore, for the year ending

December 31, 2018

for the Corporation). Early implementation is

not

allowed for public companies. Management does

not

expect the standard will have a significant effect on the Corporation’s consolidated financial statements, however the exact effect is still being determined.

In

January 2016,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

No.

2016

-

01,

Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU covers various changes to the accounting, measurement, and disclosures related to certain financial instruments, including requiring equity investments to be accounted for at fair value with changes recorded through earnings, the use of the exit price when measuring fair value, and disaggregation of financial assets and liabilities by category for disclosure purposes. The new guidance will be effective for the Company's year ending

December 31, 2018.

Early adoption is permitted as early as periods ending after

December 31, 2017

with some additional options for early application. The Company does

not

believe adopting the provisions of ASU

No.

2016

-

01

in the future will have a material impact on the consolidated financial statements. The Company has

not

yet quantified the impact of the change.

In

June 2016,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

No.

2016

-

13,

Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The ASU includes increased disclosures and various changes to the accounting and measurement of financial assets including the Company

’s loans and available-for-sale and held-to-maturity debt securities. Each financial asset presented on the balance sheet would have a unique allowance for credit losses valuation account that is deducted from the amortized cost basis to present the net carrying value at the amount expected to be collected on the financial asset. The amendments in this ASU also eliminate the probable initial recognition threshold in current GAAP and instead, reflect an entity’s current estimate of all expected credit losses using reasonable and supportable forecasts. The new credit loss guidance will be effective for the Company's year ending

December 31, 2020.

Upon adoption, the ASU will be applied using a modified retrospective transition method to the beginning of the

first

reporting period in which the guidance is effective. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Early adoption for all institutions is permitted for fiscal years beginning after

December 15, 2018,

including interim periods within those fiscal years.

The standard will likely have an effect on the Company's consolidated financial statements from a onetime adjustment to increase the ALLL upon adoption of the standard and due to increased provision expense at the time loans are originated.

XML

Note 2 - Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2017

Notes Tables

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

	For the three months ended June 30,				For the six months ended June 30,
	2017		2016		2017		2016
Basic
Net income	$	3,640,000	$	4,239,000	$	6,820,000	$	7,236,000
Average common shares outstanding		22,865,529		22,884,350		22,843,523		22,869,453
Earnings per common share - basic	$	0.16	$	0.19	$	0.30	$	0.32
Diluted
Net income	$	3,640,000	$	4,239,000	$	6,820,000	$	7,236,000
Average common shares outstanding		22,865,529		22,884,350		22,843,523		22,869,453
Equity compensation		141,237		165,368		144,280		160,385
Average common shares outstanding - diluted		23,006,766		23,049,718		22,987,803		23,029,838
Earnings per common share - diluted	$	0.16	$	0.18	$	0.30	$	0.31

XML

Note 3 - Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2017

Notes Tables

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

				Weighted Average
	SOSARs			Base Price
SOSARs Outstanding, January 1, 2017		467,118		$	5.38
Granted		94,500			10.90
Exercised		(156,094	)		5.21
Forfeited		(9,773	)		6.96
Expired		-			-
SOSARs Outstanding, June 30, 2017		395,751		$	6.72
SOSARs Exercisable, June 30, 2017		202,148		$	4.53

XML

Note 4 - Loans (Tables)

6 Months Ended

Jun. 30, 2017

Notes Tables

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

	June 30,		December 31,
	2017		2016
Residential real estate loans	$	213,648	$	216,436
Commercial and Construction real estate loans		286,901		271,623
Agriculture and agricultural real estate loans		22,689		21,518
Commercial and industrial loans		120,050		96,761
Loans to individuals for household, family, and other personal expenditures		39,461		45,999
Total loans, gross	$	682,749	$	652,337
Less: Allowance for loan losses		8,137		8,458
Net Loans	$	674,612	$	643,879

Schedule of Non-performing Assets [Table Text Block]

	June 30,			December 31,
	2017			2016
Nonaccrual loans	$	4,143		$	4,656
Loans 90 days past due and accruing		3			10
Restructured loans		10,103			14,161
Total nonperforming loans	$	14,249		$	18,827
Other real estate owned		1,502			1,634
Other assets		40			-
Total nonperforming assets	$	15,791		$	20,461
Nonperforming assets to total assets		1.19	%		1.51	%
Allowance for loan losses to nonperforming loans		57.11	%		44.92	%

XML

Note 5 - Allowance For Loan Losses (Tables)

6 Months Ended

Jun. 30, 2017

Notes Tables

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

	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, 2017
Beginning Balance	$	200	$	1,579		$	3,438		$	534		$	1,570		$	1,013		$	8,334
Charge-offs		-		-			(384	)		-			-			(12	)		(396	)
Recoveries		-		42			37			13			92			15			199
Provision		120		(125	)		268			(6	)		(264	)		7			-
Ending balance	$	320	$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Allowance for loan losses: For the six months ended June 30, 2017
Beginning Balance	$	201	$	1,632		$	3,336		$	525		$	1,599		$	1,165		$	8,458
Charge-offs		-		-			(409	)		-			(50	)		(49	)		(508	)
Recoveries		3		98			74			26			146			40			387
Provision		116		(234	)		358			(10	)		(297	)		(133	)		(200	)
Ending balance	$	320	$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Allowance for loan losses as of June 30, 2017
Ending balance individually evaluated for impairment	$	-	$	143		$	44		$	374		$	221		$	181		$	963
Ending balance collectively evaluated for impairment		320		1,353			3,315			167			1,177			842			7,174
Ending balance	$	320	$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Loans as of June 30, 2017
Ending balance individually evaluated for impairment	$	1,209	$	286		$	3,025		$	1,689		$	6,101		$	442		$	12,752
Ending balance collectively evaluated for impairment		21,480		119,764			260,365			21,822			207,547			39,019			669,997
Ending balance	$	22,689	$	120,050		$	263,390		$	23,511		$	213,648		$	39,461		$	682,749

	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, 2016
Beginning Balance	$	487		$	1,597		$	5,018		$	475		$	1,920		$	1,040		$	10,537
Charge-offs		(221	)		(12	)		(296	)		-			(65	)		(24	)		(618	)
Recoveries		-			44			46			14			45			35			184
Provision		(66	)		(103	)		(298	)		(29	)		(109	)		405			(200	)
Ending balance	$	200		$	1,526		$	4,470		$	460		$	1,791		$	1,456		$	9,903
Allowance for loan losses: For the six months ended June 30, 2016
Beginning Balance	$	389		$	2,279		$	4,350		$	420		$	2,235		$	1,223		$	10,896
Charge-offs		(221	)		(12	)		(352	)		-			(156	)		(86	)		(827	)
Recoveries		-			77			69			27			103			58			334
Provision		32			(818	)		403			13			(391	)		261			(500	)
Ending balance	$	200		$	1,526		$	4,470		$	460		$	1,791		$	1,456		$	9,903
Allowance for loan losses as of June 30, 2016
Ending balance individually evaluated for impairment	$	1		$	468		$	447		$	262		$	309		$	188		$	1,675
Ending balance collectively evaluated for impairment		199			1,058			4,023			198			1,482			1,268			8,228
Ending balance	$	200		$	1,526		$	4,470		$	460		$	1,791		$	1,456		$	9,903
Loans as of June 30, 2016
Ending balance individually evaluated for impairment	$	1,366		$	823		$	10,805		$	1,779		$	7,212		$	496		$	22,481
Ending balance collectively evaluated for impairment		19,798			85,903			236,551			14,991			208,024			50,532			615,799
Ending balance	$	21,164		$	86,726		$	247,356		$	16,770		$	215,236		$	51,028		$	638,280

Financing Receivable Credit Quality Indicators [Table Text Block]

	Agriculture and Agricultural Real Estate		Commercial		Commercial Real Estate		Construction Real Estate		Residential Real Estate		Consumer and Other		Total
Not Rated	$	1	$	1,757	$	188	$	13,663	$	131,120	$	33,011	$	179,740
10		-		5,742		-		-		-		-		5,742
20		424		304		400		-		-		-		1,128
30		600		32,915		7,528		-		826		4,174		46,043
40		15,181		71,915		213,775		4,578		68,307		2,171		375,927
45		1,552		2,564		12,076		3,032		5,497		-		24,721
50		2,072		2,946		21,792		369		2,521		9		29,709
55		1,807		1,406		3,184		1,555		1,189		-		9,141
60		1,052		501		4,126		314		4,188		96		10,277
7		-		-		-		-		-		-		-
80		-		-		321		-		-		-		321
90		-		-		-		-		-		-		-
Total	$	22,689	$	120,050	$	263,390	$	23,511	$	213,648	$	39,461	$	682,749
Performing	$	21,922	$	119,609	$	259,704	$	21,663	$	206,641	$	38,961	$	668,500
Nonperforming		767		441		3,686		1,848		7,007		500		14,249
Total	$	22,689	$	120,050	$	263,390	$	23,511	$	213,648	$	39,461	$	682,749

	Agriculture and Agricultural Real Estate		Commercial		Commercial Real Estate		Construction Real Estate		Residential Real Estate		Consumer and Other		Total
Not Rated	$	2	$	1,768	$	214	$	9,960	$	132,144	$	39,114	$	183,202
10		-		5,787		-		-		-		-		5,787
20		293		348		447		-		-		145		1,233
30		645		17,373		8,128		-		218		-		26,364
40		15,827		63,687		198,416		4,211		70,275		6,626		359,042
45		1,507		2,142		16,227		2,974		4,513		-		27,363
50		1,769		4,090		16,828		448		3,393		12		26,540
55		263		927		4,081		1,574		989		-		7,834
60		1,212		639		7,828		287		4,904		102		14,972
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	21,518	$	96,761	$	252,169	$	19,454	$	216,436	$	45,999	$	652,337
Performing	$	20,834	$	96,240	$	244,816	$	17,734	$	208,458	$	45,428	$	633,510
Nonperforming		684		521		7,353		1,720		7,978		571		18,827
Total	$	21,518	$	96,761	$	252,169	$	19,454	$	216,436	$	45,999	$	652,337

Past Due Financing Receivables [Table Text Block]

June 30, 2017	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	$	-	$	-	$	113	$	113	$	22,576	$	22,689	$	-
Commercial		204		5		48	$	257		119,793		120,050		3
Commercial Real Estate		681		719		824		2,224		261,166		263,390		-
Construction Real Estate		567		-		159		726		22,785		23,511		-
Residential Real Estate		1,103		117		1,377		2,597		211,051		213,648		-
Consumer and Other		35		88		3		126		39,335		39,461		-
Total	$	2,590	$	929	$	2,524	$	6,043	$	676,706	$	682,749	$	3

December 31, 2016	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	$	93	$	-	$	113	$	206	$	21,312	$	21,518	$	-
Commercial		77		46		23		146		96,615		96,761		10
Commercial Real Estate		708		363		828		1,899		250,270		252,169		-
Construction Real Estate		-		-		-		-		19,454		19,454		-
Residential Real Estate		1,523		192		1,558		3,273		213,163		216,436		-
Consumer and Other		149		46		-		195		45,804		45,999		-
Total	$	2,550	$	647	$	2,522	$	5,719	$	646,618	$	652,337	$	10

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

	June 30, 2017		December 31, 2016
Agriculture and Agricultural Real Estate	$	199	$	113
Commercial		152		169
Commercial Real Estate		1,337		1,625
Construction Real Estate		181		31
Residential Real Estate		2,216		2,623
Consumer and Other		58		95
Total	$	4,143	$	4,656

Impaired Financing Receivables [Table Text Block]

June 30, 2017	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	$	1,209	$	1,404	$	-	$	1,215	$	14	$	1,217	$	28
Commercial		61		61		-		62		1		64		1
Commercial Real Estate		1,270		1,530		-		1,278		-		1,288		19
Construction Real Estate		134		167		-		154		2		156		4
Residential Real Estate		4,336		4,524		-		4,540		47		4,570		107
Consumer and Other		1		1		-		1		-		1		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-		-		-
Commercial		225		225		143		253		2		272		5
Commercial Real Estate		1,755		1,774		44		1,776		18		1,787		37
Construction Real Estate		1,555		1,555		374		1,560		18		1,564		36
Residential Real Estate		1,765		1,828		221		1,802		18		1,809		35
Consumer and Other		441		441		181		445		5		449		10
Total:
Agriculture and Agricultural Real Estate	$	1,209	$	1,404	$	-	$	1,215	$	14	$	1,217	$	28
Commercial		286		286		143		315		3		336		6
Commercial Real Estate		3,025		3,304		44		3,054		18		3,075		56
Construction Real Estate		1,689		1,722		374		1,714		20		1,720		40
Residential Real Estate		6,101		6,352		221		6,342		65		6,379		142
Consumer and Other		442		442		181		446		5		450		10
Total	$	12,752	$	13,510	$	963	$	13,086	$	125	$	13,177	$	282

	Recorded Investment as of December 31, 2016		Unpaid Principal Balance as of December 31, 2016		Related Allowance as of December 31, 2016		Average Recorded Investment for the Three Months Ended June 30, 2016		Interest Income Recognized in the Three Months Ended June 30, 2016		Average Recorded Investment for the Six Months Ended June 30, 2016		Interest Income Recognized in the Six Months Ended June 30, 2016
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	966	$	1,164	$	-	$	1,026	$	10	$	1,028	$	25
Commercial		88		140		-		146		3		148		5
Commercial Real Estate		4,295		4,502		-		7,217		70		7,255		133
Construction Real Estate		144		177		-		127		2		130		4
Residential Real Estate		4,916		5,157		-		4,292		47		4,335		98
Consumer and Other		11		11		-		34		1		35		1
With an allowance recorded:
Agriculture and Agricultural Real Estate		246		246		5		352		3		417		3
Commercial		267		274		199		726		8		754		17
Commercial Real Estate		2,558		2,610		129		4,140		44		4,272		98
Construction Real Estate		1,573		1,573		388		1,676		19		1,681		38
Residential Real Estate		2,182		2,224		236		3,269		26		3,292		63
Consumer and Other		465		465		184		467		6		471		11
Total:
Agriculture and Agricultural Real Estate	$	1,212	$	1,410	$	5	$	1,378	$	13	$	1,445	$	28
Commercial		355		414		199		872		11		902		22
Commercial Real Estate		6,853		7,112		129		11,357		114		11,527		231
Construction Real Estate		1,717		1,750		388		1,803		21		1,811		42
Residential Real Estate		7,098		7,381		236		7,561		73		7,627		161
Consumer and Other		476		476		184		501		7		506		12
Total	$	17,711	$	18,543	$	1,141	$	23,472	$	239	$	23,818	$	496

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Three months ended						Six months ended
	June 30, 2017						June 30, 2017
	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		-		-		-		2		29		29
Commercial Real Estate		1		280		279		3		353		332
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		-		-		-		3		212		180
Consumer and Other		-		-		-		1		1		-
Total		1	$	280	$	279		9	$	595	$	541

	Three months ended						Six months ended
	June 30, 2016						June 30, 2016
	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		1	$	362	$	362		1	$	362	$	362
Commercial		-		-		-		-		-		-
Commercial Real Estate		-		-		-		-		-		-
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		6		251		250		7		451		447
Consumer and Other		1		57		57		1		57		57
Total		8	$	670	$	669		9	$	870	$	866

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Note 6 - Investment Securities (Tables)

6 Months Ended

Jun. 30, 2017

Notes Tables

Held-to-maturity Securities [Table Text Block]

	Held to Maturity
	June 30, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political
Subdivisions	$	38,117	$	1,044	$	(150	)	$	39,011
Corporate Debt Securities		500		1		-			501
	$	38,617	$	1,045	$	(150	)	$	39,512

	Held to Maturity
	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	40,241	$	701	$	(288	)	$	40,654
Corporate Debt Securities		500		2		-			502
	$	40,741	$	703	$	(288	)	$	41,156

Available-for-sale Securities [Table Text Block]

	Available for Sale
	June 30, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	236,531	$	716	$	(3,859	)	$	233,388
Mortgage Backed Securities issued by U.S. Government Agencies		156,783		48		(1,773	)		155,058
Obligations of States and Political Subdivisions		28,153		96		(168	)		28,081
Corporate Debt Securities		20,608		382		(14	)		20,976
Equity Securities		2,044		65		-			2,109
	$	444,119	$	1,307	$	(5,814	)	$	439,612

	Available for Sale
	December 31, 2016
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	282,130	$	389	$	(7,519	)	$	275,000
Mortgage Backed Securities issued by U.S. Government Agencies		148,764		118		(2,673	)		146,209
Obligations of States and Political Subdivisions		30,909		109		(409	)		30,609
Corporate Debt Securities		34,363		135		(338	)		34,160
Equity Securities		2,044		45		-			2,089
	$	498,210	$	796	$	(10,939	)	$	488,067

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

	Held to Maturity				Available for Sale
			Estimated				Estimated
	Amortized		Market		Amortized		Market
	Cost		Value		Cost		Value
Contractual maturity in
1 year or less	$	9,134	$	9,171	$	3,586	$	3,588
After 1 year through five years		20,838		21,250		125,298		125,044
After 5 years through 10 years		7,466		7,923		146,841		144,290
After 10 years		1,179		1,168		9,567		9,523
Total		38,617		39,512		285,292		282,445
Mortgage Backed Securities		-		-		156,783		155,058
Securities with no stated maturity		-		-		2,044		2,109
Total	$	38,617	$	39,512	$	444,119	$	439,612

Schedule of Unrealized Loss on Investments [Table Text Block]

	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	$	167,460	$	3,859	$	-	$	-	$	167,460	$	3,859
Mortgage Backed Securities issued by U.S. Government Agencies		102,272		1,354		29,259		419		131,531		1,773
Obligations of States and Political Subdivisions		25,954		313		1,184		5		27,138		318
Corporate Debt Securities		2,022		14		-		-		2,022		14
	$	297,708	$	5,540	$	30,443	$	424	$	328,151	$	5,964

	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	$	242,212	$	7,519	$	-	$	-	$	242,212	$	7,519
Mortgage Backed Securities issued by U.S. Government Agencies		112,995		2,144		22,857		529		135,852		2,673
Obligations of States and Political Subdivisions		40,524		682		2,976		15		43,500		697
Corporate Debt Securities		24,025		338		-		-		24,025		338
	$	419,756	$	10,683	$	25,833	$	544	$	445,589	$	11,227

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Note 7 - Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2017

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

									Total
	Carrying								Estimated
June 30, 2017	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	40,607	$	40,607	$	-	$	-	$	40,607
Time Deposits in Other Banks		17,696		-		16,906		750		17,656
Securities - Held to Maturity
Obligations of States and Political Subdivisions		38,117		-		2,747		36,264		39,011
Corporate Debt Securities		500		-		501		-		501
Securities - Available for Sale
Obligations of U.S. Government Agencies		233,388		-		233,388		-		233,388
MBS issued by U.S. Government Agencies		155,058		-		155,058		-		155,058
Obligations of States and Political Subdivisions		28,081		-		28,081		-		28,081
Corporate Debt Securities		20,976		-		20,976		-		20,976
Equity Securities		2,109		2,109		-		-		2,109
Federal Home Loan Bank Stock		4,148		-		4,148		-		4,148
Loans Held for Sale		899		-		-		919		919
Loans, net		674,612		-		-		666,394		666,394
Accrued Interest Receivable		3,923		-		-		3,923		3,923
Financial Liabilities:
Noninterest Bearing Deposits		290,595		290,595		-		-		290,595
Interest Bearing Deposits		886,474		-		887,768		-		887,768
Accrued Interest Payable		52		-		-		52		52

									Total
	Carrying								Estimated
December 31, 2016	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	52,772	$	52,772	$	-	$	-	$	52,772
Time Deposits in Other Banks		18,946		-		18,940		-		18,940
Securities - Held to Maturity
Obligations of States and Political Subdivisions		40,241		-		3,153		37,501		40,654
Corporate Debt Securities		500		-		502		-		502
Securities - Available for Sale
Obligations of U.S. Government Agencies		275,000		-		275,000		-		275,000
MBS issued by U.S. Government Agencies		146,209		-		146,209		-		146,209
Obligations of States and Political Subdivisions		30,609		-		30,609		-		30,609
Corporate Debt Securities		34,160		-		34,160		-		34,160
Equity Securities		2,089		2,089		-		-		2,089
Federal Home Loan Bank Stock		4,148		-		4,148		-		4,148
Loans Held for Sale		611		-		-		623		623
Loans, net		643,879		-		-		642,908		642,908
Accrued Interest Receivable		4,335		-		-		4,335		4,335
Financial Liabilities:
Noninterest Bearing Deposits		279,001		279,001		-		-		279,001
Interest Bearing Deposits		920,716		-		922,187		-		922,187
Repurchase Agreements		-		-		-		-		-
Accrued Interest Payable		57		-		-		57		57

Fair Value Measurements, Nonrecurring [Table Text Block]

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2017
Impaired loans	$	-	$	-	$	11,789
Other Real Estate Owned	$	-	$	-	$	1,502
December 31, 2016
Impaired loans	$	-	$	-	$	16,570
Other Real Estate Owned	$	-	$	-	$	1,634

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Note 8 - Financial Instruments With Off-balance Sheet Risk (Tables)

6 Months Ended

Jun. 30, 2017

Notes Tables

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

	Contractual Amount
	June 30,		December 31,
	2017		2016
Commitments to extend credit:
Unused portion of commercial lines of credit	$	74,609	$	75,454
Unused portion of credit card lines of credit		5,486		4,983
Unused portion of home equity lines of credit		28,134		25,057
Standby letters of credit and financial guarantees written		1,281		1,582

XML

Note 1 - Basis of Presentation and Accounting Policies (Details Textual)	6 Months Ended
	Jun. 30, 2017
Number of Reportable Segments	1
Monroe County, Michigan [Member]
Number of Stores	14
Wayne County, Michigan [Member]
Number of Stores	6
Number of Loan and Wealth Management Offices	1

XML

Note 2 - Earnings Per Share - Calculations of Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Net Income	$ 3,640	$ 4,239	$ 6,820	$ 7,236
Earnings per common share - basic (in dollars per share)	$ 0.16	$ 0.19	$ 0.30	$ 0.32
Net income	$ 3,640	$ 4,239	$ 6,820	$ 7,236
Average common shares outstanding (in shares)	22,865,529	22,884,350	22,843,523	22,869,453
Equity compensation (in shares)	141,237	165,368	144,280	160,385
Average common shares outstanding - diluted (in shares)	23,006,766	23,049,718	22,987,803	23,029,838
Earnings per common share - diluted (in dollars per share)	$ 0.16	$ 0.18	$ 0.30	$ 0.31

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Note 3 - Stock Based Compensation (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	Feb. 23, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share Price	$ 10.90	$ 9.70		$ 9.70
Allocated Share-based Compensation Expense		$ 162,000	$ 157,000	$ 293,000	$ 271,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		873,000		$ 873,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition				1 year 262 days
Executive Officer [Member] | Stock Incentive Plan 2008 [Member]
Restricted Stock Units, Number of Shares of Common Stock Per RSU	1
Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted				94,500
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 3.37
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value		$ 1,000,000		$ 1,000,000
Shares, Issued		107,743		107,743
Stock Appreciation Rights (SARs) [Member] | Stock Incentive Plan 2008 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	7 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate	33.54%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	2.20%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	1.83%
Stock Appreciation Rights (SARs) [Member] | Certain Officers [Member] | Stock Incentive Plan 2008 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Granted	94,500
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Restricted Stock Units (RSUs) [Member] | Stock Incentive Plan 2008 [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options		$ 39,000		$ 39,000
Restricted Stock Units (RSUs) [Member] | Executive Officer [Member] | Stock Incentive Plan 2008 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value	$ 10.90
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period				0
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	24,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period	2 years
Restricted Stock Units (RSUs) [Member] | Non-executive Members of Board of Directors [Member] | Stock Incentive Plan 2008 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 10.90
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	6,000

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Note 3 - Stock Based Compensation - SOSARs Activity (Details) - Stock Appreciation Rights (SARs) [Member]	6 Months Ended
	Jun. 30, 2017 $ / shares shares
SOSARs Outstanding, January 1, 2017 (in shares) | shares	467,118
SOSARs Outstanding, January 1, 2017 (in dollars per share) | $ / shares	$ 5.38
SOSARs Outstanding, June 30, 2017 (in dollars per share) | $ / shares	$ 6.72
Granted (in shares) | shares	94,500
Granted (in dollars per share) | $ / shares	$ 10.90
Exercised (in shares) | shares	(156,094)
Exercised (in dollars per share) | $ / shares	$ 5.21
Forfeited (in shares) | shares	(9,773)
Forfeited (in dollars per share) | $ / shares	$ 6.96
Expired (in shares) | shares
Expired (in dollars per share) | $ / shares
SOSARs Outstanding, June 30, 2017 (in shares) | shares	395,751
SOSARs Exercisable, June 30, 2017 (in shares) | shares	202,148
SOSARs Exercisable, June 30, 2017 (in dollars per share) | $ / shares	$ 4.53

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Note 4 - Loans (Details Textual)	6 Months Ended
	Jun. 30, 2017 USD ($)
Impairment Review Minimum Amount Threshold	$ 250,000

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Note 4 - Loans - Loans Receivable Outstanding (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016
Loans	$ 682,749	$ 652,337	$ 638,280
Less: Allowance for loan losses	8,137	8,458
Net Loans	674,612	643,879
Residential Portfolio Segment [Member]
Loans	213,648	216,436	215,236
Commercial and Construction Real Estate Portfolio Segment [Member]
Loans	286,901	271,623
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Loans	22,689	21,518	21,164
Commercial and Industrial Portfolio Segment [Member]
Loans	120,050	96,761
Consumer and Other Portfolio Segment [Member]
Loans	$ 39,461	$ 45,999	$ 51,028

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Note 4 - Loans - Nonperforming Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016
Non-accrual loans	$ 4,143	$ 4,656
Loans 90 days past due and accruing	3	10
Loans	682,749	652,337	$ 638,280
Other real estate owned	1,502	1,634
Total nonperforming assets	1,326,392	1,357,283
Nonperforming Financial Instruments [Member]
Non-accrual loans	4,143	4,656
Loans 90 days past due and accruing	3	10
Restructured loans	10,103	14,161
Loans	14,249	18,827
Other real estate owned	1,502	1,634
Other assets	40
Total nonperforming assets	$ 15,791	$ 20,461
Nonperforming assets to total assets	1.19%	1.51%
Allowance for loan losses to nonperforming loans	57.11%	44.92%

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Note 5 - Allowance For Loan Losses (Details Textual) xbrli-pure in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Loans and Leases Receivable, Impaired, Commitment to Lend	$ 0	$ 0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0	0
Financing Receivable, Allowance for Credit Losses	$ 8,137,000	$ 9,903,000	$ 8,334,000	$ 8,458,000	$ 10,537,000	$ 10,896,000
Troubled Debt Restructuring [Member]
Financing Receivable, Allowance for Credit Losses	$ 963,000

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Note 5 - Allowance For Loan Losses - Activity in the Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016
Recoveries	$ 199	$ 184	$ 387	$ 334
Provision		(200)	(200)	(500)
Balance	8,137	9,903	8,137	9,903
Ending balance individually evaluated for impairment					$ 963		$ 1,675
Ending balance collectively evaluated for impairment					7,174		8,228
Ending balance	8,334	10,537	8,137	9,903	8,137	$ 8,458	9,903
Ending balance individually evaluated for impairment					12,752		22,481
Ending balance collectively evaluated for impairment					669,997		615,799
Ending balance					682,749	652,337	638,280
Balance	8,334	10,537	8,458	10,896
Charge-offs	(396)	(618)	(508)	(827)
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Recoveries			3
Provision	120	(66)	116	32
Balance	320	200	320	200
Ending balance individually evaluated for impairment							1
Ending balance collectively evaluated for impairment					320		199
Ending balance	200	487	320	200	320	201	200
Ending balance individually evaluated for impairment					1,209		1,366
Ending balance collectively evaluated for impairment					21,480		19,798
Ending balance					22,689	21,518	21,164
Balance	200	487	201	389
Charge-offs		(221)		(221)
Commercial Portfolio Segment [Member]
Recoveries	42	44	98	77
Provision	(125)	(103)	(234)	(818)
Balance	1,496	1,526	1,496	1,526
Ending balance individually evaluated for impairment					143		468
Ending balance collectively evaluated for impairment					1,353		1,058
Ending balance	1,579	1,597	1,496	1,526	1,496	1,632	1,526
Ending balance individually evaluated for impairment					286		823
Ending balance collectively evaluated for impairment					119,764		85,903
Ending balance					120,050	96,761	86,726
Balance	1,579	1,597	1,632	2,279
Charge-offs		(12)		(12)
Commercial Real Estate Portfolio Segment [Member]
Recoveries	37	46	74	69
Provision	268	(298)	358	403
Balance	3,359	4,470	3,359	4,470
Ending balance individually evaluated for impairment					44		447
Ending balance collectively evaluated for impairment					3,315		4,023
Ending balance	3,438	5,018	3,359	4,470	3,359	3,336	4,470
Ending balance individually evaluated for impairment					3,025		10,805
Ending balance collectively evaluated for impairment					260,365		236,551
Ending balance					263,390	252,169	247,356
Balance	3,438	5,018	3,336	4,350
Charge-offs	(384)	(296)	(409)	(352)
Construction Real Estate Portfolio Segment [Member]
Recoveries	13	14	26	27
Provision	(6)	(29)	(10)	13
Balance	541	460	541	460
Ending balance individually evaluated for impairment					374		262
Ending balance collectively evaluated for impairment					167		198
Ending balance	534	475	541	460	541	525	460
Ending balance individually evaluated for impairment					1,689		1,779
Ending balance collectively evaluated for impairment					21,822		14,991
Ending balance					23,511	19,454	16,770
Balance	534	475	525	420
Charge-offs
Residential Portfolio Segment [Member]
Recoveries	92	45	146	103
Provision	(264)	(109)	(297)	(391)
Balance	1,398	1,791	1,398	1,791
Ending balance individually evaluated for impairment					221		309
Ending balance collectively evaluated for impairment					1,177		1,482
Ending balance	1,570	1,920	1,398	1,791	1,398	1,599	1,791
Ending balance individually evaluated for impairment					6,101		7,212
Ending balance collectively evaluated for impairment					207,547		208,024
Ending balance					213,648	216,436	215,236
Balance	1,570	1,920	1,599	2,235
Charge-offs		(65)	(50)	(156)
Consumer and Other Portfolio Segment [Member]
Recoveries	15	35	40	58
Provision	7	405	(133)	261
Balance	1,023	1,456	1,023	1,456
Ending balance individually evaluated for impairment					181		188
Ending balance collectively evaluated for impairment					842		1,268
Ending balance	1,013	1,040	1,023	1,456	1,023	1,165	1,456
Ending balance individually evaluated for impairment					442		496
Ending balance collectively evaluated for impairment					39,019		50,532
Ending balance					$ 39,461	$ 45,999	$ 51,028
Balance	1,013	1,040	1,165	1,223
Charge-offs	$ (12)	$ (24)	$ (49)	$ (86)

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Note 5 - Allowance For Loan Losses - Credit Risk by Internally Assigned Grade (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016
Loans	$ 682,749	$ 652,337	$ 638,280
Performing Financial Instruments [Member]
Loans	668,500	633,510
Nonperforming Financial Instruments [Member]
Loans	14,249	18,827
Not Rated [Member]
Loans	179,740	183,202
Risk Grade Rating 1 [Member]
Loans	5,742	5,787
Risk Rating Grade 2 [Member]
Loans	1,128	1,233
Risk Grade Rating 3 [Member]
Loans	46,043	26,364
Risk Grade Rating 4 [Member]
Loans	375,927	359,042
Risk Grade Rating 4.5 [Member]
Loans	24,721	27,363
Risk Grade Rating 5 [Member]
Loans	29,709	26,540
Risk Grade Rating 5.5 [Member]
Loans	9,141	7,834
Risk Grade Rating 6 [Member]
Loans	10,277	14,972
Risk Grade Rating 7 [Member]
Loans
Risk Grade Rating 8 [Member]
Loans	321
Risk Grade Rating 9 [Member]
Loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Loans	22,689	21,518	21,164
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	21,922	20,834
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	767	684
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Not Rated [Member]
Loans	1	2
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Loans	424	293
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans	600	645
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	15,181	15,827
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	1,552	1,507
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	2,072	1,769
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans	1,807	263
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	1,052	1,212
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Loans
Commercial Portfolio Segment [Member]
Loans	120,050	96,761	86,726
Commercial Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	119,609	96,240
Commercial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	441	521
Commercial Portfolio Segment [Member] | Not Rated [Member]
Loans	1,757	1,768
Commercial Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Loans	5,742	5,787
Commercial Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Loans	304	348
Commercial Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans	32,915	17,373
Commercial Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	71,915	63,687
Commercial Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	2,564	2,142
Commercial Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	2,946	4,090
Commercial Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans	1,406	927
Commercial Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	501	639
Commercial Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Loans
Commercial Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Loans
Commercial Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Loans
Commercial Real Estate Portfolio Segment [Member]
Loans	263,390	252,169	247,356
Commercial Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	259,704	244,816
Commercial Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	3,686	7,353
Commercial Real Estate Portfolio Segment [Member] | Not Rated [Member]
Loans	188	214
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Loans
Commercial Real Estate Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Loans	400	447
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans	7,528	8,128
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	213,775	198,416
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	12,076	16,227
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	21,792	16,828
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans	3,184	4,081
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	4,126	7,828
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Loans
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Loans	321
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Loans
Construction Real Estate Portfolio Segment [Member]
Loans	23,511	19,454	16,770
Construction Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	21,663	17,734
Construction Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	1,848	1,720
Construction Real Estate Portfolio Segment [Member] | Not Rated [Member]
Loans	13,663	9,960
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Loans
Construction Real Estate Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Loans
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	4,578	4,211
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	3,032	2,974
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	369	448
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans	1,555	1,574
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	314	287
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Loans
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Loans
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Loans
Residential Portfolio Segment [Member]
Loans	213,648	216,436	215,236
Residential Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	206,641	208,458
Residential Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	7,007	7,978
Residential Portfolio Segment [Member] | Not Rated [Member]
Loans	131,120	132,144
Residential Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Loans
Residential Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Loans
Residential Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans	826	218
Residential Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	68,307	70,275
Residential Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	5,497	4,513
Residential Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	2,521	3,393
Residential Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans	1,189	989
Residential Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	4,188	4,904
Residential Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Loans
Residential Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Loans
Residential Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Loans
Consumer and Other Portfolio Segment [Member]
Loans	39,461	45,999	$ 51,028
Consumer and Other Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	38,961	45,428
Consumer and Other Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	500	571
Consumer and Other Portfolio Segment [Member] | Not Rated [Member]
Loans	33,011	39,114
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Loans
Consumer and Other Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Loans		145
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans	4,174
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	2,171	6,626
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	9	12
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	96	102
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Loans

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Note 5 - Allowance For Loan Losses - Past Due Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016	Jun. 30, 2016
Past due	$ 6,043	$ 5,719
Current	676,706	646,618
Loans	682,749	652,337	$ 638,280
Loans 90 days past due and accruing	3	10
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due	113	206
Current	22,576	21,312
Loans	22,689	21,518	21,164
Loans 90 days past due and accruing
Commercial Portfolio Segment [Member]
Past due	257	146
Current	119,793	96,615
Loans	120,050	96,761	86,726
Loans 90 days past due and accruing	3	10
Commercial Real Estate Portfolio Segment [Member]
Past due	2,224	1,899
Current	261,166	250,270
Loans	263,390	252,169	247,356
Loans 90 days past due and accruing
Construction Real Estate Portfolio Segment [Member]
Past due	726
Current	22,785	19,454
Loans	23,511	19,454	16,770
Loans 90 days past due and accruing
Residential Portfolio Segment [Member]
Past due	2,597	3,273
Current	211,051	213,163
Loans	213,648	216,436	215,236
Loans 90 days past due and accruing
Consumer and Other Portfolio Segment [Member]
Past due	126	195
Current	39,335	45,804
Loans	39,461	45,999	$ 51,028
Loans 90 days past due and accruing
Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	2,590	2,550
Financing Receivables, 30 to 59 Days Past Due [Member] | Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due		93
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past due	204	77
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Past due	681	708
Financing Receivables, 30 to 59 Days Past Due [Member] | Construction Real Estate Portfolio Segment [Member]
Past due	567
Financing Receivables, 30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member]
Past due	1,103	1,523
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer and Other Portfolio Segment [Member]
Past due	35	149
Financing Receivables, 60 to 89 Days Past Due [Member]
Past due	929	647
Financing Receivables, 60 to 89 Days Past Due [Member] | Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past due	5	46
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Past due	719	363
Financing Receivables, 60 to 89 Days Past Due [Member] | Construction Real Estate Portfolio Segment [Member]
Past due
Financing Receivables, 60 to 89 Days Past Due [Member] | Residential Portfolio Segment [Member]
Past due	117	192
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer and Other Portfolio Segment [Member]
Past due	88	46
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	2,524	2,522
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due	113	113
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past due	48	23
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Past due	824	828
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Construction Real Estate Portfolio Segment [Member]
Past due	159
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member]
Past due	1,377	1,558
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer and Other Portfolio Segment [Member]
Past due	$ 3

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Note 5 - Allowance For Loan Losses - Non-accrual Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Non-accrual loans	$ 4,143	$ 4,656
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Non-accrual loans	199	113
Commercial Portfolio Segment [Member]
Non-accrual loans	152	169
Commercial Real Estate Portfolio Segment [Member]
Non-accrual loans	1,337	1,625
Construction Real Estate Portfolio Segment [Member]
Non-accrual loans	181	31
Residential Portfolio Segment [Member]
Non-accrual loans	2,216	2,623
Consumer and Other Portfolio Segment [Member]
Non-accrual loans	$ 58	$ 95

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Note 5 - Allowance For Loan Losses - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Impaired loans	$ 12,752		$ 12,752		$ 17,711
Unpaid principal balance	13,510		13,510		18,543
Related allowance	963		963		1,141
Average recorded investment	13,086	$ 23,472	13,177	$ 23,818
Interest income recognized	125	239	282	496
Related allowance	963		963		1,141
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Interest income recognized with allowance		3		3
Impaired loans	1,209		1,209		1,212
Unpaid principal balance	1,404		1,404		1,410
Related allowance					5
Average recorded investment	1,215	1,378	1,217	1,445
Interest income recognized	14	13	28	28
Recorded investment - without allowance	1,209		1,209		966
Unpaid principal balance - without allowance	1,404		1,404		1,164
Average recorded investment - without allowance	1,215	1,026	1,217	1,028
Interest income recognized without allowance	14	10	28	25
Recorded investment - with allowance					246
Unpaid principal balance - with allowance					246
Related allowance					5
Average recorded investment - with allowance		352		417
Commercial Portfolio Segment [Member]
Interest income recognized with allowance	2	8	5	17
Impaired loans	286		286		355
Unpaid principal balance	286		286		414
Related allowance	143		143		199
Average recorded investment	315	872	336	902
Interest income recognized	3	11	6	22
Recorded investment - without allowance	61		61		88
Unpaid principal balance - without allowance	61		61		140
Average recorded investment - without allowance	62	146	64	148
Interest income recognized without allowance	1	3	1	5
Recorded investment - with allowance	225		225		267
Unpaid principal balance - with allowance	225		225		274
Related allowance	143		143		199
Average recorded investment - with allowance	253	726	272	754
Commercial Real Estate Portfolio Segment [Member]
Interest income recognized with allowance	18	44	37	98
Impaired loans	3,025		3,025		6,853
Unpaid principal balance	3,304		3,304		7,112
Related allowance	44		44		129
Average recorded investment	3,054	11,357	3,075	11,527
Interest income recognized	18	114	56	231
Recorded investment - without allowance	1,270		1,270		4,295
Unpaid principal balance - without allowance	1,530		1,530		4,502
Average recorded investment - without allowance	1,278	7,217	1,288	7,255
Interest income recognized without allowance		70	19	133
Recorded investment - with allowance	1,755		1,755		2,558
Unpaid principal balance - with allowance	1,774		1,774		2,610
Related allowance	44		44		129
Average recorded investment - with allowance	1,776	4,140	1,787	4,272
Construction Real Estate Portfolio Segment [Member]
Interest income recognized with allowance	18	19	36	38
Impaired loans	1,689		1,689		1,717
Unpaid principal balance	1,722		1,722		1,750
Related allowance	374		374		388
Average recorded investment	1,714	1,803	1,720	1,811
Interest income recognized	20	21	40	42
Recorded investment - without allowance	134		134		144
Unpaid principal balance - without allowance	167		167		177
Average recorded investment - without allowance	154	127	156	130
Interest income recognized without allowance	2	2	4	4
Recorded investment - with allowance	1,555		1,555		1,573
Unpaid principal balance - with allowance	1,555		1,555		1,573
Related allowance	374		374		388
Average recorded investment - with allowance	1,560	1,676	1,564	1,681
Residential Portfolio Segment [Member]
Interest income recognized with allowance	18	26	35	63
Impaired loans	6,101		6,101		7,098
Unpaid principal balance	6,352		6,352		7,381
Related allowance	221		221		236
Average recorded investment	6,342	7,561	6,379	7,627
Interest income recognized	65	73	142	161
Recorded investment - without allowance	4,336		4,336		4,916
Unpaid principal balance - without allowance	4,524		4,524		5,157
Average recorded investment - without allowance	4,540	4,292	4,570	4,335
Interest income recognized without allowance	47	47	107	98
Recorded investment - with allowance	1,765		1,765		2,182
Unpaid principal balance - with allowance	1,828		1,828		2,224
Related allowance	221		221		236
Average recorded investment - with allowance	1,802	3,269	1,809	3,292
Consumer and Other Portfolio Segment [Member]
Interest income recognized with allowance	5	6	10	11
Impaired loans	442		442		476
Unpaid principal balance	442		442		476
Related allowance	181		181		184
Average recorded investment	446	501	450	506
Interest income recognized	5	7	10	12
Recorded investment - without allowance	1		1		11
Unpaid principal balance - without allowance	1		1		11
Average recorded investment - without allowance	1	34	1	35
Interest income recognized without allowance		1		1
Recorded investment - with allowance	441		441		465
Unpaid principal balance - with allowance	441		441		465
Related allowance	181		181		$ 184
Average recorded investment - with allowance	$ 445	$ 467	$ 449	$ 471

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Note 5 - Allowance For Loan Losses - Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)
Pre-modification recorded principal balance	$ 280	$ 670	$ 595	$ 870
Post-modification recorded principal balance	$ 279	$ 669	$ 541	$ 866
Number of contracts	1	8	9	9
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Pre-modification recorded principal balance		$ 362		$ 362
Post-modification recorded principal balance		$ 362		$ 362
Number of contracts		1		1
Commercial Portfolio Segment [Member]
Pre-modification recorded principal balance			$ 29
Post-modification recorded principal balance			$ 29
Number of contracts			2
Commercial Real Estate Portfolio Segment [Member]
Pre-modification recorded principal balance	$ 280		$ 353
Post-modification recorded principal balance	$ 279		$ 332
Number of contracts	1		3
Construction Real Estate Portfolio Segment [Member]
Pre-modification recorded principal balance
Post-modification recorded principal balance
Number of contracts
Residential Portfolio Segment [Member]
Pre-modification recorded principal balance		$ 251	$ 212	$ 451
Post-modification recorded principal balance		$ 250	$ 180	$ 447
Number of contracts		6	3	7
Consumer and Other Portfolio Segment [Member]
Pre-modification recorded principal balance		$ 57	$ 1	$ 57
Post-modification recorded principal balance		$ 57		$ 57
Number of contracts		1	1	1

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Note 6 - Investment Securities (Details Textual)	Jun. 30, 2017	Dec. 31, 2016
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	163	230

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Note 6 - Investment Securities - Held to Maturity Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Held to maturity, estimated market value	$ 39,512	$ 41,156
Held to maturity, amortized cost	38,617	40,741
Held to maturity, gross unrealized gains	1,045	703
Held to maturity, gross unrealized losses	(150)	(288)
US States and Political Subdivisions Debt Securities [Member]
Held to maturity, estimated market value	39,011	40,654
Held to maturity, amortized cost	38,117	40,241
Held to maturity, gross unrealized gains	1,044	701
Held to maturity, gross unrealized losses	(150)	(288)
Corporate Debt Securities [Member]
Held to maturity, estimated market value	501	502
Held to maturity, amortized cost	500	500
Held to maturity, gross unrealized gains	1	2
Held to maturity, gross unrealized losses

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Note 6 - Investment Securities - Available for Sale Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Available for sale securities, gross unrealized losses	$ (5,814)	$ (10,939)
Available for Sale Securities	439,612	488,067
Available for sale securities, amortized cost	444,119	498,210
Available for sale securities, gross unrealized gains	1,307	796
US Treasury and Government [Member]
Available for sale securities, gross unrealized losses	(3,859)	(7,519)
Available for Sale Securities	233,388	275,000
Available for sale securities, amortized cost	236,531	282,130
Available for sale securities, gross unrealized gains	716	389
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available for sale securities, gross unrealized losses	(1,773)	(2,673)
Available for Sale Securities	155,058	146,209
Available for sale securities, amortized cost	156,783	148,764
Available for sale securities, gross unrealized gains	48	118
US States and Political Subdivisions Debt Securities [Member]
Available for sale securities, gross unrealized losses	(168)	(409)
Available for Sale Securities	28,081	30,609
Available for sale securities, amortized cost	28,153	30,909
Available for sale securities, gross unrealized gains	96	109
Corporate Debt Securities [Member]
Available for sale securities, gross unrealized losses	(14)	(338)
Available for Sale Securities	20,976	34,160
Available for sale securities, amortized cost	20,608	34,363
Available for sale securities, gross unrealized gains	382	135
Equity Securities [Member]
Available for sale securities, gross unrealized losses
Available for Sale Securities	2,109	2,089
Available for sale securities, amortized cost	2,044	2,044
Available for sale securities, gross unrealized gains	$ 65	$ 45

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Note 6 - Investment Securities - Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
1 year or less, held to maturity amortized cost	$ 9,134
1 year or less, held to maturity estimated market value	9,171
1 year or less, available for sale amortized cost	3,586
1 year or less, available for sale estimated market value	3,588
After 1 year through five years, held to maturity amortized cost	20,838
After 1 year through five years, held to maturity estimated market value	21,250
After 1 year through five years, available for sale amortized cost	125,298
After 1 year through five years, available for sale estimated market value	125,044
After 5 years through 10 years, held to maturity amortized cost	7,466
After 5 years through 10 years, held to maturity estimated market value	7,923
After 5 years through 10 years, available for sale amortized cost	146,841
After 5 years through 10 years, available for sale estimated market value	144,290
After 10 years, held to maturity amortized cost	1,179
After 10 years, held to maturity estimated market value	1,168
After 10 years, available for sale amortized cost	9,567
After 10 years, available for sale estimated market value	9,523
Total, held to maturity amortized cost, held to maturity amortized cost	38,617
Total, held to maturity estimated market value	39,512
Total, available for sale amortized cost	285,292
Total, available for sale amortized cos, available for sale estimated market value	282,445
Mortgage Backed Securities, held to maturity amortized cost
Mortgage Backed Securities, held to maturity estimated market value
Mortgage Backed Securities, available for sale amortized cost	156,783
Mortgage Backed Securities, available for sale estimated market value	155,058
Securities with no stated maturity, held to maturity amortized cost
Securities with no stated maturity, held to maturity estimated market value
Securities with no stated maturity, available for sale amortized cost	2,044
Securities with no stated maturity, available for sale estimated market value	2,109
Held to maturity, amortized cost	38,617	$ 40,741
Held to maturity, estimated market value	39,512	$ 41,156
Total, available for sale amortized cost	444,119
Total, available for sale estimated market value	$ 439,612

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Note 6 - Investment Securities - Securities in Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Less than 12 months, aggregate fair value	$ 297,708	$ 419,756
Less than 12 months, gross unrealized losses	5,540	10,683
12 months or longer, aggregate fair value	30,443	25,833
12 months or longer, gross unrealized losses	424	544
Total, aggregate fair value	328,151	445,589
Total, gross unrealized losses	5,964	11,227
US Treasury and Government [Member]
Less than 12 months, aggregate fair value	167,460	242,212
Less than 12 months, gross unrealized losses	3,859	7,519
12 months or longer, aggregate fair value
12 months or longer, gross unrealized losses
Total, aggregate fair value	167,460	242,212
Total, gross unrealized losses	3,859	7,519
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Less than 12 months, aggregate fair value	102,272	112,995
Less than 12 months, gross unrealized losses	1,354	2,144
12 months or longer, aggregate fair value	29,259	22,857
12 months or longer, gross unrealized losses	419	529
Total, aggregate fair value	131,531	135,852
Total, gross unrealized losses	1,773	2,673
US States and Political Subdivisions Debt Securities [Member]
Less than 12 months, aggregate fair value	25,954	40,524
Less than 12 months, gross unrealized losses	313	682
12 months or longer, aggregate fair value	1,184	2,976
12 months or longer, gross unrealized losses	5	15
Total, aggregate fair value	27,138	43,500
Total, gross unrealized losses	318	697
Corporate Debt Securities [Member]
Less than 12 months, aggregate fair value	2,022	24,025
Less than 12 months, gross unrealized losses	14	338
12 months or longer, aggregate fair value
12 months or longer, gross unrealized losses
Total, aggregate fair value	2,022	24,025
Total, gross unrealized losses	$ 14	$ 338

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Note 7 - Fair Value of Financial Instruments (Details Textual) - USD ($) $ in Thousands	6 Months Ended		12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Proceeds from Sale of Available-for-sale Securities	$ 73,918
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets, Fair Value Disclosure	0		$ 0
Proceeds from Sale of Available-for-sale Securities	$ 0		$ 0

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Note 7- Fair Value of Financial Instruments - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Held to Maturity Securities	$ 39,512	$ 41,156
Available for Sale Securities	439,612	488,067
Time Deposits in Other Banks	17,696	18,946
US States and Political Subdivisions Debt Securities [Member]
Held to Maturity Securities	39,011	40,654
Available for Sale Securities	28,081	30,609
Corporate Debt Securities [Member]
Held to Maturity Securities	501	502
Available for Sale Securities	20,976	34,160
US Treasury and Government [Member]
Available for Sale Securities	233,388	275,000
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available for Sale Securities	155,058	146,209
Equity Securities [Member]
Available for Sale Securities	2,109	2,089
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member]
Federal Home Loan Bank Stock	4,148	4,148
Loans Held for Sale	899	611
Loans, net	674,612	643,879
Accrued Interest Receivable	3,923	4,335
Noninterest Bearing Deposits	290,595	279,001
Interest Bearing Deposits	886,474	920,716
Repurchase Agreements
Accrued Interest Payable	52	57
Cash and due from banks	40,607	52,772
Time Deposits in Other Banks	17,696	18,946
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Held to Maturity Securities	38,117	40,241
Available for Sale Securities	28,081	30,609
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member]
Held to Maturity Securities	500	500
Available for Sale Securities	20,976	34,160
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | US Treasury and Government [Member]
Available for Sale Securities	233,388	275,000
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available for Sale Securities	155,058
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member]
Available for Sale Securities		146,209
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available for Sale Securities	2,109	2,089
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member]
Federal Home Loan Bank Stock	4,148	4,148
Loans Held for Sale	919	623
Loans, net	666,394	642,908
Accrued Interest Receivable	3,923	4,335
Noninterest Bearing Deposits	290,595	279,001
Interest Bearing Deposits	887,768	922,187
Repurchase Agreements
Accrued Interest Payable	52	57
Cash and due from banks	40,607	52,772
Time Deposits in Other Banks	17,656	18,940
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Held to Maturity Securities	39,011	40,654
Available for Sale Securities	28,081	30,609
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member]
Held to Maturity Securities	501	502
Available for Sale Securities	20,976	34,160
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | US Treasury and Government [Member]
Available for Sale Securities	233,388	275,000
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available for Sale Securities	155,058
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Collateralized Mortgage Backed Securities [Member]
Available for Sale Securities		146,209
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available for Sale Securities	2,109	2,089
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Federal Home Loan Bank Stock
Loans Held for Sale
Loans, net
Accrued Interest Receivable
Noninterest Bearing Deposits	290,595	279,001
Interest Bearing Deposits
Repurchase Agreements
Accrued Interest Payable
Cash and due from banks	40,607	52,772
Time Deposits in Other Banks
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US States and Political Subdivisions Debt Securities [Member]
Held to Maturity Securities
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Held to Maturity Securities
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US Treasury and Government [Member]
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Collateralized Mortgage Backed Securities [Member]
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
Available for Sale Securities	2,109	2,089
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Federal Home Loan Bank Stock	4,148	4,148
Loans Held for Sale
Loans, net
Accrued Interest Receivable
Noninterest Bearing Deposits
Interest Bearing Deposits	887,768	922,187
Repurchase Agreements
Accrued Interest Payable
Cash and due from banks
Time Deposits in Other Banks	16,906	18,940
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Held to Maturity Securities	2,747	3,153
Available for Sale Securities	28,081	30,609
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Held to Maturity Securities	501	502
Available for Sale Securities	20,976	34,160
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US Treasury and Government [Member]
Available for Sale Securities	233,388	275,000
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available for Sale Securities	155,058
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Backed Securities [Member]
Available for Sale Securities		146,209
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member]
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Federal Home Loan Bank Stock
Loans Held for Sale	919	623
Loans, net	666,394	642,908
Accrued Interest Receivable	3,923	4,335
Noninterest Bearing Deposits
Interest Bearing Deposits
Repurchase Agreements
Accrued Interest Payable	52	57
Cash and due from banks
Time Deposits in Other Banks	750
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | US States and Political Subdivisions Debt Securities [Member]
Held to Maturity Securities	36,264	37,501
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Held to Maturity Securities
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | US Treasury and Government [Member]
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Collateralized Mortgage Backed Securities [Member]
Available for Sale Securities
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Equity Securities [Member]
Available for Sale Securities

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Note 7 - Fair Value of Financial Instruments - Assets Measure at Fair Value on a Nonrecurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Impaired loans	$ 12,752	$ 17,711
Other real estate owned	1,502	1,634
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Impaired loans
Other real estate owned
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Impaired loans
Other real estate owned
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Impaired loans	11,789	16,570
Other real estate owned	$ 1,502	$ 1,634

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Note 8 - Financial Instruments With Off-balance Sheet Risk (Details Textual)	6 Months Ended
	Jun. 30, 2017
Home Equity Line of Credit [Member]
Line of Credit Facility, Expiration Period	10 years

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Note 8 - Financial Instruments With Off-balance Sheet Risk - Off-balance Sheet Credit Risk Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Commitments to Extend Credit - Commercial Lines of Credit [Member]
Off-balance sheet credit risks	$ 74,609	$ 75,454
Commitments to Extend Credit - Credit Card Lines of Credit [Member]
Off-balance sheet credit risks	5,486	4,983
Commitments to Extend Credit - Home Equity Lines of Credit [Member]
Off-balance sheet credit risks	28,134	25,057
Standby Letters of Credit and Financial Guarantees [Member]
Off-balance sheet credit risks	$ 1,281	$ 1,582