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 September 30, 2018

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 every Interactive Data File required to be submitted 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 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.

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 November 8, 2018, there were 22,991,496 shares of the Company’s Common Stock outstanding.

Part I Financial Information

Item 1. Financial Statements

MBT FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

	September 30, 2018
Dollars in thousands	(Unaudited)			December 31, 2017
ASSETS
Cash and Cash Equivalents
Cash and due from banks
Non-interest bearing	$	17,436		$	18,233
Interest bearing		20,548			34,777
Total cash and cash equivalents		37,984			53,010
Interest Bearing Time Deposits in Other Banks		11,946			15,196
Securities - Held to Maturity		-			37,163
Securities - Available for Sale		430,831			442,816
Equity Securities		7,403			4,148
Loans held for sale		183			346
Loans		752,712			694,979
Allowance for Loan Losses		(7,986	)		(7,666	)
Loans - Net		744,726			687,313
Accrued interest receivable and other assets		19,187			20,463
Other Real Estate Owned		997			1,412
Bank Owned Life Insurance		59,205			58,153
Premises and Equipment - Net		26,660			27,400
Total assets	$	1,339,122		$	1,347,420
LIABILITIES
Deposits
Non-interest bearing	$	291,731		$	299,838
Interest-bearing		874,545			898,326
Total deposits		1,166,276			1,198,164
Federal Home Loan Bank advances		35,000			-
Interest payable and other liabilities		16,495			16,598
Total liabilities		1,217,771			1,214,762
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 22,990,208 and 22,907,844 shares issued and outstanding)		23,403			22,840
Retained earnings		112,343			117,524
Unearned compensation		(19	)		-
Accumulated other comprehensive loss		(14,376	)		(7,706	)
Total stockholders' equity		121,351			132,658
Total liabilities and stockholders' equity	$	1,339,122		$	1,347,420

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 September 30,						Nine Months Ended September 30,
Dollars in thousands, except per share data	2018			2017			2018			2017
Interest Income
Interest and fees on loans	$	9,164		$	8,095		$	26,117		$	23,168
Interest on investment securities-
Tax-exempt		415			327			1,262			943
Taxable		2,120			2,054			6,417			6,507
Interest on balances due from banks		193			182			376			392
Total interest income		11,892			10,658			34,172			31,010
Interest Expense
Interest on deposits		456			427			1,270			1,317
Interest on borrowed funds		219			-			316			3
Total interest expense		675			427			1,586			1,320
Net Interest Income		11,217			10,231			32,586			29,690
Recovery Of Loan Losses		-			-			(100	)		(200	)
Net Interest Income After
Recovery Of Loan Losses		11,217			10,231			32,686			29,890
Other Income
Income from wealth management services		1,193			1,155			3,556			3,830
Service charges and other fees		993			1,076			2,894			3,136
Debit card income		763			719			2,269			2,147
Net gain (loss) on sales and redemptions of securities available for sale		(91	)		150			(193	)		227
Net gain (loss) on sales of Other Real Estate Owned		-			7			536			(89	)
Origination fees on mortgage loans sold		152			87			306			261
Bank owned life insurance income		350			377			1,052			1,130
Other		680			464			1,807			1,583
Total other income		4,040			4,035			12,227			12,225
Other Expenses
Salaries and employee benefits		5,381			5,313			16,714			16,020
Occupancy expense		660			694			2,001			2,124
Equipment expense		881			783			2,548			2,271
Marketing expense		389			375			1,233			961
Professional fees		550			570			1,736			1,779
EFT/ATM expense		297			256			844			763
Other Real Estate Owned expenses		25			33			61			95
FDIC Deposit Insurance Assessment		97			107			296			321
Bonding and other insurance expense		129			120			398			367
Telephone expense		84			83			233			302
Other		663			616			2,070			2,017
Total other expenses		9,156			8,950			28,134			27,020
Income Before Income Taxes		6,101			5,316			16,779			15,095
Income Tax Expense		1,127			1,383			2,958			4,342
Net Income	$	4,974		$	3,933		$	13,821		$	10,753
Other Comprehensive Income - Net of Tax
Unrealized gains (losses) on securities		(1,972	)		(679	)		(6,868	)		3,091
Reclassification adjustment for (gains) losses included in net income		71			(99	)		152			(150	)
Postretirement benefit liability		31			27			95			80
Total Other Comprehensive Income (Loss) - Net of Tax		(1,870	)		(751	)		(6,621	)		3,021
Comprehensive Income	$	3,104		$	3,182		$	7,200		$	13,774
Basic Earnings Per Common Share	$	0.21		$	0.17		$	0.60		$	0.47
Diluted Earnings Per Common Share	$	0.21		$	0.17		$	0.60		$	0.47
Dividends Declared Per Share of Common Stock	$	0.10		$	0.06		$	0.83		$	0.86

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

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MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED

												Accumulated
												Other
	Common Stock					Retained			Unearned			Comprehensive
Dollars in thousands	Shares		Amount			Earnings			Compensation			Income (Loss)			Total
Balance - January 1, 2018		22,907,844	$	22,840		$	117,524		$	-		$	(7,706	)	$	132,658
Issuance of Common Stock
SOSARs exercised, net of shares redeemed for taxes		45,749		(209	)		-			-			-			(209	)
Restricted stock awards, net of shares redeemed for taxes		7,500		78			-			(78	)		-			-
Employee Stock Purchase Plan and other stock issued		29,115		309			-			-			-			309
Tax benefit from exercise of options		-		-			-			-			-			-
Equity Compensation		-		489			-			59			-			548
Deferred Directors' Compensation		-		(104	)		-			-			-			(104	)
Cumulative Effect Adjustment (ASU 2016-01)		-		-			49			-			(49	)		-
Dividends declared ($0.83 per share)		-		-			(19,051	)		-			-			(19,051	)
Net income		-		-			13,821			-			-			13,821
Other comprehensive income - net of tax		-		-			-			-			(6,621	)		(6,621	)
Balance - September 30, 2018		22,990,208	$	23,403		$	112,343		$	(19	)	$	(14,376	)	$	121,351

												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
Issuance of Common Stock
SOSARs exercised, net of shares redeemed for taxes		64,211		(253	)		-			-			-			(253	)
Restricted stock awards, net of shares redeemed for taxes		6,000		65			-			(65	)		-			-
Employee Stock Purchase Plan and other stock issued		27,412		294			-			-			-			294
Tax benefit from exercise of options		-		-			583			-			-			583
Equity Compensation		-		404			-			49			-			453
Deferred Directors' Compensation		-		(354	)		-			-			-			(354	)
Dividends declared ($0.86 per share)		-		-			(19,642	)		-			-			(19,642	)
Net income		-		-			10,753			-			-			10,753
Other comprehensive income - net of tax		-		-			-			-			3,021			3,021
Balance - September 30, 2017		22,875,505	$	22,718		$	117,773		$	(20	)	$	(4,502	)	$	135,969

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

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MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

	Nine Months Ended September 30,
Dollars in thousands	2018			2017
Cash Flows from Operating Activities
Net Income	$	13,821		$	10,753
Adjustments to reconcile net income to net cash from operating activities
Recovery of loan losses		(100	)		(200	)
Depreciation		1,102			1,174
Deferred tax expense		-			(241	)
Net amortization of investment premium and discount		1,673			1,710
Adjustment for assets carried at fair market value		63			-
Writedowns of Other Real Estate Owned		42			76
Net (decrease) increase in interest payable and other liabilities		(86	)		237
Net decrease (increase) in interest receivable and other assets		2,033			(1,266	)
Writedowns of Other Assets		-			37
Equity based compensation expense		548			453
Net (gain) loss on sale/settlement of securities		193			(227	)
Increase in cash surrender value of life insurance		(1,052	)		(1,131	)
Net cash provided by operating activities	$	18,237		$	11,375
Cash Flows from Investing Activities
Proceeds from maturities of interest bearing time deposits in other banks	$	3,250		$	2,500
Proceeds from maturities and redemptions of investment securities held to maturity		4,567			11,113
Proceeds from maturities and redemptions of investment securities available for sale		45,400			28,385
Proceeds from sales of investment securities held to maturity		1,612			-
Proceeds from sales of investment securities available for sale		23,569			135,327
Net increase in loans		(57,898	)		(42,033	)
Proceeds from sales of other real estate owned		1,698			726
Proceeds from sales of other assets		438			230
Purchase of time deposits in other banks		-			(500	)
Purchase of investment securities held to maturity		(133	)		(4,455	)
Purchase of Bank Owned Life Insurance		-			(4,357	)
Proceeds from surrender of Bank Owned Life Insurance		-			309
Purchase of investment securities available for sale		(39,565	)		(137,941	)
Purchase of bank premises and equipment		(362	)		(977	)
Net cash used for investing activities	$	(17,424	)	$	(11,673	)
Cash Flows from Financing Activities
Net decrease in deposits	$	(31,888	)	$	(4,382	)
Proceeds from Federal Home Loan Bank borrowings		40,000			-
Repayment of Federal Home Loan Bank borrowings		(5,000	)		-
Issuance of common stock		309			294
Stock redeemed for tax withholding - stock based compensation		(209	)		(253	)
Dividends paid		(19,051	)		(19,642	)
Net cash used for financing activities	$	(15,839	)	$	(23,983	)
Net Decrease in Cash and Cash Equivalents	$	(15,026	)	$	(24,281	)
Cash and Cash Equivalents at Beginning of Period		53,010			52,772
Cash and Cash Equivalents at End of Period	$	37,984		$	28,491
Supplemental Cash Flow Information
Cash paid for interest	$	1,556		$	1,321
Cash paid for federal income taxes	$	1,419		$	3,076
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	$	748		$	827
Transfer of loans to other assets	$	-		$	40

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

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MBT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The unaudited consolidated financial statements include the accounts of MBT Financial Corp. (the “Company”) and its subsidiary, Monroe Bank & Trust (the “Bank”). The Bank includes the accounts of its wholly owned subsidiary, MB&T Financial Services, Inc. The Bank operates 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.

On October 9, 2018, the Company and First Merchants Corporation (“First Merchants”) signed an Agreement and Plan of Reorganization and Merger (the “Merger Agreement”), pursuant to which the Company will merge with and into First Merchants. Subject to the terms and conditions of the Merger Agreement, each share of the Company will be converted into 0.275 shares of First Merchants common stock. Consummation of the merger is subject to various conditions, including, among others, requisite regulatory approval and approval of the Company’s shareholders. The Merger Agreement was entered into subsequent to the end of the third quarter and the financial statements for the third quarter do not reflect any activity pertaining to the Merger Agreement.

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.

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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 is effective for public entities for reporting periods beginning after December 15, 2017 (therefore, for the year ending December 31, 2018 for the Company). The ASU does not apply to financial instruments, which constitute a significant portion of our revenue. The Company adopted ASU 2014-09 on January 1, 2018 and determined that adoption of the standard did not have a significant impact on its financial statements.

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. Management has developed an implementation timeline and begun the process of segmenting the portfolio.

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In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs – Premium Amortization on Purchased Callable Debt Securities (Subtopic 310-20).  This ASU was issued to shorten the amortization period for the premium to the earliest call date on debt securities.  This premium will now be recorded as a reduction to net interest margin during the shorter yield to call period, as compared to prior practice of amortizing the premium as a reduction to net interest margin over the contractual life of the instrument.  This ASU does not change the current method of amortizing any discount over the contractual life of the debt security, and this pronouncement is effective for fiscal years beginning after December 15, 2018, and must be adopted on a modified retrospective basis.  The Company has reviewed the investment portfolio and determined that the standard will not have a material effect on its financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU was issued to improve the recognition and measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized in net income, requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, and require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements. ASU 2016-01 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption. The Company adopted ASU 2016-01 on January 1, 2018 and it did not have a material effect on the consolidated financial statements. For exit pricing on loans, the Company made a fair value adjustment based on the yield metrics of the portfolio and applied a credit mark and a discount to reflect transaction costs.

2. EARNINGS PER SHARE

The calculations of earnings per common share are as follows:

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Basic
Net income	$	4,974,000	$	3,933,000	$	13,821,000	$	10,753,000
Average common shares outstanding		22,985,176		22,871,451		22,969,182		22,852,935
Earnings per common share - basic	$	0.21	$	0.17	$	0.60	$	0.47
Diluted
Net income	$	4,974,000	$	3,933,000	$	13,821,000	$	10,753,000
Average common shares outstanding		22,985,176		22,871,451		22,969,182		22,852,935
Equity compensation		136,675		169,509		131,329		181,598
Average common shares outstanding - diluted		23,121,851		23,040,960		23,100,511		23,034,533
Earnings per common share - diluted	$	0.21	$	0.17	$	0.60	$	0.47

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3. STOCK BASED COMPENSATION

Stock Only Stock Appreciation Rights (SOSARs) - On February 22, 2018, 105,000 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, 2018. The fair value of $2.36 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 23.64%, a risk free interest rate of 2.86% and dividend yield of 2.18%. The fair value of the Company’s common stock was $10.45 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, 2018		372,585		$	6.82
Granted		105,000			10.45
Exercised		(106,870	)		4.33
Forfeited		(4,336	)		10.09
Expired		-			-
SOSARs Outstanding, September 30, 2018		366,379		$	8.55
SOSARs Exercisable, September 30, 2018		174,181		$	6.66

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 September 30, 2018 was $11.30. The value of the exercisable SOSARs that are in-the-money as of September 30, 2018 was $808,000, and exercise of those SOSARs on that date would have resulted in the issuance of 71,522 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 22, 2018, 21,500 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, 2019 if the defined performance targets are achieved. The grant date fair value of the stock was $10.45 per share. Earned RSUs vest on December 15, 2020 and as of September 30, 2018 none of the RSUs were vested.

Restricted Stock Awards – On February 22, 2018, 7,500 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, 2018. The expense for the restricted stock is based on the grant date value of $10.45 and is recognized over the vesting period. The unrecognized cost related to the non-vested restricted stock awards was $19,000 as of September 30, 2018.

The total expense for equity based compensation was $156,000 in the third quarter of 2018 and $161,000 in the third quarter of 2017. The total expense for equity based compensation was $548,000 in the first nine months of 2018 and $454,000 in the first nine months of 2017. The unrecognized compensation expense for all equity based compensation plans is $648,000 as of September 30, 2018. The expense is expected to be recognized over a weighted average period of 1.60 years.

-9-

4. LOANS

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

Loans consist of the following (000s omitted):

	September 30,		December 31,
	2018		2017
Residential real estate loans	$	229,485	$	222,014
Commercial and Construction real estate loans		295,673		293,202
Agriculture and agricultural real estate loans		22,624		21,231
Commercial and industrial loans		154,188		122,219
Loans to individuals for household, family, and other personal expenditures		50,742		36,313
Total loans, gross	$	752,712	$	694,979
Less: Allowance for loan losses		7,986		7,666
Net Loans	$	744,726	$	687,313

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):

	September 30,			December 31,
	2018			2017
Nonaccrual loans	$	4,494		$	3,658
Loans 90 days past due and accruing		5			3
Restructured loans		6,854			9,625
Total nonperforming loans	$	11,353		$	13,286
Other real estate owned		997			1,412
Other assets		448			40
Total nonperforming assets	$	12,798		$	14,738
Nonperforming assets to total assets		0.96	%		1.09	%
Allowance for loan losses to nonperforming loans		70.34	%		57.70	%

-10-

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 for loan losses during the three and nine months ended September 30, 2018 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 September 30, 2018
Beginning Balance	$	262	$	1,449		$	2,949		$	474		$	1,142		$	1,682		$	7,958
Charge-offs		-		-			(80	)		-			(6	)		(11	)		(97	)
Recoveries		3		34			15			12			34			27			125
Provision		61		(77	)		(419	)		(14	)		(134	)		583			-
Ending balance	$	326	$	1,406		$	2,465		$	472		$	1,036		$	2,281		$	7,986
Allowance for loan losses: For the nine months ended September 30, 2018
Beginning Balance	$	195	$	1,443		$	3,297		$	491		$	1,279		$	961		$	7,666
Charge-offs		-		-			(83	)		-			(64	)		(13	)		(160	)
Recoveries		5		65			304			46			107			53			580
Provision		126		(102	)		(1,053	)		(65	)		(286	)		1,280			(100	)
Ending balance	$	326	$	1,406		$	2,465		$	472		$	1,036		$	2,281		$	7,986
Allowance for loan losses as of September 30, 2018
Ending balance individually evaluated for impairment	$	-	$	162		$	173		$	340		$	107		$	149		$	931
Ending balance collectively evaluated for impairment		326		1,244			2,292			132			929			2,132			7,055
Ending balance	$	326	$	1,406		$	2,465		$	472		$	1,036		$	2,281		$	7,986
Loans as of September 30, 2018
Ending balance individually evaluated for impairment	$	1,127	$	246		$	4,617		$	1,546		$	4,153		$	406		$	12,095
Ending balance collectively evaluated for impairment		21,497		153,942			265,927			23,583			225,332			50,336			740,617
Ending balance	$	22,624	$	154,188		$	270,544		$	25,129		$	229,485		$	50,742		$	752,712

-11-

Activity in the allowance for loan losses during the three and nine months ended September 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 September 30, 2017
Beginning Balance	$	320		$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Charge-offs		-			(6	)		(163	)		-			(49	)		(88	)		(306	)
Recoveries		77			18			23			13			31			17			179
Provision		(67	)		(199	)		56			(56	)		(134	)		400			-
Ending balance	$	330		$	1,309		$	3,275		$	498		$	1,246		$	1,352		$	8,010
Allowance for loan losses: For the nine months ended September 30, 2017
Beginning Balance	$	201		$	1,632		$	3,336		$	525		$	1,599		$	1,165		$	8,458
Charge-offs		-			(6	)		(572	)		-			(99	)		(137	)		(814	)
Recoveries		80			116			97			39			177			57			566
Provision		49			(433	)		414			(66	)		(431	)		267			(200	)
Ending balance	$	330		$	1,309		$	3,275		$	498		$	1,246		$	1,352		$	8,010
Allowance for loan losses as of September 30, 2017
Ending balance individually evaluated for impairment	$	1		$	139		$	16		$	367		$	174		$	206		$	903
Ending balance collectively evaluated for impairment		329			1,170			3,259			131			1,072			1,146			7,107
Ending balance	$	330		$	1,309		$	3,275		$	498		$	1,246		$	1,352		$	8,010
Loans as of September 30, 2017
Ending balance individually evaluated for impairment	$	1,095		$	220		$	2,622		$	1,598		$	5,368		$	433		$	11,336
Ending balance collectively evaluated for impairment		22,346			122,773			268,893			20,544			211,046			36,928			682,530
Ending balance	$	23,441		$	122,993		$	271,515		$	22,142		$	216,414		$	37,361		$	693,866

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.

-12-

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.

• 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 September 30, 2018 are as follows (000s omitted):

Credit Quality Indicators as of September 30, 2018

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	$	-	$	2,573	$	114	$	11,612	$	146,009	$	45,226	$	205,534
10		-		6,805		-		-		-		-		6,805
20		281		115		206		-		-		-		602
30		490		44,661		23,963		-		1,273		3,662		74,049
40		16,046		93,097		213,410		8,979		73,940		1,840		407,312
45		1,336		2,082		15,442		1,402		2,730		-		22,992
50		1,879		4,355		10,799		1,590		2,185		-		20,808
55		-		251		2,108		1,510		731		-		4,600
60		2,592		249		4,502		36		2,617		14		10,010
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	22,624	$	154,188	$	270,544	$	25,129	$	229,485	$	50,742	$	752,712
Performing	$	21,946	$	153,889	$	266,992	$	23,583	$	224,627	$	50,322	$	741,359
Nonperforming		678		299		3,552		1,546		4,858		420		11,353
Total	$	22,624	$	154,188	$	270,544	$	25,129	$	229,485	$	50,742	$	752,712

The portfolio segments in each credit risk grade as of December 31, 2017 are as follows (000s omitted):

Credit Quality Indicators as of December 31, 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	$	-	$	1,341	$	160	$	13,903	$	135,311	$	30,359	$	181,074
10		-		6,870		-		-		-		-		6,870
20		281		293		353		-		-		-		927
30		503		29,655		6,300		-		941		3,972		41,371
40		14,819		76,792		223,468		4,857		72,634		1,947		394,517
45		1,414		2,391		12,244		1,528		5,363		-		22,940
50		1,864		3,778		21,802		1,667		3,590		6		32,707
55		1,441		594		1,857		1,537		867		2		6,298
60		909		505		3,460		66		3,308		27		8,275
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	21,231	$	122,219	$	269,644	$	23,558	$	222,014	$	36,313	$	694,979
Performing	$	20,665	$	121,768	$	265,801	$	21,955	$	215,643	$	35,861	$	681,693
Nonperforming		566		451		3,843		1,603		6,371		452		13,286
Total	$	21,231	$	122,219	$	269,644	$	23,558	$	222,014	$	36,313	$	694,979

-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 September 30, 2018 and December 31, 2017 (000s omitted):

September 30, 2018	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	$	56	$	-	$	75	$	131	$	22,493	$	22,624	$	-
Commercial		388		109		30	$	527		153,661		154,188		5
Commercial Real Estate		402		-		1,852		2,254		268,290		270,544		-
Construction Real Estate		-		-		-		-		25,129		25,129		-
Residential Real Estate		1,098		74		492		1,664		227,821		229,485		-
Consumer and Other		53		-		-		53		50,689		50,742		-
Total	$	1,997	$	183	$	2,449	$	4,629	$	748,083	$	752,712	$	5

December 31, 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	$	-	$	-	$	-	$	-	$	21,231	$	21,231	$	-
Commercial		111		8		5		124		122,095		122,219		3
Commercial Real Estate		834		783		56		1,673		267,971		269,644		-
Construction Real Estate		17		-		-		17		23,541		23,558		-
Residential Real Estate		1,361		58		871		2,290		219,724		222,014		-
Consumer and Other		55		2		-		57		36,256		36,313		-
Total	$	2,378	$	851	$	932	$	4,161	$	690,818	$	694,979	$	3

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 September 30, 2018 and December 31, 2017 (000s omitted):

	September 30, 2018		December 31, 2017
Agriculture and Agricultural Real Estate	$	119	$	-
Commercial		104		243
Commercial Real Estate		2,939		1,580
Construction Real Estate		7		33
Residential Real Estate		1,311		1,783
Consumer and Other		14		19
Total	$	4,494	$	3,658

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 September 30, 2018 and September 30, and December 31, 2017 (000s omitted):

September 30, 2018	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 Nine Months Ended		Interest Income Recognized in the Nine Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	891	$	888	$	-	$	889	$	12	$	903	$	35
Commercial		-		-		-		-		-		-		-
Commercial Real Estate		2,873		2,875		-		2,896		7		2,902		72
Construction Real Estate		-		-		-		-		-		-		-
Residential Real Estate		3,809		3,983		-		4,006		41		4,058		149
Consumer and Other		32		32		-		33		1		34		2
With an allowance recorded:
Agriculture and Agricultural Real Estate		236		236		-		236		3		238		9
Commercial		246		253		162		256		3		261		9
Commercial Real Estate		1,744		1,807		173		1,878		27		1,895		84
Construction Real Estate		1,546		1,580		340		1,572		19		1,585		56
Residential Real Estate		344		352		107		355		4		359		12
Consumer and Other		374		375		149		377		3		382		8
Total:
Agriculture and Agricultural Real Estate	$	1,127	$	1,124	$	-	$	1,125	$	15	$	1,141	$	44
Commercial		246		253		162		256		3		261		9
Commercial Real Estate		4,617		4,682		173		4,774		34		4,797		156
Construction Real Estate		1,546		1,580		340		1,572		19		1,585		56
Residential Real Estate		4,153		4,335		107		4,361		45		4,417		161
Consumer and Other		406		407		149		410		4		416		10
Total	$	12,095	$	12,381	$	931	$	12,498	$	120	$	12,617	$	436

	Recorded Investment as of December 31, 2017		Unpaid Principal Balance as of December 31, 2017		Related Allowance as of December 31, 2017		Average Recorded Investment for the Three Months Ended September 30, 2017		Interest Income Recognized in the Three Months Ended September 30, 2017		Average Recorded Investment for the Nine Months Ended September 30, 2017		Interest Income Recognized in the Nine Months Ended September 30, 2017
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	829	$	826	$	-	$	849	$	11	$	850	$	32
Commercial		-		-		-		-		-		-		-
Commercial Real Estate		1,977		2,034		-		2,177		23		2,238		59
Construction Real Estate		17		21		-		-		-		-		-
Residential Real Estate		3,757		3,935		-		4,054		51		4,110		150
Consumer and Other		30		30		-		-		-		1		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		241		240		1		242		3		244		10
Commercial		265		268		148		220		2		224		7
Commercial Real Estate		1,776		1,783		219		614		6		621		17
Construction Real Estate		1,586		1,619		360		1,622		19		1,635		57
Residential Real Estate		1,464		1,515		177		1,537		16		1,552		45
Consumer and Other		402		403		205		437		5		444		15
Total:
Agriculture and Agricultural Real Estate	$	1,070	$	1,066	$	1	$	1,091	$	14	$	1,094	$	42
Commercial		265		268		148		220		2		224		7
Commercial Real Estate		3,753		3,817		219		2,791		29		2,859		76
Construction Real Estate		1,603		1,640		360		1,622		19		1,635		57
Residential Real Estate		5,221		5,450		177		5,591		67		5,662		195
Consumer and Other		432		433		205		437		5		445		15
Total	$	12,344	$	12,674	$	1,110	$	11,752	$	136	$	11,919	$	392

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”).

-16-

Loans that have been classified as TDRs during the three and nine month periods ended September 30, 2018 and September 30, 2017 are as follows (000s omitted from dollar amounts):

	Three months ended						Nine months ended
	September 30, 2018						September 30, 2018
	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		-		-		-		-		-		-
Commercial Real Estate		1		58		53		2		341		333
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		1		78		78		3		250		228
Consumer and Other		-		-		-		-		-		-
Total		2	$	136	$	131		5	$	591	$	561

	Three months ended						Nine months ended
	September 30, 2017						September 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		225		202		4		578		492
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		1		99		99		5		371		229
Consumer and Other		-		-		-		1		1		-
Total		2	$	324	$	301		12	$	979	$	750

-17-

The Bank considers TDRs that become past due under the modified terms as defaulted. The following table shows the loans that became TDRs during the nine month periods ended September 30, 2018 and September 30, 2017 that subsequently defaulted during the nine month periods ended September 30, 2018 and September 30, 2017, respectively.

	Nine months ended				Nine months ended
	September 30, 2018				September 30, 2017
	Number of Contracts		Recorded Principal Balance		Number of Contracts		Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-		-	$	-
Commercial		-		-		-		-
Commercial Real Estate		-		-		-		-
Construction Real Estate		-		-		-		-
Residential Real Estate		-		-		1		99
Consumer and Other		-		-		-		-
Total		-	$	-		1	$	99

The Company has allocated $871,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings at September 30, 2018. In addition, there were no commitments to lend additional amounts to borrowers that are classified as troubled debt restructurings as of September 30, 2018 and September 30, 2017.

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6. INVESTMENT SECURITIES 

The following is a summary of the Bank’s investment securities portfolio as of September 30, 2018 and December 31, 2017 (000s omitted):

	Held to Maturity
	September 30, 2018
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	-	$	-	$	-	$	-
Corporate Debt Securities		-		-		-		-
	$	-	$	-	$	-	$	-

	Available for Sale
	September 30, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	139,690	$	-	$	(7,768	)	$	131,922
Mortgage Backed Securities issued by U.S. Government Agencies		221,515		-		(7,556	)		213,959
Obligations of States and Political Subdivisions		72,570		4		(1,258	)		71,316
Corporate Debt Securities		13,556		108		(30	)		13,634
	$	447,331	$	112	$	(16,612	)	$	430,831

	Held to Maturity
	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	36,663	$	666	$	(322	)	$	37,007
Corporate Debt Securities		500		-		(21	)		479
	$	37,163	$	666	$	(343	)	$	37,486

	Available for Sale
	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	140,090	$	32	$	(4,242	)	$	135,880
Mortgage Backed Securities issued by U.S. Government Agencies		248,649		3		(3,875	)		244,777
Obligations of States and Political Subdivisions		37,308		48		(373	)		36,983
Corporate Debt Securities		22,662		462		(41	)		23,083
Equity Securities		2,044		49		-			2,093
	$	450,753	$	594	$	(8,531	)	$	442,816

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The amortized cost and estimated market values of securities by contractual maturity as of September 30, 2018 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	$	-	$	-	$	9,239	$	9,239
After 1 year through five years		-		-		69,750		67,387
After 5 years through 10 years		-		-		107,097		101,421
After 10 years		-		-		39,730		38,825
Total		-		-		225,816		216,872
Mortgage Backed Securities		-		-		221,515		213,959
Total	$	-	$	-	$	447,331	$	430,831

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 September 30, 2018 and December 31, 2017.

	September 30, 2018
	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	$	17,086	$	536	$	109,557	$	7,231	$	126,643	$	7,767
Mortgage Backed Securities issued by U.S. Government Agencies		76,652		2,410		137,306		5,146		213,958		7,556
Obligations of States and Political Subdivisions		37,508		968		13,134		655		50,642		1,623
Corporate Debt Securities		4,511		45		-		-		4,511		45
	$	135,757	$	3,959	$	259,997	$	13,032	$	395,754	$	16,991

	December 31, 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	$	25,257	$	286	$	105,329	$	3,956	$	130,586	$	4,242
Mortgage Backed Securities issued by U.S. Government Agencies		161,792		1,725		81,157		2,150		242,949		3,875
Obligations of States and Political Subdivisions		23,898		357		16,741		338		40,639		695
Corporate Debt Securities		4,560		39		2,009		23		6,569		62
	$	215,507	$	2,407	$	205,236	$	6,467	$	420,743	$	8,874

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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 September 30, 2018. As of September 30, 2018 and December 31, 2017, there were 199 and 205 securities in an unrealized loss position, respectively.

During the third quarter of 2018, the Company sold Obligations of States and Political Subdivisions that were classified as Held to Maturity. According to ASC 320-10-25, the sale of these securities was inconsistent with the Held to Maturity classification, and as a result, the Company reclassified all of its remaining Held to Maturity investments as Available for Sale as of September 30, 2018.

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 cash, equity mutual fund investments where quoted prices are available in an active market, noninterest bearing demand deposits, and overnight federal funds 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 September 30, 2018 and December 31, 2017, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
September 30, 2018	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	37,984	$	37,984	$	-	$	-	$	37,984
Time Deposits in Other Banks		11,946		-		10,954		750		11,704
Securities - Held to Maturity
Obligations of States and Political Subdivisions		-		-		-		-		-
Corporate Debt Securities		-		-		-		-		-
Securities - Available for Sale
Obligations of U.S. Government Agencies		131,922		-		131,922		-		131,922
MBS issued by U.S. Government Agencies		213,959		-		213,959		-		213,959
Obligations of States and Political Subdivisions		71,316		-		71,316		-		71,316
Corporate Debt Securities		13,634		-		13,634		-		13,634
Equity Securities		7,403		3,255		4,148		-		7,403
Loans Held for Sale		183		-		-		186		186
Loans, net		744,726		-		-		684,324		684,324
Accrued Interest Receivable		4,772		-		-		4,772		4,772
Financial Liabilities:
Noninterest Bearing Deposits		291,731		291,731		-		-		291,731
Interest Bearing Deposits		874,545		-		875,157		-		875,157
Borrowed funds
FHLB Advances		35,000		-		34,775		-		34,775
Accrued Interest Payable		92		-		-		92		92

									Total
	Carrying								Estimated
December 31, 2017	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	53,010	$	53,010	$	-	$	-	$	53,010
Time Deposits in Other Banks		15,196		-		15,082		-		15,082
Securities - Held to Maturity
Obligations of States and Political Subdivisions		36,663		-		2,407		34,600		37,007
Corporate Debt Securities		500		-		479		-		479
Securities - Available for Sale
Obligations of U.S. Government Agencies		135,880		-		135,880		-		135,880
MBS issued by U.S. Government Agencies		244,777		-		244,777		-		244,777
Obligations of States and Political Subdivisions		36,983		-		36,983		-		36,983
Corporate Debt Securities		23,083		-		23,083		-		23,083
Equity Securities		2,093		2,093		-		-		2,093
Federal Home Loan Bank Stock		4,148		-		4,148		-		4,148
Loans Held for Sale		346		-		-		356		356
Loans, net		687,313		-		-		657,684		657,684
Accrued Interest Receivable		4,169		-		-		4,169		4,169
Financial Liabilities:
Noninterest Bearing Deposits		299,838		299,838		-		-		299,838
Interest Bearing Deposits		898,326		-		899,481		-		899,481
Accrued Interest Payable		61		-		-		61		61

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

The Company’s assets with Level 3 fair values are carried at their amortized cost values as of September 30, 2018 or December 31, 2017. 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)
September 30, 2018
Impaired loans	$	-	$	-	$	11,164
Other Real Estate Owned	$	-	$	-	$	997
December 31, 2017
Impaired loans	$	-	$	-	$	11,234
Other Real Estate Owned	$	-	$	-	$	1,412

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.

-23-

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

	Contractual Amount
	September 30,		December 31,
	2018		2017
Commitments to extend credit:
Unused portion of commercial lines of credit	$	117,670	$	103,080
Unused portion of credit card lines of credit		6,271		5,934
Unused portion of home equity lines of credit		35,272		30,368
Standby letters of credit and financial guarantees written		1,837		1,364

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

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

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

Introduction

MBT Financial Corp. (the “Company”) is a bank holding company with one 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.

On October 9, 2018, the Company and First Merchants Corporation (“First Merchants”) signed an Agreement and Plan of Reorganization and Merger (the “Merger Agreement”), pursuant to which the Company will merge with and into First Merchants. Subject to the terms and conditions of the Merger Agreement, each share of the Company will be converted into 0.275 shares of First Merchants common stock. Consummation of the merger is subject to various conditions, including, among others, requisite regulatory approval and approval of the Company’s shareholders. For additional information regarding the Merger Agreement and the related proposed merger transaction, please see the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 10, 2018.

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.

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The net profit of $4,974,000 for the third quarter of 2018 was an increase of $1,041,000 or 26.5% compared to the third quarter of 2017. The increase was mainly the result of an increase of $986,000 in the net interest income and a decrease of $256,000 in the federal income tax expense. For the first nine months of 2018, net income is up $3,068,000, or 28.5% compared to 2017. The year to date improvement is due to the increase of $2,896,000 in net interest income and the decrease of $1,384,000 in federal income tax expense. The effect of these items was mitigated by an increase of $1,114,000 in non-interest expenses, which was primarily due to higher salaries and employee benefits.

The national economic condition is good, and the economy in southeast Michigan is continuing to recover. State and local unemployment rates are holding steady near their lowest post-recession levels, and are now comparable to the national average. Commercial and residential development property values continue to improve, with most 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, but increased slightly in the third quarter of 2018. Classified assets increased $1.0 million, or 9.3% compared to a year ago. Net recoveries were $420,000, or 0.08% of loans, annualized, in the first three quarters of 2018, compared to net charge offs of $248,000, or 0.05% in the first three quarters of 2017. Due to improving loan quality metrics and net recoveries, we were able to reduce our Allowance for Loan and Lease Losses (ALLL) as a percent of loans from 1.15% at September 30, 2017 to 1.06% as of September 30, 2018. Even though the ALLL decreased as a percent of loans outstanding, the growth in the loan portfolio necessitated an increase in the size of the ALLL. The ALLL increased $320,000 during the first nine months of 2018 due to the net recoveries of $420,000, offset by the year to date negative provision of $100,000. We assess the adequacy of our ALLL each quarter, and adjust it as necessary by debiting or crediting the provision expense. The allowance includes $931,000 of specific allocations on $12.1 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 20 quarters. The improvement in the historical loss rates is slowing and loan growth is continuing, so we do not expect negative provisions to continue.

The $986,000 increase in Net Interest Income in the third quarter of 2018 compared to the third quarter of 2017 was due to the increase in the net interest margin from 3.38% to 3.62%, and the increase of $17.6 million in the amount of average earning assets. The net interest margin increased because the yield on earnings assets increased 35 basis points while the cost of interest bearing liabilities only increased 10 basis points. Non-interest income for the quarter increased $5,000 and non-interest expenses increased $206,000.

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.

-25-

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 conditions remained strong this quarter, with steady local unemployment rates and increasing property values. 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 12.9% during the nine months, from $14.7 million to $12.8 million, while total classified assets increased from $9.7 million to $11.9 million. Loan delinquencies increased from $4.2 million 30 days or more past due as of December 31, 2017 to $4.6 million as of September 30, 2018 and the delinquency percentage increased from 0.60% to 0.61% of the total loans. Over the last twelve months, NPAs decreased $1.8 million, or 12.3%, with nonperforming loans decreasing 14.3% from $13.3 million to $11.4 million, and Other Real Estate Owned and Other Assets(“OREO”) unchanged at $1.45 million. Total classified assets, which include internally classified watch list loans, other real estate, and watch list investment securities, increased $2.2 million, or 22.4%. The amount required in the Allowance for Loan and Lease Losses (“ALLL”) was unchanged at $8.0 million compared to a year ago because the improvement in the quality of the assets in the loan portfolio and the decrease in the historical loss rates were offset by the increase in the size of the loan portfolio. The ALLL is now 1.06% of loans, down from 1.15% at September 30, 2017. The ALLL is 70.34% of nonperforming loans (“NPLs”), compared to 57.70% at year end and 62.03% at September 30, 2017. In light of current economic conditions, we believe that this level of ALLL adequately estimates the potential losses in the loan portfolio.

Since December 31, 2017, total loans held for investment increased $57.7 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 fourth quarter of 2018.

Since December 31, 2017, deposits decreased $31.9 million, borrowed funds increased $35.0 million, other liabilities decreased $0.1 million, and capital decreased $11.3 million, and as a result our total assets decreased $8.3 million, or 0.6%. Deposits decreased during the first half of 2018 as some of our local competitors increased their deposit interest rates faster than we did. We monitor the competition closely, and adjusted some of our pricing in order to preserve our strong deposit base while still controlling our interest expense. This resulted in a small amount of deposit funding growth in the third quarter of 2018. We will continue to price our deposit products competitively, but we have adequate on and off balance sheet liquidity to fund our continued loan growth without needing to actively grow deposits. The total capital decreased $11.3 million since December 31, 2017, mainly because dividends paid exceeded earnings by $5.2 million due to the special dividend of $13.8 million paid in the first quarter of 2018. Capital also decreased due to an increase of $6.7 million in the Accumulated Other Comprehensive Loss, which was due to the decrease 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 9.85% at December 31, 2017 to 9.06% at September 30, 2018.

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Results of Operations – Third Quarter 2018 vs. Third Quarter 2017

Net Interest Income - A comparison of the income statements for the three months ended September 30, 2018 and 2017 shows an increase of $986,000, or 9.6%, in Net Interest Income. Interest income on loans increased $1,069,000, or 13.2% as the average loans outstanding increased $64.7 million and the average yield on loans increased from 4.68% to 4.84%. The average loans outstanding increased due to the purchases of consumer loans and syndicated commercial loans, and organic growth in our local markets. The interest income on investments, fed funds sold, and interest bearing balances due from banks increased $165,000 even though the average amount of investments, fed funds sold, and interest bearing balances due from banks decreased $47.0 million as the yield increased from 1.90% to 2.22%. 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 increased $29,000, or 6.8% even though the average deposits decreased $11.5 million as the average cost of deposits increased from 0.14% to 0.15%. Due to the growth in loans and the decrease in deposit funding, average borrowed funds increased $36.8 million, and the cost of borrowed funds increased $219,000 compared to the third quarter of 2017. Average total interest bearing liabilities increased $12.7 million, and the cost of interest bearing liabilities increased from 0.19% in the third quarter of 2017 to 0.29% in the third quarter of 2018. As a result, interest expense increased $248,000, or 58.1%.

Provision for Loan Losses - The Company did not record a Provision for Loan Losses expense in the third quarter of 2017 or the third quarter of 2018. We charged off $97,000 of principal while recovering $125,000 of previously charged off loans in the third quarter of 2018, for a net recovery total of $28,000, or 0.01% 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. Even though the portfolio risk indicators improved, growth in the portfolio resulted in the need for an increase in the amount of ALLL required. The net recoveries of $28,000 enabled us to achieve the required ALLL without recording a provision expense. The allowance includes $931,000 of specific allocations and $7.1 million of general allocations. The general allocation is based on the historical charge off experience of the previous 20 quarters. The historical charge off rate is not expected to continue to improve significantly, and if loan growth continues as expected, provision expenses may be required in the future.

Other Income – Non interest income increased $5,000, or 0.1% compared to the third quarter of 2017. Increases in Wealth Management income, Debit Card income, and Other non-interest income were offset by the decrease in gains on securities transactions. Origination fees on mortgage loans sold increased $65,000 because we retained more of our fixed rate mortgage loan originations in the third quarter of 2018.

Other Expenses – Total non-interest expenses increased $206,000, or 2.3% compared to the third quarter of 2017. Salaries and Employee Benefits increased $68,000, or 1.2% mainly due to higher retirement and healthcare benefit expenses. Occupancy expense decreased $34,000 due to lower depreciation and maintenance costs. Equipment expense increased $98,000 due to higher computer expense, which includes expenses related to a wealth management system conversion that was completed in the third quarter of 2018.

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As a result of the above activity, the Profit Before Income Taxes in the third quarter of 2018 was $6,101,000, an increase of $785,000 compared to the pre-tax profit of $5,316,000 in the third quarter of 2017. The Company recorded a federal income tax expense of $1,127,000 in the third quarter of 2018, reflecting an effective tax rate of 18.5%, compared to the tax expense of $1,383,000 in the third quarter of 2017, which reflected an effective rate of 26.0%. The tax expense in the third quarter of 2018 reflects the decrease in our statutory rate from 34% to 21% resulting from the Tax Cuts and Jobs Act. The Net profit for the third quarter of 2018 was $4,974,000, an increase of 26.5% compared to the net profit of $3,933,000 in the third quarter of 2017.

Results of Operations – First Three Quarters 2018 vs. First Three Quarters 2017

Net Interest Income - A comparison of the income statements for the nine months ended September 30, 2018 and 2017 shows an increase of $2,896,000, or 9.8%, in Net Interest Income. Interest income on loans increased $2,949,000, or 12.7% as the average loans outstanding increased $56.0 million and the average yield on loans increased from 4.61% to 4.80%. The average loans outstanding increased due to the purchase of a pool of consumer loans related to the refinance of student debt, purchases of syndicated loans, and organic growth in our local markets. The interest income on investments, fed funds sold, and interest bearing balances due from banks increased $213,000 even though the average amount of investments, fed funds sold, and interest bearing balances due from banks decreased $54.7 million because the investment portfolio yield increased from 1.91% to 2.17%. 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 $47,000, or 3.6% as the average deposits decreased $10.3 million and the average cost of deposits decreased from 0.15% to 0.14%. 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 flat yield curve interest rate environment. Due to the increase in loans and the decrease in deposit funding, the Bank increased its average use of borrowed funds by $18.3 million. The cost of the borrowed funds increased from 0.96% in the first nine months of 2017 to 2.25% in the first nine months of 2018, resulting in an increase of $313,000 in interest expense on borrowed funds. The cost of all interest bearing liabilities increased from 0.19% for the first nine months of 2017 to 0.24% for the first nine months of 2018.

Provision for Loan Losses - The Provision for Loan Losses increased $100,000 compared to the first nine months of 2017 as a $100,000 credit to provision expense was recorded in the first quarter of 2018, compared to a negative provision expense of $200,000 that was recorded in the first quarter of 2017. We charged off $160,000 of principal while recovering $580,000 of previously charged off loans in the first three quarters of 2018, for a net recovery total of $420,000, or 0.08% 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. Even though the portfolio grew, the risk indicators improved, resulting in the need for an increase of $320,000 in the amount of ALLL required. The net recoveries of $420,000 enabled us to achieve the required ALLL by recording the negative provision expense of $100,000. The historical charge off rate is not expected to continue to improve significantly, and if loan growth continues as expected, provision expenses may be required.

Other Income – Non interest income was $12.2 million in the first three quarters of 2018 and 2017. Wealth management fees decreased $274,000 due to an accrual adjustment of $389,000 in 2017. Service charges on deposit accounts decreased $242,000 due to lower overdraft activity and higher earnings credits on certain business checking accounts. Gains on securities transactions decreased $420,000 due to losses in 2018 related to some portfolio restructuring transactions, and gains in 2017. Gains on other real estate transactions increased $625,000 due to gains on sales in 2018 compared to losses on sales in 2017. Debit card income increased $122,000, or 5.7% due to increased customer debit card usage.

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Other Expenses – Total non-interest expenses increased $1,114,000, or 4.1% compared to the first three quarters of 2017. Salaries and Employee Benefits increased $694,000, or 4.3% due to higher salaries, a larger incentive compensation accrual, and an adjustment to the stock based compensation accrual related to the special dividend in the first half of 2018. Also, the 401k matching contribution increased due to higher employee deferrals, health insurance benefits expense increased, and payroll tax expense was higher. Equipment expense increased $277,000 due to higher computer expense, which included PC network hardware replacement and expenses related to a wealth management system conversion in 2018. Marketing expenses increased $272,000, or 28.3% due to increased advertising and other expenses related to our branding initiative.

As a result of the above activity, the Profit Before Income Taxes in the first three quarters of 2018 was $16,779,000, an increase of $1,684,000 compared to the pre-tax profit of $15,095,000 in the first three quarters of 2017. The Company recorded a federal income tax expense of $2,958,000 in the first three quarters of 2018, reflecting an effective tax rate of 17.6%, compared to the tax expense of $4,342,000 in the first three quarters of 2017, which reflected an effective rate of 28.8%. The tax expense in 2018 reflects the decrease in our statutory rate from 34% to 21% resulting from the Tax Cuts and Jobs Act, and also includes a tax benefit related to our stock based compensation program. The Net profit for the first three quarters of 2018 was $13,821,000, an increase of 28.5% compared to the net profit of $10,753,000 in the first three quarters of 2017.

Cash Flows

Cash flows provided by operating activities increased $6,862,000 compared to the first nine months of 2017 mainly because the net income was $3,068,000 higher in 2018 and $3,299,000 more cash was provided by reducing interest receivable and other assets. The cash flow used for investing activities in the first nine months of 2018 was $17.4 million because the cash provided by sales, maturities, and redemption of securities, net of purchases of investment securities was $38.8 million while the cash used to increase loans was $57.9 million. The cash flow used for investing activities in the first nine months of 2017 was $11.7 million because the cash provided by sales, maturities, and redemption of securities, net of purchases of investment securities was $39.4 million while the cash used to increase loans and bank owned life insurance was $42.0 million and $4.4 million, respectively. The amount of cash provided by the investment portfolio decreased because the higher rate environment has slowed the prepayments of mortgage backed securities and callable debt securities. The bank is actively growing its loan portfolio, and primarily funding that growth with cash flow from the investment portfolio. The amount of cash used for financing activities was $8.1 million lower in the first nine months of 2018 than it was in the first nine months of 2017 even though deposits decreased by $27.5 million more in the first nine months of 2018 because cash provided by borrowing, net of repayments of borrowings, was $35.0 million higher. The amount of cash used to pay dividends decreased by $0.6 million as the dividend payout ratio decreased from 182.7% in 2017 to 137.8% in 2018. In the first nine months of 2018, the cash used for investing and financing activities exceeded the cash provided by operating activities, and the amount of cash and cash equivalents decreased by $15.0 million during the period. In the first nine months of 2017, the cash used for investing and financing activities exceeded the cash provided by operating activities, resulting in a decrease of $24.3 million in cash and cash equivalents during the first nine months of 2017. We expect cash flows from redemptions of investment securities and deposit growth to exceed our uses for loan growth in the fourth quarter of 2018, and as a result we plan to utilize that cash flow to reduce borrowings. We anticipate that we will maintain our current level of cash and cash equivalents through the end of the year.

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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 September 30, 2018, the Bank was utilizing $35 million of its authorized limit of $255 million with the Federal Home Loan Bank of Indianapolis, $0 of its $20 million overdraft line of credit with the Federal Home Loan Bank of Indianapolis, and $0 of 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 nine months of 2018 the Company was in compliance with its Funds Management Policy regarding liquidity and capital.

Total stockholders’ equity of the Company was $121.4 million at September 30, 2018 and $132.7 million at December 31, 2017. Retained earnings decreased $5.2 million as the year to date profit was exceeded by the payment of cash dividends on the common stock, and the Accumulated Other Comprehensive Loss (AOCL) increased due to a decrease in the value of our securities that are classified as Available For Sale. Total equity decreased $11.3 million while total assets decreased $8.3 million, so the ratio of equity to assets decreased from 9.85% at December 31, 2017 to 9.06% at September 30, 2018.

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 a Total Risk Based Capital ratio of at least 8%, a Tier 1 Risk Based Capital ratio of at least 6%, and a Tier 1 Leverage Ratio of at least 4% 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 Risk Based Capital is at least 8% of Risk Weighted Assets, and the Tier 1 Leverage Capital ratio is at least 5%. Basel III implemented the new Common Equity Tier 1 Capital to Risk Weighted Assets ratio, with a minimum of 4.5% to be considered adequately capitalized and a minimum of 6.5% required to be considered well capitalized.

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

	Actual					Minimum to Qualify as Well Capitalized
	Amount		Ratio			Amount		Ratio
As of September 30, 2018:
Total Capital to Risk-Weighted Assets
Consolidated	$	144,047		15.76	%	$	91,419		10.0	%
Monroe Bank & Trust		142,676		15.63	%		91,288		10.0	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		135,726		14.85	%		73,135		8.0	%
Monroe Bank & Trust		134,355		14.72	%		73,030		8.0	%
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated		135,726		14.85	%		59,422		6.5	%
Monroe Bank & Trust		134,355		14.72	%		59,337		6.5	%
Tier 1 Capital to Average Assets
Consolidated		135,726		9.96	%		68,160		5.0	%
Monroe Bank & Trust		134,355		9.86	%		68,109		5.0	%

	Actual					Minimum to Qualify as Well Capitalized
	Amount		Ratio			Amount		Ratio
As of December 31, 2017:
Total Capital to Risk-Weighted Assets
Consolidated	$	148,387		17.39	%	$	85,350		10.0	%
Monroe Bank & Trust		146,842		17.21	%		85,343		10.0	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		140,364		16.45	%		68,280		8.0	%
Monroe Bank & Trust		138,819		16.27	%		68,274		8.0	%
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated		140,364		16.45	%		55,477		6.5	%
Monroe Bank & Trust		138,819		16.27	%		55,473		6.5	%
Tier 1 Capital to Average Assets
Consolidated		140,364		10.44	%		67,229		5.0	%
Monroe Bank & Trust		138,819		10.33	%		67,216		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 2017.

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.

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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, 400, and 500 basis points and decreases of 100, 200, and 300 basis points in the interest rates. The net interest income projections are compared to a base case projection, which assumes no changes in interest rates.

The Bank’s ALCO has established limits in the acceptable amount of interest rate risk, as measured by the change in the Bank’s projected net interest income, in its policy. Throughout the first three quarters of 2018, 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, 400, and 500 basis points and minus 100, 200, and 300 basis points in interest rates. The discount rates used to determine the present values of the loans and deposits, as well as the prepayment rates for the loans, are based on Management’s expectations of the effect of the rate changes on the market for loans and deposits. In addition, each quarter, the Bank conducts additional analyses that utilize other rate scenarios, such as larger shifts in rates and changes in the shape of the yield curve, to assess the Bank’s exposure to interest rate risk in stress scenarios.

The Bank’s interest rate risk, as measured by the net interest income and economic value of equity simulations, has not changed significantly from December 31, 2017.

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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 September 30, 2018, 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 September 30, 2018, 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 September 30, 2018, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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, 2017.

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

The Company has a stock repurchase program which it publicly announced on January 25, 2018. 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, 2018 and will expire on January 31, 2020. The Company did not repurchase any shares of its common stock during the three months ended September 30, 2018, and 2,000,000 shares remain available under the repurchase authorization.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits

2.1	Agreement and Plan of Reorganization and Merger between First Merchants Corporation and MBT Financial Corp. dated October 9, 2018. Previously filed as Exhibit 2.1 to MBT Financial Corp.'s Form 8-K filed with the Securities and Exchange Commission on October 10, 2018.
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.

10.1	Amended and Restated Change in Control Agreement with H. Douglas Chaffin.  Previously field as Exhibit 10.1 to MBT Financial Corp.’s Form 8-K filed with the Securities and Exchange Commission on August 8, 2018.
10.2	Form of Severance Agreement with Mr. Scott E. McKelvey, Thomas G. Myers, Audrey Mistor and John L. Skibski.  Previously field as Exhibit 10.2 to MBT Financial Corp.’s Form 8-K filed with the Securities and Exchange Commission on August 8, 2018.
10.3	The Monroe Bank & Trust Supplemental Executive Retirement Agreement with H. Douglas Chaffin, as amended.  Previously field as Exhibit 10.3 to MBT Financial Corp.’s Form 8-K filed with the Securities and Exchange Commission on August 8, 2018.
10.4	Voting Agreement dated October 9, 2018 among First Merchants Corporation, each member of the Board of Directors of MBT Financial Corp., Patriot Financial Partners and Castle Creek Capital Partners.  Previously field as Exhibit 10.1 to MBT Financial Corp.’s Form 8-K filed with the Securities and Exchange Commission on October 10, 2018.
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

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Signatures

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

	MBT Financial Corp.                     (Registrant)
November 9, 2018	By /s/ H. Douglas Chaffin
Date	H. Douglas Chaffin            President &            Chief Executive Officer
November 9, 2018	By /s/ John L. Skibski
Date	John L. Skibski            Executive Vice President and            Chief Financial Officer

-36-

-37-

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: November 9, 2018	/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: November 9, 2018	/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 September 30, 2018 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

November 9, 2018

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 September 30, 2018 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

November 9, 2018

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	9 Months Ended
	Sep. 30, 2018	Nov. 08, 2018
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 Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding (in shares)		22,991,496
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Cash and due from banks
Non-interest bearing	$ 17,436	$ 18,233
Interest bearing	20,548	34,777
Total cash and cash equivalents	37,984	53,010
Interest Bearing Time Deposits in Other Banks	11,946	15,196
Securities - Held to Maturity		37,163
Securities - Available for Sale	430,831	442,816
Equity Securities	7,403	4,148
Loans held for sale	183	346
Loans	752,712	694,979
Allowance for Loan Losses	(7,986)	(7,666)
Loans - Net	744,726	687,313
Accrued interest receivable and other assets	19,187	20,463
Other real estate owned	997	1,412
Bank Owned Life Insurance	59,205	58,153
Premises and Equipment - Net	26,660	27,400
Total assets	1,339,122	1,347,420
Deposits
Non-interest bearing	291,731	299,838
Interest-bearing	874,545	898,326
Total deposits	1,166,276	1,198,164
Federal Home Loan Bank advances	35,000
Interest payable and other liabilities	16,495	16,598
Total liabilities	1,217,771	1,214,762
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 22,990,208 and 22,907,844 shares issued and outstanding)	23,403	22,840
Retained earnings	112,343	117,524
Unearned compensation	(19)
Accumulated other comprehensive loss	(14,376)	(7,706)
Total stockholders' equity	121,351	132,658
Total liabilities and stockholders' equity	$ 1,339,122	$ 1,347,420

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares $ / shares in Thousands	Sep. 30, 2018	Dec. 31, 2017
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)	22,990,208	22,907,844
Common stock, shares outstanding (in shares)	22,990,208	22,907,844

XML

Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Interest Income
Interest and fees on loans	$ 9,164	$ 8,095	$ 26,117	$ 23,168
Interest on investment securities-
Tax-exempt	415	327	1,262	943
Taxable	2,120	2,054	6,417	6,507
Interest on balances due from banks	193	182	376	392
Total interest income	11,892	10,658	34,172	31,010
Interest Expense
Interest on deposits	456	427	1,270	1,317
Interest on borrowed funds	219		316	3
Total interest expense	675	427	1,586	1,320
Net Interest Income	11,217	10,231	32,586	29,690
Recovery Of Loan Losses			(100)	(200)
Net Interest Income After Recovery Of Loan Losses	11,217	10,231	32,686	29,890
Other Income
Net gain (loss) on sales and redemptions of securities available for sale	(91)	150	(193)	227
Net gain (loss) on sales of Other Real Estate Owned		7	536	(89)
Bank owned life insurance income	350	377	1,052	1,130
Other	680	464	1,807	1,583
Total other income	4,040	4,035	12,227	12,225
Other Expenses
Salaries and employee benefits	5,381	5,313	16,714	16,020
Occupancy expense	660	694	2,001	2,124
Equipment expense	881	783	2,548	2,271
Marketing expense	389	375	1,233	961
Professional fees	550	570	1,736	1,779
EFT/ATM expense	297	256	844	763
Other Real Estate Owned expenses	25	33	61	95
FDIC Deposit Insurance Assessment	97	107	296	321
Bonding and other insurance expense	129	120	398	367
Telephone expense	84	83	233	302
Other	663	616	2,070	2,017
Total other expenses	9,156	8,950	28,134	27,020
Income Before Income Taxes	6,101	5,316	16,779	15,095
Income Tax Expense	1,127	1,383	2,958	4,342
Net Income	4,974	3,933	13,821	10,753
Other Comprehensive Income - Net of Tax
Unrealized gains (losses) on securities	(1,972)	(679)	(6,868)	3,091
Reclassification adjustment for (gains) losses included in net income	71	(99)	152	(150)
Postretirement benefit liability	31	27	95	80
Total Other Comprehensive Income (Loss) - Net of Tax	(1,870)	(751)	(6,621)	3,021
Comprehensive Income	$ 3,104	$ 3,182	$ 7,200	$ 13,774
Basic Earnings Per Common Share (in dollars per share)	$ 0.21	$ 0.17	$ 0.60	$ 0.47
Diluted Earnings Per Common Share (in dollars per share)	0.21	0.17	0.60	0.47
Dividends Declared Per Share of Common Stock (in dollars per share)	$ 0.10	$ 0.06	$ 0.83	$ 0.86
Fiduciary and Trust [Member]
Other Income
Noninterest income	$ 1,193	$ 1,155	$ 3,556	$ 3,830
Deposit Account [Member]
Other Income
Noninterest income	993	1,076	2,894	3,136
Debit Card [Member]
Other Income
Noninterest income	763	719	2,269	2,147
Mortgage Banking [Member]
Other Income
Noninterest income	$ 152	$ 87	$ 306	$ 261

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 (in shares) at Dec. 31, 2016	22,777,882
Balance at Dec. 31, 2016	$ 22,562	$ 126,079	$ (4)	$ (7,523)	$ 141,114
SOSARs exercised, net of shares redeemed for taxes (in shares)	64,211
SOSARs exercised, net of shares redeemed for taxes	$ (253)				(253)
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)	27,412
Employee Stock Purchase Plan and other stock issued	$ 294				294
Tax benefit from exercise of options		583			583
Equity Compensation	404		49		453
Deferred Directors' Compensation	$ (354)				(354)
Dividends declared		(19,642)			(19,642)
Net Income		10,753			10,753
Other comprehensive income - net of tax				3,021	3,021
Balance (in shares) at Sep. 30, 2017	22,875,505
Balance at Sep. 30, 2017	$ 22,718	117,773	(20)	(4,502)	135,969
Balance (in shares) at Dec. 31, 2017	22,907,844
Balance at Dec. 31, 2017	$ 22,840	117,524		(7,706)	132,658
SOSARs exercised, net of shares redeemed for taxes (in shares)	45,749
SOSARs exercised, net of shares redeemed for taxes	$ (209)				(209)
Restricted stock awards, net of shares redeemed for taxes (in shares)	7,500
Restricted stock awards, net of shares redeemed for taxes	$ 78		(78)
Employee Stock Purchase Plan and other stock issued (in shares)	29,115
Employee Stock Purchase Plan and other stock issued	$ 309				309
Tax benefit from exercise of options
Equity Compensation	489		59		548
Deferred Directors' Compensation	(104)				(104)
Cumulative Effect Adjustment (ASU 2016-01)		49		(49)
Dividends declared		(19,051)			(19,051)
Net Income		13,821			13,821
Other comprehensive income - net of tax				(6,621)	(6,621)
Balance (in shares) at Sep. 30, 2018	22,990,208
Balance at Sep. 30, 2018	$ 23,403	$ 112,343	$ (19)	$ (14,376)	$ 121,351

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Retained Earnings [Member]
Dividends declared (in dollars per share)	$ 0.83	$ 0.86
Dividends declared (in dollars per share)	0.83	0.86
Dividends declared (in dollars per share)	0.83	0.86
Dividends declared (in dollars per share)	$ 0.83	$ 0.86

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash Flows from Operating Activities
Net Income	$ 13,821	$ 10,753
Adjustments to reconcile net income to net cash from operating activities
Recovery of loan losses	(100)	(200)
Depreciation	1,102	1,174
Deferred tax expense		(241)
Net amortization of investment premium and discount	1,673	1,710
Adjustment for assets carried at fair market value	63
Writedowns of Other Real Estate Owned	42	76
Net (decrease) increase in interest payable and other liabilities	(86)	237
Net decrease (increase) in interest receivable and other assets	2,033	(1,266)
Writedowns of Other Assets		37
Equity based compensation expense	548	453
Net (gain) loss on sale/settlement of securities	193	(227)
Increase in cash surrender value of life insurance	(1,052)	(1,131)
Net cash provided by operating activities	18,237	11,375
Cash Flows from Investing Activities
Proceeds from maturities of interest bearing time deposits in other banks	3,250	2,500
Proceeds from maturities and redemptions of investment securities held to maturity	4,567	11,113
Proceeds from maturities and redemptions of investment securities available for sale	45,400	28,385
Proceeds from sales of investment securities held to maturity	1,612
Proceeds from sales of investment securities available for sale	23,569	135,327
Net increase in loans	(57,898)	(42,033)
Proceeds from sales of other real estate owned	1,698	726
Proceeds from sales of other assets	438	230
Purchase of time deposits in other banks		(500)
Purchase of investment securities held to maturity	(133)	(4,455)
Purchase of Bank Owned Life Insurance		(4,357)
Proceeds from surrender of Bank Owned Life Insurance		309
Purchase of investment securities available for sale	(39,565)	(137,941)
Purchase of bank premises and equipment	(362)	(977)
Net cash used for investing activities	(17,424)	(11,673)
Cash Flows from Financing Activities
Net decrease in deposits	(31,888)	(4,382)
Proceeds from Federal Home Loan Bank borrowings	40,000
Repayment of Federal Home Loan Bank borrowings	(5,000)
Issuance of common stock	309	294
Stock redeemed for tax withholding - stock based compensation	(209)	(253)
Dividends paid	(19,051)	(19,642)
Net cash used for financing activities	(15,839)	(23,983)
Net Decrease in Cash and Cash Equivalents	(15,026)	(24,281)
Cash and Cash Equivalents at Beginning of Period	53,010	52,772
Cash and Cash Equivalents at End of Period	37,984	28,491
Supplemental Cash Flow Information
Cash paid for interest	1,556	1,321
Cash paid for federal income taxes	1,419	3,076
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	748	827
Transfer of loans to other assets		$ 40

XML

Note 1 - Basis of Presentation and Accounting Policies

9 Months Ended

Sep. 30, 2018

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.

On

October 9, 2018,

the Company and First Merchants Corporation (“First Merchants”) signed an Agreement and Plan of Reorganization and Merger (the “Merger Agreement”), pursuant to which the Company will merge with and into First Merchants. Subject to the terms and conditions of the Merger Agreement, each share of the Company will be converted into

0.275

shares of First Merchants common stock. Consummation of the merger is subject to various conditions, including, among others, requisite regulatory approval and approval of the Company’s shareholders. The Merger Agreement was entered into subsequent to the end of the

third

quarter and the financial statements for the

third

quarter do

not

reflect any activity pertaining to the Merger Agreement.

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

is effective for public entities for reporting periods beginning after

December 15, 2017 (

therefore, for the year ending

December 31, 2018

for the Company). The ASU does

not

apply to financial instruments, which constitute a significant portion of our revenue. The Company adopted ASU

2014

-

09

on

January 1, 2018

and determined that adoption of the standard did

not

have a significant impact on its financial statements.

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. Management has developed an implementation timeline and begun the process of segmenting the portfolio.

In

March 2017,

the FASB issued ASU

No.

2017

-

08,

Receivables-Nonrefundable Fees and Other Costs – Premium Amortization on Purchased Callable Debt Securities (Subtopic

310

-

20

).  This ASU was issued to shorten the amortization period for the premium to the earliest call date on debt securities.  This premium will now be recorded as a reduction to net interest margin during the shorter yield to call period, as compared to prior practice of amortizing the premium as a reduction to net interest margin over the contractual life of the instrument.  This ASU does

not

change the current method of amortizing any discount over the contractual life of the debt security, and this pronouncement is effective for fiscal years beginning after

December 15, 2018,

and must be adopted on a modified retrospective basis.  The Company has reviewed the investment portfolio and determined that the standard will

not

have a material effect on its financial statements.

In

January 2016,

the FASB issued ASU

No.

2016

-

01,

Financial Instruments-Overall (Subtopic

825

-

10

), Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU was issued to improve the recognition and measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized in net income, requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, and require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements. ASU

2016

-

01

is effective for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017.

The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption. The Company adopted ASU

2016

-

01

on

January 1, 2018

and it did

not

have a material effect on the consolidated financial statements. For exit pricing on loans, the Company made a fair value adjustment based on the yield metrics of the portfolio and applied a credit mark and a discount to reflect transaction costs.

XML

Note 2 - Earnings Per Share

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

2.

EARNINGS PER SHARE

The calculations of earnings per common share are as follows:

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Basic
Net income	$	4,974,000	$	3,933,000	$	13,821,000	$	10,753,000
Average common shares outstanding		22,985,176		22,871,451		22,969,182		22,852,935
Earnings per common share - basic	$	0.21	$	0.17	$	0.60	$	0.47
Diluted
Net income	$	4,974,000	$	3,933,000	$	13,821,000	$	10,753,000
Average common shares outstanding		22,985,176		22,871,451		22,969,182		22,852,935
Equity compensation		136,675		169,509		131,329		181,598
Average common shares outstanding - diluted		23,121,851		23,040,960		23,100,511		23,034,533
Earnings per common share - diluted	$	0.21	$	0.17	$	0.60	$	0.47

XML

Note 3 - Stock Based Compensation

9 Months Ended

Sep. 30, 2018

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 22, 2018,

105,000

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, 2018.

The fair value of

$2.36

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

23.64%,

a risk free interest rate of

2.86%

and dividend yield of

2.18%.

The fair value of the Company’s common stock was

$10.45

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, 2018		372,585		$	6.82
Granted		105,000			10.45
Exercised		(106,870	)		4.33
Forfeited		(4,336	)		10.09
Expired		-			-
SOSARs Outstanding, September 30, 2018		366,379		$	8.55
SOSARs Exercisable, September 30, 2018		174,181		$	6.66

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

September 30, 2018

was

$11.30.

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

September 30, 2018

was

$808,000,

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

71,522

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 22, 2018,

21,500

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, 2019

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

$10.45

per share. Earned RSUs vest on

December 15, 2020

and as of

September 30, 2018

none

of the RSUs were vested.

Restricted Stock Awards

– On

February 22, 2018,

7,500

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, 2018.

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

$10.45

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

$19,000

as of

September 30, 2018.

The total expense for equity based compensation was

$156,000

in the

third

quarter of

2018

and

$161,000

in the

third

quarter of

2017.

The total expense for equity based compensation was

$548,000

in the

first

nine

months of

2018

and

$454,000

in the

first

nine

months of

2017.

The unrecognized compensation expense for all equity based compensation plans is

$648,000

as of

September 30, 2018.

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

1.60

years.

XML

Note 4 - Loans

9 Months Ended

Sep. 30, 2018

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, 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):

	September 30,		December 31,
	2018		2017
Residential real estate loans	$	229,485	$	222,014
Commercial and Construction real estate loans		295,673		293,202
Agriculture and agricultural real estate loans		22,624		21,231
Commercial and industrial loans		154,188		122,219
Loans to individuals for household, family, and other personal expenditures		50,742		36,313
Total loans, gross	$	752,712	$	694,979
Less: Allowance for loan losses		7,986		7,666
Net Loans	$	744,726	$	687,313

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):

	September 30,			December 31,
	2018			2017
Nonaccrual loans	$	4,494		$	3,658
Loans 90 days past due and accruing		5			3
Restructured loans		6,854			9,625
Total nonperforming loans	$	11,353		$	13,286
Other real estate owned		997			1,412
Other assets		448			40
Total nonperforming assets	$	12,798		$	14,738
Nonperforming assets to total assets		0.96	%		1.09	%
Allowance for loan losses to nonperforming loans		70.34	%		57.70	%

XML

Note 5 - Allowance For Loan Losses

9 Months Ended

Sep. 30, 2018

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 for loan losses during the

three

and

nine

months ended

September 30, 2018

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 September 30, 2018
Beginning Balance	$	262	$	1,449		$	2,949		$	474		$	1,142		$	1,682		$	7,958
Charge-offs		-		-			(80	)		-			(6	)		(11	)		(97	)
Recoveries		3		34			15			12			34			27			125
Provision		61		(77	)		(419	)		(14	)		(134	)		583			-
Ending balance	$	326	$	1,406		$	2,465		$	472		$	1,036		$	2,281		$	7,986
Allowance for loan losses: For the nine months ended September 30, 2018
Beginning Balance	$	195	$	1,443		$	3,297		$	491		$	1,279		$	961		$	7,666
Charge-offs		-		-			(83	)		-			(64	)		(13	)		(160	)
Recoveries		5		65			304			46			107			53			580
Provision		126		(102	)		(1,053	)		(65	)		(286	)		1,280			(100	)
Ending balance	$	326	$	1,406		$	2,465		$	472		$	1,036		$	2,281		$	7,986
Allowance for loan losses as of September 30, 2018
Ending balance individually evaluated for impairment	$	-	$	162		$	173		$	340		$	107		$	149		$	931
Ending balance collectively evaluated for impairment		326		1,244			2,292			132			929			2,132			7,055
Ending balance	$	326	$	1,406		$	2,465		$	472		$	1,036		$	2,281		$	7,986
Loans as of September 30, 2018
Ending balance individually evaluated for impairment	$	1,127	$	246		$	4,617		$	1,546		$	4,153		$	406		$	12,095
Ending balance collectively evaluated for impairment		21,497		153,942			265,927			23,583			225,332			50,336			740,617
Ending balance	$	22,624	$	154,188		$	270,544		$	25,129		$	229,485		$	50,742		$	752,712

Activity in the allowance for loan losses during the

three

and

nine

months ended

September 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 September 30, 2017
Beginning Balance	$	320		$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Charge-offs		-			(6	)		(163	)		-			(49	)		(88	)		(306	)
Recoveries		77			18			23			13			31			17			179
Provision		(67	)		(199	)		56			(56	)		(134	)		400			-
Ending balance	$	330		$	1,309		$	3,275		$	498		$	1,246		$	1,352		$	8,010
Allowance for loan losses: For the nine months ended September 30, 2017
Beginning Balance	$	201		$	1,632		$	3,336		$	525		$	1,599		$	1,165		$	8,458
Charge-offs		-			(6	)		(572	)		-			(99	)		(137	)		(814	)
Recoveries		80			116			97			39			177			57			566
Provision		49			(433	)		414			(66	)		(431	)		267			(200	)
Ending balance	$	330		$	1,309		$	3,275		$	498		$	1,246		$	1,352		$	8,010
Allowance for loan losses as of September 30, 2017
Ending balance individually evaluated for impairment	$	1		$	139		$	16		$	367		$	174		$	206		$	903
Ending balance collectively evaluated for impairment		329			1,170			3,259			131			1,072			1,146			7,107
Ending balance	$	330		$	1,309		$	3,275		$	498		$	1,246		$	1,352		$	8,010
Loans as of September 30, 2017
Ending balance individually evaluated for impairment	$	1,095		$	220		$	2,622		$	1,598		$	5,368		$	433		$	11,336
Ending balance collectively evaluated for impairment		22,346			122,773			268,893			20,544			211,046			36,928			682,530
Ending balance	$	23,441		$	122,993		$	271,515		$	22,142		$	216,414		$	37,361		$	693,866

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.

• 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

September 30, 2018

are as follows (

000s

omitted):

Credit Quality Indicators as of

September 30, 2018

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	$	-	$	2,573	$	114	$	11,612	$	146,009	$	45,226	$	205,534
10		-		6,805		-		-		-		-		6,805
20		281		115		206		-		-		-		602
30		490		44,661		23,963		-		1,273		3,662		74,049
40		16,046		93,097		213,410		8,979		73,940		1,840		407,312
45		1,336		2,082		15,442		1,402		2,730		-		22,992
50		1,879		4,355		10,799		1,590		2,185		-		20,808
55		-		251		2,108		1,510		731		-		4,600
60		2,592		249		4,502		36		2,617		14		10,010
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	22,624	$	154,188	$	270,544	$	25,129	$	229,485	$	50,742	$	752,712
Performing	$	21,946	$	153,889	$	266,992	$	23,583	$	224,627	$	50,322	$	741,359
Nonperforming		678		299		3,552		1,546		4,858		420		11,353
Total	$	22,624	$	154,188	$	270,544	$	25,129	$	229,485	$	50,742	$	752,712

The portfolio segments in each credit risk grade as of

December 31, 2017

are as follows (

000s

omitted):

Credit Quality Indicators as of

December 31, 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	$	-	$	1,341	$	160	$	13,903	$	135,311	$	30,359	$	181,074
10		-		6,870		-		-		-		-		6,870
20		281		293		353		-		-		-		927
30		503		29,655		6,300		-		941		3,972		41,371
40		14,819		76,792		223,468		4,857		72,634		1,947		394,517
45		1,414		2,391		12,244		1,528		5,363		-		22,940
50		1,864		3,778		21,802		1,667		3,590		6		32,707
55		1,441		594		1,857		1,537		867		2		6,298
60		909		505		3,460		66		3,308		27		8,275
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	21,231	$	122,219	$	269,644	$	23,558	$	222,014	$	36,313	$	694,979
Performing	$	20,665	$	121,768	$	265,801	$	21,955	$	215,643	$	35,861	$	681,693
Nonperforming		566		451		3,843		1,603		6,371		452		13,286
Total	$	21,231	$	122,219	$	269,644	$	23,558	$	222,014	$	36,313	$	694,979

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

September 30, 2018

and

December 31, 2017 (

000s

omitted):

September 30, 2018	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	$	56	$	-	$	75	$	131	$	22,493	$	22,624	$	-
Commercial		388		109		30	$	527		153,661		154,188		5
Commercial Real Estate		402		-		1,852		2,254		268,290		270,544		-
Construction Real Estate		-		-		-		-		25,129		25,129		-
Residential Real Estate		1,098		74		492		1,664		227,821		229,485		-
Consumer and Other		53		-		-		53		50,689		50,742		-
Total	$	1,997	$	183	$	2,449	$	4,629	$	748,083	$	752,712	$	5

December 31, 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	$	-	$	-	$	-	$	-	$	21,231	$	21,231	$	-
Commercial		111		8		5		124		122,095		122,219		3
Commercial Real Estate		834		783		56		1,673		267,971		269,644		-
Construction Real Estate		17		-		-		17		23,541		23,558		-
Residential Real Estate		1,361		58		871		2,290		219,724		222,014		-
Consumer and Other		55		2		-		57		36,256		36,313		-
Total	$	2,378	$	851	$	932	$	4,161	$	690,818	$	694,979	$	3

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

September 30, 2018

and

December 31, 2017 (

000s

omitted):

	September 30, 2018		December 31, 2017
Agriculture and Agricultural Real Estate	$	119	$	-
Commercial		104		243
Commercial Real Estate		2,939		1,580
Construction Real Estate		7		33
Residential Real Estate		1,311		1,783
Consumer and Other		14		19
Total	$	4,494	$	3,658

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

September 30, 2018

and

September 30,

and

December 31, 2017 (

000s

omitted):

September 30, 2018	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 Nine Months Ended		Interest Income Recognized in the Nine Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	891	$	888	$	-	$	889	$	12	$	903	$	35
Commercial		-		-		-		-		-		-		-
Commercial Real Estate		2,873		2,875		-		2,896		7		2,902		72
Construction Real Estate		-		-		-		-		-		-		-
Residential Real Estate		3,809		3,983		-		4,006		41		4,058		149
Consumer and Other		32		32		-		33		1		34		2
With an allowance recorded:
Agriculture and Agricultural Real Estate		236		236		-		236		3		238		9
Commercial		246		253		162		256		3		261		9
Commercial Real Estate		1,744		1,807		173		1,878		27		1,895		84
Construction Real Estate		1,546		1,580		340		1,572		19		1,585		56
Residential Real Estate		344		352		107		355		4		359		12
Consumer and Other		374		375		149		377		3		382		8
Total:
Agriculture and Agricultural Real Estate	$	1,127	$	1,124	$	-	$	1,125	$	15	$	1,141	$	44
Commercial		246		253		162		256		3		261		9
Commercial Real Estate		4,617		4,682		173		4,774		34		4,797		156
Construction Real Estate		1,546		1,580		340		1,572		19		1,585		56
Residential Real Estate		4,153		4,335		107		4,361		45		4,417		161
Consumer and Other		406		407		149		410		4		416		10
Total	$	12,095	$	12,381	$	931	$	12,498	$	120	$	12,617	$	436

	Recorded Investment as of December 31, 2017		Unpaid Principal Balance as of December 31, 2017		Related Allowance as of December 31, 2017		Average Recorded Investment for the Three Months Ended September 30, 2017		Interest Income Recognized in the Three Months Ended September 30, 2017		Average Recorded Investment for the Nine Months Ended September 30, 2017		Interest Income Recognized in the Nine Months Ended September 30, 2017
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	829	$	826	$	-	$	849	$	11	$	850	$	32
Commercial		-		-		-		-		-		-		-
Commercial Real Estate		1,977		2,034		-		2,177		23		2,238		59
Construction Real Estate		17		21		-		-		-		-		-
Residential Real Estate		3,757		3,935		-		4,054		51		4,110		150
Consumer and Other		30		30		-		-		-		1		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		241		240		1		242		3		244		10
Commercial		265		268		148		220		2		224		7
Commercial Real Estate		1,776		1,783		219		614		6		621		17
Construction Real Estate		1,586		1,619		360		1,622		19		1,635		57
Residential Real Estate		1,464		1,515		177		1,537		16		1,552		45
Consumer and Other		402		403		205		437		5		444		15
Total:
Agriculture and Agricultural Real Estate	$	1,070	$	1,066	$	1	$	1,091	$	14	$	1,094	$	42
Commercial		265		268		148		220		2		224		7
Commercial Real Estate		3,753		3,817		219		2,791		29		2,859		76
Construction Real Estate		1,603		1,640		360		1,622		19		1,635		57
Residential Real Estate		5,221		5,450		177		5,591		67		5,662		195
Consumer and Other		432		433		205		437		5		445		15
Total	$	12,344	$	12,674	$	1,110	$	11,752	$	136	$	11,919	$	392

The Bank

may

agree to modify the terms of a loan in order to improve the Bank’s ability to collect amounts due. These modifications

may

include reduction of the interest rate, extension of the loan term, or in some cases, reduction of the principal balance. Modifications that are performed due to the debtor’s financial difficulties are considered Troubled Debt Restructurings (“TDRs”).

Loans that have been classified as TDRs during the

three

and

nine

month periods ended

September 30, 2018

and

September 30, 2017

are as follows (

000s

omitted from dollar amounts):

	Three months ended						Nine months ended
	September 30, 2018						September 30, 2018
	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		-		-		-		-		-		-
Commercial Real Estate		1		58		53		2		341		333
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		1		78		78		3		250		228
Consumer and Other		-		-		-		-		-		-
Total		2	$	136	$	131		5	$	591	$	561

	Three months ended						Nine months ended
	September 30, 2017						September 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		225		202		4		578		492
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		1		99		99		5		371		229
Consumer and Other		-		-		-		1		1		-
Total		2	$	324	$	301		12	$	979	$	750

The Bank considers TDRs that become past due under the modified terms as defaulted. The following table shows the loans that became TDRs during the

nine

month periods ended

September 30, 2018

and

September 30, 2017

that subsequently defaulted during the

nine

month periods ended

September 30, 2018

and

September 30, 2017,

respectively.

	Nine months ended				Nine months ended
	September 30, 2018				September 30, 2017
	Number of Contracts		Recorded Principal Balance		Number of Contracts		Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-		-	$	-
Commercial		-		-		-		-
Commercial Real Estate		-		-		-		-
Construction Real Estate		-		-		-		-
Residential Real Estate		-		-		1		99
Consumer and Other		-		-		-		-
Total		-	$	-		1	$	99

The Company has allocated

$871,000

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

September 30, 2018.

In addition, there were

no

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

September 30, 2018

and

September 30, 2017.

XML

Note 6 - Investment Securities

9 Months Ended

Sep. 30, 2018

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

September 30, 2018

and

December 31, 2017 (

000s

omitted):

	Held to Maturity
	September 30, 2018
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	-	$	-	$	-	$	-
Corporate Debt Securities		-		-		-		-
	$	-	$	-	$	-	$	-

	Available for Sale
	September 30, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	139,690	$	-	$	(7,768	)	$	131,922
Mortgage Backed Securities issued by U.S. Government Agencies		221,515		-		(7,556	)		213,959
Obligations of States and Political Subdivisions		72,570		4		(1,258	)		71,316
Corporate Debt Securities		13,556		108		(30	)		13,634
	$	447,331	$	112	$	(16,612	)	$	430,831

	Held to Maturity
	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	36,663	$	666	$	(322	)	$	37,007
Corporate Debt Securities		500		-		(21	)		479
	$	37,163	$	666	$	(343	)	$	37,486

	Available for Sale
	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	140,090	$	32	$	(4,242	)	$	135,880
Mortgage Backed Securities issued by U.S. Government Agencies		248,649		3		(3,875	)		244,777
Obligations of States and Political Subdivisions		37,308		48		(373	)		36,983
Corporate Debt Securities		22,662		462		(41	)		23,083
Equity Securities		2,044		49		-			2,093
	$	450,753	$	594	$	(8,531	)	$	442,816

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

September 30, 2018

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	$	-	$	-	$	9,239	$	9,239
After 1 year through five years		-		-		69,750		67,387
After 5 years through 10 years		-		-		107,097		101,421
After 10 years		-		-		39,730		38,825
Total		-		-		225,816		216,872
Mortgage Backed Securities		-		-		221,515		213,959
Total	$	-	$	-	$	447,331	$	430,831

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

September 30, 2018

and

December 31, 2017.

	September 30, 2018
	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	$	17,086	$	536	$	109,557	$	7,231	$	126,643	$	7,767
Mortgage Backed Securities issued by U.S. Government Agencies		76,652		2,410		137,306		5,146		213,958		7,556
Obligations of States and Political Subdivisions		37,508		968		13,134		655		50,642		1,623
Corporate Debt Securities		4,511		45		-		-		4,511		45
	$	135,757	$	3,959	$	259,997	$	13,032	$	395,754	$	16,991

	December 31, 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	$	25,257	$	286	$	105,329	$	3,956	$	130,586	$	4,242
Mortgage Backed Securities issued by U.S. Government Agencies		161,792		1,725		81,157		2,150		242,949		3,875
Obligations of States and Political Subdivisions		23,898		357		16,741		338		40,639		695
Corporate Debt Securities		4,560		39		2,009		23		6,569		62
	$	215,507	$	2,407	$	205,236	$	6,467	$	420,743	$	8,874

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

September 30, 2018.

As of

September 30, 2018

and

December 31, 2017,

there were

199

and

205

securities in an unrealized loss position, respectively.

During the

third

quarter of

2018,

the Company sold Obligations of States and Political Subdivisions that were classified as Held to Maturity. According to ASC

320

-

10

-

25,

the sale of these securities was inconsistent with the Held to Maturity classification, and as a result, the Company reclassified all of its remaining Held to Maturity investments as Available for Sale as of

September 30, 2018.

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Note 7 - Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [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 cash, equity mutual fund investments where quoted prices are available in an active market, noninterest bearing demand deposits, and overnight federal funds 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

September 30, 2018

and

December 31, 2017,

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

									Total
	Carrying								Estimated
September 30, 2018	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	37,984	$	37,984	$	-	$	-	$	37,984
Time Deposits in Other Banks		11,946		-		10,954		750		11,704
Securities - Held to Maturity
Obligations of States and Political Subdivisions		-		-		-		-		-
Corporate Debt Securities		-		-		-		-		-
Securities - Available for Sale
Obligations of U.S. Government Agencies		131,922		-		131,922		-		131,922
MBS issued by U.S. Government Agencies		213,959		-		213,959		-		213,959
Obligations of States and Political Subdivisions		71,316		-		71,316		-		71,316
Corporate Debt Securities		13,634		-		13,634		-		13,634
Equity Securities		7,403		3,255		4,148		-		7,403
Loans Held for Sale		183		-		-		186		186
Loans, net		744,726		-		-		684,324		684,324
Accrued Interest Receivable		4,772		-		-		4,772		4,772
Financial Liabilities:
Noninterest Bearing Deposits		291,731		291,731		-		-		291,731
Interest Bearing Deposits		874,545		-		875,157		-		875,157
Borrowed funds
FHLB Advances		35,000		-		34,775		-		34,775
Accrued Interest Payable		92		-		-		92		92

									Total
	Carrying								Estimated
December 31, 2017	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	53,010	$	53,010	$	-	$	-	$	53,010
Time Deposits in Other Banks		15,196		-		15,082		-		15,082
Securities - Held to Maturity
Obligations of States and Political Subdivisions		36,663		-		2,407		34,600		37,007
Corporate Debt Securities		500		-		479		-		479
Securities - Available for Sale
Obligations of U.S. Government Agencies		135,880		-		135,880		-		135,880
MBS issued by U.S. Government Agencies		244,777		-		244,777		-		244,777
Obligations of States and Political Subdivisions		36,983		-		36,983		-		36,983
Corporate Debt Securities		23,083		-		23,083		-		23,083
Equity Securities		2,093		2,093		-		-		2,093
Federal Home Loan Bank Stock		4,148		-		4,148		-		4,148
Loans Held for Sale		346		-		-		356		356
Loans, net		687,313		-		-		657,684		657,684
Accrued Interest Receivable		4,169		-		-		4,169		4,169
Financial Liabilities:
Noninterest Bearing Deposits		299,838		299,838		-		-		299,838
Interest Bearing Deposits		898,326		-		899,481		-		899,481
Accrued Interest Payable		61		-		-		61		61

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

September 30, 2018

or

December 31, 2017.

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)
September 30, 2018
Impaired loans	$	-	$	-	$	11,164
Other Real Estate Owned	$	-	$	-	$	997
December 31, 2017
Impaired loans	$	-	$	-	$	11,234
Other Real Estate Owned	$	-	$	-	$	1,412

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

9 Months Ended

Sep. 30, 2018

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
	September 30,		December 31,
	2018		2017
Commitments to extend credit:
Unused portion of commercial lines of credit	$	117,670	$	103,080
Unused portion of credit card lines of credit		6,271		5,934
Unused portion of home equity lines of credit		35,272		30,368
Standby letters of credit and financial guarantees written		1,837		1,364

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)

9 Months Ended

Sep. 30, 2018

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

is effective for public entities for reporting periods beginning after

December 15, 2017 (

therefore, for the year ending

December 31, 2018

for the Company). The ASU does

not

apply to financial instruments, which constitute a significant portion of our revenue. The Company adopted ASU

2014

-

09

on

January 1, 2018

and determined that adoption of the standard did

not

have a significant impact on its financial statements.

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. Management has developed an implementation timeline and begun the process of segmenting the portfolio.

In

March 2017,

the FASB issued ASU

No.

2017

-

08,

Receivables-Nonrefundable Fees and Other Costs – Premium Amortization on Purchased Callable Debt Securities (Subtopic

310

-

20

).  This ASU was issued to shorten the amortization period for the premium to the earliest call date on debt securities.  This premium will now be recorded as a reduction to net interest margin during the shorter yield to call period, as compared to prior practice of amortizing the premium as a reduction to net interest margin over the contractual life of the instrument.  This ASU does

not

change the current method of amortizing any discount over the contractual life of the debt security, and this pronouncement is effective for fiscal years beginning after

December 15, 2018,

and must be adopted on a modified retrospective basis.  The Company has reviewed the investment portfolio and determined that the standard will

not

have a material effect on its financial statements.

In

January 2016,

the FASB issued ASU

No.

2016

-

01,

Financial Instruments-Overall (Subtopic

825

-

10

), Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU was issued to improve the recognition and measurement of financial instruments by requiring equity investments to be measured at fair value with changes in fair value recognized in net income, requiring public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, eliminating the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, and require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or accompanying notes to the financial statements. ASU

2016

-

01

is effective for annual periods, and interim periods within those annual periods, beginning after

December 15, 2017.

The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the year of adoption. The Company adopted ASU

2016

-

01

on

January 1, 2018

and it did

not

have a material effect on the consolidated financial statements. For exit pricing on loans, the Company made a fair value adjustment based on the yield metrics of the portfolio and applied a credit mark and a discount to reflect transaction costs.

XML

Note 2 - Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

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

	For the three months ended September 30,				For the nine months ended September 30,
	2018		2017		2018		2017
Basic
Net income	$	4,974,000	$	3,933,000	$	13,821,000	$	10,753,000
Average common shares outstanding		22,985,176		22,871,451		22,969,182		22,852,935
Earnings per common share - basic	$	0.21	$	0.17	$	0.60	$	0.47
Diluted
Net income	$	4,974,000	$	3,933,000	$	13,821,000	$	10,753,000
Average common shares outstanding		22,985,176		22,871,451		22,969,182		22,852,935
Equity compensation		136,675		169,509		131,329		181,598
Average common shares outstanding - diluted		23,121,851		23,040,960		23,100,511		23,034,533
Earnings per common share - diluted	$	0.21	$	0.17	$	0.60	$	0.47

XML

Note 3 - Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 2018

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, 2018		372,585		$	6.82
Granted		105,000			10.45
Exercised		(106,870	)		4.33
Forfeited		(4,336	)		10.09
Expired		-			-
SOSARs Outstanding, September 30, 2018		366,379		$	8.55
SOSARs Exercisable, September 30, 2018		174,181		$	6.66

XML

Note 4 - Loans (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

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

	September 30,		December 31,
	2018		2017
Residential real estate loans	$	229,485	$	222,014
Commercial and Construction real estate loans		295,673		293,202
Agriculture and agricultural real estate loans		22,624		21,231
Commercial and industrial loans		154,188		122,219
Loans to individuals for household, family, and other personal expenditures		50,742		36,313
Total loans, gross	$	752,712	$	694,979
Less: Allowance for loan losses		7,986		7,666
Net Loans	$	744,726	$	687,313

Schedule of Non-performing Assets [Table Text Block]

	September 30,			December 31,
	2018			2017
Nonaccrual loans	$	4,494		$	3,658
Loans 90 days past due and accruing		5			3
Restructured loans		6,854			9,625
Total nonperforming loans	$	11,353		$	13,286
Other real estate owned		997			1,412
Other assets		448			40
Total nonperforming assets	$	12,798		$	14,738
Nonperforming assets to total assets		0.96	%		1.09	%
Allowance for loan losses to nonperforming loans		70.34	%		57.70	%

XML

Note 5 - Allowance For Loan Losses (Tables)

9 Months Ended

Sep. 30, 2018

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 September 30, 2018
Beginning Balance	$	262	$	1,449		$	2,949		$	474		$	1,142		$	1,682		$	7,958
Charge-offs		-		-			(80	)		-			(6	)		(11	)		(97	)
Recoveries		3		34			15			12			34			27			125
Provision		61		(77	)		(419	)		(14	)		(134	)		583			-
Ending balance	$	326	$	1,406		$	2,465		$	472		$	1,036		$	2,281		$	7,986
Allowance for loan losses: For the nine months ended September 30, 2018
Beginning Balance	$	195	$	1,443		$	3,297		$	491		$	1,279		$	961		$	7,666
Charge-offs		-		-			(83	)		-			(64	)		(13	)		(160	)
Recoveries		5		65			304			46			107			53			580
Provision		126		(102	)		(1,053	)		(65	)		(286	)		1,280			(100	)
Ending balance	$	326	$	1,406		$	2,465		$	472		$	1,036		$	2,281		$	7,986
Allowance for loan losses as of September 30, 2018
Ending balance individually evaluated for impairment	$	-	$	162		$	173		$	340		$	107		$	149		$	931
Ending balance collectively evaluated for impairment		326		1,244			2,292			132			929			2,132			7,055
Ending balance	$	326	$	1,406		$	2,465		$	472		$	1,036		$	2,281		$	7,986
Loans as of September 30, 2018
Ending balance individually evaluated for impairment	$	1,127	$	246		$	4,617		$	1,546		$	4,153		$	406		$	12,095
Ending balance collectively evaluated for impairment		21,497		153,942			265,927			23,583			225,332			50,336			740,617
Ending balance	$	22,624	$	154,188		$	270,544		$	25,129		$	229,485		$	50,742		$	752,712

	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 September 30, 2017
Beginning Balance	$	320		$	1,496		$	3,359		$	541		$	1,398		$	1,023		$	8,137
Charge-offs		-			(6	)		(163	)		-			(49	)		(88	)		(306	)
Recoveries		77			18			23			13			31			17			179
Provision		(67	)		(199	)		56			(56	)		(134	)		400			-
Ending balance	$	330		$	1,309		$	3,275		$	498		$	1,246		$	1,352		$	8,010
Allowance for loan losses: For the nine months ended September 30, 2017
Beginning Balance	$	201		$	1,632		$	3,336		$	525		$	1,599		$	1,165		$	8,458
Charge-offs		-			(6	)		(572	)		-			(99	)		(137	)		(814	)
Recoveries		80			116			97			39			177			57			566
Provision		49			(433	)		414			(66	)		(431	)		267			(200	)
Ending balance	$	330		$	1,309		$	3,275		$	498		$	1,246		$	1,352		$	8,010
Allowance for loan losses as of September 30, 2017
Ending balance individually evaluated for impairment	$	1		$	139		$	16		$	367		$	174		$	206		$	903
Ending balance collectively evaluated for impairment		329			1,170			3,259			131			1,072			1,146			7,107
Ending balance	$	330		$	1,309		$	3,275		$	498		$	1,246		$	1,352		$	8,010
Loans as of September 30, 2017
Ending balance individually evaluated for impairment	$	1,095		$	220		$	2,622		$	1,598		$	5,368		$	433		$	11,336
Ending balance collectively evaluated for impairment		22,346			122,773			268,893			20,544			211,046			36,928			682,530
Ending balance	$	23,441		$	122,993		$	271,515		$	22,142		$	216,414		$	37,361		$	693,866

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	$	-	$	2,573	$	114	$	11,612	$	146,009	$	45,226	$	205,534
10		-		6,805		-		-		-		-		6,805
20		281		115		206		-		-		-		602
30		490		44,661		23,963		-		1,273		3,662		74,049
40		16,046		93,097		213,410		8,979		73,940		1,840		407,312
45		1,336		2,082		15,442		1,402		2,730		-		22,992
50		1,879		4,355		10,799		1,590		2,185		-		20,808
55		-		251		2,108		1,510		731		-		4,600
60		2,592		249		4,502		36		2,617		14		10,010
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	22,624	$	154,188	$	270,544	$	25,129	$	229,485	$	50,742	$	752,712
Performing	$	21,946	$	153,889	$	266,992	$	23,583	$	224,627	$	50,322	$	741,359
Nonperforming		678		299		3,552		1,546		4,858		420		11,353
Total	$	22,624	$	154,188	$	270,544	$	25,129	$	229,485	$	50,742	$	752,712

	Agriculture and Agricultural Real Estate		Commercial		Commercial Real Estate		Construction Real Estate		Residential Real Estate		Consumer and Other		Total
Not Rated	$	-	$	1,341	$	160	$	13,903	$	135,311	$	30,359	$	181,074
10		-		6,870		-		-		-		-		6,870
20		281		293		353		-		-		-		927
30		503		29,655		6,300		-		941		3,972		41,371
40		14,819		76,792		223,468		4,857		72,634		1,947		394,517
45		1,414		2,391		12,244		1,528		5,363		-		22,940
50		1,864		3,778		21,802		1,667		3,590		6		32,707
55		1,441		594		1,857		1,537		867		2		6,298
60		909		505		3,460		66		3,308		27		8,275
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	21,231	$	122,219	$	269,644	$	23,558	$	222,014	$	36,313	$	694,979
Performing	$	20,665	$	121,768	$	265,801	$	21,955	$	215,643	$	35,861	$	681,693
Nonperforming		566		451		3,843		1,603		6,371		452		13,286
Total	$	21,231	$	122,219	$	269,644	$	23,558	$	222,014	$	36,313	$	694,979

Past Due Financing Receivables [Table Text Block]

September 30, 2018	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	$	56	$	-	$	75	$	131	$	22,493	$	22,624	$	-
Commercial		388		109		30	$	527		153,661		154,188		5
Commercial Real Estate		402		-		1,852		2,254		268,290		270,544		-
Construction Real Estate		-		-		-		-		25,129		25,129		-
Residential Real Estate		1,098		74		492		1,664		227,821		229,485		-
Consumer and Other		53		-		-		53		50,689		50,742		-
Total	$	1,997	$	183	$	2,449	$	4,629	$	748,083	$	752,712	$	5

December 31, 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	$	-	$	-	$	-	$	-	$	21,231	$	21,231	$	-
Commercial		111		8		5		124		122,095		122,219		3
Commercial Real Estate		834		783		56		1,673		267,971		269,644		-
Construction Real Estate		17		-		-		17		23,541		23,558		-
Residential Real Estate		1,361		58		871		2,290		219,724		222,014		-
Consumer and Other		55		2		-		57		36,256		36,313		-
Total	$	2,378	$	851	$	932	$	4,161	$	690,818	$	694,979	$	3

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

	September 30, 2018		December 31, 2017
Agriculture and Agricultural Real Estate	$	119	$	-
Commercial		104		243
Commercial Real Estate		2,939		1,580
Construction Real Estate		7		33
Residential Real Estate		1,311		1,783
Consumer and Other		14		19
Total	$	4,494	$	3,658

Impaired Financing Receivables [Table Text Block]

September 30, 2018	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 Nine Months Ended		Interest Income Recognized in the Nine Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	891	$	888	$	-	$	889	$	12	$	903	$	35
Commercial		-		-		-		-		-		-		-
Commercial Real Estate		2,873		2,875		-		2,896		7		2,902		72
Construction Real Estate		-		-		-		-		-		-		-
Residential Real Estate		3,809		3,983		-		4,006		41		4,058		149
Consumer and Other		32		32		-		33		1		34		2
With an allowance recorded:
Agriculture and Agricultural Real Estate		236		236		-		236		3		238		9
Commercial		246		253		162		256		3		261		9
Commercial Real Estate		1,744		1,807		173		1,878		27		1,895		84
Construction Real Estate		1,546		1,580		340		1,572		19		1,585		56
Residential Real Estate		344		352		107		355		4		359		12
Consumer and Other		374		375		149		377		3		382		8
Total:
Agriculture and Agricultural Real Estate	$	1,127	$	1,124	$	-	$	1,125	$	15	$	1,141	$	44
Commercial		246		253		162		256		3		261		9
Commercial Real Estate		4,617		4,682		173		4,774		34		4,797		156
Construction Real Estate		1,546		1,580		340		1,572		19		1,585		56
Residential Real Estate		4,153		4,335		107		4,361		45		4,417		161
Consumer and Other		406		407		149		410		4		416		10
Total	$	12,095	$	12,381	$	931	$	12,498	$	120	$	12,617	$	436

	Recorded Investment as of December 31, 2017		Unpaid Principal Balance as of December 31, 2017		Related Allowance as of December 31, 2017		Average Recorded Investment for the Three Months Ended September 30, 2017		Interest Income Recognized in the Three Months Ended September 30, 2017		Average Recorded Investment for the Nine Months Ended September 30, 2017		Interest Income Recognized in the Nine Months Ended September 30, 2017
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	829	$	826	$	-	$	849	$	11	$	850	$	32
Commercial		-		-		-		-		-		-		-
Commercial Real Estate		1,977		2,034		-		2,177		23		2,238		59
Construction Real Estate		17		21		-		-		-		-		-
Residential Real Estate		3,757		3,935		-		4,054		51		4,110		150
Consumer and Other		30		30		-		-		-		1		-
With an allowance recorded:
Agriculture and Agricultural Real Estate		241		240		1		242		3		244		10
Commercial		265		268		148		220		2		224		7
Commercial Real Estate		1,776		1,783		219		614		6		621		17
Construction Real Estate		1,586		1,619		360		1,622		19		1,635		57
Residential Real Estate		1,464		1,515		177		1,537		16		1,552		45
Consumer and Other		402		403		205		437		5		444		15
Total:
Agriculture and Agricultural Real Estate	$	1,070	$	1,066	$	1	$	1,091	$	14	$	1,094	$	42
Commercial		265		268		148		220		2		224		7
Commercial Real Estate		3,753		3,817		219		2,791		29		2,859		76
Construction Real Estate		1,603		1,640		360		1,622		19		1,635		57
Residential Real Estate		5,221		5,450		177		5,591		67		5,662		195
Consumer and Other		432		433		205		437		5		445		15
Total	$	12,344	$	12,674	$	1,110	$	11,752	$	136	$	11,919	$	392

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Three months ended						Nine months ended
	September 30, 2018						September 30, 2018
	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		-		-		-		-		-		-
Commercial Real Estate		1		58		53		2		341		333
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		1		78		78		3		250		228
Consumer and Other		-		-		-		-		-		-
Total		2	$	136	$	131		5	$	591	$	561

	Three months ended						Nine months ended
	September 30, 2017						September 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		225		202		4		578		492
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		1		99		99		5		371		229
Consumer and Other		-		-		-		1		1		-
Total		2	$	324	$	301		12	$	979	$	750

Troubled Debt Restructurings on Financing Receivables Default [Table Text Block]

	Nine months ended				Nine months ended
	September 30, 2018				September 30, 2017
	Number of Contracts		Recorded Principal Balance		Number of Contracts		Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-		-	$	-
Commercial		-		-		-		-
Commercial Real Estate		-		-		-		-
Construction Real Estate		-		-		-		-
Residential Real Estate		-		-		1		99
Consumer and Other		-		-		-		-
Total		-	$	-		1	$	99

XML

Note 6 - Investment Securities (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

Debt Securities, Held-to-maturity [Table Text Block]

	Held to Maturity
	September 30, 2018
			Gross		Gross		Estimated
	Amortized		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	-	$	-	$	-	$	-
Corporate Debt Securities		-		-		-		-
	$	-	$	-	$	-	$	-

	Held to Maturity
	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions	$	36,663	$	666	$	(322	)	$	37,007
Corporate Debt Securities		500		-		(21	)		479
	$	37,163	$	666	$	(343	)	$	37,486

Available-for-sale Securities [Table Text Block]

	Available for Sale
	September 30, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	139,690	$	-	$	(7,768	)	$	131,922
Mortgage Backed Securities issued by U.S. Government Agencies		221,515		-		(7,556	)		213,959
Obligations of States and Political Subdivisions		72,570		4		(1,258	)		71,316
Corporate Debt Securities		13,556		108		(30	)		13,634
	$	447,331	$	112	$	(16,612	)	$	430,831

	Available for Sale
	December 31, 2017
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	140,090	$	32	$	(4,242	)	$	135,880
Mortgage Backed Securities issued by U.S. Government Agencies		248,649		3		(3,875	)		244,777
Obligations of States and Political Subdivisions		37,308		48		(373	)		36,983
Corporate Debt Securities		22,662		462		(41	)		23,083
Equity Securities		2,044		49		-			2,093
	$	450,753	$	594	$	(8,531	)	$	442,816

Investments Classified by Contractual Maturity Date [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	$	-	$	-	$	9,239	$	9,239
After 1 year through five years		-		-		69,750		67,387
After 5 years through 10 years		-		-		107,097		101,421
After 10 years		-		-		39,730		38,825
Total		-		-		225,816		216,872
Mortgage Backed Securities		-		-		221,515		213,959
Total	$	-	$	-	$	447,331	$	430,831

Schedule of Unrealized Loss on Investments [Table Text Block]

	September 30, 2018
	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	$	17,086	$	536	$	109,557	$	7,231	$	126,643	$	7,767
Mortgage Backed Securities issued by U.S. Government Agencies		76,652		2,410		137,306		5,146		213,958		7,556
Obligations of States and Political Subdivisions		37,508		968		13,134		655		50,642		1,623
Corporate Debt Securities		4,511		45		-		-		4,511		45
	$	135,757	$	3,959	$	259,997	$	13,032	$	395,754	$	16,991

	December 31, 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	$	25,257	$	286	$	105,329	$	3,956	$	130,586	$	4,242
Mortgage Backed Securities issued by U.S. Government Agencies		161,792		1,725		81,157		2,150		242,949		3,875
Obligations of States and Political Subdivisions		23,898		357		16,741		338		40,639		695
Corporate Debt Securities		4,560		39		2,009		23		6,569		62
	$	215,507	$	2,407	$	205,236	$	6,467	$	420,743	$	8,874

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Note 7 - Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Notes Tables

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

									Total
	Carrying								Estimated
September 30, 2018	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	37,984	$	37,984	$	-	$	-	$	37,984
Time Deposits in Other Banks		11,946		-		10,954		750		11,704
Securities - Held to Maturity
Obligations of States and Political Subdivisions		-		-		-		-		-
Corporate Debt Securities		-		-		-		-		-
Securities - Available for Sale
Obligations of U.S. Government Agencies		131,922		-		131,922		-		131,922
MBS issued by U.S. Government Agencies		213,959		-		213,959		-		213,959
Obligations of States and Political Subdivisions		71,316		-		71,316		-		71,316
Corporate Debt Securities		13,634		-		13,634		-		13,634
Equity Securities		7,403		3,255		4,148		-		7,403
Loans Held for Sale		183		-		-		186		186
Loans, net		744,726		-		-		684,324		684,324
Accrued Interest Receivable		4,772		-		-		4,772		4,772
Financial Liabilities:
Noninterest Bearing Deposits		291,731		291,731		-		-		291,731
Interest Bearing Deposits		874,545		-		875,157		-		875,157
Borrowed funds
FHLB Advances		35,000		-		34,775		-		34,775
Accrued Interest Payable		92		-		-		92		92

									Total
	Carrying								Estimated
December 31, 2017	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	53,010	$	53,010	$	-	$	-	$	53,010
Time Deposits in Other Banks		15,196		-		15,082		-		15,082
Securities - Held to Maturity
Obligations of States and Political Subdivisions		36,663		-		2,407		34,600		37,007
Corporate Debt Securities		500		-		479		-		479
Securities - Available for Sale
Obligations of U.S. Government Agencies		135,880		-		135,880		-		135,880
MBS issued by U.S. Government Agencies		244,777		-		244,777		-		244,777
Obligations of States and Political Subdivisions		36,983		-		36,983		-		36,983
Corporate Debt Securities		23,083		-		23,083		-		23,083
Equity Securities		2,093		2,093		-		-		2,093
Federal Home Loan Bank Stock		4,148		-		4,148		-		4,148
Loans Held for Sale		346		-		-		356		356
Loans, net		687,313		-		-		657,684		657,684
Accrued Interest Receivable		4,169		-		-		4,169		4,169
Financial Liabilities:
Noninterest Bearing Deposits		299,838		299,838		-		-		299,838
Interest Bearing Deposits		898,326		-		899,481		-		899,481
Accrued Interest Payable		61		-		-		61		61

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)
September 30, 2018
Impaired loans	$	-	$	-	$	11,164
Other Real Estate Owned	$	-	$	-	$	997
December 31, 2017
Impaired loans	$	-	$	-	$	11,234
Other Real Estate Owned	$	-	$	-	$	1,412

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

9 Months Ended

Sep. 30, 2018

Notes Tables

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

	Contractual Amount
	September 30,		December 31,
	2018		2017
Commitments to extend credit:
Unused portion of commercial lines of credit	$	117,670	$	103,080
Unused portion of credit card lines of credit		6,271		5,934
Unused portion of home equity lines of credit		35,272		30,368
Standby letters of credit and financial guarantees written		1,837		1,364

XML

Note 1 - Basis of Presentation and Accounting Policies (Details Textual)	9 Months Ended
	Sep. 30, 2018	Oct. 09, 2018 shares
Number of Reportable Segments	1
MBT Financial [Member] | Subsequent Event [Member]
Business Combination, Shares Converted, Shares Per Acquired Company's Shares		0.275
Monroe County, Michigan [Member]
Number of Stores	14
Wayne County, Michigan [Member]
Number of Stores	6
Number of Loan and Wealth Management Offices	1

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Note 2 - Earnings Per Share - Calculations of Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Net Income	$ 4,974	$ 3,933	$ 13,821	$ 10,753
Average common shares outstanding (in shares)	22,985,176	22,871,451	22,969,182	22,852,935
Earnings per common share - basic (in dollars per share)	$ 0.21	$ 0.17	$ 0.60	$ 0.47
Net income	$ 4,974	$ 3,933	$ 13,821	$ 10,753
Equity compensation (in shares)	136,675	169,509	131,329	181,598
Average common shares outstanding - diluted (in shares)	23,121,851	23,040,960	23,100,511	23,034,533
Earnings per common share - diluted (in dollars per share)	$ 0.21	$ 0.17	$ 0.60	$ 0.47

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Note 3 - Stock Based Compensation (Details Textual) - USD ($)		3 Months Ended		9 Months Ended
	Feb. 22, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
Share Price	$ 10.45	$ 11.30		$ 11.30
Allocated Share-based Compensation Expense, Total		$ 156,000	$ 161,000	$ 548,000	$ 454,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Total		648,000		$ 648,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition				1 year 219 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				105,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 2.36
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value		$ 808,000		$ 808,000
Shares, Issued, Ending Balance		71,522		71,522
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	23.64%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	2.86%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	2.18%
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	105,000
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
Stock Appreciation Rights (SARs) [Member] | Executive Officer [Member] | Stock Incentive Plan 2008 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	21,500
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		$ 19,000		$ 19,000
Restricted Stock Units (RSUs) [Member] | Executive Officer [Member] | Stock Incentive Plan 2008 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Requisite Service Period	2 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value, Ending Balance	$ 10.45
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period				0
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	$ 10.45
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	7,500

XML

Note 3 - Stock Based Compensation - SOSARs Activity (Details) - Stock Appreciation Rights (SARs) [Member]	9 Months Ended
	Sep. 30, 2018 $ / shares shares
SOSARs Outstanding, January 1, 2018 (in shares) | shares	372,585
SOSARs Outstanding, January 1, 2018 (in dollars per share) | $ / shares	$ 6.82
Granted (in shares) | shares	105,000
Granted (in dollars per share) | $ / shares	$ 10.45
Exercised (in shares) | shares	(106,870)
Exercised (in dollars per share) | $ / shares	$ 4.33
Forfeited (in shares) | shares	(4,336)
Forfeited (in dollars per share) | $ / shares	$ 10.09
Expired (in shares) | shares
Expired (in dollars per share) | $ / shares
SOSARs Outstanding, September 30, 2018 (in shares) | shares	366,379
SOSARs Outstanding, September 30, 2018 (in dollars per share) | $ / shares	$ 8.55
SOSARs Exercisable, September 30, 2018 (in shares) | shares	174,181
SOSARs Exercisable, September 30, 2018 (in dollars per share) | $ / shares	$ 6.66

XML

Note 4 - Loans (Details Textual)	9 Months Ended
	Sep. 30, 2018 USD ($)
Impairment Review Minimum Amount Threshold	$ 250,000

XML

Note 4 - Loans - Loans Receivable Outstanding (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Loans	$ 752,712	$ 694,979	$ 693,866
Less: Allowance for loan losses	7,986	7,666
Net Loans	744,726	687,313
Residential Portfolio Segment [Member]
Loans	229,485	222,014	216,414
Commercial and Construction Real Estate Portfolio Segment [Member]
Loans	295,673	293,202
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Loans	22,624	21,231	23,441
Commercial and Industrial Portfolio Segment [Member]
Loans	154,188	122,219
Consumer and Other Portfolio Segment [Member]
Loans	$ 50,742	$ 36,313	$ 37,361

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Note 4 - Loans - Nonperforming Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Non-accrual loans	$ 4,494	$ 3,658
Loans 90 days past due and accruing	5	3
Total nonperforming loans	752,712	694,979	$ 693,866
Other real estate owned	997	1,412
Total nonperforming assets	1,339,122	1,347,420
Nonperforming Financial Instruments [Member]
Non-accrual loans	4,494	3,658
Loans 90 days past due and accruing	5	3
Restructured loans	6,854	9,625
Total nonperforming loans	11,353	13,286
Other real estate owned	997	1,412
Other assets	448	40
Total nonperforming assets	$ 12,798	$ 14,738
Nonperforming assets to total assets	0.96%	1.09%
Allowance for loan losses to nonperforming loans	70.34%	57.70%

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Note 5 - Allowance For Loan Losses (Details Textual) - USD ($)	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses, Ending Balance	$ 7,986,000	$ 7,958,000	$ 7,666,000	$ 8,010,000	$ 8,137,000	$ 8,458,000
Loans and Leases Receivable, Impaired, Commitment to Lend	0			$ 0
Troubled Debt Restructuring [Member]
Financing Receivable, Allowance for Credit Losses, Ending Balance	$ 871,000

XML

Note 5 - Allowance For Loan Losses - Activity in the Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Balance	$ 7,958	$ 8,137	$ 7,666	$ 8,458
Charge-offs	(97)	(306)	(160)	(814)
Recoveries	125	179	580	566
Recovery Of Loan Losses			(100)	(200)
Balance	7,986	8,010	7,986	8,010
Ending balance individually evaluated for impairment					$ 931		$ 903
Ending balance collectively evaluated for impairment					7,055		7,107
Ending balance	7,958	8,137	7,986	8,010	7,986	$ 7,666	8,010
Ending balance individually evaluated for impairment					12,095		11,336
Ending balance collectively evaluated for impairment					740,617		682,530
Loans					752,712	694,979	693,866
Charge-offs	(97)	(306)	(160)	(814)
Recoveries	125	179	580	566
Recovery of loan losses			(100)	(200)
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Balance	262	320	195	201
Charge-offs
Recoveries	3	77	5	80
Recovery Of Loan Losses	61	(67)	126	49
Balance	326	330	326	330
Ending balance individually evaluated for impairment							1
Ending balance collectively evaluated for impairment					326		329
Ending balance	262	320	326	330	326	195	330
Ending balance individually evaluated for impairment					1,127		1,095
Ending balance collectively evaluated for impairment					21,497		22,346
Loans					22,624	21,231	23,441
Charge-offs
Recoveries	3	77	5	80
Recovery of loan losses	61	(67)	126	49
Commercial Portfolio Segment [Member]
Balance	1,449	1,496	1,443	1,632
Charge-offs		(6)		(6)
Recoveries	34	18	65	116
Recovery Of Loan Losses	(77)	(199)	(102)	(433)
Balance	1,406	1,309	1,406	1,309
Ending balance individually evaluated for impairment					162		139
Ending balance collectively evaluated for impairment					1,244		1,170
Ending balance	1,449	1,496	1,406	1,309	1,406	1,443	1,309
Ending balance individually evaluated for impairment					246		220
Ending balance collectively evaluated for impairment					153,942		122,773
Loans					154,188	122,219	122,993
Charge-offs		(6)		(6)
Recoveries	34	18	65	116
Recovery of loan losses	(77)	(199)	(102)	(433)
Commercial Real Estate Portfolio Segment [Member]
Balance	2,949	3,359	3,297	3,336
Charge-offs	(80)	(163)	(83)	(572)
Recoveries	15	23	304	97
Recovery Of Loan Losses	(419)	56	(1,053)	414
Balance	2,465	3,275	2,465	3,275
Ending balance individually evaluated for impairment					173		16
Ending balance collectively evaluated for impairment					2,292		3,259
Ending balance	2,949	3,359	2,465	3,275	2,465	3,297	3,275
Ending balance individually evaluated for impairment					4,617		2,622
Ending balance collectively evaluated for impairment					265,927		268,893
Loans					270,544	269,644	271,515
Charge-offs	(80)	(163)	(83)	(572)
Recoveries	15	23	304	97
Recovery of loan losses	(419)	56	(1,053)	414
Construction Real Estate Portfolio Segment [Member]
Balance	474	541	491	525
Charge-offs
Recoveries	12	13	46	39
Recovery Of Loan Losses	(14)	(56)	(65)	(66)
Balance	472	498	472	498
Ending balance individually evaluated for impairment					340		367
Ending balance collectively evaluated for impairment					132		131
Ending balance	474	541	472	498	472	491	498
Ending balance individually evaluated for impairment					1,546		1,598
Ending balance collectively evaluated for impairment					23,583		20,544
Loans					25,129	23,558	22,142
Charge-offs
Recoveries	12	13	46	39
Recovery of loan losses	(14)	(56)	(65)	(66)
Residential Portfolio Segment [Member]
Balance	1,142	1,398	1,279	1,599
Charge-offs	(6)	(49)	(64)	(99)
Recoveries	34	31	107	177
Recovery Of Loan Losses	(134)	(134)	(286)	(431)
Balance	1,036	1,246	1,036	1,246
Ending balance individually evaluated for impairment					107		174
Ending balance collectively evaluated for impairment					929		1,072
Ending balance	1,142	1,398	1,036	1,246	1,036	1,279	1,246
Ending balance individually evaluated for impairment					4,153		5,368
Ending balance collectively evaluated for impairment					225,332		211,046
Loans					229,485	222,014	216,414
Charge-offs	(6)	(49)	(64)	(99)
Recoveries	34	31	107	177
Recovery of loan losses	(134)	(134)	(286)	(431)
Consumer and Other Portfolio Segment [Member]
Balance	1,682	1,023	961	1,165
Charge-offs	(11)	(88)	(13)	(137)
Recoveries	27	17	53	57
Recovery Of Loan Losses	583	400	1,280	267
Balance	2,281	1,352	2,281	1,352
Ending balance individually evaluated for impairment					149		206
Ending balance collectively evaluated for impairment					2,132		1,146
Ending balance	1,682	1,023	2,281	1,352	2,281	961	1,352
Ending balance individually evaluated for impairment					406		433
Ending balance collectively evaluated for impairment					50,336		36,928
Loans					$ 50,742	$ 36,313	$ 37,361
Charge-offs	(11)	(88)	(13)	(137)
Recoveries	27	17	53	57
Recovery of loan losses	$ 583	$ 400	$ 1,280	$ 267

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Note 5 - Allowance For Loan Losses - Credit Risk by Internally Assigned Grade (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Loans	$ 752,712	$ 694,979	$ 693,866
Performing Financial Instruments [Member]
Loans	741,359	681,693
Nonperforming Financial Instruments [Member]
Loans	11,353	13,286
Not Rated [Member]
Loans	205,534	181,074
Risk Grade Rating 1 [Member]
Loans	6,805	6,870
Risk Rating Grade 2 [Member]
Loans	602	927
Risk Grade Rating 3 [Member]
Loans	74,049	41,371
Risk Grade Rating 4 [Member]
Loans	407,312	394,517
Risk Grade Rating 4.5 [Member]
Loans	22,992	22,940
Risk Grade Rating 5 [Member]
Loans	20,808	32,707
Risk Grade Rating 5.5 [Member]
Loans	4,600	6,298
Risk Grade Rating 6 [Member]
Loans	10,010	8,275
Risk Grade Rating 7 [Member]
Loans
Risk Grade Rating 8 [Member]
Loans
Risk Grade Rating 9 [Member]
Loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Loans	22,624	21,231	23,441
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	21,946	20,665
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	678	566
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Not Rated [Member]
Loans
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	281	281
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans	490	503
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	16,046	14,819
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	1,336	1,414
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	1,879	1,864
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans		1,441
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	2,592	909
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	154,188	122,219	122,993
Commercial Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	153,889	121,768
Commercial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	299	451
Commercial Portfolio Segment [Member] | Not Rated [Member]
Loans	2,573	1,341
Commercial Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Loans	6,805	6,870
Commercial Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Loans	115	293
Commercial Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans	44,661	29,655
Commercial Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	93,097	76,792
Commercial Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	2,082	2,391
Commercial Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	4,355	3,778
Commercial Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans	251	594
Commercial Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	249	505
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	270,544	269,644	271,515
Commercial Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	266,992	265,801
Commercial Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	3,552	3,843
Commercial Real Estate Portfolio Segment [Member] | Not Rated [Member]
Loans	114	160
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Loans
Commercial Real Estate Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Loans	206	353
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans	23,963	6,300
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	213,410	223,468
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	15,442	12,244
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	10,799	21,802
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans	2,108	1,857
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	4,502	3,460
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Loans
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Loans
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Loans
Construction Real Estate Portfolio Segment [Member]
Loans	25,129	23,558	22,142
Construction Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	23,583	21,955
Construction Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	1,546	1,603
Construction Real Estate Portfolio Segment [Member] | Not Rated [Member]
Loans	11,612	13,903
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	8,979	4,857
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	1,402	1,528
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	1,590	1,667
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans	1,510	1,537
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	36	66
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	229,485	222,014	216,414
Residential Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	224,627	215,643
Residential Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	4,858	6,371
Residential Portfolio Segment [Member] | Not Rated [Member]
Loans	146,009	135,311
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	1,273	941
Residential Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	73,940	72,634
Residential Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Loans	2,730	5,363
Residential Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Loans	2,185	3,590
Residential Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans	731	867
Residential Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	2,617	3,308
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	50,742	36,313	$ 37,361
Consumer and Other Portfolio Segment [Member] | Performing Financial Instruments [Member]
Loans	50,322	35,861
Consumer and Other Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Loans	420	452
Consumer and Other Portfolio Segment [Member] | Not Rated [Member]
Loans	45,226	30,359
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Loans
Consumer and Other Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Loans	3,662	3,972
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Loans	1,840	1,947
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		6
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Loans		2
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Loans	14	27
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	Sep. 30, 2018	Dec. 31, 2017	Sep. 30, 2017
Past due	$ 4,629	$ 4,161
Current	748,083	690,818
Loans	752,712	694,979	$ 693,866
Loans 90 days past due and accruing	5	3
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due	131
Current	22,493	21,231
Loans	22,624	21,231	23,441
Loans 90 days past due and accruing
Commercial Portfolio Segment [Member]
Past due	527	124
Current	153,661	122,095
Loans	154,188	122,219	122,993
Loans 90 days past due and accruing	5	3
Commercial Real Estate Portfolio Segment [Member]
Past due	2,254	1,673
Current	268,290	267,971
Loans	270,544	269,644	271,515
Loans 90 days past due and accruing
Construction Real Estate Portfolio Segment [Member]
Past due		17
Current	25,129	23,541
Loans	25,129	23,558	22,142
Loans 90 days past due and accruing
Residential Portfolio Segment [Member]
Past due	1,664	2,290
Current	227,821	219,724
Loans	229,485	222,014	216,414
Loans 90 days past due and accruing
Consumer and Other Portfolio Segment [Member]
Past due	53	57
Current	50,689	36,256
Loans	50,742	36,313	$ 37,361
Loans 90 days past due and accruing
Financing Receivables, 30 to 59 Days Past Due [Member]
Past due	1,997	2,378
Financing Receivables, 30 to 59 Days Past Due [Member] | Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due	56
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past due	388	111
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Past due	402	834
Financing Receivables, 30 to 59 Days Past Due [Member] | Construction Real Estate Portfolio Segment [Member]
Past due		17
Financing Receivables, 30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member]
Past due	1,098	1,361
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer and Other Portfolio Segment [Member]
Past due	53	55
Financing Receivables, 60 to 89 Days Past Due [Member]
Past due	183	851
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	109	8
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Past due		783
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	74	58
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer and Other Portfolio Segment [Member]
Past due		2
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Past due	2,449	932
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due	75
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past due	30	5
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Past due	1,852	56
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Construction Real Estate Portfolio Segment [Member]
Past due
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member]
Past due	492	871
Financing Receivables, Equal to Greater than 90 Days Past Due [Member] | Consumer and Other Portfolio Segment [Member]
Past due

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Note 5 - Allowance For Loan Losses - Non-accrual Loans (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Non-accrual loans	$ 4,494	$ 3,658
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Non-accrual loans	119
Commercial Portfolio Segment [Member]
Non-accrual loans	104	243
Commercial Real Estate Portfolio Segment [Member]
Non-accrual loans	2,939	1,580
Construction Real Estate Portfolio Segment [Member]
Non-accrual loans	7	33
Residential Portfolio Segment [Member]
Non-accrual loans	1,311	1,783
Consumer and Other Portfolio Segment [Member]
Non-accrual loans	$ 14	$ 19

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Note 5 - Allowance For Loan Losses - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Related allowance	$ 931		$ 931		$ 1,110
Recorded investment	12,095		12,095		12,344
Unpaid principal balance	12,381		12,381		12,674
Average recorded investment	12,498	$ 11,752	12,617	$ 11,919
Interest income recognized	120	136	436	392
Total	931		931		1,110
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Recorded investment - without allowance	891		891		829
Unpaid principal balance - without allowance	888		888		826
Average recorded investment - without allowance	889	849	903	850
Interest income recognized without allowance	12	11	35	32
Recorded investment - with allowance	236		236		241
Unpaid principal balance - with allowance	236		236		240
Related allowance					1
Average recorded investment - with allowance	236	242	238	244
Interest income recognized with allowance	3	3	9	10
Recorded investment	1,127		1,127		1,070
Unpaid principal balance	1,124		1,124		1,066
Average recorded investment	1,125	1,091	1,141	1,094
Interest income recognized	15	14	44	42
Total					1
Commercial Portfolio Segment [Member]
Recorded investment - without allowance
Unpaid principal balance - without allowance
Average recorded investment - without allowance
Interest income recognized without allowance
Recorded investment - with allowance	246		246		265
Unpaid principal balance - with allowance	253		253		268
Related allowance	162		162		148
Average recorded investment - with allowance	256	220	261	224
Interest income recognized with allowance	3	2	9	7
Recorded investment	246		246		265
Unpaid principal balance	253		253		268
Average recorded investment	256	220	261	224
Interest income recognized	3	2	9	7
Total	162		162		148
Commercial Real Estate Portfolio Segment [Member]
Recorded investment - without allowance	2,873		2,873		1,977
Unpaid principal balance - without allowance	2,875		2,875		2,034
Average recorded investment - without allowance	2,896	2,177	2,902	2,238
Interest income recognized without allowance	7	23	72	59
Recorded investment - with allowance	1,744		1,744		1,776
Unpaid principal balance - with allowance	1,807		1,807		1,783
Related allowance	173		173		219
Average recorded investment - with allowance	1,878	614	1,895	621
Interest income recognized with allowance	27	6	84	17
Recorded investment	4,617		4,617		3,753
Unpaid principal balance	4,682		4,682		3,817
Average recorded investment	4,774	2,791	4,797	2,859
Interest income recognized	34	29	156	76
Total	173		173		219
Construction Real Estate Portfolio Segment [Member]
Recorded investment - without allowance					17
Unpaid principal balance - without allowance					21
Average recorded investment - without allowance
Interest income recognized without allowance
Recorded investment - with allowance	1,546		1,546		1,586
Unpaid principal balance - with allowance	1,580		1,580		1,619
Related allowance	340		340		360
Average recorded investment - with allowance	1,572	1,622	1,585	1,635
Interest income recognized with allowance	19	19	56	57
Recorded investment	1,546		1,546		1,603
Unpaid principal balance	1,580		1,580		1,640
Average recorded investment	1,572	1,622	1,585	1,635
Interest income recognized	19	19	56	57
Total	340		340		360
Residential Portfolio Segment [Member]
Recorded investment - without allowance	3,809		3,809		3,757
Unpaid principal balance - without allowance	3,983		3,983		3,935
Average recorded investment - without allowance	4,006	4,054	4,058	4,110
Interest income recognized without allowance	41	51	149	150
Recorded investment - with allowance	344		344		1,464
Unpaid principal balance - with allowance	352		352		1,515
Related allowance	107		107		177
Average recorded investment - with allowance	355	1,537	359	1,552
Interest income recognized with allowance	4	16	12	45
Recorded investment	4,153		4,153		5,221
Unpaid principal balance	4,335		4,335		5,450
Average recorded investment	4,361	5,591	4,417	5,662
Interest income recognized	45	67	161	195
Total	107		107		177
Consumer and Other Portfolio Segment [Member]
Recorded investment - without allowance	32		32		30
Unpaid principal balance - without allowance	32		32		30
Average recorded investment - without allowance	33		34	1
Interest income recognized without allowance	1		2
Recorded investment - with allowance	374		374		402
Unpaid principal balance - with allowance	375		375		403
Related allowance	149		149		205
Average recorded investment - with allowance	377	437	382	444
Interest income recognized with allowance	3	5	8	15
Recorded investment	406		406		432
Unpaid principal balance	407		407		433
Average recorded investment	410	437	416	445
Interest income recognized	4	$ 5	10	$ 15
Total	$ 149		$ 149		$ 205

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Note 5 - Allowance For Loan Losses - Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)
Number of contracts	2	2	5,000	12,000
Pre-modification recorded principal balance	$ 136	$ 324	$ 591	$ 979
Post-modification recorded principal balance	$ 131	$ 301	$ 561	$ 750
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Number of contracts
Pre-modification recorded principal balance
Post-modification recorded principal balance
Commercial Portfolio Segment [Member]
Number of contracts				2,000
Pre-modification recorded principal balance				$ 29
Post-modification recorded principal balance				$ 29
Commercial Real Estate Portfolio Segment [Member]
Number of contracts	1	1	2,000	4,000
Pre-modification recorded principal balance	$ 58	$ 225	$ 341	$ 578
Post-modification recorded principal balance	$ 53	$ 202	$ 333	$ 492
Construction Real Estate Portfolio Segment [Member]
Number of contracts
Pre-modification recorded principal balance
Post-modification recorded principal balance
Residential Portfolio Segment [Member]
Number of contracts	1	1	3,000	5,000
Pre-modification recorded principal balance	$ 78	$ 99	$ 250	$ 371
Post-modification recorded principal balance	$ 78	$ 99	$ 228	$ 229
Consumer and Other Portfolio Segment [Member]
Number of contracts				1,000
Pre-modification recorded principal balance				$ 1
Post-modification recorded principal balance

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Note 5 - Allowance For Loan Losses - Troubled Debt Restructurings Subsequent Default (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2018 USD ($)	Sep. 30, 2017 USD ($)
Number of contracts		1
Recorded principal balance		$ 99
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Number of contracts
Recorded principal balance
Commercial Portfolio Segment [Member]
Number of contracts
Recorded principal balance
Commercial Real Estate Portfolio Segment [Member]
Number of contracts
Recorded principal balance
Construction Real Estate Portfolio Segment [Member]
Number of contracts
Recorded principal balance
Residential Portfolio Segment [Member]
Number of contracts		1
Recorded principal balance		$ 99
Consumer and Other Portfolio Segment [Member]
Number of contracts
Recorded principal balance

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Note 6 - Investment Securities (Details Textual)	Sep. 30, 2018	Dec. 31, 2017
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Total	199	205

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Note 6 - Investment Securities - Held to Maturity Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Held to maturity, amortized cost		$ 37,163
Held to maturity, gross unrealized gains		666
Held to maturity, gross unrealized losses		(343)
Held to maturity, estimated market value		37,486
US States and Political Subdivisions Debt Securities [Member]
Held to maturity, amortized cost		36,663
Held to maturity, gross unrealized gains		666
Held to maturity, gross unrealized losses		(322)
Held to maturity, estimated market value		37,007
Corporate Debt Securities [Member]
Held to maturity, amortized cost		500
Held to maturity, gross unrealized gains
Held to maturity, gross unrealized losses		(21)
Held to maturity, estimated market value		$ 479

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Note 6 - Investment Securities - Available for Sale Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Available for sale securities, amortized cost	$ 447,331	$ 450,753
Available for sale securities, gross unrealized gains	112	594
Available for sale securities, gross unrealized losses	(16,612)	(8,531)
Securities - Available for Sale	430,831	442,816
US Treasury and Government [Member]
Available for sale securities, amortized cost	139,690	140,090
Available for sale securities, gross unrealized gains		32
Available for sale securities, gross unrealized losses	(7,768)	(4,242)
Securities - Available for Sale	131,922	135,880
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available for sale securities, amortized cost	221,515	248,649
Available for sale securities, gross unrealized gains		3
Available for sale securities, gross unrealized losses	(7,556)	(3,875)
Securities - Available for Sale	213,959	244,777
US States and Political Subdivisions Debt Securities [Member]
Available for sale securities, amortized cost	72,570	37,308
Available for sale securities, gross unrealized gains	4	48
Available for sale securities, gross unrealized losses	(1,258)	(373)
Securities - Available for Sale	71,316	36,983
Corporate Debt Securities [Member]
Available for sale securities, amortized cost	13,556	22,662
Available for sale securities, gross unrealized gains	108	462
Available for sale securities, gross unrealized losses	(30)	(41)
Securities - Available for Sale	$ 13,634	23,083
Equity Securities [Member]
Available for sale securities, amortized cost		2,044
Available for sale securities, gross unrealized gains		49
Available for sale securities, gross unrealized losses
Securities - Available for Sale		$ 2,093

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Note 6 - Investment Securities - Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
1 year or less, held to maturity amortized cost
1 year or less, held to maturity estimated market value
1 year or less, available for sale amortized cost	9,239
1 year or less, available for sale estimated market value	9,239
After 1 year through five years, held to maturity amortized cost
After 1 year through five years, held to maturity estimated market value
After 1 year through five years, available for sale amortized cost	69,750
After 1 year through five years, available for sale estimated market value	67,387
After 5 years through 10 years, held to maturity amortized cost
After 5 years through 10 years, held to maturity estimated market value
After 5 years through 10 years, available for sale amortized cost	107,097
After 5 years through 10 years, available for sale estimated market value	101,421
After 10 years, held to maturity amortized cost
After 10 years, held to maturity estimated market value
After 10 years, available for sale amortized cost	39,730
After 10 years, available for sale estimated market value	38,825
Total, held to maturity amortized cost, held to maturity amortized cost
Total, held to maturity estimated market value
Total, available for sale amortized cost	225,816
Total, available for sale amortized cos, available for sale estimated market value	216,872
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	221,515
Mortgage Backed Securities, available for sale estimated market value	213,959
Held to maturity, amortized cost		$ 37,163
Held to maturity, estimated market value		37,486
Total, available for sale amortized cost	447,331	450,753
Total, available for sale estimated market value	$ 430,831	$ 442,816

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Note 6 - Investment Securities - Securities in Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Less than 12 months, aggregate fair value	$ 135,757	$ 215,507
Less than 12 months, gross unrealized losses	3,959	2,407
12 months or longer, aggregate fair value	259,997	205,236
12 months or longer, gross unrealized losses	13,032	6,467
Total, aggregate fair value	395,754	420,743
Total, gross unrealized losses	16,991	8,874
US Treasury and Government [Member]
Less than 12 months, aggregate fair value	17,086	25,257
Less than 12 months, gross unrealized losses	536	286
12 months or longer, aggregate fair value	109,557	105,329
12 months or longer, gross unrealized losses	7,231	3,956
Total, aggregate fair value	126,643	130,586
Total, gross unrealized losses	7,767	4,242
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Less than 12 months, aggregate fair value	76,652	161,792
Less than 12 months, gross unrealized losses	2,410	1,725
12 months or longer, aggregate fair value	137,306	81,157
12 months or longer, gross unrealized losses	5,146	2,150
Total, aggregate fair value	213,958	242,949
Total, gross unrealized losses	7,556	3,875
US States and Political Subdivisions Debt Securities [Member]
Less than 12 months, aggregate fair value	37,508	23,898
Less than 12 months, gross unrealized losses	968	357
12 months or longer, aggregate fair value	13,134	16,741
12 months or longer, gross unrealized losses	655	338
Total, aggregate fair value	50,642	40,639
Total, gross unrealized losses	1,623	695
Corporate Debt Securities [Member]
Less than 12 months, aggregate fair value	4,511	4,560
Less than 12 months, gross unrealized losses	45	39
12 months or longer, aggregate fair value		2,009
12 months or longer, gross unrealized losses		23
Total, aggregate fair value	4,511	6,569
Total, gross unrealized losses	$ 45	$ 62

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Note 7 - Fair Value of Financial Instruments (Details Textual) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Assets, Fair Value Disclosure	$ 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	Sep. 30, 2018	Dec. 31, 2017
Financial Assets:
Time Deposits in Other Banks	$ 11,946	$ 15,196
Securities - Held to Maturity		37,486
Securities - Available for Sale	430,831	442,816
US States and Political Subdivisions Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity		37,007
Securities - Available for Sale	71,316	36,983
Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity		479
Securities - Available for Sale	13,634	23,083
US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale	131,922	135,880
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Financial Assets:
Securities - Available for Sale	213,959	244,777
Equity Securities [Member]
Financial Assets:
Securities - Available for Sale		2,093
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member]
Financial Assets:
Cash and due from banks	37,984	53,010
Time Deposits in Other Banks	11,946	15,196
Equity Securities	7,403
Loans Held for Sale	183	346
Loans, net	744,726	687,313
Accrued Interest Receivable	4,772	4,169
Federal Home Loan Bank Stock		4,148
Financial Liabilities:
Noninterest Bearing Deposits	291,731	299,838
Interest Bearing Deposits	874,545	898,326
FHLB Advances	35,000
Accrued Interest Payable	92	61
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity		36,663
Securities - Available for Sale	71,316	36,983
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity		500
Securities - Available for Sale	13,634	23,083
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale	131,922	135,880
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Financial Assets:
Securities - Available for Sale	213,959	244,777
Reported Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Financial Assets:
Securities - Available for Sale		2,093
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member]
Financial Assets:
Cash and due from banks	37,984	53,010
Time Deposits in Other Banks	11,704	15,082
Equity Securities	7,403
Loans Held for Sale	186	356
Loans, net	684,324	657,684
Accrued Interest Receivable	4,772	4,169
Federal Home Loan Bank Stock		4,148
Financial Liabilities:
Noninterest Bearing Deposits	291,731	299,838
Interest Bearing Deposits	875,157	899,481
FHLB Advances	34,775
Accrued Interest Payable	92	61
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity		37,007
Securities - Available for Sale	71,316	36,983
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity		479
Securities - Available for Sale	13,634	23,083
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale	131,922	135,880
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Financial Assets:
Securities - Available for Sale	213,959	244,777
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Financial Assets:
Securities - Available for Sale		2,093
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Financial Assets:
Cash and due from banks	37,984	53,010
Time Deposits in Other Banks
Equity Securities	3,255
Loans Held for Sale
Loans, net
Accrued Interest Receivable
Federal Home Loan Bank Stock
Financial Liabilities:
Noninterest Bearing Deposits	291,731	299,838
Interest Bearing Deposits
FHLB Advances
Accrued Interest Payable
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]
Financial Assets:
Securities - Held to Maturity
Securities - Available for Sale
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity
Securities - Available for Sale
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale
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]
Financial Assets:
Securities - Available for Sale
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
Financial Assets:
Securities - Available for Sale		2,093
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Cash and due from banks
Time Deposits in Other Banks	10,954	15,082
Equity Securities	4,148
Loans Held for Sale
Loans, net
Accrued Interest Receivable
Federal Home Loan Bank Stock		4,148
Financial Liabilities:
Noninterest Bearing Deposits
Interest Bearing Deposits	875,157	899,481
FHLB Advances	34,775
Accrued Interest Payable
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]
Financial Assets:
Securities - Held to Maturity		2,407
Securities - Available for Sale	71,316	36,983
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity		479
Securities - Available for Sale	13,634	23,083
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale	131,922	135,880
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]
Financial Assets:
Securities - Available for Sale	213,959	244,777
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member]
Financial Assets:
Securities - Available for Sale
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Cash and due from banks
Time Deposits in Other Banks	750
Equity Securities
Loans Held for Sale	186	356
Loans, net	684,324	657,684
Accrued Interest Receivable	4,772	4,169
Federal Home Loan Bank Stock
Financial Liabilities:
Noninterest Bearing Deposits
Interest Bearing Deposits
FHLB Advances
Accrued Interest Payable	92	61
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]
Financial Assets:
Securities - Held to Maturity		34,600
Securities - Available for Sale
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity
Securities - Available for Sale
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale
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]
Financial Assets:
Securities - Available for Sale
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Equity Securities [Member]
Financial Assets:
Securities - Available for Sale

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Note 7 - Fair Value of Financial Instruments - Assets Measured on a Nonrecurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Dec. 31, 2017
Impaired loans	$ 12,095	$ 12,344
Other Real Estate Owned	997	1,412
Fair Value, Measurements, Nonrecurring [Member]
Impaired loans
Other Real Estate Owned
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	11,164	11,234
Other Real Estate Owned	$ 997	$ 1,412

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Note 8 - Financial Instruments With Off-balance Sheet Risk (Details Textual)	9 Months Ended
	Sep. 30, 2018
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	Sep. 30, 2018	Dec. 31, 2017
Commitments to Extend Credit - Commercial Lines of Credit [Member]
Commitments to extend credit:
Off-balance sheet credit risks	$ 117,670	$ 103,080
Commitments to Extend Credit - Credit Card Lines of Credit [Member]
Commitments to extend credit:
Off-balance sheet credit risks	6,271	5,934
Commitments to Extend Credit - Home Equity Lines of Credit [Member]
Commitments to extend credit:
Off-balance sheet credit risks	35,272	30,368
Standby Letters of Credit and Financial Guarantees [Member]
Commitments to extend credit:
Off-balance sheet credit risks	$ 1,837	$ 1,364