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 March 31, 2019

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 (check one).

Large accelerated filer ☐    Accelerated Filer ☑      

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

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

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes ☐  No ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MBTF	NASDAQ-Global

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of May 9, 2019, there were 23,036,758 shares of the Company’s Common Stock outstanding.

Part I Financial Information

Item 1. Financial Statements

MBT FINANCIAL CORP.

CONSOLIDATED BALANCE SHEETS

	March 31, 2019
Dollars in thousands	(Unaudited)			December 31, 2018
ASSETS
Cash and Cash Equivalents
Cash and due from banks
Non-interest bearing	$	18,426		$	17,058
Interest bearing		414,381			34,784
Total cash and cash equivalents		432,807			51,842
Interest Bearing Time Deposits in Other Banks		600			10,796
Securities - Available for Sale		30,133			401,613
Equity Securities		7,450			7,415
Loans held for sale		-			488
Loans		766,877			768,660
Allowance for Loan Losses		(7,503	)		(7,771	)
Loans - Net		759,374			760,889
Accrued interest receivable and other assets		16,662			16,743
Other Real Estate Owned		58			692
Bank Owned Life Insurance		59,901			59,563
Premises and Equipment - Net		26,480			26,850
Total assets	$	1,333,465		$	1,336,891
LIABILITIES
Deposits
Non-interest bearing	$	290,929		$	297,704
Interest-bearing		892,220			885,206
Total deposits		1,183,149			1,182,910
Federal Home Loan Bank advances		10,000			10,000
Interest payable and other liabilities		10,028			16,314
Total liabilities		1,203,177			1,209,224
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 23,036,758 and 23,033,715 shares issued and outstanding)		23,565			23,453
Retained earnings		106,477			113,921
Accumulated other comprehensive income (loss)		246			(9,707	)
Total stockholders' equity		130,288			127,667
Total liabilities and stockholders' equity	$	1,333,465		$	1,336,891

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

-2-

MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - UNAUDITED

	Three Months Ended March 31,
Dollars in thousands, except per share data	2019			2018
Interest Income
Interest and fees on loans	$	9,571		$	8,217
Interest on investment securities-
Tax-exempt		296			404
Taxable		1,174			2,210
Interest on balances due from banks		1,209			125
Total interest income		12,250			10,956
Interest Expense
Interest on deposits		568			414
Interest on borrowed funds		64			6
Total interest expense		632			420
Net Interest Income		11,618			10,536
Recovery Of Loan Losses		-			(100	)
Net Interest Income After
Recovery Of Loan Losses		11,618			10,636
Other Income
Income from wealth management services		1,161			1,185
Service charges and other fees		822			946
Debit card income		701			720
Net loss on sales and redemptions of securities available for sale		(11,646	)		(101	)
Net gain on sales of Other Real Estate Owned		9			19
Origination fees on mortgage loans sold		69			62
Bank owned life insurance income		338			353
Other		659			600
Total other income (loss)		(7,887	)		3,784
Other Expenses
Salaries and employee benefits		6,064			5,962
Occupancy expense		729			721
Equipment expense		913			793
Marketing expense		292			377
Professional fees		843			594
EFT/ATM expense		291			259
Other Real Estate Owned expenses		22			15
FDIC Deposit Insurance Assessment		89			107
Bonding and other insurance expense		429			132
Telephone expense		80			75
Other		558			757
Total other expenses		10,310			9,792
Income (Loss) Before Income Taxes		(6,579	)		4,628
Income Tax Expense (Benefit)		(1,438	)		726
Net Income (Loss)	$	(5,141	)	$	3,902
Other Comprehensive Income - Net of Tax
Unrealized gains (losses) on securities		387			(4,204	)
Reclassification adjustment for (gains) losses included in net income		9,200			80
Postretirement benefit liability		366			32
Effect of accounting change on equity securities		-			(49	)
Total Other Comprehensive Income (Loss) - Net of Tax		9,953			(4,141	)
Comprehensive Income (Loss)	$	4,812		$	(239	)
Basic Earnings (Loss) Per Common Share	$	(0.22	)	$	0.17
Diluted Earnings (Loss) Per Common Share	$	(0.22	)	$	0.17
Dividends Declared Per Share of Common Stock	$	0.10		$	0.66

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

-3-

MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED

											Accumulated
											Other
	Common Stock					Retained			Unearned		Comprehensive
Dollars in thousands	Shares		Amount			Earnings			Compensation		Income (Loss)			Total
Balance - January 1, 2019		23,033,715	$	23,453		$	113,921		$	-	$	(9,707	)	$	127,667
Issuance of Common Stock
SOSARs exercised, net of shares redeemed for taxes		186		(1	)		-			-		-			(1	)
Employee Stock Purchase Plan and other stock issued		2,857		30			-			-		-			30
Equity Compensation		-		93			-			-		-			93
Deferred Directors' Compensation		-		(10	)		-			-		-			(10	)
Dividends declared ($0.10 per share)		-		-			(2,303	)		-		-			(2,303	)
Net loss		-		-			(5,141	)		-		-			(5,141	)
Other comprehensive income - net of tax		-		-			-			-		9,953			9,953
Balance - March 31, 2019		23,036,758	$	23,565		$	106,477		$	-	$	246		$	130,288

												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		39,825		(178	)		-			-			-			(178	)
Restricted stock awards, net of shares redeemed for taxes		7,500		78			-			(78	)		-			-
Employee Stock Purchase Plan and other stock issued		18,092		189			-			-			-			189
Tax benefit from exercise of options		-		-			-			-			-			-
Tax benefit from exercise of options		-		-			-			-			-			-
Equity Compensation		-		216			-			19			-			235
Deferred Directors' Compensation		-		(67	)		-			-			-			(67	)
Cumulative Effect Adjustment (ASU 2016-01)		-		-			49			-			(49	)		-
Dividends declared ($0.66 per share)		-		-			(15,145	)		-			-			(15,145	)
Net income		-		-			3,902			-			-			3,902
Other comprehensive income - net of tax		-		-			-			-			(4,092	)		(4,092	)
Balance - March 31, 2018		22,973,261	$	23,078		$	106,330		$	(59	)	$	(11,847	)	$	117,502

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

-4-

MBT FINANCIAL CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

	Three Months Ended March 31,
Dollars in thousands	2019			2018
Cash Flows from Operating Activities
Net Income (Loss)	$	(5,141	)	$	3,902
Adjustments to reconcile net income to net cash from operating activities
Recovery of loan losses		-			(100	)
Depreciation		346			370
Net amortization of investment premium and discount		259			576
Adjustment for assets carried at fair market value		(35	)		36
Net decrease in interest payable and other liabilities		(5,835	)		(1,434	)
Net decrease (increase) in interest receivable and other assets		(2,550	)		2,555
Equity based compensation expense		93			235
Net loss on sale/settlement of securities		11,646			101
Increase in cash surrender value of life insurance		(338	)		(352	)
Net cash provided by (used for) operating activities	$	(1,555	)	$	5,889
Cash Flows from Investing Activities
Proceeds from maturities of interest bearing time deposits in other banks	$	750		$	1,000
Proceeds from maturities and redemptions of investment securities held to maturity		-			241
Proceeds from maturities and redemptions of investment securities available for sale		5,278			12,666
Proceeds from sales of investment securities available for sale		367,161			19,181
Proceeds from sales of interest bearing time deposits in other banks		9,446			-
Net (increase) decrease in loans		2,003			(27,140	)
Proceeds from sales of other real estate owned		643			347
Proceeds from sales of other assets		-			40
Purchase of investment securities available for sale		(728	)		(30,799	)
Purchase of bank premises and equipment		-			(32	)
Net cash provided by (used for) investing activities	$	384,553		$	(24,496	)
Cash Flows from Financing Activities
Net increase (decrease) in deposits	$	239		$	(4,801	)
Issuance of common stock		30			189
Stock redeemed for tax withholding - stock based compensation		1			(178	)
Dividends paid		(2,303	)		(15,145	)
Net cash used for financing activities	$	(2,033	)	$	(19,935	)
Net Increase (Decrease) in Cash and Cash Equivalents	$	380,965		$	(38,542	)
Cash and Cash Equivalents at Beginning of Period		51,842			53,010
Cash and Cash Equivalents at End of Period	$	432,807		$	14,468
Supplemental Cash Flow Information
Cash paid for interest	$	619		$	420
Cash paid for federal income taxes	$	-		$	-
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned	$	-		$	144

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

-5-

MBT FINANCIAL CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

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

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. The merger was approved at a special meeting of the Company’s shareholders on February 14, 2019 and the transaction is expected to be completed in the second quarter of 2019.

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.

-6-

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

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 begun the process of segmenting the portfolio. Our bank's merger with First Merchants Bank will be completed prior to the effective date, and First Merchants will complete the implementation.

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.  Adoption of the standard did not have a material effect on the Company’s financial statements.

-7-

2. EARNINGS PER SHARE

The calculations of earnings per common share are as follows:

	For the three months ended March 31,
	2019			2018
Basic
Net income (loss)	$	(5,141,000	)	$	3,902,000
Average common shares outstanding		23,035,369			22,943,736
Earnings (Loss) per common share - basic	$	(0.22	)	$	0.17
Diluted
Net income (loss)	$	(5,141,000	)	$	3,902,000
Average common shares outstanding		23,035,369			22,943,736
Equity compensation		-			119,464
Average common shares outstanding - diluted		23,035,369			23,063,200
Earnings per common share - diluted	$	(0.22	)	$	0.17

3. STOCK BASED COMPENSATION

Stock Only Stock Appreciation Rights (SOSARs) – 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, 2019		347,379		$	8.78
Granted		-			-
Exercised		(2,166	)		9.44
Forfeited		-			-
Expired		-			-
SOSARs Outstanding, March 31, 2019		345,213		$	8.78
SOSARs Exercisable, March 31, 2019		152,879		$	6.41

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 March 31, 2019 was $10.02. The value of the exercisable SOSARs that are in-the-money as of March 31, 2019 was $552,000, and exercise of those SOSARs on that date would have resulted in the issuance of 55,079 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.

The total expense for equity based compensation was $93,000 in the first quarter of 2019 and $236,000 in the first quarter of 2018. The unrecognized compensation expense for all equity based compensation plans is $413,000 as of March 31, 2019. The expense is expected to be recognized over a weighted average period of 1.40 years.

-8-

4. LOANS

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

Loans consist of the following (000s omitted):

	March 31,		December 31,
	2019		2018
Residential real estate loans	$	231,074	$	230,008
Commercial and Construction real estate loans		306,593		306,694
Agriculture and agricultural real estate loans		22,087		22,486
Commercial and industrial loans		162,446		162,026
Loans to individuals for household, family, and other personal expenditures		44,677		47,446
Total loans, gross	$	766,877	$	768,660
Less: Allowance for loan losses		7,503		7,771
Net Loans	$	759,374	$	760,889

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):

	March 31,			December 31,
	2019			2018
Nonaccrual loans	$	7,134		$	5,566
Loans 90 days past due and accruing		61			-
Restructured loans		3,418			4,495
Total nonperforming loans	$	10,613		$	10,061
Other real estate owned		58			692
Other assets		-			-
Total nonperforming assets	$	10,671		$	10,753
Nonperforming assets to total assets		0.80	%		0.80	%
Allowance for loan losses to nonperforming loans		70.70	%		77.24	%

-9-

5. ALLOWANCE FOR LOAN LOSSES

The Company separates its loan portfolio into segments to perform the calculation and analysis of the allowance for loan losses. The six segments analyzed are Agriculture and Agricultural Real Estate, Commercial, Commercial Real Estate, Construction Real Estate, Residential Real Estate, and Consumer and Other. The Agriculture and Agricultural Real Estate segment includes all loans to finance agricultural production and all loans secured by agricultural real estate. This segment does not include loans to finance agriculture that are secured by residential real estate, which are included in the Residential Real Estate segment. The Commercial segment includes loans to finance commercial and industrial businesses that are not secured by real estate. The Commercial Real Estate segment includes loans secured by non-farm, non-residential real estate. The Construction Real Estate segment includes loans to finance construction and land development. This includes residential and commercial construction and land development. The Residential Real Estate segment includes all loans, other than construction loans, that are secured by single family and multi-family residential real estate properties. The Consumer and Other segment includes all loans not included in any other segment. These are primarily loans to consumers for household, family, and other personal expenditures. 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 months ended March 31, 2019 was as follows (000s omitted):

	Agriculture and Agricultural Real Estate		Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the three months ended March 31, 2019
Beginning Balance	$	205	$	1,266		$	3,012		$	184		$	1,218		$	1,886		$	7,771
Charge-offs		-		(252	)		(151	)		-			-			(8	)		(411	)
Recoveries		-		27			24			12			75			5			143
Provision		35		720			153			(158	)		(82	)		(668	)		-
Ending balance	$	240	$	1,761		$	3,038		$	38		$	1,211		$	1,215		$	7,503
Allowance for loan losses as of March 31, 2019
Ending balance individually evaluated for impairment	$	-	$	138		$	118		$	-		$	83		$	127		$	466
Ending balance collectively evaluated for impairment		240		1,623			2,920			38			1,128			1,088			7,037
Ending balance	$	240	$	1,761		$	3,038		$	38		$	1,211		$	1,215		$	7,503
Loans as of March 31, 2019
Ending balance individually evaluated for impairment	$	2,556	$	287		$	3,503		$	32		$	3,051		$	401		$	9,830
Ending balance collectively evaluated for impairment		19,531		162,159			275,149			27,909			228,023			44,276			757,047
Ending balance	$	22,087	$	162,446		$	278,652		$	27,941		$	231,074		$	44,677		$	766,877

-10-

Activity in the allowance for loan losses during the three months ended March 31, 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 March 31, 2018
Beginning Balance	$	195	$	1,443		$	3,297		$	491		$	1,279		$	961		$	7,666
Charge-offs		-		-			(3	)		-			(7	)		(2	)		(12	)
Recoveries		2		15			240			20			42			12			331
Provision		13		(61	)		(446	)		(50	)		(225	)		669			(100	)
Ending balance	$	210	$	1,397		$	3,088		$	461		$	1,089		$	1,640		$	7,885
Allowance for loan losses as of March 31, 2018
Ending balance individually evaluated for impairment	$	1	$	146		$	315		$	354		$	131		$	199		$	1,146
Ending balance collectively evaluated for impairment		209		1,251			2,773			107			958			1,441			6,739
Ending balance	$	210	$	1,397		$	3,088		$	461		$	1,089		$	1,640		$	7,885
Loans as of March 31, 2018
Ending balance individually evaluated for impairment	$	1,139	$	260		$	3,720		$	1,574		$	4,566		$	424		$	11,683
Ending balance collectively evaluated for impairment		21,180		131,642			266,608			18,354			218,752			54,421			710,957
Ending balance	$	22,319	$	131,902		$	270,328		$	19,928		$	223,318		$	54,845		$	722,640

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.

-11-

• 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.

-12-

The portfolio segments in each credit risk grade as of March 31, 2019 are as follows (000s omitted):

Credit Quality Indicators as of March 31, 2019
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	$	-	$	1,731	$	44	$	11,948	$	147,437	$	39,747	$	200,907
10		-		3,998		-		-		-		-		3,998
20		64		116		185		-		-		-		365
30		267		46,455		24,609		-		1,363		3,424		76,118
40		13,977		103,187		219,492		13,051		73,934		1,495		425,136
45		1,589		1,909		19,787		1,360		2,719		-		27,364
50		3,755		4,582		6,866		245		2,590		-		18,038
55		72		255		2,363		-		693		-		3,383
60		2,363		213		5,306		1,337		2,338		11		11,568
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	22,087	$	162,446	$	278,652	$	27,941	$	231,074	$	44,677	$	766,877
Performing	$	19,490	$	162,181	$	275,374	$	27,909	$	227,091	$	44,219	$	756,264
Nonperforming		2,597		265		3,278		32		3,983		458		10,613
Total	$	22,087	$	162,446	$	278,652	$	27,941	$	231,074	$	44,677	$	766,877

The portfolio segments in each credit risk grade as of December 31, 2018 are as follows (000s omitted):

Credit Quality Indicators as of December 31, 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	$	-	$	3,652	$	60	$	12,878	$	147,167	$	42,259	$	206,016
10		-		6,877		-		-		-		-		6,877
20		64		117		196		-		-		-		377
30		481		47,263		24,899		-		1,268		3,556		77,467
40		16,038		97,598		219,079		11,555		74,141		1,618		420,029
45		1,472		2,024		19,462		1,381		2,623		-		26,962
50		1,852		3,851		9,084		249		1,896		-		16,932
55		-		305		2,132		-		713		-		3,150
60		2,579		339		4,380		1,337		2,200		13		10,848
70		-		-		-		-		-		-		-
80		-		-		2		-		-		-		2
90		-		-		-		-		-		-		-
Total	$	22,486	$	162,026	$	279,294	$	27,400	$	230,008	$	47,446	$	768,660
Performing	$	20,305	$	161,749	$	276,021	$	27,368	$	226,119	$	47,037	$	758,599
Nonperforming		2,181		277		3,273		32		3,889		409		10,061
Total	$	22,486	$	162,026	$	279,294	$	27,400	$	230,008	$	47,446	$	768,660

-13-

Loans are considered past due when contractually required payment of interest or principal has not been received. The amount classified as past due is the entire principal balance outstanding of the loan, not just the amount of payments that are past due. The following is a summary of past due loans as of March 31, 2019 and December 31, 2018 (000s omitted):

March 31, 2019	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	$	264	$	16	$	1,719	$	1,999	$	20,088	$	22,087	$	-
Commercial		149		21		46	$	216		162,230		162,446		15
Commercial Real Estate		914		936		636		2,486		276,166		278,652		-
Construction Real Estate		-		-		32		32		27,909		27,941		-
Residential Real Estate		1,810		81		387		2,278		228,796		231,074		-
Consumer and Other		153		50		47		250		44,427		44,677		46
Total	$	3,290	$	1,104	$	2,867	$	7,261	$	759,616	$	766,877	$	61

December 31, 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	$	632	$	1,235	$	-	$	1,867	$	20,619	$	22,486	$	-
Commercial		186		110		31		327		161,699		162,026		-
Commercial Real Estate		804		-		1,849		2,653		276,641		279,294		-
Construction Real Estate		-		-		-		-		27,400		27,400		-
Residential Real Estate		1,217		340		376		1,933		228,075		230,008		-
Consumer and Other		79		13		-		92		47,354		47,446		-
Total	$	2,918	$	1,698	$	2,256	$	6,872	$	761,788	$	768,660	$	-

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

The following is a summary of non-accrual loans as of March 31, 2019 and December 31, 2018 (000s omitted):

	March 31, 2019		December 31, 2018
Agriculture and Agricultural Real Estate	$	2,363	$	1,624
Commercial		85		106
Commercial Real Estate		3,277		2,907
Construction Real Estate		32		5
Residential Real Estate		1,366		912
Consumer and Other		11		12
Total	$	7,134	$	5,566

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

-14-

The following is a summary of impaired loans as of March 31, 2019 and March 31, and December 31, 2018 (000s omitted):

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		Interest Income Recognized in the Three Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	2,556	$	2,555	$	-	$	2,595	$	(14	)
Commercial		67		67		-		91		1
Commercial Real Estate		1,899		2,116		-		2,076		61
Construction Real Estate		32		67		-		52		-
Residential Real Estate		2,660		2,822		-		2,842		39
Consumer and Other		134		135		-		137		2
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-
Commercial		220		229		138		231		2
Commercial Real Estate		1,604		1,697		118		1,698		5
Construction Real Estate		-		-		-		-		-
Residential Real Estate		391		403		83		405		5
Consumer and Other		267		267		127		270		3
Total:
Agriculture and Agricultural Real Estate	$	2,556	$	2,555	$	-	$	2,595	$	(14	)
Commercial		287		296		138		322		3
Commercial Real Estate		3,503		3,813		118		3,774		66
Construction Real Estate		32		67		-		52		-
Residential Real Estate		3,051		3,225		83		3,247		44
Consumer and Other		401		402		127		407		5
Total	$	9,830	$	10,358	$	466	$	10,397	$	104

	Recorded Investment as of December 31, 2018		Unpaid Principal Balance as of December 31, 2018		Related Allowance as of December 31, 2018		Average Recorded Investment for the Three Months Ended March 31, 2018		Interest Income Recognized in the Three Months Ended March 31, 2018
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	2,388	$	2,384	$	-	$	820	$	11
Commercial		-		-		-		-		-
Commercial Real Estate		1,863		1,871		-		1,706		21
Construction Real Estate		-		-		-		-		-
Residential Real Estate		3,015		3,174		-		4,129		52
Consumer and Other		58		59		-		84		1
With an allowance recorded:
Agriculture and Agricultural Real Estate		234		234		-		240		3
Commercial		226		234		142		266		3
Commercial Real Estate		1,299		1,380		146		2,064		32
Construction Real Estate		32		67		4		1,597		19
Residential Real Estate		306		316		94		660		7
Consumer and Other		339		339		143		345		4
Total:
Agriculture and Agricultural Real Estate	$	2,622	$	2,618	$	-	$	1,060	$	14
Commercial		226		234		142		266		3
Commercial Real Estate		3,162		3,251		146		3,770		53
Construction Real Estate		32		67		4		1,597		19
Residential Real Estate		3,321		3,490		94		4,789		59
Consumer and Other		397		398		143		429		5
Total	$	9,760	$	10,058	$	529	$	11,911	$	153

-15-

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

Loans that have been classified as TDRs during the three month periods ended March 31, 2019 and March 31, 2018 are as follows (000s omitted from dollar amounts):

	Three months ended						Three months ended
	March 31, 2019						March 31, 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		2	$	77	$	16		-	$	-	$	-
Commercial		-		-		-		-		-		-
Commercial Real Estate		1		39		36		1		283		283
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		-		-		-		1		150		150
Consumer and Other		1		15		14		-		-		-
Total		4	$	131	$	66		2	$	433	$	433

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 three month periods ended March 31, 2019 and March 31, 2018 that subsequently defaulted during the three month periods ended March 31, 2019 and March 31, 2018, respectively.

	Three months ended				Three months ended
	March 31, 2019				March 31, 2018
	Number of Contracts		Post- Modification Recorded Principal Balance		Number of Contracts		Post- Modification Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-		-	$	-
Commercial		-		-		-		-
Commercial Real Estate		-		-		1		283
Construction Real Estate		-		-		-		-
Residential Real Estate		-		-		-		-
Consumer and Other		-		-		-		-
Total		-	$	-		1	$	283

The Company has allocated $417,000 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings at March 31, 2019. In addition, there were no commitments to lend additional amounts to borrowers that are classified as troubled debt restructurings as of March 31, 2019 and March 31, 2018.

-16-

6. INVESTMENT SECURITIES 

The following is a summary of the Bank’s investment securities portfolio as of March 31, 2019 and December 31, 2018 (000s omitted):

	Available for Sale
	March 31, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions		29,127		626		(116	)		29,637
Corporate Debt Securities		500		-		(4	)		496
	$	29,627	$	626	$	(120	)	$	30,133

	Available for Sale
	December 31, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	134,160	$	1	$	(5,926	)	$	128,235
Mortgage Backed Securities issued by U.S. Government Agencies		196,224		32		(5,702	)		190,554
Obligations of States and Political Subdivisions		69,309		604		(804	)		69,109
Corporate Debt Securities		13,552		173		(10	)		13,715
	$	413,245	$	810	$	(12,442	)	$	401,613

The amortized cost and estimated market values of securities by contractual maturity as of March 31, 2019 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.

	Available for Sale
			Estimated
	Amortized		Market
	Cost		Value
Contractual maturity in
1 year or less	$	8,462	$	8,503
After 1 year through five years		15,112		15,310
After 5 years through 10 years		5,387		5,661
After 10 years		666		659
Total	$	29,627	$	30,133

-17-

The investment securities portfolio is evaluated for impairment throughout the year. Impairment is recorded against individual securities, unless the decrease in fair value is attributable to interest rates or the lack of an active market, and Management determines that the Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before a recovery of their amortized costs bases, which may be maturity. The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2019 and December 31, 2018.

March 31, 2019
	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 States and Political Subdivisions		7,915		116		-		-		7,915		116
Corporate Debt Securities		496		4		-		-		496		4
	$	8,411	$	120	$	-	$	-	$	8,411	$	120

December 31, 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	$	3,946	$	65	$	117,750	$	5,861	$	121,696	$	5,926
Mortgage Backed Securities issued by U.S. Government Agencies		19,945		131		165,604		5,571		185,549		5,702
Obligations of States and Political Subdivisions		32,260		573		5,955		231		38,215		804
Corporate Debt Securities		490		10		-		-		490		10
	$	56,641	$	779	$	289,309	$	11,663	$	345,950	$	12,442

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. The Company sold most of its Available for Sale Securities in the first quarter of 2019, retaining debt securities issued by local issuers that it does not intend to sell. Because the Company does not intend to sell the remaining investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other than temporarily impaired at March 31, 2019. As of March 31, 2019 and December 31, 2018, there were 37 and 165 securities in an unrealized loss position, respectively.

7. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

-18-

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 March 31, 2019 and December 31, 2018, and the valuation techniques used by the Company to determine those fair values.

									Total
	Carrying								Estimated
March 31, 2019	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	432,807	$	432,807	$	-	$	-	$	432,807
Time Deposits in Other Banks		600		-		600		-		600
Securities - Available for Sale
Obligations of States and Political Subdivisions		29,637		-		29,637		-		29,637
Corporate Debt Securities		496		-		496		-		496
Equity Securities		7,450		2,077		5,373		-		7,450
Loans, net		759,374		-		-		747,951		747,951
Accrued Interest Receivable		3,135		-		-		3,135		3,135
Financial Liabilities:
Noninterest Bearing Deposits		290,929		290,929		-		-		290,929
Interest Bearing Deposits		892,220		-		892,881		-		892,881
Borrowed funds
FHLB Advances		10,000		-		10,212		-		10,212
Accrued Interest Payable		77		-		-		77		77

-19-

									Total
	Carrying								Estimated
December 31, 2018	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	51,842	$	51,842	$	-	$	-	$	51,842
Time Deposits in Other Banks		10,796		-		10,548		-		10,548
Securities - Available for Sale
Obligations of U.S. Government Agencies		128,235		-		128,235		-		128,235
MBS issued by U.S. Government Agencies		190,554		-		190,554		-		190,554
Obligations of States and Political Subdivisions		69,109		-		69,109		-		69,109
Corporate Debt Securities		13,715		-		13,715		-		13,715
Equity Securities		7,415		2,042		5,373		-		7,415
Loans Held for Sale		488		-		-		502		502
Loans, net		760,889		-		-		750,249		750,249
Accrued Interest Receivable		4,413		-		-		4,413		4,413
Financial Liabilities:
Noninterest Bearing Deposits		297,704		297,704		-		-		297,704
Interest Bearing Deposits		885,206		-		885,886		-		885,886
Federal Home Loan Bank Advances		10,000		-		-		10,042		10,042
Accrued Interest Payable		65		-		-		65		65

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 March 31, 2019 or December 31, 2018. 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)
March 31, 2019
Impaired loans	$	-	$	-	$	9,364
Other Real Estate Owned	$	-	$	-	$	58
December 31, 2018
Impaired loans	$	-	$	-	$	9,231
Other Real Estate Owned	$	-	$	-	$	692

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

8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

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

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

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

	Contractual Amount
	March 31,		December 31,
	2019		2018
Commitments to extend credit:
Unused portion of commercial lines of credit	$	119,668	$	116,119
Unused portion of credit card lines of credit		7,018		6,680
Unused portion of home equity lines of credit		36,823		34,621
Standby letters of credit and financial guarantees written		1,223		1,763
All other off-balance sheet commitments		-		-

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

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

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

Introduction

MBT Financial Corp. (the “Company”) is a bank holding company with one 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 expected to occur in the second quarter of 2019.

Executive Overview

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

The net loss of $5,141,000 for the first quarter of 2019 was caused by losses totaling $11,646,000 on the sale of investment securities as the Company liquidated a substantial portion of its investment portfolio in anticipation of its merger with First Merchants. Excluding the securities losses, net profit would have been $4,059,000, an increase of $157,000 or 4.0% compared to the first quarter of 2018. The Net Interest Income increased $1,082,000, or 10.3% due to an improvement in the Net Interest Margin from 3.49% in the first quarter of 2018 to 3.83% in the first quarter of 2019. The effect of the improved margin was mitigated by an increase of $518,000 in non-interest expenses.

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, had been improving steadily since 2014, and stabilized recently. Net charge offs were $268,000, or 0.14% of loans, annualized, in the first quarter of 2019, compared to net recoveries of $319,000, or 0.18% of loans in the first quarter of 2018. Due to improving loan quality metrics, we were able to reduce our Allowance for Loan and Lease Losses (ALLL) as a percent of loans from 1.01% at December 31, 2018 to 0.98% as of March 31, 2019. The ALLL decreased $268,000 during the first quarter of 2019 due to the net charge offs of $268,000, as we did not record a provision during the quarter. We assess the adequacy of our ALLL each quarter, and adjust it as necessary by debiting or crediting the provision expense. The allowance includes $466,000 of specific allocations on $9.8 million of loans evaluated for impairment and $7.0 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 future provisions may be necessary.

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The $1,082,000 increase in Net Interest Income in the first quarter of 2019 compared to the first quarter of 2018 was due to the increase in the net interest margin from 3.49% to 3.83%, and the increase of $5.0 million in the amount of average earning assets. The net interest margin increased because the yield on earnings assets increased 41 basis points while the cost of interest bearing liabilities only increased 9 basis points. Non-interest income for the quarter (excluding securities losses) decreased $126,000 and non-interest expenses increased $518,000.

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.

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 0.7% during the quarter, from $10.75 million to $10.67 million. Loan delinquencies increased from $6.9 million 30 days or more past due as of December 31, 2018 to $7.3 million as of March 31, 2019 and the delinquency percentage increased from 0.89% to 0.94% of the total loans. Over the last twelve months, NPAs decreased $2.3 million, or 17.7%, with nonperforming loans decreasing 9.6% from $11.7 million to $10.6 million, and Other Real Estate Owned (“OREO”) decreasing from $1.2 million to $58,000. The amount required in the Allowance for Loan and Lease Losses (“ALLL”) was decreased from $7.9 million a year ago to $7.5 million because the decreases required by the improvement in the quality of the assets and the historical loss rates exceeded the amount required by the increase in the size of the loan portfolio. The ALLL is now 0.98% of loans, down from 1.09% at March 31, 2018. The ALLL is 70.70% of nonperforming loans (“NPLs”), compared to 67.15% at March 31, 2018. 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, 2018, total loans held for investment decreased $1.8 million as new loan activity was exceeded by payments received and other reductions in the period. Our pipeline of loans in process remained steady and our unfunded loan commitments increased, so we expect loans outstanding to increase in 2019.

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Since December 31, 2018, deposits were unchanged at $1.183 billion, and borrowed funds were unchanged at $10.0 million, while other liabilities decreased $6.3 million and capital increased $2.6 million. As a result, our total assets decreased $3.4 million, or 0.3%. We will continue to price our deposit products competitively, but we have adequate liquidity on our balance sheet to fund our continued loan growth due to the investment sales. Capital increased and assets decreased, causing the capital to assets ratio to increase from 9.55% at December 31, 2018 to 9.77% at March 31, 2019.

Results of Operations – First Quarter 2019 vs. First Quarter 2018

Net Interest Income - A comparison of the income statements for the three months ended March 31, 2019 and 2018 shows an increase of $1,082,000, or 10.3%, in Net Interest Income. Interest income on loans increased $1,354,000, or 16.5% as the average loans outstanding increased $63.8 million and the average yield on loans increased from 4.72% to 5.04%. 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 decreased $60,000 even though the yield increased from 2.14% to 2.36% as the average amount of investments, fed funds sold, and interest bearing balances due from banks decreased $58.8 million. The Company continues to maintain a high level of liquidity, but some of that liquidity is being used by redeploying earning assets from low yielding short term investments and deposits in the Federal Reserve Bank into higher yielding loans. The interest expense on deposits increased $154,000, or 37.2% even though the average deposits decreased $4.0 million as the average cost of deposits increased from 0.14% to 0.19%. Due to the growth in loans and the decrease in deposit funding, average borrowed funds increased $8.5 million, and the cost of borrowed funds increased $58,000 compared to the first quarter of 2018. Average total interest bearing liabilities increased $7.9 million, and the cost of interest bearing liabilities increased from 0.19% in the first quarter of 2018 to 0.28% in the first quarter of 2019. As a result, interest expense increased $212,000, or 50.5%.

Provision for Loan Losses - The Company did not record a Provision for Loan Losses expense in the first quarter of 2019, which was an increase of $100,000 compared to the negative provision expense of $100,000 in the first quarter of 2018. We charged off $411,000 of principal while recovering $143,000 of previously charged off loans in the first quarter of 2019, for a net charge off total of $268,000, or 0.14% of average 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. In the first quarter of 2019, the portfolio risk indicators improved and the amount of loans outstanding decreased slightly, resulting in the need for a decrease in the amount of ALLL required. The net charge offs of $268,000 enabled us to achieve the required ALLL without recording a negative provision expense. The allowance includes $466,000 of specific allocations and $7.0 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 decreased $11,671,000, or 308.4% compared to the first quarter of 2018. Excluding securities losses in both periods, non-interest income decreased $126,000, or 3.2%. Wealth Management income, Service Charges on Deposit Accounts, Debit Card income, and Bank Owned Life Insurance income all decreased. Origination fees on mortgage loans sold and Other non-interest income increased slightly.

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Other Expenses – Total non-interest expenses increased $518,000, or 5.3% compared to the first quarter of 2018. Salaries and Employee Benefits increased $102,000, or 1.7% mainly because workers’ compensation insurance increased due to a refund received in the first quarter of 2018. Professional fees increased $249,000, or 41.9% due to higher legal and accounting fees. Other insurance increased $297,000 primarily due to costs related to settling post retirement death benefits with former directors and officers.

As a result of the above activity, the Loss Before Income Taxes in the first quarter of 2019 was $6,579,000, a decrease of $11,207,000 compared to the pre-tax profit of $4,628,000 in the first quarter of 2018. The Company recorded a federal income tax benefit of $1,438,000 in the first quarter of 2019, reflecting an effective tax rate of 21.9%, compared to the tax expense of $726,000 in the first quarter of 2018, which reflected an effective rate of 15.7%. The Net Loss for the first quarter of 2019 was $5,141,000, a decrease of 231.8% compared to the net profit of $3,902,000 in the first quarter of 2018.

Cash Flows

Cash flows provided by operating activities decreased $7,444,000 compared to the first three months of 2018 mainly due to the large loss on the sale of investment securities in 2019. The cash flow from investing activities increased $409,049 compared to 2018 due to the sale of a substantial portion of the investment portfolio in the in the first three months of 2019. The securities were sold as the first part of a portfolio restructuring that is being completed in conjunction with our merger with First Merchants Bank, and the proceeds were still being held in cash as of the end of the first quarter of 2019. The amount of cash used for financing activities was $17.9 million lower in the first three months of 2019 than it was in the first three months of 2018 due to the large decrease in deposits and the special dividend paid in the first three months of 2018. In the first three months of 2019, the cash provided by investing activities greatly exceeded the cash used for operating and financing activities, and the amount of cash and cash equivalents increased by $381.0 million during the period. In the first three months of 2018, the cash used for investing and financing activities exceeded the cash provided by operating activities, resulting in a decrease of $38.5 million in cash and cash equivalents during the first three months of 2018. As we redeploy the proceeds from the investment securities sales in 2019 we expect cash flows from investing activities to exceed the cash provided by operating activities, resulting in a decrease from our current level of cash and cash equivalents.

Liquidity and Capital

The Company believes it has sufficient liquidity to fund its lending activity and allow for fluctuations in deposit levels. The high level of cash and cash equivalents ensures that the Company can meet its liquidity without utilizing any of its external sources of liquidity. External sources of liquidity include a Federal funds line that has been established with our correspondent bank and Repurchase Agreements with money center banks that allow us to pledge securities as collateral for borrowings. As of March 31, 2019, the Bank was utilizing $10 million of its authorized limit of $275 million with the Federal Home Loan Bank of Indianapolis, and none of its $25 million federal funds line with a correspondent bank. The Company periodically draws on its 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 three months of 2019 the Company was in compliance with its Funds Management Policy regarding liquidity and capital.

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Total stockholders’ equity of the Company was $130.3 million at March 31, 2019 and $127.7 million at December 31, 2018. Retained earnings decreased $7.4 million due to the year to date loss of $5.1 million and the dividends paid of $2.3 million. The Accumulated Other Comprehensive Income (Loss) (“AOCI” or “AOCL”) increased because the unrealized losses on Available for Sale securities made up the largest portion of the AOCL as of December 31, 2018, and most of those losses were realized when the investment portfolio was sold. Total equity increased $2.6 million while total assets decreased $3.4 million, so the ratio of equity to assets increased from 9.55% at December 31, 2018 to 9.77% at March 31, 2019.

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.

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

	Actual					Minimum to Qualify as Well Capitalized
	Amount		Ratio			Amount		Ratio
As of March 31, 2019:
Total Capital to Risk-Weighted Assets
Consolidated	$	137,880		15.80	%	$	87,258		10.0	%
Monroe Bank & Trust		136,149		15.63	%		87,120		10.0	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		130,042		14.90	%		69,806		8.0	%
Monroe Bank & Trust		128,311		14.73	%		69,696		8.0	%
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated		130,042		14.90	%		56,718		6.5	%
Monroe Bank & Trust		128,311		14.73	%		56,628		6.5	%
Tier 1 Capital to Average Assets
Consolidated		130,042		9.66	%		67,292		5.0	%
Monroe Bank & Trust		128,311		9.55	%		67,211		5.0	%

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	Actual					Minimum to Qualify as Well Capitalized
	Amount		Ratio			Amount		Ratio
As of December 31, 2018:
Total Capital to Risk-Weighted Assets
Consolidated	$	145,480		15.79	%	$	92,111		10.0	%
Monroe Bank & Trust		143,583		15.61	%		91,976		10.0	%
Tier 1 Capital to Risk-Weighted Assets
Consolidated		137,374		14.91	%		73,689		8.0	%
Monroe Bank & Trust		135,477		14.73	%		73,580		8.0	%
Common Equity Tier 1 Capital to Risk-Weighted Assets
Consolidated		137,374		14.91	%		59,872		6.5	%
Monroe Bank & Trust		135,477		14.73	%		59,784		6.5	%
Tier 1 Capital to Average Assets
Consolidated		137,374		10.28	%		66,824		5.0	%
Monroe Bank & Trust		135,477		10.15	%		66,741		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 by estimating the effect of changes in interest rates on its projected net interest income and the economic value of its equity. The sale of a large portion of its investment portfolio in the first quarter of 2019 significantly changed the Bank’s interest rate risk position.

Forward-Looking Statements

Certain statements contained herein are not based on historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements which are based on various assumptions (some of which are beyond the Company's control), may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate," "anticipate," "continue," or similar terms or variations on those terms, or the negative of these terms. Actual results could differ materially from those set forth in forward-looking statements, due to a variety of factors, including, but not limited to, those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset/liability management, changes in the financial and securities markets, including changes with respect to the market value of our financial assets, the availability of and costs associated with sources of liquidity, and the ability of the Company to resolve or dispose of problem loans.

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

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Each quarter, the Asset and Liability Committee (ALCO), which includes the senior management of the Bank and a non executive member of the board of directors, estimates the effect of interest rate changes on the projected net interest income of the Bank. The sensitivity of the Bank’s net interest income to changes in interest rates is measured by using a computer based simulation model to estimate the impact on earnings of increases of 100, 200, 300, and 400 basis points and decreases of 100, 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. In the first quarter of 2019, the Bank’s interest rate risk exceeded its policy limits.

The ALCO also monitors interest rate risk by estimating the effect of changes in interest rates on the economic value of the Bank’s equity each quarter. The economic value of the Bank’s equity is first determined by subtracting the fair value of the Bank’s liabilities from the fair value of the Bank’s assets. The Bank estimates the interest rate risk by calculating the effect of market interest rate changes on that economic value of its equity. For this analysis, the Bank assumes immediate parallel shifts of plus 100, 200, 300, and 400 basis points and minus 100, 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 tables below summarize the net interest income sensitivity as of March 31, 2019 and December 31, 2018:

	Base		Rates			Rates			Rates			Rates			Rates			Rates			Rates
(Dollars in Thousands)	Projection		Up 1%			Up 2%			Up 3%			Up 4%			Down 1%			Down 2%			Down 3%
March 31, 2019 12 Month Projection
Interest Income	$	50,880	$	56,898		$	62,893		$	68,858		$	74,715		$	44,687		$	38,300		$	35,904
Interest Expense		2,788		4,510			6,232			7,954			9,676			1,464			1,111			1,107
Net Interest Income	$	48,092	$	52,388		$	56,661		$	60,904		$	65,039		$	43,223		$	37,189		$	34,797
Percent Change From Base Projection				8.9	%		17.8	%		26.6	%		35.2	%		-10.1	%		-22.7	%		-27.6	%
ALCO Policy Limit (+/-)				10.0	%		15.0	%		20.0	%		25.0	%		10.0	%		15.0	%		20.0	%

	Base		Rates			Rates			Rates			Rates			Rates			Rates			Rates
(Dollars in Thousands)	Projection		Up 1%			Up 2%			Up 3%			Up 4%			Down 1%			Down 2%			Down 3%
December 31, 2018 12 Month Projection
Interest Income	$	52,131	$	54,672		$	57,191		$	59,685		$	62,046		$	49,619		$	46,524		$	45,265
Interest Expense		2,755		4,444			6,133			7,822			9,511			1,488			1,134			1,121
Net Interest Income	$	49,376	$	50,228		$	51,058		$	51,863		$	52,535		$	48,131		$	45,390		$	44,144
Percent Change From Base Projection				1.7	%		3.4	%		5.0	%		6.4	%		-2.5	%		-8.1	%		-10.6	%
ALCO Policy Limit (+/-)				10.0	%		15.0	%		20.0	%		30.0	%		10.0	%		15.0	%		20.0	%

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Due to the large amount of cash held in variable rate deposits at the Federal Reserve Bank, the increase in Net Interest Income in the 2%, 3%, and 4% rising rate scenarios exceeded the Bank’s policy limits, and the decrease in Net Interest Income in the 1%, 2%, and 3% decreasing rate scenarios also exceeded the Bank’s policy limits. Management is in the process of reinvesting the cash in investment securities that will reduce the risk to acceptable levels.

The tables below summarize the amount of interest rate risk to the economic value of the Bank’s equity as of March 31, 2019 and December 31, 2018:

	Economic Value at March 31, 2019
	Rates
(Dollars in Millions)	Base		Up 1%			Up 2%			Up 3%			Up 4%			Down 1%			Down 2%			Down 3%
Assets	$	1,322,924	$	1,309,444		$	1,296,248		$	1,283,195		$	1,270,260		$	1,335,213		$	1,346,016		$	1,354,916
Liabilities		1,132,425		1,106,344			1,081,280			1,057,184			1,034,011			1,160,539			1,192,309			1,196,923
Stockholders' Equity	$	190,499	$	203,100		$	214,968		$	226,011		$	236,249		$	174,674		$	153,707		$	157,993
Change in Equity				6.6	%		12.8	%		18.6	%		24.0	%		-8.3	%		-19.3	%		-17.1	%
ALCO Policy Limit (+/-)				10.0	%		20.0	%		30.0	%		40.0	%		10.0	%		20.0	%		30.0	%

	Economic Value at December 31, 2018
	Rates
(Dollars in Millions)	Base		Up 1%			Up 2%			Up 3%			Up 4%			Down 1%			Down 2%			Down 3%
Assets	$	1,329,149	$	1,298,132		$	1,268,967		$	1,241,032		$	1,214,084		$	1,357,942		$	1,385,228		$	1,399,592
Liabilities		1,129,827		1,103,978			1,079,135			1,055,251			1,032,280			1,157,675			1,189,053			1,197,122
Stockholders' Equity	$	199,322	$	194,154		$	189,832		$	185,781		$	181,804		$	200,267		$	196,175		$	202,470
Change in Equity				-2.6	%		-4.8	%		-6.8	%		-8.8	%		0.5	%		-1.6	%		1.6	%
ALCO Policy Limit (+/-)				10.0	%		20.0	%		30.0	%		40.0	%		10.0	%		20.0	%		30.0	%

The Economic Value of Equity analysis measures market risk by estimating the changes in the economic values of the Bank’s equity caused by changes in interest rates. This analysis indicates that moving assets from long term fixed investment securities to variable rate overnight deposits changed the market risk of our balance sheet, however, the estimated variability of the economic value of equity was within the Bank’s established policy limits.

Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of March 31, 2019, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of March 31, 2019, in alerting them in a timely manner to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings.

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended March 31, 2019, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

-29-

Part II Other Information

Item 1. Legal Proceedings

Except as set forth in the Company's Annual Report on Form 10-K originally filed with the SEC on March 18, 2019 (the "2018 10-K"), neither the Company nor its subsidiaries are a party to, nor is any of their property the subject of any material pending legal proceedings other than ordinary routine litigation incidental to their respective businesses, nor are any such proceedings known to be contemplated by governmental authorities. There have been no material developments with respect to any of the matters referenced in the 2018 10-K since the filing thereof.

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, 2018.

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 March 31, 2019, 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.

-30-

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.

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

-31-

Signatures

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

			MBT Financial Corp.
			(Registrant)
May 10, 2019	By	/s/  H. Douglas Chaffin
Date			H. Douglas Chaffin
			President &
			Chief Executive Officer
May 10, 2019	By	/s/  John L. Skibski
Date			John L. Skibski
			Executive Vice President and
			Chief Financial Officer

-32-

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, H. Douglas Chaffin, certify that:

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

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2019	/s/ H. Douglas Chaffin
	H. Douglas Chaffin
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, John L. Skibski, certify that:

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

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)     Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)     Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)     Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)     Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)     All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)     Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 10, 2019	/s/ John L. Skibski
	John L. Skibski
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MBT Financial Corp. (the "Company") on Form 10-Q for the period ending March 31, 2019 as filed with the Securities and Exchange Commission (the "Report"), I, H. Douglas Chaffin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

/s/ H. Douglas Chaffin                     

H. Douglas Chaffin

Chief Executive Officer

May 10, 2019

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

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MBT Financial Corp. (the "Company") on Form 10-Q for the period ending March 31, 2019 as filed with the Securities and Exchange Commission (the "Report"), I, John L. Skibski, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)     The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

/s/ John L. Skibski                     

John L. Skibski

Chief Financial Officer

May 10, 2019

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	3 Months Ended
	Mar. 31, 2019	May 09, 2019
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	true
Entity Common Stock, Shares Outstanding (in shares)		23,036,758
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Cash and due from banks
Non-interest bearing	$ 18,426	$ 17,058
Interest bearing	414,381	34,784
Total cash and cash equivalents	432,807	51,842
Interest Bearing Time Deposits in Other Banks	600	10,796
Securities - Available for Sale	30,133	401,613
Equity Securities	7,450	7,415
Loans held for sale		488
Loans	766,877	768,660
Allowance for Loan Losses	(7,503)	(7,771)
Loans - Net	759,374	760,889
Accrued interest receivable and other assets	16,662	16,743
Other real estate owned	58	692
Bank Owned Life Insurance	59,901	59,563
Premises and Equipment - Net	26,480	26,850
Total assets	1,333,465	1,336,891
Deposits
Non-interest bearing	290,929	297,704
Interest-bearing	892,220	885,206
Total deposits	1,183,149	1,182,910
Federal Home Loan Bank advances	10,000	10,000
Interest payable and other liabilities	10,028	16,314
Total liabilities	1,203,177	1,209,224
STOCKHOLDERS' EQUITY
Common stock (no par value; 50,000,000 shares authorized, 23,036,758 and 23,033,715 shares issued and outstanding)	23,565	23,453
Retained earnings	106,477	113,921
Accumulated other comprehensive loss	246	(9,707)
Total stockholders' equity	130,288	127,667
Total liabilities and stockholders' equity	$ 1,333,465	$ 1,336,891

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares $ / shares in Thousands	Mar. 31, 2019	Dec. 31, 2018
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)	23,036,758	23,033,715
Common stock, shares outstanding (in shares)	23,036,758	23,033,715

XML

Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Interest Income
Interest and fees on loans	$ 9,571	$ 8,217
Interest on investment securities-
Tax-exempt	296	404
Taxable	1,174	2,210
Interest on balances due from banks	1,209	125
Total interest income	12,250	10,956
Interest Expense
Interest on deposits	568	414
Interest on borrowed funds	64	6
Total interest expense	632	420
Net Interest Income	11,618	10,536
Recovery Of Loan Losses		(100)
Net Interest Income After Net Interest Income After Recovery Of Loan Losses	11,618	10,636
Other Income
Net gain (loss) on sales and redemptions of securities available for sale	(11,646)	(101)
Net gain (loss) on sales of Other Real Estate Owned	9	19
Bank owned life insurance income	338	353
Other	659	600
Total other income	(7,887)	3,784
Other Expenses
Salaries and employee benefits	6,064	5,962
Occupancy expense	729	721
Equipment expense	913	793
Marketing expense	292	377
Professional fees	843	594
EFT/ATM expense	291	259
Other Real Estate Owned expenses	22	15
FDIC Deposit Insurance Assessment	89	107
Bonding and other insurance expense	429	132
Telephone expense	80	75
Other	558	757
Total other expenses	10,310	9,792
Income (Loss) Before Income Taxes	(6,579)	4,628
Income Tax Expense (Benefit)	(1,438)	726
Net Income	(5,141)	3,902
Other Comprehensive Income - Net of Tax
Unrealized gains (losses) on securities	387	(4,204)
Reclassification adjustment for (gains) losses included in net income	9,200	80
Postretirement benefit liability	366	32
Effect of accounting change on equity securities		(49)
Total Other Comprehensive Income (Loss) - Net of Tax	9,953	(4,141)
Comprehensive Income (Loss)	$ 4,812	$ (239)
Basic Earnings (Loss) Per Common Share (in dollars per share)	$ (0.22)	$ 0.17
Diluted Earnings (Loss) Per Common Share (in dollars per share)	(0.22)	0.17
Dividends Declared Per Share of Common Stock (in dollars per share)	$ 0.10	$ 0.66
Fiduciary and Trust [Member]
Other Income
Noninterest income	$ 1,161	$ 1,185
Noninterest income	1,161	1,185
Deposit Account [Member]
Other Income
Noninterest income	822	946
Noninterest income	822	946
Debit Card [Member]
Other Income
Noninterest income	701	720
Noninterest income	701	720
Mortgage Banking [Member]
Other Income
Noninterest income	69	62
Noninterest income	$ 69	$ 62

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, 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)	39,825
SOSARs exercised, net of shares redeemed for taxes	$ (178)				(178)
Employee Stock Purchase Plan and other stock issued (in shares)	18,092
Employee Stock Purchase Plan and other stock issued	$ 189				189
Equity Compensation	216		19		235
Deferred Directors' Compensation	(67)				(67)
Dividends declared		(15,145)			(15,145)
Net Income (Loss)		3,902			3,902
Other comprehensive income - net of tax				(4,092)	(4,092)
Balance (in shares) at Mar. 31, 2018	22,973,261
Balance at Mar. 31, 2018	$ 23,078	106,330	(59)	(11,847)	117,502
Restricted stock awards, net of shares redeemed for taxes (in shares)	7,500
Restricted stock awards, net of shares redeemed for taxes	$ 78		(78)
Tax benefit from exercise of options
Cumulative Effect Adjustment (ASU 2016-01)		49		(49)
Balance (in shares) at Dec. 31, 2018	23,033,715
Balance at Dec. 31, 2018	$ 23,453	113,921		(9,707)	127,667
SOSARs exercised, net of shares redeemed for taxes (in shares)	186
SOSARs exercised, net of shares redeemed for taxes	$ (1)				(1)
Employee Stock Purchase Plan and other stock issued (in shares)	2,857
Employee Stock Purchase Plan and other stock issued	$ 30				30
Equity Compensation	93				93
Deferred Directors' Compensation	(10)				(10)
Dividends declared		(2,303)			(2,303)
Net Income (Loss)		(5,141)			(5,141)
Other comprehensive income - net of tax				9,953	9,953
Balance (in shares) at Mar. 31, 2019	23,036,758
Balance at Mar. 31, 2019	$ 23,565	$ 106,477		$ 246	$ 130,288

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Retained Earnings [Member]
Dividends declared (in dollars per share)	$ 0.10	$ 0.66
Dividends declared (in dollars per share)	$ 0.10	$ 0.66

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash Flows from Operating Activities
Net Income (Loss)	$ (5,141)	$ 3,902
Adjustments to reconcile net income to net cash from operating activities
Recovery Of Loan Losses		(100)
Depreciation	346	370
Net amortization of investment premium and discount	259	576
Adjustment for assets carried at fair market value	(35)	36
Net decrease in interest payable and other liabilities	(5,835)	(1,434)
Net decrease (increase) in interest receivable and other assets	(2,550)	2,555
Equity based compensation expense	93	235
Net loss on sale/settlement of securities	11,646	101
Increase in cash surrender value of life insurance	(338)	(352)
Net cash provided by (used for) operating activities	(1,555)	5,889
Cash Flows from Investing Activities
Proceeds from maturities of interest bearing time deposits in other banks	750	1,000
Proceeds from maturities and redemptions of investment securities held to maturity		241
Proceeds from maturities and redemptions of investment securities available for sale	5,278	12,666
Proceeds from sales of investment securities available for sale	367,161	19,181
Proceeds from sales of interest bearing time deposits in other banks	9,446
Net (increase) decrease in loans	2,003	(27,140)
Proceeds from sales of other real estate owned	643	347
Proceeds from sales of other assets		40
Purchase of investment securities available for sale	(728)	(30,799)
Purchase of bank premises and equipment		(32)
Net cash used for (provided by) investing activities	384,553	(24,496)
Cash Flows from Financing Activities
Net increase (decrease) in deposits	239	(4,801)
Issuance of common stock	30	189
Stock redeemed for tax withholding - stock based compensation	1	(178)
Dividends paid	(2,303)	(15,145)
Net cash used for financing activities	(2,033)	(19,935)
Net Decrease in Cash and Cash Equivalents	380,965	(38,542)
Cash and Cash Equivalents at Beginning of Period	51,842	53,010
Cash and Cash Equivalents at End of Period	432,807	14,468
Supplemental Cash Flow Information
Cash paid for interest	619	420
Cash paid for federal income taxes
Supplemental Schedule of Non Cash Investing Activities
Transfer of loans to other real estate owned		144
Transfer of loans to other assets

XML

Note 1 - Basis of Presentation and Accounting Policies

3 Months Ended

Mar. 31, 2019

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. The merger was approved at a special meeting of the Company’s shareholders on

February 14, 2019

and the transaction is expected to be completed in the

second

quarter of

2019.

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

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.  Adoption of the standard did

not

have a material effect on the Company’s financial statements.

XML

Note 2 - Earnings Per Share

3 Months Ended

Mar. 31, 2019

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 March 31,
	2019			2018
Basic
Net income (loss)	$	(5,141,000	)	$	3,902,000
Average common shares outstanding		23,035,369			22,943,736
Earnings (Loss) per common share - basic	$	(0.22	)	$	0.17
Diluted
Net income (loss)	$	(5,141,000	)	$	3,902,000
Average common shares outstanding		23,035,369			22,943,736
Equity compensation		-			119,464
Average common shares outstanding - diluted		23,035,369			23,063,200
Earnings per common share - diluted	$	(0.22	)	$	0.17

XML

Note 3 - Stock-based Compensation Plan

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

3.

STOCK BASED COMPENSATION

Stock Only Stock Appreciation Rights (SOSARs)

– 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, 2019		347,379		$	8.78
Granted		-			-
Exercised		(2,166	)		9.44
Forfeited		-			-
Expired		-			-
SOSARs Outstanding, March 31, 2019		345,213		$	8.78
SOSARs Exercisable, March 31, 2019		152,879		$	6.41

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

March 31, 2019

was

$10.02.

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

March 31, 2019

was

$552,000,

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

55,079

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.

The total expense for equity based compensation was

$93,000

in the

first

quarter of

2019

and

$236,000

in the

first

quarter of

2018.

The unrecognized compensation expense for all equity based compensation plans is

$413,000

as of

March 31, 2019.

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

1.42

years.

XML

Note 4 - Loans

3 Months Ended

Mar. 31, 2019

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):

	March 31,		December 31,
	2019		2018
Residential real estate loans	$	231,074	$	230,008
Commercial and Construction real estate loans		306,593		306,694
Agriculture and agricultural real estate loans		22,087		22,486
Commercial and industrial loans		162,446		162,026
Loans to individuals for household, family, and other personal expenditures		44,677		47,446
Total loans, gross	$	766,877	$	768,660
Less: Allowance for loan losses		7,503		7,771
Net Loans	$	759,374	$	760,889

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):

	March 31,			December 31,
	2019			2018
Nonaccrual loans	$	7,134		$	5,566
Loans 90 days past due and accruing		61			-
Restructured loans		3,418			4,495
Total nonperforming loans	$	10,613		$	10,061
Other real estate owned		58			692
Other assets		-			-
Total nonperforming assets	$	10,671		$	10,753
Nonperforming assets to total assets		0.80	%		0.80	%
Allowance for loan losses to nonperforming loans		70.70	%		77.24	%

XML

Note 5 - Allowance For Loan Losses

3 Months Ended

Mar. 31, 2019

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

months ended

March 31, 2019

was as follows (

000s

omitted):

	Agriculture and Agricultural Real Estate		Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the three months ended March 31, 2019
Beginning Balance	$	205	$	1,266		$	3,012		$	184		$	1,218		$	1,886		$	7,771
Charge-offs		-		(252	)		(151	)		-			-			(8	)		(411	)
Recoveries		-		27			24			12			75			5			143
Provision		35		720			153			(158	)		(82	)		(668	)		-
Ending balance	$	240	$	1,761		$	3,038		$	38		$	1,211		$	1,215		$	7,503
Allowance for loan losses as of March 31, 2019
Ending balance individually evaluated for impairment	$	-	$	138		$	118		$	-		$	83		$	127		$	466
Ending balance collectively evaluated for impairment		240		1,623			2,920			38			1,128			1,088			7,037
Ending balance	$	240	$	1,761		$	3,038		$	38		$	1,211		$	1,215		$	7,503
Loans as of March 31, 2019
Ending balance individually evaluated for impairment	$	2,556	$	287		$	3,503		$	32		$	3,051		$	401		$	9,830
Ending balance collectively evaluated for impairment		19,531		162,159			275,149			27,909			228,023			44,276			757,047
Ending balance	$	22,087	$	162,446		$	278,652		$	27,941		$	231,074		$	44,677		$	766,877

Activity in the allowance for loan losses during the

three

months ended

March 31, 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 March 31, 2018
Beginning Balance	$	195	$	1,443		$	3,297		$	491		$	1,279		$	961		$	7,666
Charge-offs		-		-			(3	)		-			(7	)		(2	)		(12	)
Recoveries		2		15			240			20			42			12			331
Provision		13		(61	)		(446	)		(50	)		(225	)		669			(100	)
Ending balance	$	210	$	1,397		$	3,088		$	461		$	1,089		$	1,640		$	7,885
Allowance for loan losses as of March 31, 2018
Ending balance individually evaluated for impairment	$	1	$	146		$	315		$	354		$	131		$	199		$	1,146
Ending balance collectively evaluated for impairment		209		1,251			2,773			107			958			1,441			6,739
Ending balance	$	210	$	1,397		$	3,088		$	461		$	1,089		$	1,640		$	7,885
Loans as of March 31, 2018
Ending balance individually evaluated for impairment	$	1,139	$	260		$	3,720		$	1,574		$	4,566		$	424		$	11,683
Ending balance collectively evaluated for impairment		21,180		131,642			266,608			18,354			218,752			54,421			710,957
Ending balance	$	22,319	$	131,902		$	270,328		$	19,928		$	223,318		$	54,845		$	722,640

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

March 31, 2019

are as follows (

000s

omitted):

Credit Quality Indicators as of March 31, 2019
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	$	-	$	1,731	$	44	$	11,948	$	147,437	$	39,747	$	200,907
10		-		3,998		-		-		-		-		3,998
20		64		116		185		-		-		-		365
30		267		46,455		24,609		-		1,363		3,424		76,118
40		13,977		103,187		219,492		13,051		73,934		1,495		425,136
45		1,589		1,909		19,787		1,360		2,719		-		27,364
50		3,755		4,582		6,866		245		2,590		-		18,038
55		72		255		2,363		-		693		-		3,383
60		2,363		213		5,306		1,337		2,338		11		11,568
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	22,087	$	162,446	$	278,652	$	27,941	$	231,074	$	44,677	$	766,877
Performing	$	19,490	$	162,181	$	275,374	$	27,909	$	227,091	$	44,219	$	756,264
Nonperforming		2,597		265		3,278		32		3,983		458		10,613
Total	$	22,087	$	162,446	$	278,652	$	27,941	$	231,074	$	44,677	$	766,877

The portfolio segments in each credit risk grade as of

December 31, 2018

are as follows (

000s

omitted):

Credit Quality Indicators as of December 31, 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	$	-	$	3,652	$	60	$	12,878	$	147,167	$	42,259	$	206,016
10		-		6,877		-		-		-		-		6,877
20		64		117		196		-		-		-		377
30		481		47,263		24,899		-		1,268		3,556		77,467
40		16,038		97,598		219,079		11,555		74,141		1,618		420,029
45		1,472		2,024		19,462		1,381		2,623		-		26,962
50		1,852		3,851		9,084		249		1,896		-		16,932
55		-		305		2,132		-		713		-		3,150
60		2,579		339		4,380		1,337		2,200		13		10,848
70		-		-		-		-		-		-		-
80		-		-		2		-		-		-		2
90		-		-		-		-		-		-		-
Total	$	22,486	$	162,026	$	279,294	$	27,400	$	230,008	$	47,446	$	768,660
Performing	$	20,305	$	161,749	$	276,021	$	27,368	$	226,119	$	47,037	$	758,599
Nonperforming		2,181		277		3,273		32		3,889		409		10,061
Total	$	22,486	$	162,026	$	279,294	$	27,400	$	230,008	$	47,446	$	768,660

Loans are considered past due when contractually required payment of interest or principal has

not

been received. The amount classified as past due is the entire principal balance outstanding of the loan,

not

just the amount of payments that are past due. The following is a summary of past due loans as of

March 31, 2019

and

December 31, 2018 (

000s

omitted):

March 31, 2019	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	$	264	$	16	$	1,719	$	1,999	$	20,088	$	22,087	$	-
Commercial		149		21		46	$	216		162,230		162,446		15
Commercial Real Estate		914		936		636		2,486		276,166		278,652		-
Construction Real Estate		-		-		32		32		27,909		27,941		-
Residential Real Estate		1,810		81		387		2,278		228,796		231,074		-
Consumer and Other		153		50		47		250		44,427		44,677		46
Total	$	3,290	$	1,104	$	2,867	$	7,261	$	759,616	$	766,877	$	61

December 31, 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	$	632	$	1,235	$	-	$	1,867	$	20,619	$	22,486	$	-
Commercial		186		110		31		327		161,699		162,026		-
Commercial Real Estate		804		-		1,849		2,653		276,641		279,294		-
Construction Real Estate		-		-		-		-		27,400		27,400		-
Residential Real Estate		1,217		340		376		1,933		228,075		230,008		-
Consumer and Other		79		13		-		92		47,354		47,446		-
Total	$	2,918	$	1,698	$	2,256	$	6,872	$	761,788	$	768,660	$	-

Loans are placed on non-accrual status when, in the opinion of Management, the collection of additional interest is doubtful. Loans are automatically placed on non-accrual status upon becoming

ninety

days past due, however, loans

may

be placed on non-accrual status regardless of whether or

not

they are past due. All cash received on non-accrual loans is applied to the principal balance. Loans are considered for return to accrual status on an individual basis when all principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The following is a summary of non-accrual loans as of

March 31, 2019

and

December 31, 2018 (

000s

omitted):

	March 31, 2019		December 31, 2018
Agriculture and Agricultural Real Estate	$	2,363	$	1,624
Commercial		85		106
Commercial Real Estate		3,277		2,907
Construction Real Estate		32		5
Residential Real Estate		1,366		912
Consumer and Other		11		12
Total	$	7,134	$	5,566

For loans deemed to be impaired due to an expectation that all contractual payments will probably

not

be received, impairment is measured by comparing the Bank’s recorded investment in the loan to the present value of expected cash flows discounted at the loan’s effective interest rate, the fair value of the collateral, or the loan’s observable market price.

The following is a summary of impaired loans as of

March 31, 2019

and

March 31,

and

December 31, 2018 (

000s

omitted):

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		Interest Income Recognized in the Three Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	2,556	$	2,555	$	-	$	2,595	$	(14	)
Commercial		67		67		-		91		1
Commercial Real Estate		1,899		2,116		-		2,076		61
Construction Real Estate		32		67		-		52		-
Residential Real Estate		2,660		2,822		-		2,842		39
Consumer and Other		134		135		-		137		2
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-
Commercial		220		229		138		231		2
Commercial Real Estate		1,604		1,697		118		1,698		5
Construction Real Estate		-		-		-		-		-
Residential Real Estate		391		403		83		405		5
Consumer and Other		267		267		127		270		3
Total:
Agriculture and Agricultural Real Estate	$	2,556	$	2,555	$	-	$	2,595	$	(14	)
Commercial		287		296		138		322		3
Commercial Real Estate		3,503		3,813		118		3,774		66
Construction Real Estate		32		67		-		52		-
Residential Real Estate		3,051		3,225		83		3,247		44
Consumer and Other		401		402		127		407		5
Total	$	9,830	$	10,358	$	466	$	10,397	$	104

	Recorded Investment as of December 31, 2018		Unpaid Principal Balance as of December 31, 2018		Related Allowance as of December 31, 2018		Average Recorded Investment for the Three Months Ended March 31, 2018		Interest Income Recognized in the Three Months Ended March 31, 2018
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	2,388	$	2,384	$	-	$	820	$	11
Commercial		-		-		-		-		-
Commercial Real Estate		1,863		1,871		-		1,706		21
Construction Real Estate		-		-		-		-		-
Residential Real Estate		3,015		3,174		-		4,129		52
Consumer and Other		58		59		-		84		1
With an allowance recorded:
Agriculture and Agricultural Real Estate		234		234		-		240		3
Commercial		226		234		142		266		3
Commercial Real Estate		1,299		1,380		146		2,064		32
Construction Real Estate		32		67		4		1,597		19
Residential Real Estate		306		316		94		660		7
Consumer and Other		339		339		143		345		4
Total:
Agriculture and Agricultural Real Estate	$	2,622	$	2,618	$	-	$	1,060	$	14
Commercial		226		234		142		266		3
Commercial Real Estate		3,162		3,251		146		3,770		53
Construction Real Estate		32		67		4		1,597		19
Residential Real Estate		3,321		3,490		94		4,789		59
Consumer and Other		397		398		143		429		5
Total	$	9,760	$	10,058	$	529	$	11,911	$	153

The Bank

may

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

may

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

Loans that have been classified as TDRs during the

three

month periods ended

March 31, 2019

and

March 31, 2018

are as follows (

000s

omitted from dollar amounts):

	Three months ended						Three months ended
	March 31, 2019						March 31, 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		2	$	77	$	16		-	$	-	$	-
Commercial		-		-		-		-		-		-
Commercial Real Estate		1		39		36		1		283		283
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		-		-		-		1		150		150
Consumer and Other		1		15		14		-		-		-
Total		4	$	131	$	66		2	$	433	$	433

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

three

month periods ended

March 31, 2019

and

March 31, 2018

that subsequently defaulted during the

three

month periods ended

March 31, 2019

and

March 31, 2018,

respectively.

	Three months ended				Three months ended
	March 31, 2019				March 31, 2018
	Number of Contracts		Post- Modification Recorded Principal Balance		Number of Contracts		Post- Modification Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-		-	$	-
Commercial		-		-		-		-
Commercial Real Estate		-		-		1		283
Construction Real Estate		-		-		-		-
Residential Real Estate		-		-		-		-
Consumer and Other		-		-		-		-
Total		-	$	-		1	$	283

The Company has allocated

$417,000

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

March 31, 2019.

In addition, there were

no

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

March 31, 2019

and

March 31, 2018.

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Note 6 - Investment Securities

3 Months Ended

Mar. 31, 2019

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

March 31, 2019

and

December 31, 2018 (

000s

omitted):

	Available for Sale
	March 31, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions		29,127		626		(116	)		29,637
Corporate Debt Securities		500		-		(4	)		496
	$	29,627	$	626	$	(120	)	$	30,133

	Available for Sale
	December 31, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	134,160	$	1	$	(5,926	)	$	128,235
Mortgage Backed Securities issued by U.S. Government Agencies		196,224		32		(5,702	)		190,554
Obligations of States and Political Subdivisions		69,309		604		(804	)		69,109
Corporate Debt Securities		13,552		173		(10	)		13,715
	$	413,245	$	810	$	(12,442	)	$	401,613

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

March 31, 2019

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.

	Available for Sale
			Estimated
	Amortized		Market
	Cost		Value
Contractual maturity in
1 year or less	$	8,462	$	8,503
After 1 year through five years		15,112		15,310
After 5 years through 10 years		5,387		5,661
After 10 years		666		659
Total	$	29,627	$	30,133

The investment securities portfolio is evaluated for impairment throughout the year. Impairment is recorded against individual securities, unless the decrease in fair value is attributable to interest rates or the lack of an active market, and Management determines that the Company does

not

intend to sell the investments and it is

not

more likely than

not

that the Company will be required to sell the investments before a recovery of their amortized costs bases, which

may

be maturity. The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses (in thousands), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at 

March 31, 2019 

and

December 31, 2018.

March 31, 2019
	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 States and Political Subdivisions		7,915		116		-		-		7,915		116
Corporate Debt Securities		496		4		-		-		496		4
	$	8,411	$	120	$	-	$	-	$	8,411	$	120

December 31, 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	$	3,946	$	65	$	117,750	$	5,861	$	121,696	$	5,926
Mortgage Backed Securities issued by U.S. Government Agencies		19,945		131		165,604		5,571		185,549		5,702
Obligations of States and Political Subdivisions		32,260		573		5,955		231		38,215		804
Corporate Debt Securities		490		10		-		-		490		10
	$	56,641	$	779	$	289,309	$	11,663	$	345,950	$	12,442

The amount of investment securities issued by government agencies, states, and political subdivisions with unrealized losses and the amount of unrealized losses on those investment securities are primarily the result of market interest rates and

not

the result of the credit quality of the issuers of the securities. Because the Company does

not

intend to sell the investments and it is

not

more likely than

not

that the Company will be required to sell the investments before recovery of their amortized cost bases, which

may

be maturity, the Company does

not

consider those investments to be other than temporarily impaired at

March 31, 2019.

As of

March 31, 2019

and

December 31, 2018,

there were

37

and

165

securities in an unrealized loss position, respectively.

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Note 7 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2019

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

March 31, 2019

and

December 31, 2018,

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

									Total
	Carrying								Estimated
March 31, 2019	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	432,807	$	432,807	$	-	$	-	$	432,807
Time Deposits in Other Banks		600		-		-		600		600
Securities - Available for Sale
Obligations of States and Political Subdivisions		29,637		-		29,637		-		29,637
Corporate Debt Securities		496		-		496		-		496
Equity Securities		7,450		2,077		5,373		-		7,450
Loans, net		759,374		-		-		747,951		747,951
Accrued Interest Receivable		3,135		-		-		3,135		3,135
Financial Liabilities:
Noninterest Bearing Deposits		290,929		290,929		-		-		290,929
Interest Bearing Deposits		892,220		-		892,881		-		892,881
Borrowed funds
FHLB Advances		10,000		-		10,212		-		10,212
Accrued Interest Payable		77		-		-		77		77

									Total
	Carrying								Estimated
December 31, 2018	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	51,842	$	51,842	$	-	$	-	$	51,842
Time Deposits in Other Banks		10,796		-		10,548		-		10,548
Securities - Available for Sale
Obligations of U.S. Government Agencies		128,235		-		128,235		-		128,235
MBS issued by U.S. Government Agencies		190,554		-		190,554		-		190,554
Obligations of States and Political Subdivisions		69,109		-		69,109		-		69,109
Corporate Debt Securities		13,715		-		13,715		-		13,715
Equity Securities		7,415		2,042		5,373		-		7,415
Loans Held for Sale		488		-		-		502		502
Loans, net		760,889		-		-		750,249		750,249
Accrued Interest Receivable		4,413		-		-		4,413		4,413
Financial Liabilities:
Noninterest Bearing Deposits		297,704		297,704		-		-		297,704
Interest Bearing Deposits		885,206		-		885,886		-		885,886
Federal Home Loan Bank Advances		10,000		-		-		10,042		10,042
Accrued Interest Payable		65		-		-		65		65

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

March 31, 2019

or

December 31, 2018.

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)
March 31, 2019
Impaired loans	$	-	$	-	$	9,364
Other Real Estate Owned	$	-	$	-	$	58
December 31, 2018
Impaired loans	$	-	$	-	$	9,231
Other Real Estate Owned	$	-	$	-	$	692

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.

XML

Note 8 - Financial Instruments With Off-balance Sheet Risk

3 Months Ended

Mar. 31, 2019

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
	March 31,		December 31,
	2019		2018
Commitments to extend credit:
Unused portion of commercial lines of credit	$	119,668	$	116,119
Unused portion of credit card lines of credit		7,018		6,680
Unused portion of home equity lines of credit		36,823		34,621
Standby letters of credit and financial guarantees written		1,223		1,763
All other off-balance sheet commitments		-		-

Commitments to extend credit are agreements to lend to a customer as long as there is

no

violation of any condition established in the contract. Most commercial lines of credit are secured by real estate mortgages or other collateral, and generally have fixed expiration dates or other termination clauses. Since the lines of credit

may

expire without being drawn upon, the total committed amounts do

not

necessarily represent future cash requirements. Credit card lines of credit have various established expiration dates, but are fundable on demand. Home equity lines of credit are secured by real estate mortgages, a majority of which have

ten

year expiration dates, but are fundable on demand. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of the collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on Management’s credit evaluation of the counterparty.

Standby letters of credit written are conditional commitments issued by the Bank to guarantee the performance of a customer to a

third

party. Those guarantees are primarily issued to support public and private borrowing arrangements and other business transactions.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

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

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.  Adoption of the standard did

not

have a material effect on the Company’s financial statements.

XML

Note 2 - Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

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

	For the three months ended March 31,
	2019			2018
Basic
Net income (loss)	$	(5,141,000	)	$	3,902,000
Average common shares outstanding		23,035,369			22,943,736
Earnings (Loss) per common share - basic	$	(0.22	)	$	0.17
Diluted
Net income (loss)	$	(5,141,000	)	$	3,902,000
Average common shares outstanding		23,035,369			22,943,736
Equity compensation		-			119,464
Average common shares outstanding - diluted		23,035,369			23,063,200
Earnings per common share - diluted	$	(0.22	)	$	0.17

XML

Note 3 - Stock-based Compensation Plan (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Share-based Payment Arrangement, Option and Stock Appreciation Rights, Activity [Table Text Block]

				Weighted Average
	SOSARs			Base Price
SOSARs Outstanding, January 1, 2019		347,379		$	8.78
Granted		-			-
Exercised		(2,166	)		9.44
Forfeited		-			-
Expired		-			-
SOSARs Outstanding, March 31, 2019		345,213		$	8.78
SOSARs Exercisable, March 31, 2019		152,879		$	6.41

XML

Note 4 - Loans (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

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

	March 31,		December 31,
	2019		2018
Residential real estate loans	$	231,074	$	230,008
Commercial and Construction real estate loans		306,593		306,694
Agriculture and agricultural real estate loans		22,087		22,486
Commercial and industrial loans		162,446		162,026
Loans to individuals for household, family, and other personal expenditures		44,677		47,446
Total loans, gross	$	766,877	$	768,660
Less: Allowance for loan losses		7,503		7,771
Net Loans	$	759,374	$	760,889

Schedule of Non-performing Assets [Table Text Block]

	March 31,			December 31,
	2019			2018
Nonaccrual loans	$	7,134		$	5,566
Loans 90 days past due and accruing		61			-
Restructured loans		3,418			4,495
Total nonperforming loans	$	10,613		$	10,061
Other real estate owned		58			692
Other assets		-			-
Total nonperforming assets	$	10,671		$	10,753
Nonperforming assets to total assets		0.80	%		0.80	%
Allowance for loan losses to nonperforming loans		70.70	%		77.24	%

XML

Note 5 - Allowance For Loan Losses (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Financing Receivable, Allowance for Credit Loss [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 March 31, 2019
Beginning Balance	$	205	$	1,266		$	3,012		$	184		$	1,218		$	1,886		$	7,771
Charge-offs		-		(252	)		(151	)		-			-			(8	)		(411	)
Recoveries		-		27			24			12			75			5			143
Provision		35		720			153			(158	)		(82	)		(668	)		-
Ending balance	$	240	$	1,761		$	3,038		$	38		$	1,211		$	1,215		$	7,503
Allowance for loan losses as of March 31, 2019
Ending balance individually evaluated for impairment	$	-	$	138		$	118		$	-		$	83		$	127		$	466
Ending balance collectively evaluated for impairment		240		1,623			2,920			38			1,128			1,088			7,037
Ending balance	$	240	$	1,761		$	3,038		$	38		$	1,211		$	1,215		$	7,503
Loans as of March 31, 2019
Ending balance individually evaluated for impairment	$	2,556	$	287		$	3,503		$	32		$	3,051		$	401		$	9,830
Ending balance collectively evaluated for impairment		19,531		162,159			275,149			27,909			228,023			44,276			757,047
Ending balance	$	22,087	$	162,446		$	278,652		$	27,941		$	231,074		$	44,677		$	766,877

	Agriculture and Agricultural Real Estate		Commercial			Commercial Real Estate			Construction Real Estate			Residential Real Estate			Consumer and Other			Total
Allowance for loan losses: For the three months ended March 31, 2018
Beginning Balance	$	195	$	1,443		$	3,297		$	491		$	1,279		$	961		$	7,666
Charge-offs		-		-			(3	)		-			(7	)		(2	)		(12	)
Recoveries		2		15			240			20			42			12			331
Provision		13		(61	)		(446	)		(50	)		(225	)		669			(100	)
Ending balance	$	210	$	1,397		$	3,088		$	461		$	1,089		$	1,640		$	7,885
Allowance for loan losses as of March 31, 2018
Ending balance individually evaluated for impairment	$	1	$	146		$	315		$	354		$	131		$	199		$	1,146
Ending balance collectively evaluated for impairment		209		1,251			2,773			107			958			1,441			6,739
Ending balance	$	210	$	1,397		$	3,088		$	461		$	1,089		$	1,640		$	7,885
Loans as of March 31, 2018
Ending balance individually evaluated for impairment	$	1,139	$	260		$	3,720		$	1,574		$	4,566		$	424		$	11,683
Ending balance collectively evaluated for impairment		21,180		131,642			266,608			18,354			218,752			54,421			710,957
Ending balance	$	22,319	$	131,902		$	270,328		$	19,928		$	223,318		$	54,845		$	722,640

Financing Receivable Credit Quality Indicators [Table Text Block]

Credit Quality Indicators as of March 31, 2019
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	$	-	$	1,731	$	44	$	11,948	$	147,437	$	39,747	$	200,907
10		-		3,998		-		-		-		-		3,998
20		64		116		185		-		-		-		365
30		267		46,455		24,609		-		1,363		3,424		76,118
40		13,977		103,187		219,492		13,051		73,934		1,495		425,136
45		1,589		1,909		19,787		1,360		2,719		-		27,364
50		3,755		4,582		6,866		245		2,590		-		18,038
55		72		255		2,363		-		693		-		3,383
60		2,363		213		5,306		1,337		2,338		11		11,568
70		-		-		-		-		-		-		-
80		-		-		-		-		-		-		-
90		-		-		-		-		-		-		-
Total	$	22,087	$	162,446	$	278,652	$	27,941	$	231,074	$	44,677	$	766,877
Performing	$	19,490	$	162,181	$	275,374	$	27,909	$	227,091	$	44,219	$	756,264
Nonperforming		2,597		265		3,278		32		3,983		458		10,613
Total	$	22,087	$	162,446	$	278,652	$	27,941	$	231,074	$	44,677	$	766,877

Credit Quality Indicators as of December 31, 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	$	-	$	3,652	$	60	$	12,878	$	147,167	$	42,259	$	206,016
10		-		6,877		-		-		-		-		6,877
20		64		117		196		-		-		-		377
30		481		47,263		24,899		-		1,268		3,556		77,467
40		16,038		97,598		219,079		11,555		74,141		1,618		420,029
45		1,472		2,024		19,462		1,381		2,623		-		26,962
50		1,852		3,851		9,084		249		1,896		-		16,932
55		-		305		2,132		-		713		-		3,150
60		2,579		339		4,380		1,337		2,200		13		10,848
70		-		-		-		-		-		-		-
80		-		-		2		-		-		-		2
90		-		-		-		-		-		-		-
Total	$	22,486	$	162,026	$	279,294	$	27,400	$	230,008	$	47,446	$	768,660
Performing	$	20,305	$	161,749	$	276,021	$	27,368	$	226,119	$	47,037	$	758,599
Nonperforming		2,181		277		3,273		32		3,889		409		10,061
Total	$	22,486	$	162,026	$	279,294	$	27,400	$	230,008	$	47,446	$	768,660

Financing Receivable, Past Due [Table Text Block]

March 31, 2019	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	$	264	$	16	$	1,719	$	1,999	$	20,088	$	22,087	$	-
Commercial		149		21		46	$	216		162,230		162,446		15
Commercial Real Estate		914		936		636		2,486		276,166		278,652		-
Construction Real Estate		-		-		32		32		27,909		27,941		-
Residential Real Estate		1,810		81		387		2,278		228,796		231,074		-
Consumer and Other		153		50		47		250		44,427		44,677		46
Total	$	3,290	$	1,104	$	2,867	$	7,261	$	759,616	$	766,877	$	61

December 31, 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	$	632	$	1,235	$	-	$	1,867	$	20,619	$	22,486	$	-
Commercial		186		110		31		327		161,699		162,026		-
Commercial Real Estate		804		-		1,849		2,653		276,641		279,294		-
Construction Real Estate		-		-		-		-		27,400		27,400		-
Residential Real Estate		1,217		340		376		1,933		228,075		230,008		-
Consumer and Other		79		13		-		92		47,354		47,446		-
Total	$	2,918	$	1,698	$	2,256	$	6,872	$	761,788	$	768,660	$	-

Financing Receivable, Nonaccrual [Table Text Block]

	March 31, 2019		December 31, 2018
Agriculture and Agricultural Real Estate	$	2,363	$	1,624
Commercial		85		106
Commercial Real Estate		3,277		2,907
Construction Real Estate		32		5
Residential Real Estate		1,366		912
Consumer and Other		11		12
Total	$	7,134	$	5,566

Impaired Financing Receivables [Table Text Block]

March 31, 2019	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment for the Three Months Ended		Interest Income Recognized in the Three Months Ended
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	2,556	$	2,555	$	-	$	2,595	$	(14	)
Commercial		67		67		-		91		1
Commercial Real Estate		1,899		2,116		-		2,076		61
Construction Real Estate		32		67		-		52		-
Residential Real Estate		2,660		2,822		-		2,842		39
Consumer and Other		134		135		-		137		2
With an allowance recorded:
Agriculture and Agricultural Real Estate		-		-		-		-		-
Commercial		220		229		138		231		2
Commercial Real Estate		1,604		1,697		118		1,698		5
Construction Real Estate		-		-		-		-		-
Residential Real Estate		391		403		83		405		5
Consumer and Other		267		267		127		270		3
Total:
Agriculture and Agricultural Real Estate	$	2,556	$	2,555	$	-	$	2,595	$	(14	)
Commercial		287		296		138		322		3
Commercial Real Estate		3,503		3,813		118		3,774		66
Construction Real Estate		32		67		-		52		-
Residential Real Estate		3,051		3,225		83		3,247		44
Consumer and Other		401		402		127		407		5
Total	$	9,830	$	10,358	$	466	$	10,397	$	104

	Recorded Investment as of December 31, 2018		Unpaid Principal Balance as of December 31, 2018		Related Allowance as of December 31, 2018		Average Recorded Investment for the Three Months Ended March 31, 2018		Interest Income Recognized in the Three Months Ended March 31, 2018
With no related allowance recorded:
Agriculture and Agricultural Real Estate	$	2,388	$	2,384	$	-	$	820	$	11
Commercial		-		-		-		-		-
Commercial Real Estate		1,863		1,871		-		1,706		21
Construction Real Estate		-		-		-		-		-
Residential Real Estate		3,015		3,174		-		4,129		52
Consumer and Other		58		59		-		84		1
With an allowance recorded:
Agriculture and Agricultural Real Estate		234		234		-		240		3
Commercial		226		234		142		266		3
Commercial Real Estate		1,299		1,380		146		2,064		32
Construction Real Estate		32		67		4		1,597		19
Residential Real Estate		306		316		94		660		7
Consumer and Other		339		339		143		345		4
Total:
Agriculture and Agricultural Real Estate	$	2,622	$	2,618	$	-	$	1,060	$	14
Commercial		226		234		142		266		3
Commercial Real Estate		3,162		3,251		146		3,770		53
Construction Real Estate		32		67		4		1,597		19
Residential Real Estate		3,321		3,490		94		4,789		59
Consumer and Other		397		398		143		429		5
Total	$	9,760	$	10,058	$	529	$	11,911	$	153

Financing Receivable, Troubled Debt Restructuring [Table Text Block]

	Three months ended						Three months ended
	March 31, 2019						March 31, 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		2	$	77	$	16		-	$	-	$	-
Commercial		-		-		-		-		-		-
Commercial Real Estate		1		39		36		1		283		283
Construction Real Estate		-		-		-		-		-		-
Residential Real Estate		-		-		-		1		150		150
Consumer and Other		1		15		14		-		-		-
Total		4	$	131	$	66		2	$	433	$	433

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

	Three months ended				Three months ended
	March 31, 2019				March 31, 2018
	Number of Contracts		Post- Modification Recorded Principal Balance		Number of Contracts		Post- Modification Recorded Principal Balance
Agriculture and Agricultural Real Estate		-	$	-		-	$	-
Commercial		-		-		-		-
Commercial Real Estate		-		-		1		283
Construction Real Estate		-		-		-		-
Residential Real Estate		-		-		-		-
Consumer and Other		-		-		-		-
Total		-	$	-		1	$	283

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Note 6 - Investment Securities (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Available-for-sale Securities [Table Text Block]

	Available for Sale
	March 31, 2019
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of States and Political Subdivisions		29,127		626		(116	)		29,637
Corporate Debt Securities		500		-		(4	)		496
	$	29,627	$	626	$	(120	)	$	30,133

	Available for Sale
	December 31, 2018
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Market
	Cost		Gains		Losses			Value
Obligations of U.S. Government Agencies	$	134,160	$	1	$	(5,926	)	$	128,235
Mortgage Backed Securities issued by U.S. Government Agencies		196,224		32		(5,702	)		190,554
Obligations of States and Political Subdivisions		69,309		604		(804	)		69,109
Corporate Debt Securities		13,552		173		(10	)		13,715
	$	413,245	$	810	$	(12,442	)	$	401,613

Investments Classified by Contractual Maturity Date [Table Text Block]

	Available for Sale
			Estimated
	Amortized		Market
	Cost		Value
Contractual maturity in
1 year or less	$	8,462	$	8,503
After 1 year through five years		15,112		15,310
After 5 years through 10 years		5,387		5,661
After 10 years		666		659
Total	$	29,627	$	30,133

Schedule of Unrealized Loss on Investments [Table Text Block]

March 31, 2019
	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 States and Political Subdivisions		7,915		116		-		-		7,915		116
Corporate Debt Securities		496		4		-		-		496		4
	$	8,411	$	120	$	-	$	-	$	8,411	$	120

December 31, 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	$	3,946	$	65	$	117,750	$	5,861	$	121,696	$	5,926
Mortgage Backed Securities issued by U.S. Government Agencies		19,945		131		165,604		5,571		185,549		5,702
Obligations of States and Political Subdivisions		32,260		573		5,955		231		38,215		804
Corporate Debt Securities		490		10		-		-		490		10
	$	56,641	$	779	$	289,309	$	11,663	$	345,950	$	12,442

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Note 7 - Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

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

									Total
	Carrying								Estimated
March 31, 2019	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	432,807	$	432,807	$	-	$	-	$	432,807
Time Deposits in Other Banks		600		-		-		600		600
Securities - Available for Sale
Obligations of States and Political Subdivisions		29,637		-		29,637		-		29,637
Corporate Debt Securities		496		-		496		-		496
Equity Securities		7,450		2,077		5,373		-		7,450
Loans, net		759,374		-		-		747,951		747,951
Accrued Interest Receivable		3,135		-		-		3,135		3,135
Financial Liabilities:
Noninterest Bearing Deposits		290,929		290,929		-		-		290,929
Interest Bearing Deposits		892,220		-		892,881		-		892,881
Borrowed funds
FHLB Advances		10,000		-		10,212		-		10,212
Accrued Interest Payable		77		-		-		77		77

									Total
	Carrying								Estimated
December 31, 2018	Value		Level 1		Level 2		Level 3		Fair Value
Financial Assets:
Cash and due from banks	$	51,842	$	51,842	$	-	$	-	$	51,842
Time Deposits in Other Banks		10,796		-		10,548		-		10,548
Securities - Available for Sale
Obligations of U.S. Government Agencies		128,235		-		128,235		-		128,235
MBS issued by U.S. Government Agencies		190,554		-		190,554		-		190,554
Obligations of States and Political Subdivisions		69,109		-		69,109		-		69,109
Corporate Debt Securities		13,715		-		13,715		-		13,715
Equity Securities		7,415		2,042		5,373		-		7,415
Loans Held for Sale		488		-		-		502		502
Loans, net		760,889		-		-		750,249		750,249
Accrued Interest Receivable		4,413		-		-		4,413		4,413
Financial Liabilities:
Noninterest Bearing Deposits		297,704		297,704		-		-		297,704
Interest Bearing Deposits		885,206		-		885,886		-		885,886
Federal Home Loan Bank Advances		10,000		-		-		10,042		10,042
Accrued Interest Payable		65		-		-		65		65

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)
March 31, 2019
Impaired loans	$	-	$	-	$	9,364
Other Real Estate Owned	$	-	$	-	$	58
December 31, 2018
Impaired loans	$	-	$	-	$	9,231
Other Real Estate Owned	$	-	$	-	$	692

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

3 Months Ended

Mar. 31, 2019

Notes Tables

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

	Contractual Amount
	March 31,		December 31,
	2019		2018
Commitments to extend credit:
Unused portion of commercial lines of credit	$	119,668	$	116,119
Unused portion of credit card lines of credit		7,018		6,680
Unused portion of home equity lines of credit		36,823		34,621
Standby letters of credit and financial guarantees written		1,223		1,763
All other off-balance sheet commitments		-		-

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Note 1 - Basis of Presentation and Accounting Policies (Details Textual)	Mar. 31, 2019	Oct. 09, 2018 shares
Number of Reportable Segments	1
MBT Financial [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
	Mar. 31, 2019	Mar. 31, 2018
Net Income (Loss)	$ (5,141)	$ 3,902
Average common shares outstanding (in shares)	23,035,369	22,943,736
Earnings (Loss) per common share - basic (in dollars per share)	$ (0.22)	$ 0.17
Net income (loss)	$ (5,141)	$ 3,902
Equity compensation (in shares)		119,464
Average common shares outstanding - diluted (in shares)	23,035,369	23,063,200
Earnings per common share - diluted (in dollars per share)	$ (0.22)	$ 0.17

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Note 3 - Stock-based Compensation Plan (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Share Price	$ 10.02
Share-based Payment Arrangement, Expense	$ 93,000	$ 236,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total	$ 413,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition	1 year 153 days
Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value	$ 552,000
Shares, Issued, Ending Balance	55,079

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Note 3 - Stock-based Compensation Plan - SOSARs Activity (Details) - Stock Appreciation Rights (SARs) [Member] - $ / shares	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
SOSARs Outstanding, Balance (in shares)	347,379
SOSARs Outstanding, Weighted average base price (in dollars per share)	$ 8.78	$ 8.78
Granted (in shares)
Granted, Weighted average base price (in dollars per share)
Exercised (in shares)	(2,166)
Exercised, Weighted average base price (in dollars per share)	$ 9.44
Forfeited (in shares)
Forfeited, Weighted average base price (in dollars per share)
Expired (in shares)
Expired, Weighted average base price (in dollars per share)
SOSARs Outstanding, Balance (in shares)	345,213	347,379
SOSARs Exercisable, March 31, 2019 (in shares)	152,879
SOSARs Exercisable, Weighted average base price (in dollars per share)	$ 6.41

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Note 4 - Loans - Loans Receivable Outstanding (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Loans	$ 766,877	$ 768,660	$ 722,640
Less: Allowance for loan losses	7,503	7,771
Net Loans	759,374	760,889
Residential Portfolio Segment [Member]
Loans	231,074	230,008	223,318
Commercial and Construction Real Estate Portfolio Segment [Member]
Loans	306,593	306,694
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Loans	22,087	22,486	22,319
Commercial and Industrial Portfolio Segment [Member]
Loans	162,446	162,026
Consumer and Other Portfolio Segment [Member]
Loans	$ 44,677	$ 47,446	$ 54,845

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Note 4 - Loans - Nonperforming Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Non-accrual loans	$ 7,134	$ 5,566
Loans 90 days past due and accruing	61
Total nonperforming loans	766,877	768,660	$ 722,640
Other real estate owned	58	692
Total nonperforming assets	1,333,465	1,336,891
Nonperforming Financial Instruments [Member]
Non-accrual loans	7,134	5,566
Loans 90 days past due and accruing	61
Restructured loans	3,418	4,495
Total nonperforming loans	10,613	10,061
Other real estate owned	58	692
Other assets
Total nonperforming assets	$ 10,671	$ 10,753
Nonperforming assets to total assets	0.80%	0.80%
Allowance for loan losses to nonperforming loans	70.70%	77.24%

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Note 5 - Allowance For Loan Losses (Details Textual) - USD ($)	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Financing Receivable, Allowance for Credit Loss, Ending Balance	$ 7,503,000	$ 7,771,000	$ 7,885,000	$ 7,666,000
Financing Receivable, Troubled Debt Restructuring, Commitment to Lend	0		$ 0
Troubled Debt Restructuring [Member]
Financing Receivable, Allowance for Credit Loss, Ending Balance	$ 417,000

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Note 5 - Allowance For Loan Losses - Activity in the Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Balance	$ 7,771	$ 7,666
Charge-offs	(411)	(12)
Recoveries	143	331
Provision		(100)
Balance	7,503	7,885
Ending balance individually evaluated for impairment			$ 466		$ 1,146
Ending balance collectively evaluated for impairment			7,037		6,739
Balance	7,771	7,666	7,503	$ 7,771	7,885
Ending balance individually evaluated for impairment			9,830		11,683
Ending balance collectively evaluated for impairment			757,047		710,957
Loans			766,877	768,660	722,640
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Balance	205	195
Charge-offs
Recoveries		2
Provision	35	13
Balance	240	210
Ending balance individually evaluated for impairment					1
Ending balance collectively evaluated for impairment			240		209
Balance	205	195	240	205	210
Ending balance individually evaluated for impairment			2,556		1,139
Ending balance collectively evaluated for impairment			19,531		21,180
Loans			22,087	22,486	22,319
Commercial Portfolio Segment [Member]
Balance	1,266	1,443
Charge-offs	(252)
Recoveries	27	15
Provision	720	(61)
Balance	1,761	1,397
Ending balance individually evaluated for impairment			138		146
Ending balance collectively evaluated for impairment			1,623		1,251
Balance	1,266	1,443	1,761	1,266	1,397
Ending balance individually evaluated for impairment			287		260
Ending balance collectively evaluated for impairment			162,159		131,642
Loans			162,446	162,026	131,902
Commercial Real Estate Portfolio Segment [Member]
Balance	3,012	3,297
Charge-offs	(151)	(3)
Recoveries	24	240
Provision	153	(446)
Balance	3,038	3,088
Ending balance individually evaluated for impairment			118		315
Ending balance collectively evaluated for impairment			2,920		2,773
Balance	3,012	3,297	3,038	3,012	3,088
Ending balance individually evaluated for impairment			3,503		3,720
Ending balance collectively evaluated for impairment			275,149		266,608
Loans			278,652	279,294	270,328
Construction Real Estate Portfolio Segment [Member]
Balance	184	491
Charge-offs
Recoveries	12	20
Provision	(158)	(50)
Balance	38	461
Ending balance individually evaluated for impairment					354
Ending balance collectively evaluated for impairment			38		107
Balance	184	491	38	184	461
Ending balance individually evaluated for impairment			32		1,574
Ending balance collectively evaluated for impairment			27,909		18,354
Loans			27,941	27,400	19,928
Residential Portfolio Segment [Member]
Balance	1,218	1,279
Charge-offs		(7)
Recoveries	75	42
Provision	(82)	(225)
Balance	1,211	1,089
Ending balance individually evaluated for impairment			83		131
Ending balance collectively evaluated for impairment			1,128		958
Balance	1,218	1,279	1,211	1,218	1,089
Ending balance individually evaluated for impairment			3,051		4,566
Ending balance collectively evaluated for impairment			228,023		218,752
Loans			231,074	230,008	223,318
Consumer and Other Portfolio Segment [Member]
Balance	1,886	961
Charge-offs	(8)	(2)
Recoveries	5	12
Provision	(668)	669
Balance	1,215	1,640
Ending balance individually evaluated for impairment			127		199
Ending balance collectively evaluated for impairment			1,088		1,441
Balance	$ 1,886	$ 961	1,215	1,886	1,640
Ending balance individually evaluated for impairment			401		424
Ending balance collectively evaluated for impairment			44,276		54,421
Loans			$ 44,677	$ 47,446	$ 54,845

XML

Note 5 - Allowance For Loan Losses - Credit Risk by Internally Assigned Grade (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Total nonperforming loans	$ 766,877	$ 768,660	$ 722,640
Performing Financial Instruments [Member]
Total nonperforming loans	756,264	758,599
Nonperforming Financial Instruments [Member]
Total nonperforming loans	10,613	10,061
Not Rated [Member]
Total nonperforming loans	200,907	206,016
Risk Grade Rating 1 [Member]
Total nonperforming loans	3,998	6,877
Risk Rating Grade 2 [Member]
Total nonperforming loans	365	377
Risk Grade Rating 3 [Member]
Total nonperforming loans	76,118	77,467
Risk Grade Rating 4 [Member]
Total nonperforming loans	425,136	420,029
Risk Grade Rating 4.5 [Member]
Total nonperforming loans	27,364	26,962
Risk Grade Rating 5 [Member]
Total nonperforming loans	18,038	16,932
Risk Grade Rating 5.5 [Member]
Total nonperforming loans	3,383	3,150
Risk Grade Rating 6 [Member]
Total nonperforming loans	11,568	10,848
Risk Grade Rating 7 [Member]
Total nonperforming loans
Risk Grade Rating 8 [Member]
Total nonperforming loans		2
Risk Grade Rating 9 [Member]
Total nonperforming loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Total nonperforming loans	22,087	22,486	22,319
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Performing Financial Instruments [Member]
Total nonperforming loans	19,490	20,305
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Total nonperforming loans	2,597	2,181
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Not Rated [Member]
Total nonperforming loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Total nonperforming loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Total nonperforming loans	64	64
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Total nonperforming loans	267	481
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Total nonperforming loans	13,977	16,038
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Total nonperforming loans	1,589	1,472
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Total nonperforming loans	3,755	1,852
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Total nonperforming loans	72
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Total nonperforming loans	2,363	2,579
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Total nonperforming loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Total nonperforming loans
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Total nonperforming loans
Commercial Portfolio Segment [Member]
Total nonperforming loans	162,446	162,026	131,902
Commercial Portfolio Segment [Member] | Performing Financial Instruments [Member]
Total nonperforming loans	162,181	161,749
Commercial Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Total nonperforming loans	265	277
Commercial Portfolio Segment [Member] | Not Rated [Member]
Total nonperforming loans	1,731	3,652
Commercial Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Total nonperforming loans	3,998	6,877
Commercial Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Total nonperforming loans	116	117
Commercial Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Total nonperforming loans	46,455	47,263
Commercial Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Total nonperforming loans	103,187	97,598
Commercial Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Total nonperforming loans	1,909	2,024
Commercial Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Total nonperforming loans	4,582	3,851
Commercial Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Total nonperforming loans	255	305
Commercial Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Total nonperforming loans	213	339
Commercial Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Total nonperforming loans
Commercial Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Total nonperforming loans
Commercial Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Total nonperforming loans
Commercial Real Estate Portfolio Segment [Member]
Total nonperforming loans	278,652	279,294	270,328
Commercial Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member]
Total nonperforming loans	275,374	276,021
Commercial Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Total nonperforming loans	3,278	3,273
Commercial Real Estate Portfolio Segment [Member] | Not Rated [Member]
Total nonperforming loans	44	60
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Total nonperforming loans
Commercial Real Estate Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Total nonperforming loans	185	196
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Total nonperforming loans	24,609	24,899
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Total nonperforming loans	219,492	219,079
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Total nonperforming loans	19,787	19,462
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Total nonperforming loans	6,866	9,084
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Total nonperforming loans	2,363	2,132
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Total nonperforming loans	5,306	4,380
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Total nonperforming loans
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Total nonperforming loans		2
Commercial Real Estate Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Total nonperforming loans
Construction Real Estate Portfolio Segment [Member]
Total nonperforming loans	27,941	27,400	19,928
Construction Real Estate Portfolio Segment [Member] | Performing Financial Instruments [Member]
Total nonperforming loans	27,909	27,368
Construction Real Estate Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Total nonperforming loans	32	32
Construction Real Estate Portfolio Segment [Member] | Not Rated [Member]
Total nonperforming loans	11,948	12,878
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Total nonperforming loans
Construction Real Estate Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Total nonperforming loans
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Total nonperforming loans
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Total nonperforming loans	13,051	11,555
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Total nonperforming loans	1,360	1,381
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Total nonperforming loans	245	249
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Total nonperforming loans
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Total nonperforming loans	1,337	1,337
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Total nonperforming loans
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Total nonperforming loans
Construction Real Estate Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Total nonperforming loans
Residential Portfolio Segment [Member]
Total nonperforming loans	231,074	230,008	223,318
Residential Portfolio Segment [Member] | Performing Financial Instruments [Member]
Total nonperforming loans	227,091	226,119
Residential Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Total nonperforming loans	3,983	3,889
Residential Portfolio Segment [Member] | Not Rated [Member]
Total nonperforming loans	147,437	147,167
Residential Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Total nonperforming loans
Residential Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Total nonperforming loans
Residential Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Total nonperforming loans	1,363	1,268
Residential Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Total nonperforming loans	73,934	74,141
Residential Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Total nonperforming loans	2,719	2,623
Residential Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Total nonperforming loans	2,590	1,896
Residential Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Total nonperforming loans	693	713
Residential Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Total nonperforming loans	2,338	2,200
Residential Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Total nonperforming loans
Residential Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Total nonperforming loans
Residential Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Total nonperforming loans
Consumer and Other Portfolio Segment [Member]
Total nonperforming loans	44,677	47,446	$ 54,845
Consumer and Other Portfolio Segment [Member] | Performing Financial Instruments [Member]
Total nonperforming loans	44,219	47,037
Consumer and Other Portfolio Segment [Member] | Nonperforming Financial Instruments [Member]
Total nonperforming loans	458	409
Consumer and Other Portfolio Segment [Member] | Not Rated [Member]
Total nonperforming loans	39,747	42,259
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 1 [Member]
Total nonperforming loans
Consumer and Other Portfolio Segment [Member] | Risk Rating Grade 2 [Member]
Total nonperforming loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 3 [Member]
Total nonperforming loans	3,424	3,556
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 4 [Member]
Total nonperforming loans	1,495	1,618
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 4.5 [Member]
Total nonperforming loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 5 [Member]
Total nonperforming loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 5.5 [Member]
Total nonperforming loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 6 [Member]
Total nonperforming loans	11	13
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 7 [Member]
Total nonperforming loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 8 [Member]
Total nonperforming loans
Consumer and Other Portfolio Segment [Member] | Risk Grade Rating 9 [Member]
Total nonperforming loans

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Note 5 - Allowance For Loan Losses - Past Due Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018
Past due	$ 7,261	$ 6,872
Current	759,616	761,788
Total nonperforming loans	766,877	768,660	$ 722,640
Loans 90 days past due and accruing	61
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due	1,999	1,867
Current	20,088	20,619
Total nonperforming loans	22,087	22,486	22,319
Loans 90 days past due and accruing
Commercial Portfolio Segment [Member]
Past due	216	327
Current	162,230	161,699
Total nonperforming loans	162,446	162,026	131,902
Loans 90 days past due and accruing	15
Commercial Real Estate Portfolio Segment [Member]
Past due	2,486	2,653
Current	276,166	276,641
Total nonperforming loans	278,652	279,294	270,328
Loans 90 days past due and accruing
Construction Real Estate Portfolio Segment [Member]
Past due	32
Current	27,909	27,400
Total nonperforming loans	27,941	27,400	19,928
Loans 90 days past due and accruing
Residential Portfolio Segment [Member]
Past due	2,278	1,933
Current	228,796	228,075
Total nonperforming loans	231,074	230,008	223,318
Loans 90 days past due and accruing
Consumer and Other Portfolio Segment [Member]
Past due	250	92
Current	44,427	47,354
Total nonperforming loans	44,677	47,446	$ 54,845
Loans 90 days past due and accruing	46
Financial Asset, 30 to 59 Days Past Due [Member]
Past due	3,290	2,918
Financial Asset, 30 to 59 Days Past Due [Member] | Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due	264	632
Financial Asset, 30 to 59 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past due	149	186
Financial Asset, 30 to 59 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Past due	914	804
Financial Asset, 30 to 59 Days Past Due [Member] | Construction Real Estate Portfolio Segment [Member]
Past due
Financial Asset, 30 to 59 Days Past Due [Member] | Residential Portfolio Segment [Member]
Past due	1,810	1,217
Financial Asset, 30 to 59 Days Past Due [Member] | Consumer and Other Portfolio Segment [Member]
Past due	153	79
Financial Asset, 60 to 89 Days Past Due [Member]
Past due	1,104	1,698
Financial Asset, 60 to 89 Days Past Due [Member] | Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due	16	1,235
Financial Asset, 60 to 89 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past due	21	110
Financial Asset, 60 to 89 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Past due	936
Financial Asset, 60 to 89 Days Past Due [Member] | Construction Real Estate Portfolio Segment [Member]
Past due
Financial Asset, 60 to 89 Days Past Due [Member] | Residential Portfolio Segment [Member]
Past due	81	340
Financial Asset, 60 to 89 Days Past Due [Member] | Consumer and Other Portfolio Segment [Member]
Past due	50	13
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Past due	2,867	2,256
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Past due	1,719
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Commercial Portfolio Segment [Member]
Past due	46	31
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Commercial Real Estate Portfolio Segment [Member]
Past due	636	1,849
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Construction Real Estate Portfolio Segment [Member]
Past due	32
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Residential Portfolio Segment [Member]
Past due	387	376
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Consumer and Other Portfolio Segment [Member]
Past due	$ 47

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Note 5 - Allowance For Loan Losses - Non-accrual Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Non-accrual loans	$ 7,134	$ 5,566
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Non-accrual loans	2,363	1,624
Commercial Portfolio Segment [Member]
Non-accrual loans	85	106
Commercial Real Estate Portfolio Segment [Member]
Non-accrual loans	3,277	2,907
Construction Real Estate Portfolio Segment [Member]
Non-accrual loans	32	5
Residential Portfolio Segment [Member]
Non-accrual loans	1,366	912
Consumer and Other Portfolio Segment [Member]
Non-accrual loans	$ 11	$ 12

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Note 5 - Allowance For Loan Losses - Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Related allowance	$ 466	$ 529
Recorded investment	9,830	9,760
Unpaid principal balance	10,358	10,058
Average recorded investment	10,397	11,911
Interest income recognized	104	153
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Recorded investment - without allowance	2,556	2,388
Unpaid principal balance - without allowance	2,555	2,384
Average recorded investment - without allowance	2,595	820
Interest expense recognized without allowance	(14)
Interest income recognized without allowance		11
Recorded investment - with allowance		234
Unpaid principal balance - with allowance		234
Related allowance
Average recorded investment - with allowance		240
Interest income recognized with allowance		3
Recorded investment	2,556	2,622
Unpaid principal balance	2,555	2,618
Average recorded investment	2,595	1,060
Interest expense recognized	(14)
Interest income recognized		14
Commercial Portfolio Segment [Member]
Recorded investment - without allowance	67
Unpaid principal balance - without allowance	67
Average recorded investment - without allowance	91
Interest income recognized without allowance	1
Recorded investment - with allowance	220	226
Unpaid principal balance - with allowance	229	234
Related allowance	138	142
Average recorded investment - with allowance	231	266
Interest income recognized with allowance	2	3
Recorded investment	287	226
Unpaid principal balance	296	234
Average recorded investment	322	266
Interest income recognized	3	3
Commercial Real Estate Portfolio Segment [Member]
Recorded investment - without allowance	1,899	1,863
Unpaid principal balance - without allowance	2,116	1,871
Average recorded investment - without allowance	2,076	1,706
Interest income recognized without allowance	61	21
Recorded investment - with allowance	1,604	1,299
Unpaid principal balance - with allowance	1,697	1,380
Related allowance	118	146
Average recorded investment - with allowance	1,698	2,064
Interest income recognized with allowance	5	32
Recorded investment	3,503	3,162
Unpaid principal balance	3,813	3,251
Average recorded investment	3,774	3,770
Interest income recognized	66	53
Construction Real Estate Portfolio Segment [Member]
Recorded investment - without allowance	32
Unpaid principal balance - without allowance	67
Average recorded investment - without allowance	52
Interest income recognized without allowance
Recorded investment - with allowance		32
Unpaid principal balance - with allowance		67
Related allowance		4
Average recorded investment - with allowance		1,597
Interest income recognized with allowance		19
Recorded investment	32	32
Unpaid principal balance	67	67
Average recorded investment	52	1,597
Interest income recognized		19
Residential Portfolio Segment [Member]
Recorded investment - without allowance	2,660	3,015
Unpaid principal balance - without allowance	2,822	3,174
Average recorded investment - without allowance	2,842	4,129
Interest income recognized without allowance	39	52
Recorded investment - with allowance	391	306
Unpaid principal balance - with allowance	403	316
Related allowance	83	94
Average recorded investment - with allowance	405	660
Interest income recognized with allowance	5	7
Recorded investment	3,051	3,321
Unpaid principal balance	3,225	3,490
Average recorded investment	3,247	4,789
Interest income recognized	44	59
Consumer and Other Portfolio Segment [Member]
Recorded investment - without allowance	134	58
Unpaid principal balance - without allowance	135	59
Average recorded investment - without allowance	137	84
Interest income recognized without allowance	2	1
Recorded investment - with allowance	267	339
Unpaid principal balance - with allowance	267	339
Related allowance	127	143
Average recorded investment - with allowance	270	345
Interest income recognized with allowance	3	4
Recorded investment	401	397
Unpaid principal balance	402	398
Average recorded investment	407	429
Interest income recognized	$ 5	$ 5

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Note 5 - Allowance For Loan Losses - Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)
Number of contracts	4	2,000
Pre-modification recorded principal balance	$ 131	$ 433
Post-modification recorded principal balance	$ 66	$ 433
Agriculture and Agricultural Real Estate Loans Portfolio Segment [Member]
Number of contracts	2
Pre-modification recorded principal balance	$ 77
Post-modification recorded principal balance	$ 16
Commercial Portfolio Segment [Member]
Number of contracts
Pre-modification recorded principal balance
Post-modification recorded principal balance
Commercial Real Estate Portfolio Segment [Member]
Number of contracts	1	1,000
Pre-modification recorded principal balance	$ 39	$ 283
Post-modification recorded principal balance	$ 36	$ 283
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		1,000
Pre-modification recorded principal balance		$ 150
Post-modification recorded principal balance		$ 150
Consumer and Other Portfolio Segment [Member]
Number of contracts	1
Pre-modification recorded principal balance	$ 15
Post-modification recorded principal balance	$ 14

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Note 5 - Allowance For Loan Losses - Troubled Debt Restructurings Subsequent Default (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)
Number of contracts		1
Recorded principal balance		$ 283
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		1
Recorded principal balance		$ 283
Construction Real Estate Portfolio Segment [Member]
Number of contracts
Recorded principal balance
Residential Portfolio Segment [Member]
Number of contracts
Recorded principal balance
Consumer and Other Portfolio Segment [Member]
Number of contracts
Recorded principal balance

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Note 6 - Investment Securities (Details Textual)	Mar. 31, 2019	Dec. 31, 2018
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Total	37	165

XML

Note 6 - Investment Securities - Available for Sale Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Available for sale securities, amortized cost	$ 29,627	$ 413,245
Available for sale securities, gross unrealized gains	626	810
Available for sale securities, gross unrealized losses	(120)	(12,442)
Securities - Available for Sale	30,133	401,613
Available for sale securities, gross unrealized gains	626	810
Available for sale securities, gross unrealized losses	(120)	(12,442)
US States and Political Subdivisions Debt Securities [Member]
Available for sale securities, amortized cost	29,127	69,309
Available for sale securities, gross unrealized gains	626	604
Available for sale securities, gross unrealized losses	(116)	(804)
Securities - Available for Sale	29,637	69,109
Available for sale securities, gross unrealized gains	626	604
Available for sale securities, gross unrealized losses	(116)	(804)
US Treasury and Government [Member]
Available for sale securities, amortized cost		134,160
Available for sale securities, gross unrealized gains		1
Available for sale securities, gross unrealized losses		(5,926)
Securities - Available for Sale		128,235
Available for sale securities, gross unrealized gains		1
Available for sale securities, gross unrealized losses		(5,926)
Corporate Debt Securities [Member]
Available for sale securities, amortized cost	500	13,552
Available for sale securities, gross unrealized gains		173
Available for sale securities, gross unrealized losses	(4)	(10)
Securities - Available for Sale	496	13,715
Available for sale securities, gross unrealized gains		173
Available for sale securities, gross unrealized losses	$ (4)	(10)
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Available for sale securities, amortized cost		196,224
Available for sale securities, gross unrealized gains		32
Available for sale securities, gross unrealized losses		(5,702)
Securities - Available for Sale		190,554
Available for sale securities, gross unrealized gains		32
Available for sale securities, gross unrealized losses		$ (5,702)

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Note 6 - Investment Securities - Securities by Contractual Maturity (Details) $ in Thousands	Mar. 31, 2019 USD ($)
1 year or less, available for sale amortized cost	$ 8,462
1 year or less, available for sale estimated market value	8,503
After 1 year through five years, available for sale amortized cost	15,112
After 1 year through five years, available for sale estimated market value	15,310
After 5 years through 10 years, available for sale amortized cost	5,387
After 5 years through 10 years, available for sale estimated market value	5,661
After 10 years, available for sale amortized cost	666
After 10 years, available for sale estimated market value	659
Total, available for sale amortized cost	29,627
Total, available for sale estimated market value	$ 30,133

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Note 6 - Investment Securities - Securities in Continuous Unrealized Loss Position (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Less than 12 months, aggregate fair value	$ 8,411	$ 56,641
Less than 12 months, gross unrealized losses	120	779
12 months or longer, aggregate fair value		289,309
12 months or longer, gross unrealized losses		11,663
Total, aggregate fair value	8,411	345,950
Total, gross unrealized losses	120	12,442
US States and Political Subdivisions Debt Securities [Member]
Less than 12 months, aggregate fair value	7,915	32,260
Less than 12 months, gross unrealized losses	116	573
12 months or longer, aggregate fair value		5,955
12 months or longer, gross unrealized losses		231
Total, aggregate fair value	7,915	38,215
Total, gross unrealized losses	116	804
US Treasury and Government [Member]
Less than 12 months, aggregate fair value		3,946
Less than 12 months, gross unrealized losses		65
12 months or longer, aggregate fair value		117,750
12 months or longer, gross unrealized losses		5,861
Total, aggregate fair value		121,696
Total, gross unrealized losses		5,926
Corporate Debt Securities [Member]
Less than 12 months, aggregate fair value	496	490
Less than 12 months, gross unrealized losses	4	10
12 months or longer, aggregate fair value
12 months or longer, gross unrealized losses
Total, aggregate fair value	496	490
Total, gross unrealized losses	$ 4	10
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Less than 12 months, aggregate fair value		19,945
Less than 12 months, gross unrealized losses		131
12 months or longer, aggregate fair value		165,604
12 months or longer, gross unrealized losses		5,571
Total, aggregate fair value		185,549
Total, gross unrealized losses		$ 5,702

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Note 7 - Fair Value of Financial Instruments (Details Textual) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Fair Value, Inputs, Level 3 [Member] | Fair Value, 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	Mar. 31, 2019	Dec. 31, 2018
Financial Assets:
Time Deposits in Other Banks	$ 600	$ 10,796
Securities - Available for Sale	30,133	401,613
US States and Political Subdivisions Debt Securities [Member]
Financial Assets:
Securities - Available for Sale	29,637	69,109
US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale		128,235
Corporate Debt Securities [Member]
Financial Assets:
Securities - Available for Sale	496	13,715
Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Financial Assets:
Securities - Available for Sale		190,554
Reported Value Measurement [Member] | Fair Value, Recurring [Member]
Financial Assets:
Cash and due from banks	432,807	51,842
Time Deposits in Other Banks	600	10,796
Equity Securities	7,450
Loans, net	759,374	760,889
Accrued Interest Receivable	3,135	4,413
Loans Held for Sale		488
Financial Liabilities:
Noninterest Bearing Deposits	290,929	297,704
Interest Bearing Deposits	892,220	885,206
FHLB Advances	10,000	10,000
Accrued Interest Payable	77	65
FHLB Advances	10,000	10,000
Reported Value Measurement [Member] | Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity	29,637	69,109
Reported Value Measurement [Member] | Fair Value, Recurring [Member] | US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale		128,235
Reported Value Measurement [Member] | Fair Value, Recurring [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity	496	13,715
Reported Value Measurement [Member] | Fair Value, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Financial Assets:
Securities - Available for Sale		190,554
Reported Value Measurement [Member] | Fair Value, Recurring [Member] | Equity Securities [Member]
Financial Assets:
Securities - Available for Sale		7,415
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member]
Financial Assets:
Cash and due from banks	432,807	51,842
Time Deposits in Other Banks	600	10,548
Equity Securities	7,450
Loans, net	747,951	750,249
Accrued Interest Receivable	3,135	4,413
Loans Held for Sale		502
Financial Liabilities:
Noninterest Bearing Deposits	290,929	297,704
Interest Bearing Deposits	892,881	885,886
FHLB Advances	10,212	10,042
Accrued Interest Payable	77	65
FHLB Advances	10,212	10,042
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity	29,637	69,109
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale		128,235
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity	496	13,715
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Financial Assets:
Securities - Available for Sale		190,554
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Equity Securities [Member]
Financial Assets:
Securities - Available for Sale		7,415
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Financial Assets:
Cash and due from banks	432,807	51,842
Time Deposits in Other Banks
Equity Securities	2,077
Loans, net
Accrued Interest Receivable
Loans Held for Sale
Financial Liabilities:
Noninterest Bearing Deposits	290,929	297,704
Interest Bearing Deposits
FHLB Advances
Accrued Interest Payable
FHLB Advances
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US States and Political Subdivisions Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity
Estimate of Fair Value Measurement [Member] | Fair Value, 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, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity
Estimate of Fair Value Measurement [Member] | Fair Value, 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, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Equity Securities [Member]
Financial Assets:
Securities - Available for Sale		2,042
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Financial Assets:
Cash and due from banks
Time Deposits in Other Banks		10,548
Equity Securities	5,373
Loans, net
Accrued Interest Receivable
Loans Held for Sale
Financial Liabilities:
Noninterest Bearing Deposits
Interest Bearing Deposits	892,881	885,886
FHLB Advances	10,212
Accrued Interest Payable
FHLB Advances	10,212
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US States and Political Subdivisions Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity	29,637	69,109
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US Treasury and Government [Member]
Financial Assets:
Securities - Available for Sale		128,235
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity	496	13,715
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-backed Securities, Issued by US Government Sponsored Enterprises [Member]
Financial Assets:
Securities - Available for Sale		190,554
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Equity Securities [Member]
Financial Assets:
Securities - Available for Sale		5,373
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Financial Assets:
Cash and due from banks
Time Deposits in Other Banks	600
Equity Securities
Loans, net	747,951	750,249
Accrued Interest Receivable	3,135	4,413
Loans Held for Sale		502
Financial Liabilities:
Noninterest Bearing Deposits
Interest Bearing Deposits
FHLB Advances		10,042
Accrued Interest Payable	77	65
FHLB Advances		10,042
Estimate of Fair Value Measurement [Member] | Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | US States and Political Subdivisions Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity
Estimate of Fair Value Measurement [Member] | Fair Value, 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, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member]
Financial Assets:
Securities - Held to Maturity
Estimate of Fair Value Measurement [Member] | Fair Value, 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, 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	Mar. 31, 2019	Dec. 31, 2018
Impaired loans	$ 9,830	$ 9,760
Other Real Estate Owned	58	692
Fair Value, Nonrecurring [Member]
Impaired loans
Other Real Estate Owned
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Impaired loans
Other Real Estate Owned
Fair Value, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Impaired loans	9,364	9,231
Other Real Estate Owned	$ 58	$ 692

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Note 8 - Financial Instruments With Off-balance Sheet Risk (Details Textual)	3 Months Ended
	Mar. 31, 2019
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	Mar. 31, 2019	Dec. 31, 2018
Commitments to Extend Credit - Commercial Lines of Credit [Member]
Commitments to extend credit:
Off-balance sheet credit risks	$ 119,668	$ 116,119
Commitments to Extend Credit - Credit Card Lines of Credit [Member]
Commitments to extend credit:
Off-balance sheet credit risks	7,018	6,680
Commitments to Extend Credit - Home Equity Lines of Credit [Member]
Commitments to extend credit:
Off-balance sheet credit risks	36,823	34,621
Standby Letters of Credit and Financial Guarantees [Member]
Commitments to extend credit:
Off-balance sheet credit risks	1,223	1,763
All Other Off-Balance Sheet Commitments [Member]
Commitments to extend credit:
Off-balance sheet credit risks